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THE FMCG INDUSTRY…
• Fast Moving Consumer Goods (FMCG) industry alternatively called CPG (Consumer Packaged Goods) industry • • Primarily deals with the production, distribution and marketing of consumer packaged goods • • Principal constituents are: – Household Care – Personal Care – Food & Beverages • • FMCG products are those which have a quick turnover and relatively low cost
• Characterised by a well established distribution network, low operating costs, low per capita consumption and intense competition between the organised and unorganised segments
• Availability of key raw materials, cheap labour costs and presence across the entire value chain gives India the competitive advantage
• Resulted in presence of global players through their subsidiaries
THE INDIAN FMCG SECTOR
• Market size: – US$ 13.1 billion (in 2005) – US$ 18.2 billion (in 2008) i.e. Rs. 85,000 crore • • The fourth largest sector in the economy • • Creates employment for more than three million people in downstream activities
Britannia Industries 9. Procter & Gamble Hygiene and Health Care 10. Hindustan Unilever Ltd. Nestlé India 4. GCMMF (AMUL) 5.Marico Industries . ITC (Indian Tobacco Company) 3. Dabur India 6. Cadbury India 8. Asian Paints (India) 7. 2.TOP 10 FMCG COMPANIES (INDIA) 1.
Dabur Chyawanprash. (ITCL) Kitchens of India. Sunfeast. Bourbon Dabur India Ltd. Dabur Amla. paperboards. Candyman. Hajmola. Pure Magic. Largest Indian FMCG and Vatika. Mariegold. Lal Dant Manjan.ayurvedic products company Pudin Hara and the Real fruit juices Indian Tobacco Corporation Ltd. Fifty(BIL) Fifty. hotels. Good Day. Bingo Diversified presence in cigarettes.DOMESTIC PLAYERS Company Brands Key Feature (s) 40% market share in the overall organised biscuit market Britannia India Ltd Tiger Glucose. food products .
Hair & Care. Sweekar. Shudh Homegrown FMCG major Salt Presence in the detergent and soap markets Amul products (butter. Saffola.DOMESTIC PLAYERS Company Marico Industries Brands Key Feature (s) Parachute. Shanti Leading Indian group in Amla. Nirma Detergent. Mediker. ice-cream) movement Nirma Limited GCMMF (Amul) . cheese. Consumer Products & Oil of Malabar and Sil processed Services in the Global Beauty foods & Wellness space (Kaya Skin Clinics) Nirma Soap. Revive. Began as a cooperative milk powder. ghee.
Diet Coke. Gems. Crackle. Gold Spot. Cerelac PepsiCo Pepsi Procter & Gamble Hygiene and Health Care Limited Vicks. Heinz ketchup Nestle India Ltd (NIL) Nescafe. Fanta. Nycil. 5 Star. Maggi. Maaza. Perk.FOREIGN PLAYERS • • Cadbury India Ltd (CIL) Dairy Milk. Whisper • • • • • . Kinley. Citra Coca-Cola. Bournvita Coca-Cola India Thums Up. Glucon-D. Farex. Schweppes Colgate-Palmolive India Charmis skin cream and Axion dish wash H J Heinz Co Complan. Limca. Sprite. Éclairs. Milkmaid.
MARKET SIZE (HOUSEHOLD PRODUCTS) .
2% of the world population is in the villages of India – Rural income is rising.POTENTIAL FOR GROWTH Per capita consumption in India is low for almost all the products Growing demand in the market (rural & urban) for FMCG Rural (volumes) – 2. boosting purchasing power • Low price products in convenient packaging Urban (value) – Increase in the urban population – Increase in income levels • New categories to meet change in demand patterns .
valued at around Rs.524 crore comes from rural markets.000 crore • .HINDUSTAN UNILEVER LTD. 8. • India's largest FMCG • A subsidiary of Unilever which holds 52% of the equity • 2 out of 3 Indians use its products • Over 42 factories across India • Around 45% of HUL’s sales turnover of Rs. 17.
• • In 1931. . • • Soon after followed Lifebuoy in 1895 and other famous brands like Pears.HISTORY OF HUL • In the summer of 1888. Lux and Vim. embossed with the words "Made in England by Lever Brothers". Unilever set up its first Indian subsidiary. These three companies merged to form HUL in November 1956. began an era of marketing branded Fast Moving Consumer Goods (FMCG). visitors to the Kolkata harbour noticed crates full of Sunlight soap bars. followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). With it. Hindustan Vanaspati Manufacturing Company. Vanaspati was launched in 1918.
Bru. Close up. Vaseline. Pears. Cif… • Water Pure It • • . Domex. Rexona. Lakme. Kissan. Lifebouy… • Home Care Brands Surf Excel. Fair and Lovely. Liril. Dove. Pepsodent.PRODUCTS/BRANDS OF HUL • Food Brands Red Label. Knorr. Clinic Plus. Lipton . Ponds. Rin. Kwality Walls… • Personal Care Brands Lux. Taj Mahal. Hamam. Sunsilk. Wheel. Brooke Bond.
Inspire people to take small everyday actions that can add up to a big difference for the world 4. Develop new ways of doing business that double the size of the company while reducing environmental impact • . Help people feel good.VISION STATEMENT… The four pillars 1. Create a better future everyday 2. look good & get more out of life with brands & services that are good for them & for others 3.
MISSION STATEMENT… Add Vitality to Life Meet everyday needs for nutrition. hygiene and personal care with brands that help people feel good. look good and get more out of life Total commitment to exceptional standards of performance and productivity .
PURPOSE • Always working with integrity • Creating positive impact • Continuous commitment • Setting out our aspirations • Working with others • .
and no employee shall suffer harassment. 4) 5) Wages & working hours will comply with all applicable wage and labour laws as per the rules and regulations 6) 7) No use of forced or compulsory labour.10 PRINCIPLES BUSINESS PARTNERS CODE 1) Compliance with all applicable laws and regulations 2) 3) Respect for human rights. and employees shall be free to leave employment after reasonable notice 8) 9) There shall be no use of child labour . physical or mental punishment etc.
10 PRINCIPLES 6) There shall be respect for the right of employees to freedom of association 7) 8) Safe and healthy working conditions will be provided for all employees 9) 10)Operations will be carried out with care for the environment 11) 12)All products and services will be delivered to meet the quality and safety criteria 13) 14)No improper advantage sought. to secure delivery of goods or services to Unilever companies . including the payment of bribes.
PORTER’S FIVE FORCE MODEL… Threat of New Entrant Time and Cost of Entry Specialist Knowledge Economies of Scale Cost Advantage Technology Protection Barriers to Entry Threat of New Competitive Rivalry Number of Competitors Quality Differences Entry Other Differences Switching Costs Customer Loyalty Costs of Leaving Market Supplier Power Competitive Rivalry Buyer Power Supplier Power Number of Suppliers Size of Suppliers Your Ability to Change Cost of Changing Threat of Substitution Substitute Performance Cost of Change Threat of Substitution Buyer Power Number of Customers Size of Each Order Difference between Competition Price Sensitivity Ability to Substitute Cost of Changing .
• With highly competitive retail market. HUL decided to enter Retail Market through direct selling brand (B2C) by the name SANGAM direct • Started in Bombay…with 2 stores. Sangam has vision to grow to 15 stores.THREAT OF NEW ENTRANT • In early 2000. Sangam faced 3 problems : • Specialized knowledge – Space constraints – Cost disadvantage (No disc on competitor’s product) – Time and Cost • • .
COMPETITIVE RIVALRY • Number of Competitors • Quality Differences • Other Differences • Switching Costs • Customer Loyalty .
SUPPLIER POWER • Large economies of scale • HUL adopts Backward Integration. therefore – – No of suppliers are less – Size of Suppliers are moderate – Ability to Change is Flexible – Cost of Changing is Low • .
BUYER POWER • No of customer’s is moderate • Size of Each Order is in Bulk quantity • Price Sensitivity • Ability to substitute • Cost of changing • Tie-ups with local complementary product manufacturer to get products at cheaper and minimal rates .
had to be shut down because of threat and extortion • ECONOMIC – Increase in Oil Rates…yet HUL maintains its profits and pricing power • SOCIAL – 2009. first time soap bar was introduced… Vim Bar and Odopic Bar • LEGAL – HUL.PESTLE ANALYSIS… • POLITICAL . so far has abided laws of land in regional as well as national level. SANKALP an initiative taken by HUL managers to drive health and hygiene in rural areas • TECHNOLOGICAL – 1991.Guhwati Tea Factory. • ENVIRONMENT – First company in its vision statement to address the growing environmental damage .
2000 Cr. 3500 Cr. Cash) • Soaps and detergents segment contribute 47% revenue • Sales (Rs. 17. Fixed Assets and Rs. ROC and RON . EPS and dividend • Very high returns e.g.STRENGTHS… • More than 50 years of operation (Rs.500 Cr. ROA.) are 5 to 6 times that of Dabur. P&G and Godrej • Extensive product innovation through R&D for 51 years • Business optimisation & integration of suppliers and distributers through IT • YOY increase in growth.
WEAKNESSES… • Profitability margin parameters are low compared to ITC. P&G. Dabur. Marico and Godrej • Expenditure is 85% of sales (16% Advertising Expense) • More emphasis on power brands or low focus • Gain from other segments .
g.g. Ayurvedic products • Export advantage • .OPPORTUNITIES… • Huge Rural Market • Increased purchasing power of middle class • Growth of other segments e. food • New markets e.
THREATS… • • • • • Huge players both Domestic & International Inflation is reducing buying power Price rise Stiff competition with ITC Counterfeit products in rural areas .
o n n i stri • I te g ra ti g su p p l e rs a n d d i b u te rs th ro u g h S A P • Best marketing talent from top B -schools • T P M a n d p ro d u ct fl b i i i O p e ra ti n s exi l ty n o • E m o ti n a lb u yi g o f sa ti e d cu sto m e r o n sfi .HUL VALUE CHAIN… • B u si e ss o p ti i ti n th ro u g h n m sa o Te ch n o l g y.
PORTER’S VALUE CHAIN ANALYSIS … HUMAN RESOURCE ACCOUNTING AND INFRASTRUCTURE PROCUREMENT AND TECHNOLOGY MARGIN INBOUND LOGISTICS OPERATIONS OR MFG OUTBOUND LOGISTICS & SERVICE & SUPPORT MKTNG SALES ort Functions Primary Activities .
1996 . 1993 Alliance with the Kwality Ice cream Group. (50:50 joint venture) 1996 Kissan 1993 (from UB) Modern Foods 2002 Mergers Tata Oil Mills Company (TOMCO) April 1. 1995 Brooke Bond Lipton India Limited (BBLIL) January 1.GROWTH STRATEGIES Organic Growth Inorganic Growth through Acquisitions – Increasing Product Portfolio Acquisitions Lipton 1972 Brooke Bond 1984 Pond's USA 1986 Dollops Ice-cream 1993 Lakme Ltd.
MARKETING STRATEGIES Straddling the pyramid & deploying full portfolio To meet every need of people everywhere .
MARKETING STRATEGIES • Leading to Strong Portfolio across categories .
HUL started Project Streamline in 1997 • • Integrate Economic. Environment & Social objectives with Business agenda • • Project Shakti.700 to1000 per month for each woman . a partnership with Self Help Groups of rural women extended to about 15 states in 80.000 women entrepreneurs generating Rs.MARKETING STRATEGIES FOR RURAL INDIA • For long term benefits.000 villages with 45.
R&D STRATEGIES • Innovation is the key • Research & Development in Unilever includes: – Looking at emerging technologies – Exploring possible applications – Collaborating with external experts to adapt products for local markets • Build segments & markets for the future in areas where Unilever has strong expertise .
R&D STRATEGIES – BUILDING THE FUTURE .
Shampoos Skin Care. Beverages. Fabric Wash. Ice Cream. Processed Foods. Water Shampoos. Oral Care. Beverages & Processed Foods Skin Care. US Bangalore. Beverages. Surface • Cleaners Colworth. Processed Foods . . India Shanghai. Deos. Ice Cream. Hair Care. Deos. the Netherlands Trumbull. UK Beverages & Processed Foods Vlaardingen. China Fabric Wash. Skin Care. UK Fabric Wash.R&D STRATEGIES Six principal research and development centres Location Expertise Port Sunlight.
DISTRIBUTION STRATEGIES • • Mission is “to meet the everyday needs of people everywhere” • 7. dispatches.000 redistribution stockists covering about one million retail outlets • • Provide tailor-made services to its channel partners • • Powered distribution RSNet – online interaction on orders. information sharing and monitoring • Rural distribution through Projects Streamline and Shakti • .
HR STRATEGIES Attracting. are all sharply focused on the common goal. including about 1.400 managers. which is to "add vitality to life".000 indirect jobs in those sectors of the economy connected with the company's operations • • On an average.000 employees. Motivating and Retaining the Best Talent • The company's believes that a 'fair day's work deserves a fair day's wages’ • • 36. HUL creates five indirect jobs for every single permanent employee • • Environment for Empowering the people • . • • 200.
HR STRATEGIES • The manager works in different functions across villages and international locations • Progress is based on: – Merit – Ability and Performance – Adhering to the Company's Code of Business Principles • The values of Truth. Action and Caring form the bedrock of these business principles • Creating a new generation of Industrial Workmen . Courage.
FINANCE-RELATED STRATEGIES • Company launching new products and brand extensions with investments being made towards brand-building and increasing its market share • High divided yield. steady growth and strong market standing in its product categories have enabled HUL to command premium valuations compared to other FMCG’s. • Sustained improvement in cost saving program • Tight focus on discretionary costs • .
FUTURE RECOMMENDATIONS • Product Innovations • Economic Development • Focus on Service • Creating Alliances • Cost &Waste Reduction .
High Nutrition) Ø Reducing salt/sugar in food Ø Food structuring – Creating food structures to suit changing tastes and needs for millennia Ø Clean clothes. straighter hair Ø Intelligent deodorant Ø Healthy ice creams Ø Ø Benefits:Ø Better customer satisfaction by providing them latest technology products Ø Adaptability to changing trends in market Ø Higher competitive strength Ø Increased Product portfolio .PRODUCT INNOVATIONS Ø Plan:Ø Create health-promoting products (Low Calories. less water Ø Smoother.
ECONOMIC DEVELOPMENT Ø Plan:Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Promoting biodiversity & alleviating poverty in various rural areas Empowering women through micro enterprises Unilever Foundation for Education & Development Creating rural entrepreneurs Ø Benefits:Market penetration in rural areas Economic development Creating company image Building trust in minds of customers Ø .
FOCUS ON SERVICE Ø Plan:Ø Customer feedback is the best way to improve the product Ø Add benefit schemes like discount vouchers for customers who give feedback Ø Get feedback from customers on various products and on nutrition. health and hygiene education. empowering livelihoods and eco-efficiency Ø Ø Benefits:Ø Company image will move from pure product based to product-service based company Ø Customer will feel more valued in turn brand loyalty can be created and maintained Ø Product is better accepted by customer would result in increased sales Ø .
CREATING ALLIANCES Ø Plan:Ø Farmer development program – Support farmers financially to grow key ingredient in a popular Unilever brand Ø Building partnerships with suppliers Ø Tree planting in deprived communities supported by Unilever volunteers Ø Ø Benefits:Ø Cost reduction Ø Strategic alliance with suppliers and farmers will help long term growth Ø Rural/deprived community development .
COST & WASTE REDUCTION Ø Plan:Ø Constantly monitor and re-engineer operations to reduce waste and improve production process Ø Putting palm oil waste to good use Ø Reusing waste plastic to make jewellery & flower pots Ø Ø Benefits:Ø Reduced manufacturing cost & waste would result in high margins and more profit Ø Better utilisation of resources Ø Additional products from waste would add to product portfolio • .
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