ITC Business Portfolio

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Paper & Packaging

Agri Business

Information Technology

FAST MOVING CONSUMER GOODS ( FMCG ) MARKETING

WHAT IS FMCG ?

Also known as Consumer Packaged Goods (CPG) Products with quick turnover & relatively low cost Less thinking by consumers

Absolute profit made on FMCG products is relatively small but they sell in large quantity & earn large profits.
Durable Products; E.g. Soaps, Cosmetics, teeth cleaning products, shaving products etc. Non-Durable Products; E.g. Glassware's, bulbs, batteries, plastic goods etc.

FMCG EVOLUTION

1950s-80s Low Investment in the sector Low purchasing power Govt. emphasis on small scale sector HLL and other companys urbane focus Post liberalization Entry of MNCs Focus shifted to getting to rural consumer first Others, like Nestle, remained with the urban population Latest fad to hit the market is the sachet bug. Mushrooming of regional brands Nirma enters and changes the focus to Value for Money in the 70s Post liberalization, Jyothy Laboratories, Ghari Detergent and Anchor toothpaste giving the nation-wide brands a run for their money.

INDUSTRY SEGMENTS

Personal Care. Household Care.

Branded and Packaged Food and Beverages.

Spirits and Tobacco.

INDUSTRY CHARACTERISTICS

Branding. Distribution Network. Contract manufacturing.

Large Unorganized Sector.

MARKET PLAYERS IN INDIAN FMCG SECTOR

Domestic Players:ITC Limited Marico Nirma Limited Jyothy Laboratories Ltd.

Foreign Players:Cadbury India Limited Cargill Coca Cola Colgate Palmolive India Hindustan Unilever Limited Nestle India Limited P&G PepsiCo

TRENDS IN FMCG SECTOR

The FMCG sector has been registering double-digit growth in sales since the last couple of years. Currently, with annual revenues of US$ 14. 74 billion, it is the one of the most promising sectors. The FMCG sector is witnessing rapid growth in rural areas and is estimated to grow by 40 per cent compared to the growth of 25 per cent in urban areas. PepsiCo has announced a US$ 500 million investment in India over the next three years. FMCG companies have acquired about 15 companies and have spread their presence in more than a dozen countries.

INTRO

Design and manufacturing

Low

capital intensity Technology 3 party manufacturing

Marketing and distribution

High

initial launch cost Limited mass media options Huge distribution network

India's FMCG sector is the 4th largest sector in the economy and creates employment for more than 3 million people in downstream activities. The FMCG Industry remained insulated from inflation led demand slowdown.

reduction

in packaging cost and changes in product

mix

WHY INDIA?
1.

Large Domestic Market:Large Consumer Goods Spender:Low Penetration & Low per Capita consumption :Changing Lifestyles:Retailing New growth area Demand & Supply Gap

2.

3.

4.

5.

6.

INDIAS COMPETITIVENESS & COMPARISON WITH WORLD MARKET

1.

Materials Availability:Presence across value chain

2.

3.

Labour cost comparison:

Leveraging The Cost Advantage:- e.g. P & G outsourced Vicks Vaporub to Australia, Japan etc. from Hyderabad

4.

5.

FMCG VS. INDUSTRIAL MARKETING

Industrial Marketing
Relationship driven Maximize value of relationship Small focused target market Multi-step Buying process, longer sales cycle Rational buying decision based on business value

FMCG
Product Driven Maximize value of transaction Large target market Single-step Buying process, shorter sales cycle Emotional buying decision based on status, desire or price

SWOT Analysis

Strengths:
Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well-known brands in FMCG sector

Weaknesses:
Lower scope of investing in technology and achieving economies of scale, especially in small sectors Low exports levels "Me-too products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market.

Opportunities:
Untapped rural market Rising income levels Large domestic market- a population of over one billion. Export potential High consumer goods spending

Threats:
Removal of import restrictions resulting in replacing of domestic Brands Slowdown in rural demand Tax and regulatory structure

PORTERS 5 FORCES MODEL:

GROWTH PROSPECT:
Large market Spending pattern Changing profile and mindset of consumer

Money

for Value rather than Value for Money.

A. C. Nielsen 71% of Indians take notice of packaged goods' labels containing nutritional information compared to two years ago which was only 59%.

Chart Title
1700 1600 Total population (in billions) 1500

1400
1300 1200 1100 1000 2000 2010 2020 2030 2040 2050 India China

MARKET SEGMENTATION

Geographic Demographic Social and Economic

Behavioral

GEOGRAPHICAL

Zone region- nearest zone will be targeted first Villages and town- helps to analyze marketing strategy

Density
Climate

DEMOGRAPHIC

Age- children or adult Gender-male or female

SOCIO-ECONOMIC

Income group- high, medium or low Social and Economic- Education (illiterate, literate , highly literate), social class

BEHAVIORAL

Occasions ( Diwali, Deshehra, Eid) Brand loyalty (rural area people are more brand loyal)

MARKETING STRATEGY
Direct on-screen marketing (e.g. Harpic) Power brand strategy (Include those brand that have maximum pulling power and growth e.g. lifebuoy soap) Power brand extension (e.g. lifebuoy talcum powder) Exit from non power brand Using India as a brand

1. 2.

3.
4.

Small size packet strategy Pricing strategy Mark up Go- deterring (e.g. bingo chips) Competitor based Product bundling Same value, size increase Same value, size decrease (e.g. society tea)

TARGET MARKET
Differs from product to product examples: 1. Mc Donald's Youth 2. Vim bar - Housewives 3. Pepsodent Kids 4. Kellogg's Previously kids now adults too 5. Sugar free Age group of 35 and more

ADVERTISEMENT

Huge investment on advertisement Frequent broadcast Specially during peak hours During live matches During popular TV shows Target TV channels ( M TV, V TV) Through banners, posters, trial packs, events, hoardings, radio etc. Based on Market Research

WHY ADVERTISEMENT?

As a reminder To inform about our product To show the success of brand To attract the customers To hamper the unsecured mind of consumer (e.g. saffola,dettol) To arise the need purposely To attach consumer emotionally with product To show facts and figures of products

MESSAGE DELIVERY
Surf excel for washing machine Vim bar gel Gillette razor Bingo chips Happy dent chewing gum Bourn vita, Horlicks Pepsodent, Colgate Pepsi, sprite, coca-cola

WHY PRODUCT LINE EXTENSION IS DONE?

According to the need of consumer

To avoid the loss of product diversification To balance the profit through product line

To avoid penetration by competitor ( perk glucose)

PACKAGING

Attractive packs Vibrant colors Pack will show the important feature of product Protective packaging( bru coffee) Size wise packing (Navratna oil and Colgate) According to segmentation of Market Packaging should be enhanced time by time Affordable packs ( coca cola 200 ml).

LATEST SCENARIO IN FMCG MARKET

Increasing per year with the growth rate of 9 percent Price of raw materials are decreasing

Cost of machinery required for consumer goods are less then durable goods.

HOW TO EXCEL?
De-verticalization Rural marketing Distribution Brand managers to business managers

MARKET OPPORTUNITIES
Vast rural market Export - Leveraging the Cost Advantage Sectoral Opportunities

Dairy Based Products

India is the largest milk producer in the world, yet only around 15 per cent of the milk is processed. The organized liquid milk business is in its infancy and also has large long-term growth potential. Even investment opportunities exist in valueadded products like desserts, puddings etc. Only about 10-12 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry. The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates around 50 per cent. With rise in per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller packs are also likely to drive potential up trading. Indian tea market is dominated by unorganized players. More than 50% of the market share is capture by unorganized players highlighting high potential for organized players.

Packaged Food

Oral Care

Beverages

ADVANTAGE INDIA
Governmental policy Central and state initiatives FDIs