FMCG Marketing

Market Applications & Practices Session 2 Sonal Dabke

MARKETS are changing and so marketing must also change. As the days of mass marketing draws to an end, marketing needs to move from a command and control to a connect and collaborate mindset that relies on customer engagement, dialogue and collaboration.

Fast Moving Consumer Goods (FMCG) Alternatively called as CPG (Consumer packaged goods) industry Products that are sold quickly at relatively low cost.

Generally sell in large quantities

Absolute profit may be small but cumulative profit can be large. Replaced or fully used up over a short duration

Fast Moving Consumer Electronics (FMCE)

Innovative products electronic

Replaced more frequently than other electronic products Mobile phones, MP3 players, digital cameras, GPS Systems, and laptop computers

Neutraceuticals The New age

Fast Moving Health care Goods (FMHG) Essentially foodproducts and derivatives which have a health promoting or medicinal value Functional Foods, dietary suppliments, sports & energy products etc. Positioned as strong line of defence against lifestyle illnesses and ailments

Neutraceuticals
1989 Dr. Stephen Defelice Founder & Chairman of the foundation for innovation in medicine Traditionally available in forms similar to other pharmaceutical products New generation Neutraceutical productsprobiotic drinks & yoghurts available in supermarkets

Neutraceuticals
Main ingredients are Neutrients, herbal products and dietry supplements

Neutraceuticals
Genetically oxidents engineered foods with anti

Herbal & organically grown foods Foods for vitality; sports and energy products

Food with medicinal value

Dietary suppliments & vitamins

Neutraceutical manufacturing

companies
Raptacos Brett & Co Ltd Mumbai :Threptin Biscuit

Pfizer Ltd : Protinex

Dabur India : Chawan Prash Himalaya Herbal health care Amway Wockhardt

Common FMCG products

Food and dairy products
Glassware Paper products Pharmaceuticals Consumer electronics packaged food products

Common FMCG products

Plastic goods
Printing and stationery Household products Photography drinks etc. Confectionaries

Leading

FMCG companies &

Brands

FMCG industry economy

FMCG industry is regarded as the fourth largest sector in India with total market size of Rs 450 Bn (2006) FMCG Sector in India is estimated to grow 60% by 2010. (Report by HSBC)

FMCG Industry Economy

Per capita consumption is the lowest in the world Demand for new generation products at reasonable & affordable prices Changing Lifestyles and higher disposable income will fuel the demand for branded products

Source India Today - R K Swamy BBDO Guide to Urban Markets

Rank

Towns

Average Monthly Spending on FMCG Products* in Rs. 3,418 2,955 2,886 2,869 2,816 2,804 2,684 2,674 2,596 2,533

1 2 3 4 5 6 7 8 9 10

Chandigarh Greater Mumbai Chennai Ahmedabad Vadodara Pune Coimbatore Ludhiana Faridabad Hyderabad

Growth Drivers
Growth witnessed in both rural as well as urban areas Business aquisitions & focus on efficiencies along with strong demand will drive the growth Rapid urbanization, increased literacy levels, and rising per capita income.

Growth Prospects

12.2% of the world population in the villages of India Increased focus on farm sector will boost rural incomes

Better infrastructure facilities will improve their supply chain Low per consumption capita

Growth Prospects
Urban India
66% of total FMCG consumption, Home and personal care category, including skin care, household care and feminine hygiene

Rural India
34% of total FMCG consumption, More than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages.

Go Rural !!!
70% of Indian population in 627,000 villages Two big Indian companies HUL & ITC Toothpaste, hairoils & shampoos are the highest growing categories Growth of shampoos was 30.8% in rural India vis a vis 11% in urban India Drastically lower penetration levels

ITC's Agri Business Division

Choupal Saagar

Choupal Fresh

Choupal Pradarshan Khet

Innovation !!!

Innovation and not price war will be the key driver Innovation in product, distribution, marketing and creating brand names e.g. ITC e-choupal network Hiking add spends Rationalizing brand portfolios

Pricing strategies
High decibel promotional campaigns

Innovations by Marico
Parachute Advanced Revitalizing Hot Oil. Cooling Hair Oil under the Nihar & Parashute Brand Extend the Saffola brand into functional foods category
Low sodium salt Saffola Rice (Low GI Index) Saffola Zest (Baked Snax) Saffola Atta Mix

Acquisition!!!
Dabur acquired Balsara, Fem Care P&G Acquired Gillette HULsAcquisitionsofBrookBond,Quality,Kissanetc GodrejBoughtKeylinesBrands(UK) Marico acquired Nihar from HUL, Code 10 (Colgate) Wipro acquired Chandrika Soap Godrej eyeing Sara Lee stake Kraft and Nestle are eyeing Cadburys EmamiintalkswithGodrejHersheys(Jumpin&XS) Emami , WIpro, Marico & GCPL want to acquire Simple Skin Care Brand (UK)

Why?...
Cheap exercise Time Constraints Diversification of Portfolio or complementing current portfolio

Why?
Size or Scale related
Increased turnover Increased market share Increased market capitalization Presence on the world map

Enhanced Distribution Economies of scale

Someareasofconcern.
Overlap / Sales Cannibalization More Brands less power. HUL has decided to divest and concentrate on 30 Super Brands

Indian Competitiveness and Comparison with

the World Markets

Availability of raw materials Labor cost comparison

Presence chain

across

value

Amul supplies milk as well as dairy products like cheese, butter, etc.

Top 10 FMCG Companies

Hindustan Unilever Ltd. ITC (Indian Tobacco Company) Nestl India GCMMF (AMUL) Dabur India Procter & Gamble Hygiene and Health Care Marico Industries Asian Paints (India) Cadbury India

Britannia Industries

The Secondary Players

Scenario Change since 1991

Market Size in $ million Market Share in % Indian Indian Compani Compani es MNCs es MNCs 1992 2004 100 0 52 48

1992 Breakfast cereals Wafers, potato chips Washing Machines TV 2

2004 25

35

100

37

63

40 630

570 3030

98 97

2 3

51 49

49 51

1992 $=30 rupees 2004 $=45 rupeesSource: Center for Monitoring Indian Economy (CMIE)

Analysis of FMCG Sector

Strengths
Low operational costs Presence Presence FMCG of established distribution

networks in both urban and rural areas

of well-known brands in

sector

Analysis of FMCG Sector

Weaknesses
Lower scope of investing in technology and
achieving economies of scale, especially in small

sectors
Low exports levels Limited exposure to oversees markets

Analysis of FMCG Sector

Opportunities:
Untapped rural market
Rising income levels, i.e. increase in purchasing power of consumers By 2015, Indians under 20 are estimated to make up 55% of the population

Large domestic market- a population of over

billion.

one

Analysis of FMCG Sector

Opportunities:
Export potential High consumer goods spending Highly fragmented market with roughly half the market going to unbranded, unpackaged home

made products.

Analysis of FMCG Sector

Threats:
Removal
of import restrictions resulting in replacing of domestic brands Dependence on agriculture and monsoon for rural

demand
The increased scale of operations of retailers is shifting the bargaining power from FMCG companies to retailers.

Analysis of FMCG Sector

Threats
"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.

The growing adoption of private labels in the

household care segment

Think of it ................
Most commodities in the retail market such as milk, salt, water, atta have made their mark in the market due to their brand names. But it is a wonder that sugar has not taken any packaged format till now........ Shagun Triveni Engineering Originale -Modi Sugars Trust -Simbhaoli Sugars

Indian Consumer Class

Dealing with many small markets at one time

High distinctiveness in demand Different social customs and food habits Several religious and personal beliefs

Indian Consumer Class

Youngest population amongst the major countries Different income categories.

15 official languages

population of over 1 billion and 4 climatic zones

The Indian Consumer

Indian consumer class can be classified according to the following criteria: 1. Income 2. Socio-Economic status 3. Age demographics 4. Geographical dispersion

Income
5 groups on the basis of annual household income

1. Higher income
2. Upper middle income 3. Middle middle income 4. Lower middle income 5. Lower income

Income Classification

Does not represent a real scenario for an international business

Purchasing power of currencies differs significantly. Consumption and ownership trends in the economy do not completely depend on the income

Consumer Classification

National Council of Applied Economic Research (NCAER) there are 5 consumer classes
The Rich The Consuming Class The Climbers The Aspirants The Destitute

Consumer Classification

Consumer Classes The Rich The Consuming Class The Climbers The Aspirants The Destitute Total

Annual Income in Rs. Rs. 215,000 and more Rs 45215,000 Rs. 22-45,000 Rs. 16-22,000 Below Rs. 16,000

1996 1.2 32.5 54.1 44 33 164.8

2001 2007 Change 2 54.6 71.6 28.1 23.4 180.7 6.2 416.00% 90.9 179.00% 74.1 37.00% 15.3 -65.00% 12.8 -61.00% 199. 2 21.00%

Factors responsible for choice of FMCG Products

Others 1% Dabur Lal 4%

Pepsodent 36%

Close up 27%

Colgate 33%

Awareness of Different Brands of Tooth Paste

Factors responsible for choice of FMCG Products

Others 2% Dabur Lal 2% Close up 25%

Pepsodent 37%

Colgate 34%

Present Brands Being used

Factors responsible for choice of FMCG Products

News Paper 7% Internet 2% Others 14%

Peer Group 14% Tv Advt 63%

Source of Brand Knowledge

Factors responsible for choice of FMCG Products

Regular 30% Both 29%

Gel 41%

Preference of Flavours
Case Study published in Indian Journal of Marketing August 2009

Inference...........
3 main factors

Total Dental Care

Decay Protection, Stronger teeth, Fight germs, fresher breath, health gums, white teeth Taste, flavor, color, foam

Product Features

Price Consciousness

Price, scheme, packaging

Points to be addressed .....

Customer evaluates a brand based of various factors Customer exhibits some amount of Brand Loyalty but why........?

Hence the need to highlight the core product features with a value addition keeping in mind the need of the customer while making the product

Points to be addressed .....

Advertisement not effective unless the product can meet the innate need of the customer Message content needs to be strong A new P called Perception , if strong then it increases Brand Loyalty

Marketing Strategies
Creating Winning Brands Brand Mantra & Positioning Marico Industries Saffola : Brand Mantra :
Good for the heart www.saffolalife.com Dial a dietician- 1800-22-2929

Positioning
Dil ko rakhiye jawan 70% rice bran oil 30% safflower oil

Brand: Saffola Gold

Agency: McCann-Erickson (India) Ltd.

The film opens on a couple walking along a road when a man comes and runs away...

with the ladys bag. Her husband runs after the stealer but soon gets exhausted.

An old man sitting nearby sympathizes with the mans stamina. Gasping for breath.

...our man tells his wife, bach gaya mere haath se. Haath aa jata toh main Lootere!

TVO: Waqt hai Saffola Gold...

...apnane ka. Yeh cholestrol ghatane mein madad kare. Saffola Gold. Dil ko rakhiye jawaan.

Branding Strategies
Flanker Brands
A flanker brand is a Line extension by the

company Competes in the category without damaging the existing items market share by targeting a different group of consumers. Fighter branding or multi-branding E.g. Wheel, P& G Luv Diapers, Tide Naturals, Sweekar oil, Thums up A companys brands should attract customers from competing brands and not each other.

Branding Strategies

Advantages of Flanker Brands

Gain more shelf space for the company

Increases retailer companys brands.

dependence

on

the

Capture brand switchers Protects the company in case of product failure Prevents the dilution of main Brands equity

Branding Strategies
Cause Related Branding
Not just a solution provider but also projected in the framework of social marketing

Paras Pharma's Moov and Dermicool, Tata tea, P& G

HUL, ITC

Cause Related Branding

Jerry Welsh, a Sr. Vice President of American Express, first coined the phrase Cause Related Marketing in the 1980s while raising money for the restoration of the Statue of Liberty in New York City. American Express pledged to donate one cent towards the restoration of the Statue for each use of its card and a dollar for each issue of new card. This yielded amazing results American Express donated $1.7 mn towards the restoration; also, there was a 28% increase in card usage by American Express cardholders along with a 45%

Brand Revitalization Strategy

Causes
Positioning looses relevance eg Dalda, Core values become redundant eg Lifebuoy Hackneyed Imagery eg Liril (Karen Lunel)

What to do?
New Brand Associations e.g. Brylcream 'Style is for everyone', Wheel Lemon Fresh Brand New Elements eg Britannia created a new logo, new tagline- 'Eat healthy, think better' New Varients glucose eg Tiger

Positioning of competing brands eg Robin Blue & Ujala

Brand Revitalization Strategy

Repositioning
Brand in the decline stage Eg Lifebuoy- Koi Dar Nahi' was repositioned to target a more upmarket segment Further enhancements by using new associations and elements eg 'neem & tulsi', 'Swine flu se darne ka nahi ladne ka' Eg Cadbury's-Chocolates as Deepavali gift

Pricing Strategies

Psychological Pricing
Discount Pricing Captive Product Pricing Bundled Pricing

Marketing Strategies : Advertising

Out-of Home Advertising
Advantages:
Wide coverage of local markets Frequency Geographic flexibility

Out-of Home Advertising

Dis -advantages:
Short exposure time Quick Wear out

Measurement problems
Blind spot effect

Impact
Ability to create awareness Avoiding zipping & Zapping

Media/Origin: OOH / Indian Product Group: Beverages Brand: Horlicks

Media/Origin: OOH / IndianProduct Group: Cosmetics | Toiletries | Personal care Brand: Garnier

Media/Origin: OOH / Indian Product Group: Cosmetics | Toiletries | Personal care Brand: Fiama Di Wills

Media/Origin: OOH / Indian Product Group: Beverages Brand: Red Bull

FMCGTheRoadAhead
Excellence in operations - through Value Chain De-Verticalisation
Asset Light FMCG Company and an Asset Heavy Supply Chain Company

Rural marketing Value / Volume Focus

Distributions
Reduce Intermediaries

Increase sales by driving channel width

Brand managers to Business managers

"Only the Paranoid Survive " .........Andy Grove