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A Dissertation Report on

Current Trend in FMCG India

In the partial fulfillment of degree of Master of Business Administration


Submitted By Hatim Saifee Lakdawala
(Marketing)
Subject code: 402
Under The Guidance of
Prof. V. K. Punni.
Submitted to
Arihant Institute of Business Management, Pune
(2013-2015)

DECLARATION

I Hatim Lakdawala hereby declare that this Dissertation Report entitled

Current Trend in FMCG India


Submitted for the award of the master of Business Administration (MBA) Degree, to
the University of Pune, is a bonafide piece of research work carried out by me and
no part of this thesis has been submitted earlier, either to this university our any
other institution for fulfillment of the requirement of any Degree or Diploma.

Hatim Lakdawala

ACKNOWLEDGEMENT

I sincerely acknowledge the valuable and morale support offered by


our project guide Prof. PUNNI (Prof. AIBM), Mr. JAGDISH KALE (DM).
Due to his key interest and academic attitude I am able to complete my live
project. I take immense pleasure in completing this project and submitting
the interim project report.
I am thankful to our Director Dr. G R Shekapure Library Staff and
Administrative Staff of the Arihant Institute Of Business Management.

I would like to thank each and everyone who supported and helped me
to complete this project during the entire period.

Hatim Lakdawala

Arihant Education Foundations


ARHANT INSTITUTE OF BUSINESS MANAGEMENT,
S.NO. 276/1/2, 278/2, Bavdhan (Bk), Pune-411021
MBA- ACADEMIC YEAR 2013-15

CERTIFICATE
This is to certify that Mr. Hatim Lakdawla is a bonafide student of MBA course of this
institute for batch 2013-2015.
He/ She has undertaken and completed the project work as prescribed by University of
Pune for partial fulfillment of MBA degree as per details below:

Topic - Current

Prof. V. K. PUNNI
(Project Guide)
External Examiner
Place: Pune
Date:

trend in FMCG India

Dr. G R Shekapure
( Director)

SR.

TOPIC

PAGE NO.

Abstract

Executive Summary

Introduction

1
2
4

Literature Review

12

Industry Profile

Objective

Scope of Research

11

Research Design

12

Finding

13

Conclusion

14

Bibliography

17
30
31
32
36
37
38

NO.

Abstract:

FMCG goods are popularly known as consumer packaged goods. Items in this category include
all consumables (other than groceries/pulses) people buy at regular intervals. The most common
in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,
packaged foodstuff, and household accessories and extends to certain electronic goods. These
items are meant for daily of frequent consumption and have a high return.
FMCG brands would need to focus on R&D and innovation as a means of growth. Companies
that continue to do well would be the ones that have a culture that promotes using customer
insights to create either the next generation of products or in some cases, new product categories.
One area that we see global and local FMCG brands investing more in is health and wellness.
Health and wellness is a mega trend shaping consumer preferences and shopping habits and
FMCG brands are listening. Leading global and Indian food and beverage brands have embraced
this trend and are focused on creating new emerging brands in health and wellness.

Executive Summary:

The fast moving consumer goods (FMCG) segment is the fourth largest sector in the Indian
economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011 to
US$ 74 billion in 2018.Food products is the leading segment, accounting for 43 per cent of the
overall market. Personal care (22 per cent) and fabric care (12 per cent) come next in terms of
market share. Growing awareness, easier access, and changing lifestyles have been the key
growth drivers for the sector.

Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged
goods. Items in this category include all consumables (other than groceries/pulses) people buy at
regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste,
shaving products, shoe polish, packaged foodstuff, and household accessories and extends to
certain electronic goods. These items are meant for daily of frequent consumption and have a
high return. The Indian FMCG sector is the fourth largest sector in the economy with a total
market size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a
well-established distribution network, intense competition between the organized and
unorganized segments and low operational cost. Availability of key raw materials, cheaper labor
costs and presence across the entire value chain gives India a competitive advantage. The FMCG
market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration
level as well as per capita consumption in most product categories like jams, toothpaste, skin
care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian
population, particularly the middle class and the rural segments, presents an opportunity to
makers of branded products to convert consumers to branded products. Growth is also likely to
come from consumer 'upgrading' in the matured product categories. With 200 million people
expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of
investment in the food-processing industry.

According to a study by TMW and Marketing Sciences that surveyed 2,000 people
across different age groups ranging, young consumers are the most rational and likely to spend
more time weighing up potential purchases. The survey also suggests that younger people are
using recommendations from their peers about products and services in order to make rational
purchase decisions. According to the study, shoppers aged 18 to 24 are 174 per cent more likely
to use recommendations on social media than shoppers aged 25 and over.Another key factor
today is speed. Today's consumer wants packaged goods that work better, faster, and smarter.
The need for speed" trend highlights the importance of speed as a potentially decisive purchase
factor for packaged goods products in a world where distinctions between products are shrinking.

Younger consumers express the greatest need for speed, not a huge surprise for the Smartphone
generation. Data monitors 2013 Consumer Survey found that younger consumers those in the
15-24 year old age group were twice as likely to say that "results are achieved quickly" has a
"very high amount of influence" on their health and beauty product choices than consumers in
the oldest age group, those aged 65 or older. Speed matters, and 2014 will almost certainly see
the introduction of new game-changing timesavers.

Introduction:

The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1
billion. Well-established distribution networks, as well as intense competition between the
organized and unorganized segments are the characteristics of this sector. FMCG in India has a
strong and competitive MNC presence across the entire value chain. It has been predicted that
the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003.16 The
middle class and the rural segments of the Indian population are the most promising market for
FMCG, and give brand makers the opportunity to convert them to branded products. Most of the
product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita
consumption as well as low penetration level, but the potential for growth is huge.20 The Indian
Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased
literacy levels, and rising per capita income. The big firms are growing bigger and small-time
companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the
top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies
own these 62 brands, and 27 of these are owned by Hindustan UniLever. Pepsi is at number three
followed by ThumsUp. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), CocaCola (8) and Parle (9). These are figures the soft drink and cigarette companies have always
shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest
categories in FMCG. Between them, they account for 35 of the top 100 brands. The companies
mentioned here are the leaders in their respective sectors. The personal care category has the
largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds.
There are 11 HUL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal care
category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the personal
care category. ITC alone accounts for 60% volume market share and 70% by value of all filter
cigarettes in India. The foods category in FMCG is gaining popularity with a swing of launches
by HUL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637
crore. Nestle and Amul slug it out in the powders segment. The food category has also seen
innovations like softies in ice creams, chapattis by HUL, ready to eat rice by HUL and pizzas by
both GCMMF and Godrej Pillsbury. This category seems to have faster development than the
4

stagnating personal care category. Amul, India's largest foods company, has a good presence in
the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks
in the top 100 FMCG brands, dominates the biscuits category and has launched a series of
products at various prices. In the household care category (like mosquito repellents), Godrej and
Reckitt are two players. Good knight from Godrej is worth above Rs 217 crore, followed by
Reckitt's Mortein at Rs 149 crore. In the shampoo category, HUL's Clinic and Sunsilk make it to
the top 100, although P&G's Head and Shoulders and Pantene are also trying hard to be
positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top five FMCG
companies in India and is a herbal specialist. With a turnover of Rs. 19 billion (approx. US$ 420
million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur Chawanprash, Vatika, Hajmola
and Real. Asian Paints is enjoying a formidable presence in the Indian sub-continent, Southeast
Asia, Far East, Middle East, South Pacific, Caribbean, Africa and Europe. Asian Paints is India's
largest paint company, with a turnover of Rs.22.6 billion (around USD 513 million). Forbes
Global magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World.
Cadbury India is the market leader in the chocolate confectionery market with a 70% market
share and is ranked number two in the total food drinks market. Its popular brands include
Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380 Million) Marico
is a leading Indian group in consumer products and services in the Global Beauty and Wellness
space. The Indian fragrances market generated total revenues of $25.6 million in 2009,
representing a compound annual growth rate (CAGR) of 9% for the
period spanning 2005-2009.
The Indian hair care market generated total revenues of $1.4 billion in 2009, representing a
compound annual growth rate (CAGR) of 15.4% for the period spanning 2005-2009.
The Indian make-up market generated total revenues of $141.6 million in 2009, representing a
compound annual growth rate (CAGR) of 12.9% for the period spanning 2005-2009.
The soap and detergent industry covers laundry and toilet soaps and synthetic detergents in the
form of liquids, powders and bars. These are consumer products and their quality, price,
marketing and distribution network determines the success of the units in the sector. The industry

has developed both in the small scale sector and organized sector. The manufacture of detergents
and toilet soaps has been deli censed

The Indian personal care market is estimated to be worth US$ 4 Billion (approx. Rs. 20,000
crore) this includes Bath and Shower products, HairCare, Skin Care, Cosmetics, Fragrances and
Deodorants. Bar Soaps also has grown at a growth rate of 5% per anum over the last 5 years and
stands at market size of US$ 1.5 billion (approx Rs. 7500 crores).
The overall Indian personal care market has the potential to grow at 15-16% per annum and
thereby double to US$ 8 billion (approx 40,000 crore)by 2012.
Global turnover of Essential Oil Industry business is estimated to around US$14 billion. In this
turnover Indias share is just about 10% though potential is much more. Based on population
ratio, the potential is estimated to be 18%. The lack of coordination is responsible for not
exploiting the potential to the full extent. There are 400,000 plant species of both aromatic and
medicinal plants known to the scientists. Of these about 2000 species come from nearly 60
botanical families of essential oils. Total production of essential oils in the world is over 100,000
tones. Indias share is estimated to be about 15%. This is almost stagnant for quite some time due
to a variety of reasons.
Aromatherapy is one of the more popular natural therapies across the globe Essential Oils,
which are extracted from flowers, fruits, roots, resins and leaves are some of the earliest recorded
medicines.
More than 300 essential oils are in use today. Essential oils contain on average 100 chemical
components and have myriad functions. Some are antibacterial, antiseptic or digestive while
others are antidepressant.
The major drivers for Essential oils and perfumes are Other Mint oils, Peppermint Oil ( Mentha
Piperita), Perfumes and Perfumery Compounds, Other perfumes and Toilet Waters and Synthetic
Perfumery compounds.

THE TOP 10 COMPANIES IN FMCG SECTOR

1. Hindustan Unilever Ltd.


2. ITC (Indian Tobacco Company)
3. Nestl India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10. Marico Industries

The personal care category has the largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy,
Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs. 3,799
crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG
sales, and just below the personal care category. ITC alone accounts for 60% volume market
share and 70% by value of all filter cigarettes in India.The foods category in FMCG is gaining
popularity with a swing of launches by ITC, Godrej, and others. This category has 18 major
brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The
food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat
rice by HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have
faster development than the stagnating personal care category. Amul, India's largest foods
7

company, has a good presence in the food category with its ice-creams,curd, milk, butter, cheese,
and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and
has launched a series of products at various prices. In the household care category (like mosquito
repellents), Godrej and Reckitt are two players. Goodnight from Godrej, is worth above Rs 217
crore, followed by Reckitt's Mortein at Rs 149 crore. In the shampoo category, HLL's Clinic and
Sunsilk make it to the top 100, although P&G's Head and Shoulders and Pantene are also trying
hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top
five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion
(approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur
Chyawanprash, Vatika,Hajmola and Real. Asian Paints is enjoying a formidable presence in the
Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific,Caribbean, Africa and
Europe. Asian Paints is India's largest paint company, with a turnover of Rs.22.6 billion (around
USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best
Small Companies in the World Cadbury India is the market leader in the chocolate confectionery
market with a 70% market share and is ranked number two in the total food drinks market.Its
popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion
(USD 380 Million) Marico is a leading Indian group in consumer products and services in the
Global Beauty and Wellness space. Indias GDP unlike that of other emerging developing
countries has a bigger consumer percentage than investment. This is because Indias economic
growth model has not followed the traditional export growth model of the other countries in Asia
like China. This makes India more resilient to external shocks like the Lehman crisis and
provides a more domestic orientation to growth. India has one of the fastest growing economics
in the world and as the per capita income increase consumer companies in India are reaping
outsized rewards. India has a competitive consumer goods market with a number of domestic
and international companies competing in multiple markets and segments. Some of the
companies like HLL which is a subsidiary of the global consumer giant Unilever has become an
Indian company all but in ownership. Fast Moving Consumer Goods (FMCG) companies are
different from Consumer Durables companies. FMGC companies are what is known as
Consumer Non-Discretionary Group of Companies. These Companies sell products of everyday
use and are recession proof in the sense that the products sold by FMCG Manufacturers cant be
ignored even in times of economic recessions. Fast Moving Consumer Goods Companies have
8

been expanding rapidly in the Indian market and and are set to grow to the next level as Indias
middle class grows bigger and bigger and the existing middle class becomes richer. Indias Fast
Moving Consumer Goods Stocks form a great defensive investment class.T hey not only have
defensive characteristics but also growth as well. Indias FMCG sector is expected to grow by
more than 100% in the next 5-6 years as more and more consumers move from unorganized part
of the industry to the organized industry. Though competition has been fierce in Indias Non
Discretionary Consumer Goods Industry with the P&G and Unilever Price War in the Detergent
Segment, the Industry has seen its share of winners with Nestle, Colgate being multiages in the
last 10 years giving huge returns to investors. These stocks trade at high multiples justified with
their very high returns, strong brands and low investment requirements. ITC Ltd. With a
market capitalization of Rs.137, 000 crores, ITC is one of Indias foremost private sector
companies. While ITC is an outstanding market leader in its traditional businesses of Cigarettes,
Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its
nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and
Stationery. ITC is one of the countrys biggest foreign exchange earners (US $ 3.2 billion in the
last decade). The Companys e-Choupal initiative is enabling Indian agriculture significantly
enhance its competitiveness. It earned revenues of Rs.5,000 crores & a net profit margin of 25%
in December 2010. Hindustan Unilever Ltd. - HUL is Indias largest Fast Moving Consumer
Goods Company with categorized business like soaps, detergents, shampoos, skincare,
toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers.
With a market capitalization of Rs. 61,000 crores, the Company is a part of the everyday life of
millions of consumers across India. The company earned revenues of Rs. 5,000 crores with a net
profit margin 12%. Its parent company is Unilever, which holds about 52 % of the equity. Its
portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair
& Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe,
Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit. Nestle Ltd. Nestle India is a
subsidiary of Nestle S.A. of Switzerland. With a market cap of Rs.35, 000 crores it operates with
seven factories and a large number of co-packers. The main business includes manufacture of
Milk products. It specializes in infant food, while the other products in this range are ghee, dahi
& dairy whitener. It also has a diversified product chain like prepared dishes & cooking aids
the major one being Maggi, others are sauces, pasta, beverages like coffee & iced and instant tea.
9

Nestle is also known for its chocolate & confectionery range the major brands being Kitkat, polo
& bar-one. The sale is not only limited to India but also abroad. The company marked a steady
growth in 2010 with Rs. 1,000 crores as revenues & a net profit margin of 15%. It has been
acknowledged amongst Indias Most Respected Companies and amongst the Top Wealth
Creators of India. United Spirits Ltd. - The Company was earlier known as the McDowell & Co.
The market cap of the company is Rs 13,000 crores with revenues of Rs.1,000 crores & 6% net
profit margin in Dec 2010. United Spirits Limited (USL) is the largest spirits company in India
and second largest spirit company in the world. It enjoys a strong 59% market share for its first
line brands in India. The company has 20 millionaire brands (selling more than a million cases
per annum) with Whyte & Mackay and Bouvet Ladubay being its 100% subsidiaries. The
leading brands are Antiquity, Black Dog, Royal Challenge, Signature, Bagpiper, McDowells
No.1. The company is known for creating new benchmarks in blends and packaging in the global
spirits industry. Dabur India Dabur India Limited is the fourth largest FMCG Company in India
with Market Capitalization of Rs.16,000 crores. Dabur operates in key consumer products
categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care & Foods. For the past
125 years, the company has been dedicated to providing nature-based solutions for a healthy and
holistic lifestyle. They touch the lives of consumers, in all age groups, across all social
boundaries. Dabur specializes in Ayurvedic products. Some well known in the category are
Chyawanprash, baby medicines Janam-Ghutti & gripe water, Hajmola, Glucose-D
&Pudinhara. It earned a revenue of Rs.900 crores & a net profit margin of 14% in Dec10.
Colgate Palmolive (India) Ltd. With Rs.11,000 crores as the market capitalisation & Rs.500
crores revenues with a net profit margin of 11% in December 2010, Colgate Palmolive Ltd. is a
truly global company serving hundreds of millions of consumers worldwide. Started as a small
soap & candle company, the company is now 200 years old. Colgate is well known for its Oral
care products like toothpastes & toothbrushes. Lately introduced Colgate sensitive toothpaste
takes care of the sensitive teeth. It has also diversified its business into personal care & home
care, professional care trusted by dentists across the country. Godrej Consumer Products Ltd. Rs.350 crores 18%.is a leader among Indias Fast Moving Consumer Goods (FMCG) companies,
with leading Household and Personal Care Products. The major brands are Good knight, Cinthol,
Godrej No. 1, Expert, Hit, Jet, Fairglow, Ezee, Protekt and Snuggy are household names across
the country. With Rs. 11,000 crores as the market capitalization, the company is largest marketers
10

of toilet soaps in the country and is also leaders in hair colors and household insecticides. The
Good knight brand has been placed continues to be the most trusted household care brand in the
country in Brand Equitys Most Trusted Brands Survey 2010. The company has an emerging
presence in markets outside India. With the acquisition of KeylineBrands in the UK, Rapidol and
Kinky Group, South Africa and Godrej Global Mideast FZE, Godrej owns international brands
and trademarks in Europe, Australia, Canada, Africa and the Middle East. Godrej has also
recently acquired Tura, a leading medicated brand in West Africa, Megasari Group, a leading
household care company in Indonesia and Issue Group and Agencies, two leading hair colorant
companies in Argentina. TATA Global Beverages Ltd.- With Rs.6,000 crores as its market
capitalization TATA beverages are No.2 in Tea worldwide. It is a part of the Tata Group. With the
inception of TATA tea in 1983, there is no looking back. The company acquired the Tetley group
UK in 2000 & in 2010 TATA global beverages corporate announced formation of Pepsi JV. Its
famous brands are TATA tea, Tetley, Himalayan water, Good earth. Marico Ltd. - Marico is a
leading Indian Group in Consumer Products & Services in the Global Beauty and Wellness
space. Maricos Products and Services in Hair care, Skin Care and Healthy Foods generated a
turnover of about Rs. 26.6 billion during 2009-10. The company has a market capitalization of
Rs.8,000 crores. Marico markets well-known brands such as Parachute, Saffola, Sweekar, Hair &
Care, Nihar, Shanti, Mediker, Revive, Manjal, Kaya, Aromatic, Fiancee, HairCode, Caivil, Code
10 and Black Chic. Maricos brands and their extensions occupy leadership positions with
significant market shares in most categories- Coconut Oil, Hair Oils, Post wash hair care, Antilice Treatment, Premium Refined Edible Oils, niche Fabric Care etc. Marico is also present in the
Skin Care Solutions segment through Kaya Skin Clinics in India, Middle East and Bangladesh.

Literature Review :
11

1) Challenges persist but green shoots visible in FMCG sector


- By Zee Research Group-Delhi 13 Jan 2015

Major fast moving consumer goods (FMCG) companies have somehow managed to beat the
slowdown blues during the first quarter of current fiscal (Q1FY15). However, it can be termed as
a mixed bag performance on volume growth front.

While, HUL and Dabur registered better volume growth figures, Colgate-Palmolive posted
dismal volume growth in Q1FY15.
During Q1FY15, Hindustan Unilever (HUL), the FMCG giant, has posted a volume growth of 6
per cent. The reported figure of volume growth was above the street expectations of 4-5 per cent.
While in Q4FY14, HUL registered volume growth of 3 per cent, in Q1FY14, it posted a figure of
4 per cent.

Low single digit volume growth of 6 per cent suggests that the operating environment remains
challenging. Even Harish Manwani, chairman, HUL, in the results press release commented,
While we are seeing headwinds on market growth, consumer spending and inflation, we remain
focused on managing the business for long term competitive and profitable growth and
implementing our strategy with even greater rigor.

Similarly, Dabur India posted numbers which were in line with market expectations. Company
reported a volume growth of 8.3 per cent which was in line with street estimates of 8 per cent.
While in Q4FY14, Dabur registered volume growth of 9.4 per cent, in Q1FY14, it posted a
figure of 9 per cent.
However, the underlying volume growth of Colgate-Palmolive has slipped to multi-quarter lows
of 5 per cent (YoY) in Q1FY15. It was expected that Colgate would clock the volume growth of
12

8 per cent. While in Q4FY14, Colgate registered volume growth of 7 per cent, in Q1FY14, it
posted a figure of 11 per cent.
In order to tackle competitive intensity, HUL has reported a 6.2 per cent increase in advertising
and promotion spends (ad spends) to Rs 944.88 crore during Q1FY15 over the corresponding
period last fiscal. While, Colgate has witnessed a 15.9 per cent increase in these spends to Rs
180.55 crore, Dabur has registered a 12.6 per cent increase in ad spends to Rs 286.27 crore.

Looking at the ad spends to sales ratio, Colgates ad spends accounted for 18.99 per cent of sales,
an uptick of 55 basis points over Q1FY14. In case of HUL and Dabur, ad spends as a per cent of
sales has receded in Q1FY15 on YoY basis. While Daburs ad spends as a per cent of sales stood
at 15.36 per cent, down nearly 8 basis points over Q1FY14, HULs ad spends accounted for
12.48 per cent of sales, a downtick of 82 basis points over Q1FY14.
With regards to the outlook on the FMCG demand, nascent signs of an urban recovery can be
witnessed. According to Deutsche Bank, job creation index and consumer confidence index are
showing signs of an uptick which will drive next leg of growth.
Likewise, commenting on the financial performance of Godrej Consumer Products during
Q1FY15, Adi Godrej, chairman, Godrej Group, stated, Quarter one of fiscal year 2015 has been
a particularly challenging one. However, we feel optimistic that the worst is over.

13

2) 2015 may be a year of deal making for FMCG sector


- By Business Standard, 25 Jan 2015

After two dull years in a row, the year 2015 could see a steady
increase in outbound deals in the fast-moving consumer goods (FMCG) space, given that most
top companies in the sector are sitting on huge cash reserves.
Deals already seem to have started flowing, with Godrej Consumer Products acquiring South
Africas Frika Hair for an estimated Rs 75-80 crore earlier this week. This was the companys
fifth acquisition in Africa since it entered the continent nine years ago. The previous ones
included those of Darling Group in June 2011 and a small acquisition in Chile the next year. It
also took over a top-up in the UK in January 2013.
The year 2012 was one of the most active ones in terms of outbound FMCG deals, with Wipro
buying into LD Waxon in Singapore and VLCC acquiring Malaysias Wynn International, among
key transactions. The previous year had been one of the most active in terms of inbound deals,
with Reckitt

Benckiser completing

the

acquisition

of

Ahmedabad-based

Paras

Pharmaceuticals and Jyothy Laboratories buying into Henkel India. The biggest inbound deal,
though, came in 2013-14, when Unilever spent $5.4 billion for a 23 per cent stake in Hindustan
Unilever.
According to advisory firm Grant Thorton, the total value of FMCG deals rose from $47.94
million in 2009 to $947.43 million in 2010, and fell to $366.85 million in 2011. The result:
Companies cash reserves showed a marked rise. The listed FMCG companies in India were
sitting on a combined cash reserve of more than Rs 52,000 crore as of the end of 2013-14.
Companies, primarily the home-grown majors active in the deal market, are looking for
acquisition opportunities.

14

The total reserves of Godrej Consumer Products, which has, over a decade, acquired 13 assets,
eight of those between 2010 and 2012, have seen a four-fold jump to Rs 2,990.32 crore in
2013-14 from Rs 796.65 crore in 2009-10.

Godrej Consumer Chairman Adi Godrej has on several occasions spoken about acquisitions
importance for his company. We remain committed to our three-by-three strategy: Finding good
assets in Asia, Africa and Latin America in the areas of personal wash, hair colour and household
insecticides.
Dabur India, on a
lookout

for

possible
acquisition targets
in

India

and

abroad, had bought


Turkey-based
HobiKozmetik
2010
based

and

in
US-

Namaste

Group in 2011. It
has seen its total
reserves swell by
close to three times
from Rs 662
crore in 2009-10 to Rs 1,727.96 crore in 2013-14. Dabur Chief Executive Officer Sunil Duggal
says acquisitions continue to be on his companys radar. Dabur, too, had been in the race for
ParasPharma. The company has since made no significant buys in the FMCG space.
Marico Chairman Harsh Mariwala, too, has indicated his company is not averse to acquisitions.
And, if the fit is right, the firm could consider acquisitions in its area of operation. It last
acquired the personal care brands of the erstwhile ParasPharma from Reckitt Benckiser in May
15

2012 for Rs 500 crore. Maricos total reserves jumped to about four times between 2009-10 and
2013-14 from Rs 510.73 crore to Rs 1,908.85 crore.
Kolkata-based Emami Group went for a few acquisitions in 2014; it last bought She brand of
sanitary ware, and the edible oil brand Rasoi. Its director, AdityaAgarwal, says the company
continues

to

scout

for

acquisitions

in

the

personal

and

healthcare

segments.

There is renewed optimism in the market. Companies are again looking at growth. When that
happens, M&A (merger & acquisition) activity picks up, given that inorganic growth is quicker
to show than organic. Renewed optimism will mean there will be buyers in the market, and not
just sellers. The past 12-18 months saw only sellers, no buyers. The next 12 months will see at
least some buyers, and distressed assets could be sold, albeit at realistic prices. In the past threefour years, valuation expectations had soared. I see those at realistic levels now, says Technopak
Chairman Arvind Singhal.

Naveen Kulkarni, co-head (research), Phillip Capital, however, believes acquisitions abroad
might not make much sense now, as growth in domestic market is visible. I say this because the
(FMCG) market is slated to pick up by the end of this financial year. It makes sense to partake of
growth here rather than elsewhere, he says.
PinakiRanjan Mishra, patner& national leader (consumer & retail), Ernst & Young, says there
there

will

be

outbound

deals

but

see

inbound

deals

as

bigger

trend.

Many of these companies are debt-free. Hindustan Unilever, Emami, Gillette India, P&G India,
Colgate Palmolive and GSK reported zero debt at the end of 2013-14. Marico reduced its net
debt to Rs 273.39 crore from Rs 652.70 crore the previous year and Rs 334.42 crore in 2009-10.
Daburs net debt dropped to Rs 188.76 crore in 2013-14 from Rs 770.55 crore in 2010-11.
Godrej Consumers net debt declined to Rs 1,668.05 crore in 2013-14 from Rs 1,773.84 crore in
2009-10.

16

Industry profile:
Type of Industry: FMCG Industry

The Fast Moving Consumer Goods (FMCG) Industry in India include segments like cosmetics,
toiletries, glassware, batteries, bulbs, pharmaceuticals, packaged food products, white goods,
house care products, plastic goods, consumer non durables, etc. The FMCG market is highly
concentrated in the urban areas as the rise in the income of the middle-income group is one of the
major factors for the growth of the Indian FMCG market.

The penetration in the rural areas in India is not high as yet and the opportunity of growth in
these areas is huge by means of enhanced penetration in to the rural market and conducting
awareness programs in these areas. The scopes for the growth of the FMCG industry are high as
the per capita consumption of the FMCG products in India is low in comparison to the other
developed countries. The manufacturing of the FMCG goods is concentrated in the western and
southern belt of the country. There are other pockets of FMCG manufacturing hubs.

This is an industry that has proved itself very resilient to recession with the majority of
companies in the sector weathering the financial storm in a way that very few others have
managed. Why? Well, consumers will always need to buy the products created by FMCG
companies. They may not buy big items like refrigerators or cars in a recession, but floors still
need to be cleaned, clothes need to be laundered and aches and pains still need to be soothed.

17

Market size:
Fast Moving Consumer Goods (FMCG) Industry in India is one of the fastest developing sectors
in the Indian economy. At present the FMCG Industry is worth US$ 13.1 billion and it is the 4th
largest in the Indian Economy. These products have very fast turnaround rate, i.e. the time from
production to the revenue from the sell of the product is very less. In the present economic
scenario, time is regarded as money, so the FMCG companies have to be very fast in
manufacturing and supplying these goods.
A well-established distribution network spread across six million retail outlets (including two
million in 5,160 towns and four million in 627,000 villages) low penetration levels, low
operating costs and intense competition between the organized and unorganized segments are
key characteristics of this sector.
Organized retail has created new channels for FMCG players through diverse retail formats such
as departmental stores, hypermarkets, supermarkets and specialty stores.

Trends in FMCG revenues over the years in India


The FMCG sector in India generated revenues worth US$ 36.8 billion in 2012, a 5.7 per cent rise compared to the previous year.

Market break-up of Indian FMCG industry


Food products are the leading segment, accounting for 43 per cent of the overall market in terms of revenue.

18

Key players:

Fast Moving Consumer Goods (FMCG) Industry in India - Major Players

Britannia India ltd

Dabur India ltd.

Haier

Marico

Nirma ltd.

LG

Cadbury India ltd

Nestle

Sony

Cargill

Coca-cola

Samsung

Colgate-Palmolive India

Heinz co.

Videocon

Unilever

Nestle

IFB

Pepsi co.

Jyoti Laboratories

Electrolux

Procter & Gamble

TCL

Whirlpool

19

It was formed in 1970 by Henry Overton Wills and

Yogesh Chander Deveshwar,

(Chairman).

Headquarters in Kolkata, West Bengal, India.

In FMCG, ITC has a strong presence in :

Cigarettes: W.D.

&

H.O.

Wills, Gold

Flake

Kings, Gold

Flake

Premium, Navy

Cut, Insignia, India Kings, Classic (Verve, Menthol, Menthol Rush, Regular,Citric Twist,
Mild

&

Ultra

Mild), 555,Benson

&

Hedges, Silk

Cut, Scissors, Capstan, Berkeley, Bristol, Lucky Strike, Players and Flake.
Foods: (Kitchens of India; Aashirvaad, Minto, Sunfeast, Candyman, Bingo, Yippee,
Sunfeast Pasta brands in Ready to Eat, Staples, Biscuits, Confectionery, Noodles and Snack
Foods).
Apparel: (Wills Lifestyle and John Players brands)
Personal care: (Fiama di Wills; Vivel; Essenza di Wills; Superia; Vivel di Wills brands of
products in perfumes, haircare and skincare)
Stationery: (Classmate and PaperKraft brands)
Safety Matches and Agarbattis: Ship ; Mangaldeep; Aim brands

20

It is a multinational nutritional and health-related consumer goods company


headquartered in Vevey, Switzerland. It is the largest food company in the world
measured by revenues.

Nestl was listed No. 1 in the Fortune Global 500 as the world's most profitable
corporation.

Nestl's

products

include baby

food, bottled

water, breakfast

cereals,

coffee,

confectionery, dairy products, ice cream, pet foods and snacks.

Nestl's indias first production facility was set up in 1961 at moga (punjab)

The Nestl india head office is located at Gurgaon along with other branch offices in
Delhi,Mumbai,Chennai and kolkata.

It has 2,50,000 employees,500 factories and 8000 range of products across the globe.

21

Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat, India.

Gujarat Co-operative Milk Marketing Federation Ltd Formed in 1946,

It has also ventured into markets overseas.

Amul's product range includes milk powders, milk, butter, ghee, cheese, Masti
Dahi, Yoghurt, Buttermilk, chocolate, ice cream and others.

Revenue US$2.15 billion (201011

GCMMF (AMUL) has the largest distribution network for any FMCG company. It has
nearly 50 sales offices spread all over the country, more than 5 000 wholesale dealers and
more than 700 000 retailers.
It has Largest milk handling capacity in Asia

22

Dabur India Limited is the fourth largest FMCG Company in India with interests in
Health Care, Personal Care and Food Products.

It is public company listed in NSC and BSC.

it has 17 ultra-modern manufacturing units spread around the globe and its products
marketed in over 60 countries.

Products-Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola & Real.

It is most famous for Dabur Chyawanprash and Hajmola.

Founded in 1884 and the Founder is Dr. S K Burman,in kolkata (west bangal) and The
company headquarters are in Ghaziabad,Uttar Pradesh, India.

Net income(INR) 1475 Crore (2008-09).Total assets(INR) 1559 crore (200809).Employees3000 (Approx.)

23

It is an Indian chemicals company headquartered in Mumbai, India.

Asian Paints is India's largest paint company and Asia's third largest paint company, with
a turnover of Rs 96.32 billion.

It is one of the largest paint companies in the world and operates in 17 countries

It is Founded in 1942.

Today Asian Paints becomes the 10th largest decorative paint company in the world.

1967 Asian Paints emerges as India's leading paint company ahead of any international
competition

Headquarters Mumbai, India.

Revenue7,964 crore (US$1.45 billion)(2012)

Profit 958.39 crore (US$174.43 million)(2012)

24

Cadbury India began its operations in India in 1948 by importing chocolates.

Its Headquarters in Mumbai, India.

It now has manufacturing facilities in Thane, Induri (Pune) and Malanpur


(Gwalior), Bangalore and

Baddi

(Himachal

Pradesh)

and

sales

offices

in Ne

Delhi, Mumbai, Kolkata and Chennai.

Products Cadbury Dairy Milk, 5-star, Perk, Gems, Eclairs, Oreo and Bournvita.

It is the market leader in the chocolate confectionery business with a market share of over
70%.

The Brand Trust Report, India Study, 2011 published by Trust Research Advisory ranked
Cadbury in the top 100 most trusted brands list.

Cadbury has worked with the Kerala Agricultural University to undertake cocoa research.
Current employees are 2000.

25

It is an Indian food-products corporation based in Kolkata,India.

It is famous for its Britannia and Tiger brands of biscuit, which are popular throughout
India.

Britannia has an estimated 38% market share in biscuit segment.

Products -Bakery products, including biscuits, bread, cakes and rusk, and dairy products,
including milk, butter, cheese, ghee and dahi.

The company was established in 1892, with an investment of Rs. 295.

The brand names of biscuits include VitaMarieGold, Tiger, Nutrichoice Junior,Good


day, 50 50, Treat, Pure Magic, Milk Bikis, Good Morning, Bourbon, Thin

Arrowroot, Nice, Little Hearts and many more.

Revenue 4,670 crore (US$849.94 million)(2011) .Profit 134 crore (US$24.39 million)
(2011)

26

P&G is one of the largest and amongst the fastest growing consumer goods companies in
India. Established in 1964,

P&G India now serves over 650 million consumers across India.

Its presence pans across the Beauty & Grooming segment, the Household Care segment
as well as the Health & Well Being segment,

These include Vicks, Ariel, Tide, Olay, Gillette, Ambipur, Pampers, Pantene, Oral-B,
Head & Shoulders, Wella and Duracell.

P&G operates under three entities in India - two listed entities Procter & Gamble
Hygiene and Health Care Limited and Gillette India Limited, as well as one 100%
subsidiary of the parent company in the U.S. called Procter & Gamble Home Products.

27

Geographical Spread

28

Market Position:

Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged
goods. Items in this category include all consumables (other than groceries/pulses) people buy at
regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste,
shaving products, shoe polish, packaged foodstuff, and household accessories and extends to
certain electronic goods. These items are meant for daily of frequent consumption and have a
high return.

The Indian FMCG sector is the fourth largest sector in the economy with a total market
size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterised by a
wellestablished distribution network, intense competition between the organised and unorganised
segments and low operational cost. Availability of key raw materials, cheaper labour costs and
presence across the entire value chain gives India a competitive advantage.

The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in
2015. Penetration level as well as per capita consumption in most product categories like jams,
toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential.
Burgeoning Indian population, particularly the middle class and the rural segments, presents an
opportunity to makers of branded products to convert consumers to branded products. Growth is
also likely to come from consumer 'upgrading' in the matured product categories. With 200
million people expected to shift to processed and packaged food by 2010, India needs around
US$ 28 billion of investment in the food-processing industry

29

Objective:

Untapped rural market, changing life style.


Rising income levels i.e. increase in purchasing power of consumers.
Large domestic market with more population of median age 25.
High consumer goods spending.
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 longterm growth potential. Even investment opportunities exist in value-added 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.


India is under penetrated in many FMCG categories with rise in per capita incomes and

awareness, the growth potential is huge.


Lower price and smaller packs are also likely to drive potential up trading for major

FMCG products .
The FMCG industry changes fast and is constantly evolving. It's fair to say there is never
a dull moment in FMCG. From the pace at which goods leave the shelves to the rate of
product innovation and career progression, things move quickly. And it doesn't end there.
The brands themselves are changing just as quickly. 40% of brands on the top 100 list

twenty years ago have already been replaced by new names today.
FMCG companies can beat the recession. This is an industry that has proved itself very
resilient to recession with the majority of companies in the sector weathering the
financial storm in a way that very few others have managed

Scope of Research:

30

The FMCG (Fast Moving Consumer Goods) companies have faced tough competition
among themselves over the years which is continuously increasing.

Increase in per capita income among individuals and also various developments in rural
economy.

FMCG companies are hiring more and more people which has led to an increase in the
job prospects in this sector.

FMCG sector is creating massive employment with good career prospects. Marketing,
retail, sales, services and supply are the key areas which generates maximum career
scopes in FMCG Industry in India.

Research Design:

31

The FMCG sector is the fourth largest in the Indian economy , with a total market size of
USD 44 .9 bn in 2013.The sector grewata CAGR of 16.2% during 200613.

The sector s growth has been driven by increasing consumption, resulting from rise in
incomes, changing lifestyles, and favorable emographics.

Though the FMCG sector continues to grow in double digits, there has been some
moderation (9.4%) in growth rates during 2013 due to deceleration in GDP growth and
high inflation.

Rural India accounts for one-third of the total FMCG market and grew at a faster pace
(12.2%) than urban market (8%) in 2013

32

The

urban

sector on

stitutes 67%

of

total FMCG

market

and

market

had

size of USD

the

30 bn in

2013.

The

rural

FMCG

sector with a

market

size of USD

15

contributes

the

remaining

33%.

bn

However, in the last few years, the FMCG market has grown at a faster pace in rural
India compared with urban India.

The urban FMCG market grew 8% while rural India expanded 12.2% in2013 ,asper AC

Nielsen.
It also forec as the rural FMCG market to reach USD 100 billion by 2025

The rural FMCG market has grown owing to various welfare schemes undertaken by
Indian government

33

The rural FMCG market expands data CAGR of 13.3% to USD 14. 8 billion during
200913.

The growth of the rural market can be as cribbed to various developments chemes, such
as NREGA, introduced by the Indian government. These schemes have empowered the
rural masses and increased the purchasing power, thus boosting FMCG consumption.

The governments focus on rural markets is also encouraging many FMCG companies,
such as HUL, Dabur, and ITC, to expand the irrural network and increase product
penetration.

Food products & personal care are the largest segments accounting for 69% of the
FMCG market; biscuits and refined oil are the largest product categories.

34

Food products are the largest FMCG segment, constituting 43% of the total market,
followed by personal care products (22%).

Salty snacks was the fastest growing FMCG category in 2013 with a growth rate of 25% .
Other categories such as packaged Atta, chocolates, and non refined oil grew over 20% in
2013, as companies aggressively focused on increasing their penetration.

Sales in biscuits, refined oil, soap, and washing powder (among the top five FMCG
product categories) grew 410% in 2013, downfrom15 23 % in 2012. Their value
growth was affected due to consumers opting for cheaper options due to economics low
down and inflation, forcing companies to offer discounts to push volume sales

Finding:

35

Established distribution networks in both urban and rural areas

Presence of well-known brands in FMCG sector

Lower scope of investing in technology and achieving economies of scale,


especially in small sectors

Low exports levels Counterfeit Products. These products narrow the scope of FMCG
products in rural and semi-urban market.

Conclusion:

The FMCG sector creates employment for people with lower educational qualifications .
Iten courages many to become small entrepreneurs by setting up their own kirana stores.

36

FMCG companies have undertaken specific projects to integrate with rural India.
Examples include ITC E-Choupal and Choupal Sagar, HUL s Shakti Amma Network
etc.

Out of

the ~ 12 13 million retail stores in India, ~9 millionare FMCG kirana stores.

Thus, these to provides livelihood to ~13 millionpeople.

Cascading

multiple

taxes

(importduty, CENVAT, servicetax,

CST, StateVAT,

octroi/entrytax, and incometax) are paid at multiple points by the FMCG sector.

On an average,~30% of the sectors revenue (USD13.5bn) goes into direct and in direct
taxes.

Bibliography:
www.info.shine.com
www.business.mapsofindia.com
www.cii.in
www.iimjobs.com
37

www.chillibreeze.com

38