FMCG May 2017

FMCG
MAY 2017 (As of 3 May 2017) For updated information, please visit www.ibef.org 1
FMCG
Executive Summary...3
Advantage India.5
Market Overview and Trends...7
Porters Five Forces Analysis ........21
Strategies Adopted..23
Growth Drivers..25
Opportunities....36
Success Stories...40
Useful Information....44
MAY 2017 For updated information, please visit www.ibef.org 2

FMCG
EXECUTIVE SUMMARY (1/2)
During 20162020, FMCG market

Favourable demographics and CAGR: 20.6% in India is expected to grow at a
rise in income level to boost 103.7 CAGR of 20.6 per cent and is
FMCG market 49 expected to reach USD103.7
billion by 2020
2016 USD billion 2020F
CAGR: 19.62% 3600 Total consumption expenditure to

Total consumption reach nearly USD3600 billion by
expenditure set to increase 1469 2020 from USD1469 billion in
2015
2015 2020F
The rural FMCG market in India

CAGR: 14.6%
is expected to grow at a CAGR of
100
14.6 per cent, during 20162025
Rise in rural consumption to
and reach USD100 billion by
drive the FMCG market
2025. As of 2016, the overall
29.4
rural FMCG consumption stands
at an estimated USD29.4 billion
2016 2025F
USD billion
Source: World Bank, Emami Reports, Dabur Reports, AC Nielsen,
Notes: F (Forecast)
MAY 2017 For updated information, please visit www.ibef.org
3
FMCG
EXECUTIVE SUMMARY (2/2)
CAGR: 24.57% 180.00 The modern retail market is

Indias modern retail is expected to grow from USD60
expected to grow 3 times the
billion to USD180 billion during
present value by 2020 60.00
2015-2020F
2015 USD billion 2020F
CAGR: 10.8% 267 Indias middle income

Indias middle income class to population estimated to reach
be thrice the total population in 160
267 million by 2016 from 160
Germany by 2016
million in 2011
2011 2016
USD billion
CAGR: 4.11% Rural Indias per capita

Rural Indias per capita 631
disposable income is estimated
516
disposable income set to
to rise to USD631 in 2020 from
increase
USD516 in 2015E
2015 USD 2020F

Source: Emami Reports, Dabur Reports, AC Nielsen, McKinsey Global Institute (MGI) titled The Bird of Gold, TechSci Research
Note: Germany population is estimated to reach 81.26 million by 2016
Notes: FForecast; E-Estimated
FMCG
ADVANTAGE INDIA
FMCG
ADVANTAGE INDIA
2016 Growing demand

Growing demand Attractive opportunities 2020F
Rising incomes and growing youth population have Low penetration levels in rural market offers
been key growth drivers of the sector. Brand room for growth FMCG
FMCG
market size: consciousness has also aided demand Disposable income in rural India has increased market size:
due to the direct cash transfer scheme
USD49 USD103.7
1st Time Modern Trade Shoppers spend is Growing demand for premium products
billion billion
estimated to triple to USD1 billion by 2015 Exports is another growth segment
E-commerce companies like Amazon are
Tier II/III cities are witnessing faster growth in strengthening their business in FMCG sector,
modern trade by positioning their platform pantry as front line
offering to drive daily products sales.
Advantage
India
Higher investments Policy support
Many players are expanding into new geographies Investment approval of up to 100 per cent
& categories foreign equity in single brand retail and 51 per
cent in multi-brand retail
Modern retail share is expected to triple its growth
from USD60 billion in 2015 to USD180 billion in
2020 Initiatives like Food Security Bill and direct
With an investment of USD 254.50 million, cash transfer subsidies reach about 40 per
Patanjali is planning to setup a food & herbal park cent of households in India
in UP
Wipro is diversifying & expanding its product range The minimum capitalisation for foreign FMCG
in energy drinks, detergents & fabric conditioners. companies to invest in India is USD100 million
Nestle is looking to expand its portfolio in premium
durables cereals, pet care, coffee, & skin health
accessing the potential in India.
Source: Emami, E Estimates, F - Forecast
TechSci Research
FMCG
MARKET OVERVIEW AND TRENDS

FMCG
THE FMCG MARKET HAS THREE MAIN SEGMENTS
FMCG
Food & beverages Health care Household and Personal care
19% 31% 50%
Health beverages, staples/cereals, Oral care, hair care, skin care,

bakery products, snacks, chocolates, cosmetics/deodorants, perfumes,
ice cream, tea/coffee/soft drinks, OTC products and ethicals feminine hygiene and paper
processed fruits and vegetables, products, Fabric wash, household
dairy products, and branded flour cleaners
Source: Dabur, TechSci Research

Notes: OTC is over the counter products; ethicals are a range of pharma products,
Data as of March 2016

FMCG
EVOLUTION OF THE INDIAN FMCG SECTOR
FMCG is the 4th largest sector in the Indian economy
Household & Personal Care is the leading segment, accounting for 50 per cent of the overall market. Hair care (23 per cent)
& Food & Beverages (19 per cent) comes next in terms of market share
Growing awareness, easier access & changing lifestyles have been the key growth drivers for the sector
Retail market in India is estimated to reach USD1 trillion by 2020 from USD600 billion in 2015, with modern trade expected
to grow at 20 per cent per annum, which is likely to boost revenues of FMCG companies
People are gracefully embracing Ayurveda products, which has resulted in growth of FMCG major, Patanjali Ayurveda, with
a m-cap of USD 14.94 billion. The company aims to expand globally in the next 5 to 10 years.
Indian FMCG industry 9.0 49 2016

(USD billion)
2015
Market size of chocolates <100 1,441 2015

(USD million)
Market size of personal care 22.7 2015

<3
(USD billion)
HULs share in FMCG market 2000 9.71 2016

>50
(Personal care) (%)
Source: Dabur Annual Report, Economic Times, Emami Annual Report, Mckinsey Global Institute, CII, TechSci Research

FMCG
STRONG GROWTH IN THE INDIAN FMCG SECTOR
Trends in FMCG revenues over the years
The FMCG sector in India generated revenues worth
(USD billion)
USD47.3 billion in 2015
Over 2007-16F, the sector is expected to post CAGR of 103.7
11.9 per cent in revenues
In 2016, revenues for FMCG sector is expected to reach
USD49 billion
During 2015-16, seven leading FMCG companies in the
country have fared better than their multinational peers, in CAGR: 11.9% 49
44.9 47.3
terms of revenue growth. The combined revenue of 7 36.8
34.8
leading Indian FMCG companies during 2015-16 stood at 30.2
21.3 24.2
USD 11,066.46 million 17.8
In the long run, with the system becoming more
transparent & easily compliable, demonetisation is
expected to benefit organised players in the FMCG 2007 2008 2009 2010 2011 2012 2013 2015 2016 2020F
industry.
Source: Booz & Company, Dabur, AC Nielsen, TechSci Research,
Note: F - Forecast

FMCG
FOOD AND PERSONAL CARE MAKE UP TWO-THIRDS OF REVENUES (1/2)
Hair Care is the leading segment, accounting for 23 per Market break-up by revenue (FY16)
cent of the overall market in terms of revenue
Food Products is the 2nd leading segment of the sector
accounting for 19 per cent followed by health 5%
7%
supplements & oral care which has a market share of 23% Hair Care
16 per cent & 15 per cent, respectively 6%
Foods
Health Supplements
9%
Oral Care
OTC & Ethicals
19% Home Care
15%
Digestives
16% Skin Care
Source: Dabur, TechSci Research

FMCG
THE URBAN MARKET ACCOUNTS FOR A MAJOR CHUNK OF REVENUES
Accounting for a revenue share of around 60 per cent, Urban/rural industry break-up (2016)
urban segment is the largest contributor to the overall
revenue generated by the FMCG sector in India &
recorded a market size of around USD29.4 billion in
2016
Semi-urban and rural segments are growing at a rapid
pace; & accounted for a revenue share of 40 per cent in 40%
the overall revenues recorded by FMCG sector in India
USD49
In the last few years, the FMCG market has grown at a billion Urban
faster pace in rural India compared with urban India
60%
FMCG products account for 50 per cent of total rural Rural
spending
Source: Emami, TechSci Research

FMCG
RISING INCOME AND INCIDENCE OF CHRONIC LIFESTYLE DISEASES
Rising income; growing middle class
The number of middle class households (earning between

USD4,413.1 and USD22,065.3 per annum) is estimated to Million household, 100%
increase more than fourfold to 148 million by 2030 from 32
million in 2010
244 273 322
India has 23.6 million adults, who have been qualified as
belonging to middle class
Rising per capita income leads to increased spending on 26%
15%
30%
medical and healthcare services
32%
40%
Higher incidence of chronic lifestyle diseases 43%
29%
Lifestyle diseases are set to account for a greater part of the 23%
25%
17%
healthcare market 6%
3% 1% 3% 7%
Lifestyle diseases such as cardiac diseases, cancer & diabetes 2015 2020 2030
are treated with the help of biotechnology products, thereby
boosting revenues of biotech companies
The growing GNI per capita, PPP of USD6,746 in FY16 led to Globals(>22065.3) Strivers(11032.7-22065.3)
Income
improved lifestyle due to increased purchasing power of segment Seekers(4413.1-11032.7) Aspirers(1985.9-4413.1)
customers for healthcare products Deprived(<1985.9)
Notes: Greater distributional efficiencies and increasing demand (especially

from rural areas) due to rising disposable incomes have created new
Source: Fortis Healthcare Limited, McKinsey Quarterly, NCAER, TechSci Research
markets for products within the country, F - Forecast
FMCG
RURAL SEGMENT QUICKLY CATCHING UP (1/3)
In 2015, rural India accounted for more than 40 per cent of Annual per capita disposable income level
the total FMCG market in rural region (USD)
Total rural income, which is currently at around USD572
billion, is projected to reach USD1.8 trillion by FY21 631
Indias rural per capita disposable income is estimated to
516
increase at a CAGR of 4.4 per cent to USD631 by 2020
411
As income levels are rising, there is also a clear uptrend in
the share of non-food expenditure in rural India
The Central Government announced its plans to spend
USD9.16 billion for creating more jobs opportunities in the
rural sector, which will in turn propel demand for FMCG
products.
According to the Godrej Group, the demand for FMCG 2010 2015E 2020F
products from rural areas of the country is likely to register a
double digit growth in coming years, on the back of
Source: Godrej Group, Mckinsey Global Institute: The Bird of
improving agricultural economy and expected good gold AC Nielsen, TechSci Research
monsoon. Note: F Forecast

FMCG
RURAL SEGMENT QUICKLY CATCHING UP (2/3)
The Fast Moving Consumer Goods (FMCG) sector in Rural FMCG market (USD billion)
rural and semi-urban India is estimated to cross
USD100 billion by 2025
100
The rural FMCG market is anticipated to expand at a
CAGR of 17.41 per cent to USD100 billion during 2009
25
Rural FMCG market accounts for 40 per cent of the
overall FMCG market in India, in revenue terms
Amongst the leading retailers, Dabur generates over 40- 29.4
45 per cent of its domestic revenue from rural sales. 18.92
HUL rural revenue accounts for 45 per cent of its overall 12.3 12.1 14.8
9 10.4
sales while other companies earn 30- 35 per cent of
their revenues from rural areas
2009 2010 2011 2012 2013 2015 2016 2025E
Source: AC Nielsen, TechSci Research, Dabur Reports

Notes: E-Estimated

FMCG
INCREASING SALES OF TOP FMCG COMPANIES
Consumer products manufacturers ITC, Godrej Consumer
Products Limited (GCPL), Dabur & Marico reported healthy
Sales (USD million)
net sales in FY15 and F16
735.04
Aggregate financial performance of the leading 10 FMCG GCPL
725.48
companies over the past 8 quarters displays that the industry
has grown at an average 16-21 per cent in the past 2 years 1288.7
Dabur
ITC (FMCG) has generated highest revenue till FY16 1,295.60
951.02
Marico
During 2015-16, 7 leading FMCG companies in the country 940.00
have fared better than their multinational peers, in terms of
revenue growth. The combined revenue of 7 leading Indian 982.67
HUL (F & B)
FMCG companies during 2015-16 stood at USD11,066.46 916.30
million
5572.15
ITC(FMCG)
4282.70
In December 2016, Godrej Consumer Products Ltd (GCPL)
acquired remaining 49 per cent in Kenyan Co Charm
FY16 FY15
Industries
Source: Company Websites
Reckitt Benckiser, posted 14 per cent growth in sales in FY16,
on the back of a forced distribution push in rural market, in
support from the Swach Bharat Campaign
Biscuits & confectionery maker - Parle Products, is aiming to

increase its market share in the premium biscuits category
from 15 per cent in 201617 to around 20 per cent by 2017-
18.

FMCG
MARKET SHARE OF COMPANIES IN A FEW FMCG CATEGORIES
Market leader Other Leading Players
Hair oil 30% 19%
Shampoo 47% 27%
Oral care 54.9% 30% 14%
Skin care 54% 12% 3%
Fruit juice 60% 30%

FMCG
NOTABLE TRENDS IN FMCG (1/3)
Indian FMCG companies are consolidating their existing business portfolios which is
Consolidation
leading to divestments, mergers and acquisitions
Several companies have started innovating or customising their existing product portfolios
Product innovation
for new consumer segments..
Despite the slowdown, consumers are willing to buy premium goods at higher prices in the
Premiumisation space of convenience, health, and wellness
Consumers have started demanding customised products specifically tailored to their

individual tastes and needs
Product customisation The trend toward mass-customisation of products is expected to intensify further.
To get more value for dairy products and to improve margins, dairy firms are looking at
selling protein supplements added milk.
Consumers are becoming more brand conscious and prefer lifestyle and premium range
products given their increasing disposable income.
Brand consciousness
Companies are required to continuously focus on innovation and customer engagement to
strengthen their brand appeal in market
Source: AC Nielsen, TechSci Research

FMCG
A number of companies are exploring the business potential of overseas markets & several
regional markets. In 2016, Acrysil acquired the additional 13 per cent equity in UK-based
"Homestyle Products Ltd.
Expanding horizons
In May 2017, PepsiCo India has entered into a 'career joint venture' with Hindustan Unilever (HUL),
The 1st of its kind learning and talent development initiative will allow select employees to gain
work experience at the JV firm for 2-4 months.
Backward integration is becoming the preferred strategy for increasing profit margins, securing
Backward integration capacity & sources of supply.
Companies are now focusing on the rural market segment which is growing at a rapid pace and
Focus on rural market contributes about 50 per cent to the total FMCG market. Companies like Dabur are trying to
increase its penetration in rural areas to generate more revenues from rural India
Companies are now focused on improving their distribution networks to expand their reach in rural
Expanding distribution India. ITC one of the leading FMCG company in India is trying to reduce its lead time by making its
networks distribution channel more efficient and aiming to reach the retail outlets directly from manufacturing
facility
This approach has helped FMCG companies focus on front-end marketing

Third-party
Reservation of several items for SSI as well as additional tax incentives have made 3rd party
manufacturing
manufacturing a popular route for many big players

Notes: CER - Certified Emission Reductions; SSI - Small Scale Industry

FMCG
Rising importance of Companies are increasingly introducing smaller stock keeping units at reduced prices.
smaller-sized packs This helps them to sustain margins, maintain volumes from price-conscious customers
and expand their consumer base.
Increased hiring from Small towns are emerging as significant hiring zones. FMCG companies are hiring field
tier II/III cities staff from areas such as Kalpa (HP), Mangaliya (MP), Kota (Rajasthan) & Shirdi
(Maharashtra) to sell diverse products
FMCG companies entering Africa as it helps to be close to consumption markets within

Focus on enhancing Africa. In 2015, Godrej had acquired South Africa based company Frika Hair
presence in Africa Such foreign investments are encouraged by local governments, as they offer incentives
to enter the markets
FMCG players in India are increasingly focusing on reducing their carbon footprint by
Reducing carbon
creating eco-friendly products. They generate the required energy from renewable sources
footprint and eco-
and earn CER credits for the same. In India, organic skincare market is estimated to be
friendly products around USD81.8 million and growing at a rate of 20-25 per cent growth per year
Increasing private label With the rise of retail players, private label has become popular in the FMCG space.
penetration Private Label goods are considered substitutes of premium branded goods.

Notes: CER - Certified Emission Reductions; SSI - Small Scale Industry

FMCG
PORTERS FIVE FORCES ANALYSIS

FMCG
PORTERS FIVE FORCES ANALYSIS
Competitive Rivalry
Private label brands by retailers are priced at a discount to mainframe

brands limits competition for the weak brands
Highly fragmented industry as more MNCs are entering Threat of New
Entrants
(Medium)
Threat of New Entrants Substitute Products
Huge investments in setting up Presence of multiple brands

distribution network and Narrow product differentiation
promoting brands under many brands Bargaining Competitive Substitute
Spending on advertisements is Price war Power of Rivalry Products
aggressive Customers (High) (High)
(High)
Bargaining Power of Suppliers Bargaining Power of Customers
Big FMCG companies are able Low switching cost induces the Bargaining
to dictate the prices through customers product shift Power of
local sourcing from a Influence of marketing Suppliers
fragmented group of key strategies (Low)
commodity suppliers Availability of same or similar
alternatives
Source: TechSci Research

FMCG
STRATEGIES ADOPTED
FMCG
STRATEGIES ADOPTED
FMCG companies are trying to influence consumers with intelligent deals
Promotions & offers Firms like ITC offers combo deals to the consumers. For example, in the case of soaps &
cosmetics; 4 soap cases are offered at the price of 3, selling the range of deodorants for men &
women at a discounted price
The internet enables consumers to make their own research on the kind of products or
Research online commodities they want to purchase. 1 in 3 FMCG shoppers goes online 1st & then to the stores
Purchase offline Almost half of the automobile consumers follow Research Online Purchase Offline (ROPO) method
Indian consumers have become choosy & are less likely to stay loyal to a brand
Colgate-Palmolive has launched a toothpaste for the inflammatory gum problem of pyorrhea
ITC is coming up with new multigrain Bingo
Production innovation Dabur has launched its sugar free variant for Chyawanprash in India
As of March 2017, ITC, which ventured in coffee & chocolates segment under the Fabelle and
Sunbean brands is planning to launch another premium range of items. By doing so, the company
is planning to compete with brands like Nestle & Cadburys.
Product Flanking: Introduction of different combinations of products at different prices, to cover as

many market segments as possible
Different types of same product for different users population. For example: Calcium Sandoz &
Calcium Sandoz Women & Horlicks for older women, Junior Horlicks
Customisation Emami, with a presence in over 60 countries across the world, has decided to rework on its
overseas strategy by planning manufacturing and acquisitions in overseas markets. The company
plans to re-work on its product portfolio by getting into new categories with higher buying
preference and revamp its distribution networks.

FMCG
GROWTH DRIVERS
FMCG
GROWTH DRIVERS OF INDIAS FMCG SECTOR (1/2)
Rising
incomes
Government driving
reforms to purchase Desire to
encourage FDI experiment
inflow and market with brands
sentiments
Evolving
Greater consumer
awareness of lifestyle
products,
brands
FMCG
growth
Increasing drivers
New product
consumer
launches
demand
Availability of
online Growing rural
grocery market
stores
Strong
Growth of
distribution Source: Dabur, TechSci Research
modern trade
channel Note: FDI - Foreign Direct Investment

FMCG
GROWTH DRIVERS FOR INDIAs FMCG SECTOR (2/2)
Shift to organised market Increase in penetration

Organised sector growth is expected to grow Low penetration levels of branded products in
as the share of unorganised market in the categories like instant foods indicating a scope
FMCG sector fall with increased level of for volume growth
brand consciousness
Investment in this sector attracts investors as
Growth in modern retail will augment the the FMCG products have demand throughout
growth of organised FMCG sector the year.
Growth
drivers
Easy access Rural consumption
Availability of products has become way Rural consumption has increased, led by a
more easier as internet and different combination of increasing incomes and higher
channels of sales has made the accessibility aspiration levels, there is an increased
of desired product to customers more demand for branded products in rural India
convenient at required time and place Huge untapped rural market
Online grocery stores and online retail stores Godrej is launching OneRural programme to
like Grofers, Flipkart, Amazon making the generate more revenues from rural areas
FMCG product s more readily available
Rural India is estimated to account for ~50 per
cent of the total FMCG market, in 2016
Source: Dabur

FMCG
HIGHER INCOMES AID GROWTH IN URBAN AND RURAL MARKETS
Incomes have risen at a brisk pace in India & will Indias nominal per capita income (USD)
continue rising given the countrys strong economic
growth prospects. According to IMF, nominal per capita
income is estimated to grow at a CAGR of 4.94 per cent 2500.0 10.0%
during 2010-19F 8.0%
2000.0
An important consequence of rising incomes is growing 6.0%
appetite for premium products, primarily in the urban 1500.0 4.0%
segment 2.0%
1000.0
As the proportion of working age population in total 0.0%
1430.2
1552.5
1514.8
1504.5
1600.9
1617.3
1874.9
2026.7
2207.6
population increases, per capita income & GDP are 500.0
1942
-2.0%
expected to surge
0.0 -4.0%
Per capita income in India is expected to grow at a
CAGR of 8.09 per cent during 2015-19F
GDP per capita, current prices Growth Rate
Source: IMF, World Bank, TechSci Research

Notes: F - Forecast, E Estimated, CAGR - Compound Annual Growth Rate

FMCG
GOVERNMENT INITIATIVES FOR RURAL DEVELOPMENT
The Indian government has been supporting the rural
population with higher MSPs, loan waivers, and Total funds released by govt. for NREGA
disbursements through the NREGA programme. These (USD billion)
schemes have empowered the rural masses and
increased their purchasing power, thus boosting FMCG
consumption 11.90
During FY07-16, allocation of funds to NREGA increased 10.50 10.40
at a CAGR of 9.91 per cent, with the total funds released 8.10 7.80
by the government for NREGA reaching to USD6.32 6.32
6.20
billion by FY16 5.60
4.80
The governments focus on rural markets is also 2.70
encouraging many FMCG companies, such as HUL,
Dabur, and ITC, to expand their rural network and
increase product penetration
These measures have helped in reducing poverty in rural
India and have thus propped up rural purchasing power
Government has taken initiatives like Pradhan Mantri Jan Source: NREGA, TechSci Research
Dhan Yojana through which wage seekers are Notes: MSP is Minimum Support Price,
encouraged to open up bank accounts under Mahatma NREGA is National Rural Employment Guarantee Act
Gandhi National Rural Employee Guarantee Act
Under the upcoming Budget Scheme 2017-18, the
government is likely to retain its focus on rural economy
by continuing the pro-poor and pro-farmer schemes

FMCG
FDI INFLOWS RISE OVER THE YEARS
100 per cent FDI is allowed in food processing and single- Cumulative FDI inflows From April 2000 to
brand retail and 51 per cent in multi-brand retail. December 2016 (USD million)
This would bolster employment and supply chains, and also
provide high visibility for FMCG brands in organised retail Food Processing 7478.92
markets, bolstering consumer spending and encouraging
more product launches Soap, Cosmetics & Toilet
1197.36
preparations
The sector witnessed healthy FDI inflows of USD11628.76
million, during April 2000 to December 2016.
Paper, Pulp 1283.67
Within FMCG, food processing was the largest recipient; its
share was 64.36 per cent
Vegetable Oils 622
US based dairy giant - Schreiber Dynamix Dairies, opened
its 1st fully-automated infant nutrition plant, at Baramati, Retail Trading 935.74
Maharashtra, with an investment of US$ 37.18 million.
Britannia has signed a MoU with a Greek baker Chipita, to Tea, Coffee 111.07
produce bakery items such as croissants, rolls & various
dough products. The venture is worth an investment of US$
11 million, in which Britannia will be looking after functions Source: DIPP, TechSci Research
like logistics costs, supply-chain & distribution network

FMCG
POLICY AND REGULATORY FRAMEWORK (1/2)
To provide a level-playing field to stakeholders, the government is planning to synchronize policies of retail, FMCG and e-
commerce within a single policy framework
Proposed date of implementation of GST - April 1, 2017.

The rate of GST on services is likely to be 14 per cent and on goods is proposed to be 20
per cent
FMCG sector wants an early rollout of the GoodsandServices tax (GST) so as to reduce
Goods and Service Tax supply chain constraints, improve competitiveness of FMCG companies against
(GST) unorganised players
Major consumer product manufacturing companies like PepsiCo, Dabur, Hindustan
Unilever etc. are aligning their supply chains, IT infrastructure and warehousing systems
ahead of unified goods and services tax (GST) regime, so as to facilitate seamless
interstate movement of goods.
Excise duty on instant tea, quick brewing black tea, and ice tea would be decreased to
reduce the retail price by 30 per cent
Excise duty on other beverages and lemonade would be decreased to reduce retail sale
Excise duty price by 35 per cent
Excise duty on various tobacco products other than beedi would be increased, resulting in
retail price of tobacco products going up by 10-15 per cent
Industrial license is not required for almost all food and agro-processing industries, barring
Relaxation of license
certain items such as beer, potable alcohol and wines, cane sugar & hydrogenated animal
rules
fats and oils as well as items reserved for exclusive manufacture in the small-scale sector
Source: TechSci Research

FMCG
POLICY AND REGULATORY FRAMEWORK (2/2)
Statutory Minimum In October 2009, the government amended the Sugarcane Control Order, 1966, and
replaced the Statutory Minimum Price (SMP) of sugarcane with Fair and Remunerative
Price
Price (FRP) and the State-Advised Price (SAP)
The government approved 51 per cent FDI in multi-brand retail in 2006, which will boost
FDI in organised retail the nascent organised retail market in the country
It also allowed 100 per cent FDI in the cash and carry segment and in single-brand retail
FSB would reduce prices of food grains for Below Poverty Line (BPL) households,
allowing them to spend resources on other goods and services, including FMCG products
Food Security Bill (FSB)
This is expected to trigger higher consumption spends, particularly in rural India, which is
an important market for most FMCG companies
Telecom Regulatory FMCG companies, which are top advertisers on television (above 50 per cent share), are
Authority of India (TRAI) likely to face the twin risks of reduced inventory to advertise, which could be cut by 2530
advertising regulations per cent, and increased prices as broadcasters hike prices
Government has initiated Self Employment and Talent Utilisation (SETU) scheme to boost
SETU Scheme
young entrepreneurs. Government has invested USD163.73 million for this scheme
Source: SBI, Union Budget 2015 16, TechSci Research

FMCG
NEW GOODS AND SERVICE TAX (GST) TO SIMPLIFY TAX STRUCTURE
Supply chain structure Pricing and profitability

Introduction of GST as a unified tax regime will lead Elimination of tax cascading is expected to lower
to a re-evaluation of procurement and distribution input costs and improve profitability
arrangements Application of tax at all points of supply chain is
Removal of excise duty on products would result in likely to require adjustments to profit margins,
cash flow improvements especially for distributors and retailers
The rate of GST on services is likely to be 16% and
on goods to be 20%
Goods and Service Tax (GST)
Cash flow
System changes and transition management
Tax refunds on goods purchased for resale implies
Changes need to be made to accounting and IT
a significant reduction in the inventory cost of
systems in order to record transactions in line with
distribution
GST requirements and appropriate measures need
Distributors are also expected to experience cash to be taken to ensure smooth transition to the GST
flow from collection of GST in their sales, before
It is estimated that India will gain USD15 billion a
remitting it to the government at the end of the tax-
year by implementing the Goods and Services Tax
filing period
Source: GST India, TechSci Research

FMCG
KEY M&A DEALS IN THE INDUSTRY (1/2)
Target name (segment) Acquirer name (segment) Merger/Acquisition
Godrej Consumer Products Ltd (GCPL) Kenyan Co Charm Industries Acquisition
Zhongshan Ma Er Daily Products Ltd Wipro Consumer Care Acquisition
Kesh King Emami Acquisition
Johnson & Johnson (Savlon, Shower to Shower) ITC Acquisition

Acquisition
Fravin Emami
L.D. Waxson, Singapore Wipro Consumer Acquisition
Halite Personal Care India Private Limited (Personal care) Marico Ltd (Food and personal care) Acquisition
Paras Pharma (Personal care) Marico Ltd (Food and personal care) Acquisition
Namaste group (Personal care) Dabur (Food) Acquisition
Cosmetica Nacional (Cosmetics) Godrej Consumer Products Ltd Acquisition
CC Health Care Products Pvt Ltd (Cosmetics) Colgate-Palmolive India Ltd (Cosmetics and toiletries) Acquisition
Noble Hygiene Pvt Ltd (Household and personal products) Bennett Coleman & Co Ltd (Publishing) Acquisition
Hobi Kozmetik, Turkey (Personal care products) Dabur India (Personal care) Acquisition
Hindustan Unilever Ltd Unilever PLC Acquisition
Bush Foods Overseas Pvt Ltd Hassad Food Co Acquisition
MAY 2017 Source: Company websites, Bloomberg, TechSci Research For updated information, please visit www.ibef.org 34
FMCG
KEY M&A DEALS IN THE INDUSTRY (2/2)
Merger/
Target name (segment) Acquirer name (segment) Year
Acquisition
Godrej Industries Godrej Agrovet Ltd. Increase in stake 2017
Godrej Consumer Products Ltd (Home &
Argencos, Argentina (Hair care products) Acquisition 2016
personal care)
Lotte India Corp Ltd (Food) Lotte Confectionery Co Ltd, South Korea (Food) Acquisition 20
Megasari, Indonesia (Soap & cleaning
GCPL (Home & personal care) Acquisition 2014
products )
Issue Group, Argentina (Hair products) GCPL (Home & personal care) Acquisition 2016
Tura, Nigeria (Soap & cleaning products ) GCPL (Home & personal care) Acquisition 2015
Tern Distilleries Pvt Ltd (beverages -
United Spirits Ltd (Beverages) Acquisition 2009
wine/spirits)
Vale Do Ivai SA Acucar E Alcool (sugar &
Shree Renuka Sugars Ltd (Food) Acquisition 2011
ethanol)
Greenol Laboratories Pvt Ltd (Tea) Asian Tea & Exports Ltd (Food - tea) Acquisition
UK-based Borelli Tea Holdings Ltd, a wholly-
Olyana Holding LLC (Tea) Acquisition 2014
owned unit of Mcleod Russel India Ltd
Garden Namkeens Pvt Ltd (Food - misc.) Cavinkare Pvt Ltd (Food) Acquisition 2012
Bacardi Martini India Ltds 26% shares
from Gemini Distillery Private Ltd Bacardi Martini BV, Netherlands (Beverages) Acquisition 2011
(Beverages)
Varun Beverages Pearl Drinking - Bottling business Acquisition 2
Godrej Consumer Products Ltd (Home &
Frika Hair (Pty) Ltd, Africa Acquisition 2015
personal
As of March 2017, by acquiring an additional 2.87% care)
stake, Godrej Industries increased its stake in Godrej Agrovet Ltd.
Source: Bloomberg, TechSci Research
FMCG
OPPORTUNITIES
FMCG
GROWTH OPPORTUNITIES IN THE INDIAN FMCG INDUSTRY
Leading players of consumer products have a strong distribution network in rural India;
they also stand to gain from the contribution of technological advances like internet & e-
commerce to better logistics. Godrej is focusing on rural market for household insecticides
Rural market
segment. At present, Godrej accounts for 25 per cent of the household insecticides sales
from rural areas
Rural FMCG market size is expected to touch USD100 billion by 2025
Indian consumers are highly adaptable to new & innovative products. For instance there
Innovative products has been an easy acceptance of mens fairness creams, flavored yoghurt, cuppa mania
noodles, gel based facial bleach, drinking yogurt, sugar free Chyawanprash
With the rise in disposable incomes mid & high-income consumers in urban areas have
shifted their purchase trend from essential to premium products
Premium brands are manufacturing smaller packs of premium products. For example,
Premium products Dove soap is available in 50g packaging
Nestle is looking to expand its portfolio in premium durables cereals, pet care, coffee, &
skin health accessing the potential in India.
Indian & multinational FMCG players can leverage India as a strategic sourcing hub for
Sourcing base
cost-competitive product development & manufacturing to cater to international markets
Low penetration levels offer room for growth across consumption categories
Penetration
Major players are focusing on rural markets to increase their penetration in those areas
ITC partnered with farmers of MP to improve the living conditions in villages. It aims at
Align partnership
improving watershed development programmes where ITC has factory or agri operations
Source: Assorted articles and reports; AC Nielsen, TechSci Research
FMCG
BIG OPPORTUNITY IN LOWER PENETRATED PRODUCT CATEGORIES
Penetration of many product categories is still low. Even among those where the penetration is higher, per capita
consumption is comparatively low, thereby offering scope for high growth in future
Penetration of products such as hair oil and talcum powder is high in the country, however, some major products including
ayurvedic oil, deodorants and mens fairness creams recorded penetration of just 8 per cent, 8 per cent 4 per cent, in FY16,
respectively
Category penetration in India (FY16)
89 per cent
41 per cent
35 per cent
25 per cent
16 per cent
11 per cent 8 per cent
8 per cent 4 per cent
Hair Oil Talcum Powder Balms Antiseptic Cooling Oil Facewash Ayurvedic Oil Deodorants Men's Fairness
Cream
Source: Emami Investor Presentation June 15, TechSci Research

FMCG
INCREASING FMCG SHARE IN MODERN RETAIL
Growth of Indias FMCG purchased through modern FMCG share in modern retail
trade is surpassing growth of FMCG purchased in
2015
general trade
In 2015, market size of the organised FMCG sector was 9 per
9 per cent of the overall organised retail market and is cent
expected to reach 30 per cent by 2020. This represents
the influence of modern retail over the FMCG sector
Share of the modern retail in FMCG sales is estimated to
be 12 per cent by 2016
91%
FMCG companies are partnering with major retail players
to increase brand communication & boost their share in
modern retail
Modern Traditional
Modern retail is expected to reach USD180 billion in
2020 from USD 60 billion in 2015. Traditional retail is
expected to grow at 10 per cent & modern retail growth
rate is expected to be 20 per cent in future. Overall retail 30 per
market is expected to have 12 per cent growth rate per cent
annum
70 per
cent
2020E
Source: TCS Report, AC Nielsen, TechSci Research

Note: E- Estimated
FMCG
SUCCESS STORIES
FMCG
EMAMI ONE OF THE FASTEST GROWING FMCG COMPANIES
Salient features Sales (USD million)
Niche category player and innovator CAGR: 8.0%

Key brands are strong market leaders in their respective
400.9
367.8
categories
312.8
310.2
302.1
Portfolio includes Zandu, one of the strongest Ayurvedic
273.3
brands
Over 80 per cent of business comes from wellness
categories
During FY11-16, net sales of FMCG products in India grew
80.6
66.7
55.2
54.8
50.2
at CAGR of 8.0 per cent with the value market reaching to
58
USD400.9 million in FY16 & the profit after tax estimated at
USD54.8 million
FY11 FY12 FY13 FY14 FY15 FY16
A new product to be launched under the Zandu brand
known as Zandu Gluco Charge Sales PAT
Emami has increased focus on OTC products, Source: Company reports, Economic Times, TechSci Research
concentrating on advertising, distribution & product
launches. These initiatives are expected to increase
revenue contribution to 8 per cent from 6 per cent by FY16
Emami plans to make investments in start-ups. The
company has created a new division to evaluate & fund
such initiatives

FMCG
DABUR RIDING ON STRONG BRAND EQUITY IN INDIA
Sales (USD million)

Salient features
Among top four FMCG companies in India

CAGR: 7.6%
14 brands with turnover of USD16.6 million with 3
1295.6
1288.7
brands over USD165.9 million
1172.9
1132.4
1126.3
Wide distribution network covering 2.8 million retailers
894.3
across the country
17 world-class manufacturing plants catering to needs
of diverse markets
Daburs Vision Plan for 2011-15, successfully got
191.8
177.5
139.9
136.5
124.9
151
completed with the sales of USD1,295.6 million
recording a growth of 9.7%
In 2016, Dabur registered sales of FMCG products
FY11 FY12 FY13 FY14 FY15 FY16
worth USD1,288.7 million growing at a CAGR of 7.6%
over FY11-16 Sales PAT
The company plans to acquire the personal care, hair Source: Dabur Annual Report 2015-16, TechSci Research
care and creams businesses of CTL group based in
South Africa, at an estimated cost of USD 1.5 million
In January 2017, NewU, a beauty retail venture of
Dabur, announced plans of bringing Sri Lankan beauty
products brand - Spice Island, to India to strengthen
their portfolio

FMCG
ITC LEADING FOOD AND BEVERAGES COMPANY
Sales (USD million)

Salient features
ITC is one of the foremost company in private sector in

terms of sustained value creation, operating profits &
cash profits CAGR(1) : 8.64%
It is the only India-based FMCG company to feature in

Forbes 2000 List
ITC is a market leader in its traditional businesses of
5985.9
1593.9
5572.1
1504.0
1499.3
1486.6
1457.4
Cigarettes, Hotels, Paperboards, Packaging & Agri-
1365.9
1347.4
1314.4
5455
1291.1
1182.8
1093.3
4515.5
4911
4566
982.5
Exports
The company is rapidly gaining market share even in its
nascent businesses of Packaged Foods &
Confectionery, Branded Apparel, Personal Care & FY11 FY12 FY13 FY14 FY15 FY16
Stationery
Sales(FMCG) Sales(Total) PAT
Its Agri-Business is one of India's largest exporters of
agricultural products Source: Company reports, TechSci Research
Notes: (1) - CAGR is for Sales (FMCG)
ITCs total sales increased at a CAGR of 4.29 per cent
between FY11 & FY16 to reach net sales of USD5,572.1
million

FMCG
USEFUL INFORMATION
FMCG
INDUSTRY ASSOCIATIONS (1/3)
Indian Dairy Association

Secretary (Establishment)
Indian Dairy Association, Sector-IV, New Delhi 110022
Phone: 91-11-26170781, 26165355, 26179780
Fax: 91 11 26174719
E-mail: ida@nde.vsnl.net.in
Website: www.indairyasso.org
All India Bread Manufacturers Association

PHD House, 4/2, Siri Institutional Area, August Kranti Marg,
New Delhi 110016
Phone: 91-11-26515137; Fax: 91-11-26855450
E-mail: aibma@rediffmail.com; mallika@phdcci.in
Website: www.aibma.com
All India Food Preservers Association

206, Aurobindo Place Market Complex
Hauz Khas, New Delhi 110016
Phone: 91-11-26510860, 26518848; Fax: 91-11-26510860
Website: www.aifpa.net

FMCG
Federation of Biscuit Manufacturers of India

PHD House, 4/2, Siri Institutional Area, August Kranti Marg, New
Delhi 110016
Phone: 91-11-26515137; Fax: 91-11-26855450
E-mail: fbmi@rediffmail.com; mallika@phdcci.in
Website: www.biscuitfederation.com
Indian Soap & Toiletries Manufacturers Association

Raheja Centre, 6th Floor, Room No 614, Backbay Reclamation,
Mumbai 400021
Phone: 91-22-2824115; Fax: 91-22-22853649
E-mail: istma@bom3.vsnl.net.in
Indian Soft Drinks Manufacturers' Association

702, Ansal Bhawan, 16 KG Marg, New Delhi 110001
Phone: 91-11-46470200; Fax: 91-11-23327747

FMCG
The Solvent Extractors' Association of India

142, Jolly Maker Chambers, No 2, 14th Floor, 225, Nariman Point,
Mumbai 400021
Tel: 91-22-22021475, 22822979; Fax: 91-22-22021692
E-mail: solvent@mtnl.net.in
Website: www.seaofindia.com
Vanaspati Manufacturers Association of India

903, Akashdeep Building, 26-A, Barakhamba Road,
New Delhi 110001
Phone: 91-11-23312640; Fax: 91-11-23315698

FMCG
GLOSSARY
FDI: Foreign Direct Investment
MSP: Minimum Selling Price
NREGA: National Rural Employment Guarantee Act
FY: Indian Financial Year (April to March)
So FY09 implies April 2008 to March 2009
SEZ: Special Economic Zone
MoU: Memorandum of Understanding
Wherever applicable, numbers have been rounded off to the nearest whole number

FMCG
EXCHANGE RATES
Exchange rates (Fiscal Year) Exchange rates (Calendar Year)
Year INR equivalent of one USD Year INR equivalent of one USD
200405 44.81
2005 43.98
200506 44.14
2006 45.18
200607 45.14
200708 40.27 2007 41.34
200809 46.14 2008 43.62
200910 47.42 2009 48.42

201011 45.62
2010 45.72
201112 46.88
2011 46.85
201213 54.31
2012 53.46
201314 60.28
2013 58.44
2014-15 61.06
2014 61.03
2015-16 65.46 2015 64.15
2016-2017E 66.95 2016 (Expected) 67.22

Source: Reserve bank of India,
Average for the year
FMCG
DISCLAIMER
India Brand Equity Foundation (IBEF) engaged TechSci to prepare this presentation and the same has been prepared
by TechSci in consultation with IBEF.
All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The
same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any
medium by electronic means and whether or not transiently or incidentally to some other use of this presentation),
modified or in any manner communicated to any third party except with the written approval of IBEF.
This presentation is for information purposes only. While due care has been taken during the compilation of this
presentation to ensure that the information is accurate to the best of TechSci and IBEFs knowledge and belief, the
content is not to be construed in any manner whatsoever as a substitute for professional advice.
TechSci and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in
this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of
any reliance placed on this presentation.
Neither TechSci nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission
on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

FMCG May 2017

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

FMCG May 2017

Hochgeladen von

Copyright:

Verfügbare Formate

FMCG

MAY 2017 For updated information, please visit www.ibef.org 2

During 20162020, FMCG market

2016 USD billion 2020F

CAGR: 19.62% 3600 Total consumption expenditure to

The rural FMCG market in India

CAGR: 24.57% 180.00 The modern retail market is

2015 USD billion 2020F

CAGR: 10.8% 267 Indias middle income

CAGR: 4.11% Rural Indias per capita

2015 USD 2020F

2016 Growing demand

MARKET OVERVIEW AND TRENDS

Food & beverages Health care Household and Personal care

19% 31% 50%

Health beverages, staples/cereals, Oral care, hair care, skin care,

Source: Dabur, TechSci Research

MAY 2017 For updated information, please visit www.ibef.org 8

Indian FMCG industry 9.0 49 2016

Market size of chocolates <100 1,441 2015

Market size of personal care 22.7 2015

HULs share in FMCG market 2000 9.71 2016

MAY 2017 For updated information, please visit www.ibef.org 9

MAY 2017 For updated information, please visit www.ibef.org 10

16% Skin Care

Source: Dabur, TechSci Research

MAY 2017 For updated information, please visit www.ibef.org 11

Source: Emami, TechSci Research

MAY 2017 For updated information, please visit www.ibef.org 12

The number of middle class households (earning between

Notes: Greater distributional efficiencies and increasing demand (especially

MAY 2017 For updated information, please visit www.ibef.org 14

Source: AC Nielsen, TechSci Research, Dabur Reports

MAY 2017 For updated information, please visit www.ibef.org 15

Biscuits & confectionery maker - Parle Products, is aiming to

MAY 2017 For updated information, please visit www.ibef.org 16

Market leader Other Leading Players

Hair oil 30% 19%

Shampoo 47% 27%

Oral care 54.9% 30% 14%

Skin care 54% 12% 3%

Fruit juice 60% 30%

MAY 2017 For updated information, please visit www.ibef.org 17

Consumers have started demanding customised products specifically tailored to their

Source: AC Nielsen, TechSci Research

This approach has helped FMCG companies focus on front-end marketing

Source: AC Nielsen, TechSci Research

MAY 2017 For updated information, please visit www.ibef.org 19

FMCG companies entering Africa as it helps to be close to consumption markets within

Source: AC Nielsen, TechSci Research

MAY 2017 For updated information, please visit www.ibef.org 20

PORTERS FIVE FORCES ANALYSIS

Private label brands by retailers are priced at a discount to mainframe

Threat of New Entrants Substitute Products

Huge investments in setting up Presence of multiple brands

Bargaining Power of Suppliers Bargaining Power of Customers

Source: TechSci Research

MAY 2017 For updated information, please visit www.ibef.org 22

Product Flanking: Introduction of different combinations of products at different prices, to cover as

MAY 2017 For updated information, please visit www.ibef.org 24

MAY 2017 For updated information, please visit www.ibef.org 26

Shift to organised market Increase in penetration

MAY 2017 For updated information, please visit www.ibef.org 27