FMCG SECTOR

PRESENTED BY:

RADHA KUMARI
MBA 4th sem
UMA
 ABOUT FMCG

• Products having a quick turnover and relatively low cost.

•They get replaced within a year.

•Also known as consumer packaged goods.

•They cater to 3 very distinct aspects- necessity, comfort,

luxury.

•Consumer spends little time on the purchase decision.

•Limited inventory of these products are kept.

• Brand switching is often induced by heavy advertisement,

recommendation of the retailer or word of mouth.
INDIAN FMCG SECTOR IN 2003
 ABOUT FMCG SECTOR

 fourth largest sector of Indian economy with total market size in

excess of $14.7 billion in Oct 2009.
 Characterized by:
 Well established distribution network
 Intense competition between organised & unorganised segments
 Low operational cost
 Strong branding
 directly related to the population
 expected to grow by over 60% by 2010 (as per HSBC report)
INDUSTRY SEGMENTS

Household
Personal Care
Care

Branded &
packaged Spirits and
food and Tobacco
beverages
 Major Players

Segment Major Players

HUL, Nirma, Godrej consumer products, ITC, P&G,

Household care Dabur, Reckitt & Colman

Colgate-Palmolive, HUL, Dabur, Lakme, Marico,

Personal care Emami, P&G, Himalaya ITC
Parle Agro, Britannia, ITC, Nestle, Cadbury India,
Dabur Pepsico; United Breweries, Coca-Cola,
Food & beverages GlaxoSmithKline
 Market size

Market size of various segments in Rs. Crores

4600 Personal wash

8300
Detergent
3500
Skincare
2700 Haircare
Shampoos
3800
12000 Oral care(toothpaste)
3400 Food segment

Source: UN Population Division: Medium variant

 Some Facts

  Urban Rural
53 135
Population 2001-02 (mn household)
69 153
Population 2009-10(mn household)
28 72
% Distribution (2001-02)
3768 627000
Market (Towns/Villages)
1 3.3
Universe of Outlets (mn)

Source: Statistical Outline of India (2001-02), NCAER

Top 10 FMCG Companies
Hindustan Unilever Ltd.

ITC (Indian Tobacco Company)

Nestlé India

GCMMF (AMUL)

Dabur India

Asian Paints (India)

Cadbury India

Britannia Industries

Procter & Gamble Hygiene and Health Care

Marico Industries
 FMCG – Evolution

 1950’s-80’s – Low Investment in the sector

 Low purchasing power

 Govt’s emphasis on small scale sector

 HLL and other company’s urbane focus

 Post liberalization

 Entry of MNCs

 Focus shifted to getting to rural consumer first

 Strengths:

 Low operational costs

 Presence of established distribution
networks in both urban and rural areas
 Presence of well-known brands in FMCG
sector
 Weaknesses:

 Low exports levels

 products which illegally mimic the labels
of the established brands narrow the
scope of FMCG products in rural and
semi-urban market.
 Opportunities:

 Untapped rural market

 Rising income levels, i.e. increase in
purchasing power of consumers
 Large domestic market- a population of
over one billion.
 Export potential
 High consumer goods spending
 Threats:

 Removal of import restrictions resulting in

replacing of domestic brands
 Tax and regulatory structure
 Porter’s Five Forces Model

Threat of
New
Entrants

Bargaining Bargaining
Rivalry Among
Power of Power of
Competing Firms in
Suppliers Buyers
Industry

Threat of
Substitute
Products
Implication of Porter’s Model to FMCG sector

 Barriers to Entry  Huge investments in promoting brands

 setting up distribution networks
 intense competition

 Bargaining Power  Some of the companies are integrated backwards,

of Suppliers which reduces the supplier's clout.
 Manufacturing is largely outsourced.
 In case of branded products, there is little that the
 Bargaining Power consumer can influence, but intense competition
within the FMCG companies results in value for
of Customers money deals for consumers (e.g. buy one, get one
free concept).

 Competition  Competition is faced from both domestic, MNCs

and also from cheaper imports.
 Price wars are a common phenomenon.
 PAST
 FMCG sales grew by 14.8 per cent in the April to September period & by
seven per cent in the October-November 2009 period.
 top 10 players saw a deceleration in sales growth from 9.9% in Apr-Sep to
3.3% in Oct-Nov period.
 registered a 12% growth in 2009 despite the economic downturn
 The Sector accounted for 5 per cent of the total factory employment and
created employment for over 3 million people in downstream activities in
2007

Source: AC Nielsen data

Morgan Stanley report
Source: Rural Marketing Association of India
 Rural per capita consumption to equal
current urban levels by 2017
 Industry analysis expect the FMCG
sector in rural areas to grow 40% against
25% in urban

Source: Rural Marketing Association of India

 Pattern of sales

sales of HUL in various segments

50
45
40
35
30 April 2009( %)
25
20 April 2010 ( %)
15
10
5
0

Source: Nielsen data

 FDI Policy
 Automatic investment approval up to 100 per cent foreign

equity or 100 per cent for NRI and Overseas Corporate Bodies

(OCBs) investment allowed for most of the food processing

sector ; exceptions:-
 malted food,

 alcoholic beverages and

 those reserved for small scale industries (SSI).

 24 per cent foreign equity is permitted in the small-scale sector.

 Temporary approvals for imports for test marketing can also be obtained
from the Director General of Foreign Trade.
PRESENT

 Strong volume and price hikes led to the

sector grow at a strong 12% growth in
2009
 April 2010 recorded the highest sales
growth in eight months.


data from market researcher Nielsen.

FMCG in rural India
Expected revenue growth for 4th quarter
Cost competitiveness of India
(in terms of labour cost)
Income level of FMCG sector
UNION BUDGET & FMCG SECTOR

Budget measures Impact

Allocation of Rs 661 bn toward help provide FMCG companies

rural infrastructure development . better access to the rural heartlands

Adjustment in income tax slabs increase the disposable income in

the hands of urban consumers
Reduction in duty of replaceable positive for HUL which has
kits for household type water filters launched a water filter nationally.

Decrease in excise duty on reduced packaging costs

corrugated boxes and cartons
 Contd…
Increase in excise duty for
cigarettes and tobacco
Spending on roads and
concessions for setting up
warehousing and cold storages
Allocation of Rs 401 bn towards
MNREGS
Focus on rural spending
negative for companies like ITC,
VST and Godfrey Phillips as it will
increase the price of cigarettes.
positive for companies like Nestle,
HUL, ITC and Britannia as it would
help provide better logistics and lower
wastages.
improved living standards &
spending abilities
big positive for most FMCG
companies that have started targeting
the rural sector
future
 expected to register a 15% growth in 2010
 by 2030 India’s population will be around 1.450 Billion
 FMCG Industry which is directly related to the
population is expected to maintain a robust growth
rate.
 Future
Segment Opportunities
Dairy Based Products only around 15 per cent of milk is
processed.
The organized liquid milk
business is in its infancy & has
large long-term growth potential.
Packaged Food Only about 10-12 % of output is
processed & consumed in
packaged form, thus highlighting
the huge potential for expansion.
Beverages More than 50% of market share is
capture by unorganized players
highlighting high potential for
organized players.
Oral Care remains under penetrated in India
with penetration rate around 50%
 Company Prospects

 Hindustan Unilever Limited

 lowering its expenditure on packaging across its portfolio of food brands as part of
a wider cost-cutting drive.
 Unilever’s product - Pureit (a water purifier) has received the UNESCO Water
Digest Water Award 2008-2009.

 Procter & Gamble Hygiene & Health Care Limited (P&G)

 21 product categories out of which only 8 product have presence in India
 planning to launch the rest 13 product in India.
 aggressive plan to set up 20 new factories across the World out of which 19 is
expected to come in emerging markets (BRIC)
 Godrej Consumer Products Limited (Godrej)
 acquired 100 per cent stake in the Kinky Group Limited, South Africa (hair
segment)

 Dabur India Limited (Dabur)

 entered into the malted food drink market with the launch of a new health drink
“Dabur Chyawan Junior “
 acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL) for Rs 203.7 Crores

 got approval from Government of Himachal Pradesh to set up a medicine

manufacturing unit .
Reasons to consider a career in
FMCG
1. Its a stable industry

2. Its a high profile industry

3. You get a depth of experience very quickly

4. You can get a wide range of experience

5. Its an industry that thrives on innovation

6. There are opportunities nationwide, both urban and rural

8. Lots of choices and opportunities for advancement