31st Aug, 2015

BIZWIZ Session 3

News Roundup

Indian FMCG market can be divided into

4 segments
Food

& Beverages (47%)

Processed foods, cereals, bakery items, dairy products

Personal

Care & Healthcare (22%)

Oral care, hair care, skin care, cosmetics/ deodorants, OTC products

Household

care (15%)

Fabric wash, household cleaners

Tobacco

(16%)

Trends to be discussed today

Rural Urban Divide

Organised retail

Government Initiatives
Rural India
GST
FDI

Negative working capital

Zero Debt

Marketing Trends

TRAI Regulation - advertising

SKUs

Outsourcing manufacturing

Major trends that shall drive growth

2 distinct Indias
Rural consumption on the rise
Value for money
Spend nearly 43% of income on
FMCG profucts

Urban consumption driven by

demand of new products
Targeting new lifestyles
Organized retail to be a major boost

Some sectors surprisingly slated to do very

well
Changing

lifestyle, rising
disposable income key
drivers

Consciousness

about
healthy living helping
drive adoption of
wellness products in the
urban areas

Rural shall be the major growth driver

going forward

Rural consumption grew by

12.2% in 2013 while urban only
grew by 8%
Total rural income slated to
reach $1.8tn by 2021 from
current levels $572bn

Share of non-food expenditure

rose from 36% in FY08 to 51.4%
Advantage can be taken by
Improving distribution
Innovation through sachets and
right product mix

Per capita Disposable

Income
650
600
550
500
450
400
350
300
2010

2015E

2020E

Case example states like MP, Chattisgarh,

Bihar & Jharkhand and Orissa can drive growth
FACT

- Orissa is growing 3x the national average in FMCG

consumption

These

5 states account for 16% of the market but

contribute 20% incremental sales

Spending trends are skewed even across these

Bihar, Jharkhand and Orissa 50% on food
Madhya Pradesh & Chattisgarh 55% on non-food
Orissa spends 12.7% on OTC (milk and baby food)

states

Identifying and targeting these areas key in

face of declining sales

27% of all 181mn Indian

rural households located
here

Bihar and Orissa with 90%

and 85% rural households
have greatest density in the
country

Availability

Pricing offerings should

be smaller and affordable

Bihar & Jharkhand direct

network to take advantage
of dense populations
Madhya Pradesh & Orissa
indirect network to target
deep rural networks

Trends to be discussed today

Rural Urban Divide

Organised retail

Government Initiatives
Rural India
GST
FDI

Negative working capital

Zero Debt

Marketing Trends

TRAI Regulation - advertising

SKUs

Outsourcing manufacturing

Organized retail is a major growth driver in

urban sphere

Share of organized retail in FMCG

expected to be 16% by 2016

Growth of FMCG purchased

through modern trade surpassing
growth through general trade

FMCG cos are partnering with major

retail players to increase brand
communication
New products are even being launched
exclusively through e-retailers like
Amazon

Shoppers Stop is a success story

First

retail company to break even in India; Hypercity broke

even on EBITDA for 3rd straight quarter

Tie-up

with Snapdeal to launch online ordering and

physical collection method; to be launched in Q3 FY16

Net

profit for Q1 up 4.5x to Rs 3.4cr; Same store sales

growth expected to be 7-8%

Trends to be discussed today

Rural Urban Divide

Organised retail

Government Initiatives
Rural India
GST; FSB
FDI

Negative working capital

Zero Debt

Marketing Trends

TRAI Regulation - advertising

SKUs

Outsourcing manufacturing

Regulation that shall impact the market

Rural initiatives
Direct Cash Transfer Scheme
Creating Demand for Goods and Services
Stopping Pilferage

MGNREGA
100 Days of Work
Pradhan

Mantri Gram Sadak Yojna

FDI

100% FDI allowed in food

processing and single brand
retail; 51% in multi-brand retail

FMCG has accounted for 3.7%

of all FDI

In FMCG, food processing has

seen the maximum investment
with its share being 71.8%

Trends to be discussed today

Rural Urban Divide

Organised retail

Government Initiatives
Rural India
GST; FSB
FDI

Negative working capital

Zero Debt

Marketing Trends

TRAI Regulation - advertising

SKUs

Outsourcing manufacturing

Negative working capital

Indicator of
Operational efficiency
Cash conversion cycle is
negative
High profitability
Low bargaining power for
retailers
Means

that daily activities

are funded by the customers

Cannot

be replicated across
industries

Trends to be discussed today

Rural Urban Divide

Organised retail

Government Initiatives
Rural India
GST; FSB
FDI

Negative working capital

Zero Debt

Marketing Trends

TRAI Regulation - advertising

SKUs

Outsourcing manufacturing

Zero Debt

Drivers for zero debt

Rising interest rates
Rise in input costs

Increase in cash of companies cumulative

52000cr
GCPL 4x from 09-10 to 13-14
Dabur 3x
Marico 4x

Realistic pricing of distressed assets

acquisitions

Emami raised Rs 950cr to acquire Kesh King in a Rs

1684cr deal the biggest in recent times in the Indian
FMCG space

Trends to be discussed today

Rural Urban Divide

Organised retail

Government Initiatives
Rural India
GST; FSB
FDI

Negative working capital

Zero Debt

Marketing Trends

TRAI Regulation - advertising

SKUs

Outsourcing manufacturing

TRAI Regulation
Reduced
10+2 rule

allowed advertisement time

FMCG

firms at special risk as they take up nearly 50% of

advertisement time

Impact
Lesser inventory advertised
Rise of non-conventional marketing methods
Greater ad spends; better ROI expected

SKU
Stock

Keeping Units

Move towards more number of SKUs

Increased Penetration into lower priced segments
Reducing Grammage
Tropicana Sample

of SKUs than Price

Trends to be discussed today

Rural Urban Divide

Organised retail

Government Initiatives
Rural India
GST; FSB
FDI

Negative working capital

Zero Debt

Marketing Trends

TRAI Regulation - advertising

SKUs

Outsourcing manufacturing

Outsourcing
More
Cost

focussed approach.

Reduction

Examples
Coke
Tropicana

Questions ?