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<a title="Vie
turnover, and relatively low cost. FMCG products, which are generally replaced less than once a
products such as toiletries, soap, cosmetics, teeth cleaning products, shaving products and
products and plastic goods. FMCG may also include pharmaceuticals, consumer
electronics, packaged food products and drinks, although these are often categorized
separately.
Examples of FMCGs are soft drinks, tissue paper, and chocolate bars. A subset of
FMCGs are Fast Moving Consumer Electronics which contain innovative electronic
products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops
which are replaced more frequently than other electronic products. White goods in
FMCG refers to house hold electronic items such as Refrigerator, T.V, Music Systems
etc.
5
Major players in FMCG sector
THE TOP 10 COMPANIES IN FMCG SECTOR
S.
NO.
Companies
1.
Hindustan Unilever Ltd.
2.
ITC (Indian Tobacco Company)
3.
Nestlé 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
.India is one of the largest emerging markets in FMCG sector because of
Large domestic market
India ± an extravagant spender on consumer goods
Demand-supply gap
Rapid urbanization, increased literacy and rising per capita income
1.Hindustan Unilever Limited;-
Hindustan Unilever Limited, formerly known as Hindustan Lever Ltd is India's largest
FMCG company with sales of 10,000crores. Its parent company is Unilever, which holds
51.55% of the equity. It operates in seven business segments: Soaps and Detergents;
6
Personal Products; Beverages; Foods, including Culinary and Branded Staples; Ice
Creams; Exports, and Others, including Chemicals and Agri-Products. It has leadership in
Home & Personal care products and Food and Beverages.
2. ITC (Indian Tobacco Company):-
ITC was set up in 1910 by the name of 'Imperial Tobacco Company of India Limited'.
ITC has its presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging,
Apparel, Greeting Cards, Safety Matches and other FMCG products. ITC is a market
It is gaining its market share very rapidly in the businesses of Packaged Foods &
Nestlé Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling
finished products in the Indian market. Nestlé India is amongst India's 'Most Respected
Marie Gold
y
Treat
y
Maska Chaska
y
Good Day
y
Milk Bikis
y
Pure Magic
4.Gujarat Cooperative Milk Marketing Federation:-
Gujarat Cooperative Milk Marketing Federation (GCMMF) is the largest food product
7
marketing organization of India. It aims to provide good returns to the farmers and also to
fulfill the requirements of consumers by giving them quality products.
Amul products are used by millions of people. Amul Butter, Amul Milk Powder, Amul
Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream,
Nutramul, Amul Milk, and Amulya has made Amul one of the leading food brands in
Personal care products. Dabur India is divided into 2 major strategic business units:
y
coatings, automobile OEMs and refinishes, wood finishes, finish coats and an ancillary
product in decorative paints. It manufactures and markets paints. Asian Paints is the
Chocolates
y
5 Star
y
Perk
y
Éclairs
8
y
Celebrations
Milk food drinks
Bournvita Candy
Halls.
8.Britannia Industries Ltd:-
The Company is in the manufacturing and selling of biscuits, bread, rusk, cakes and dairy
products like cheese, butter and milk. The brand names of biscuits are:
y
Marie Gold
y
Treat
y
Maska Chaska
y
Good Day
y
Milk Bikis
y
Pure Magic
The Company's plants are located in Mumbai, Kolkata, Delhi, Chennai and
Uttarakhand.
9.Procter & Gamble;-
Procter & Gamble is a US-based company. Procter & Gamble is in the manufacturing of
personal care products, pet food and household cleaners.. The Procter & Gamble
Company (P&G) boasts boatloads of brands. It's divided into three global units: health
and well being, beauty, and household care. The company also makes pet food and water
and global ayurvedic businesses. The company also markets food products and distributes
third party products. Some of leading brands of Marico include Parachute, Saffola,
Sweekar, Shanti Amla, Hair & Care, Revive, Mediker, Oil of Malabar and the Sil range
9
of processed foods. It has six factories, and sub-contract facilities for production.
Marico's Products and Services in Hair care, Skin Care and Healthy Foods Parachute
o
Saffola
o
Sweekar
o
Nihar
o
Shanti
o
Mediker
o
Revive
o
Kaya
o
Sundari
o
Aromatic Fiancee
o
HairCode.
10
SWOT ANALYSIS
Strengths
1. Low operational cost.
population.
4. Export potential.
5. High consumer good spending.
Threats
1. Removal of import restrictions
measures like the implementation of the sixth pay commission announced by the
government may further trigger the disposable income in FY09, which may result in select
consumers moving up the value chain. On account of a rise in the disposable income with
considerable part of the disposable income is spent on buying products and services.
spend their total income on grocery while 8% is spent on personal care products, resulting
rural FMCG market is something no one can overlook. Increased focus on farm sector
will boost rural incomes, hence providing better growth prospects to the FMCG
companies. Rural marketing has become the latest marketing mantra of most FMCG
majors. True, rural India is vast with unlimited opportunities. All waiting to be tapped by
FMCGs. Not surprising that the Indian FMCG sector is busy putting in place a parallel
rural marketing strategy. Among the FMCG majors, Hindustan Lever, Marico Industries,
Colgate-Palmolive and Britannia Industries are only a few of the FMCG majors who
70% of the nation's population, that means rural India can bring in the much-needed
volumes and help FMCG companies to log in volume-driven growth. That should be
music to FMCGs who have already hit saturation points in urban India.
3)Higher employment generation:
Employment generation was triggered by a thrust in industrial activity, which led to
newer jobs in sectors like logistics, infrastructure, and other related activities. The format
12
of modern trade has also enabled more employment in India. Organised retail has
augured well for the FMCG sector which has thereby derived greater exposure leading to
more employment. Furthermore, organised retail has also created more job opportunities
without any gender bias for our teeming population. As per DIPP statistics, the food
processing industry reported the highest proposed employment numbers during the period
Aug 1991- Jun 2008, indicating a growth of 2.1% when compared to the previous
corresponding period. Similarly, the vegetable oil & vanaspati segment and soaps,
cosmetics and toiletries segment registered a growth of 3.4% and 3% respectively, during
ASSOCHAM. Of this, close to US$ 8 bn was confined to the rural areas with US$ 4 bn in
the urban & metro area and almost US$ 3 bn in the semi-urban area. The large young
population of approximately 180 mn in the rural and semi-urban region is driving the
Indian FMCG industry, with the continuous rise in their disposable income, life style,
food habit etc, among others. The lifestyle of this section of the population is undergoing
According to ASSOCHAM, the market size of FMCG in the rural and semi-urban
52% of the rural market size is captured by FMCG products and is projected to reach
57% in the next three years. This size is further expected to grow by 10% in the next
three years.
5)Growing share of organised retail:
The modern trade format provides a wider visibility to the FMCG products. Organised
opportunities.
6) Presence across value chain
13
Indian FMCG firms have a presence across the entire value chain of the industry, from
raw material supply to final processed and packaged goods, both in the personal care
products and in the food processing sector. As a result firms located in India have become
a CAGR of 12.2% during 2007 to 2011. Rising per capita income, increased literacy and
rapid urbanisation have caused rapid growth and change in demand patterns. The rising
aspiration levels, increase in spending power has led to a change in the consumption
pattern. Apart from the demand for basic goods, convenience and luxury goods are
growing at a fast pace too. The urban population between the ages of 15 to 34 years is
expected to increase from 107 m in 2001 to 138 m in 2011, an increase of 30%. This
would unleash a latent demand with more money and a new mindset. With growing
incomes at both the rural and the urban level, the market potential is expected to expand
further
THREATS
1)Entry of foreign players and imports resulting in replacing of domestic brands:-
A major threat for any Indian market player is a foreign player because they usually come
with strong potential of rapid growth. FDI is a major way of replacing domestic brands.
In CY08, FDI inflows in sectors like food processing; soaps, cosmetics &
toilet preparations and vegetable oils & vanaspati together registered a growth
of 41%.
y
The total FDI in the food processing industry underwent a growth of 15% in
CY07. This came on the back of a robust 38% growth in the previous year.
y
The pattern of FDI inflow witnessed a huge variation in between the years 2004-2007 in the soaps,
cosmetics and toiletries segment. From an almost 100% decline in CY06, the FDI inflow underwent
The vegetable oils and vanaspati segment registered a robust rise of more than
two times in CY07 as against the previous year when it had recorded a more
Recently, the government announced a cut of 4% in excise duty to fight the slowdown and further
reduced excise duty to 8% from 10% . This announcement is likely to have a positive impact on the
industry.
2) Slowdown in rural demand:-
Although it is said that rural market is a golden opportunity in hand of fmcg sector.
But reality is that it is not growing on expected pace. It can be seen by some data, like
growth rate for the period February ¶06-07 was 1.0% while for February¶07-08 it was
-2.2%. and for the period feburary¶08-09 it was -6.1%, that shows slowdown in rural
market.
Along with growth rate fmcg sector is facing one more
threat in rural market, it is highly unorganized. Fast moving consumer goods (FMCG), which is
dominated by a handful of global players, India's Rs.460 billion FMCG market remains highly fragmented
with roughly half the market going to unbranded, unpackaged home made products. And this threat for
organized sector is getting reduced day by day.
3)Tax and regulatory structure:
The total incidence of tax on processed products in India is as high as 40% on certain
items. Considering the importance of this sector, while a few countries have kept the
incidence of tax at zero %, most others have pegged it at 12% to 14%. This much level of
taxation is preventing Indian players to compete with foreign players. But now seeing this
global slowdown government is helping fmcg by some tax and duty reduction. Some
Reduction of duty on edible oil will have a positive impact on related companies.
y
Reduction of custom duty on food processing machinery and their parts from
7.5% to 5%.
15
y
Reduction of excise duty on food mixes from 16% or 8% to nil is positive for
ITC.
y
Exemption of free samples and displays from the purview of FBT will be
beneficial for FMCG companies because they spend huge amount of money on
advertising and brand building. HLL, Dabur, ITC, and Marico will be amongst the
strategy tools and has proven its usefulness on numerous occasions. Porter's model is particularly
underemphasize the importance of the (existing) strengths of the organization (inside-out) when
It is an outside-in business unit strategy tool that is used to make an analysis of the
attractiveness (value...) of an industry structure. The Competitive Forces analysis is made by the
the Barriers to entry (how easy or difficult is it for new entrants to start to compete,
which barriers do exist)
y
the Bargaining power of suppliers (how strong is the position of sellers, are there many
or only few potential suppliers, is there a monopoly)
y
the Bargaining power of buyers (how strong is the position of buyers, can they work
together to order large volumes)
y
the Rivalry among the existing players (is there a strong competition between the
existing players, is one player very dominant or all equal in strength/size)
y
the Threat of substitutes (how easy can our product or service be substituted, especially
cheaper)
When we apply Porter¶s model in FMCG sector this is what we get
Barriers to entry
.Traditionally in India, companies like ITC, HLL, Colgate, Cadbury (now de-listed) and
Nestle dominated the FMCG sector, with each one happy in their own segment, negligible
competition and many barriers to entry in the form of high import duty. Thus, these
companies were able to squeeze the customers' wallets by charging a high premium on their
17
products
Abundant supply in metros. Distribution networks are being beefed up to penetrate the rural
areas. HLL expects the FMCG market to triple in market size by FY10, which highlights the
potential.
Bargaining power of suppliers
Some of the companies are integrated backwards, which reduces the supplier's clout.
developing countries are struggling to capture and retain their market share from the
multinational companies. To attract the retailers, the distributors supply on credit and collect
the amount in unequal weekly instalments. When the supply on credit becomes inevitable,
the distributors have to find out ways of optimising the investment. Moreover, the
investment has to be shared among the retailers depending on their demand and payment
In case of branded products, there is little that the consumer can influence, but intense
competition within the FMCG companies results in value for money deals for consumers
³So often our brands are placed in situations outside of our direct control. Creating a brand that
continues to convey its position in the hands of others is the true test of Strategic Brand
Management within FMCG. Defining and focusing on your brand as a µunique individual¶ that
Players from unorganised and organized sectors continue to grab each other¶s market shares.
Highly scattered market and poor transport infrastructure limits the ability of MNCs and national
players to reach out to remote rural areas and small towns. Low brand awareness enables local
players to market their spurious look-alike brands. Also with entry of existing players in new
segments like ITC¶s entry in personal care products, Dabur¶s plans to venture into health
beverages would add to the already aggressive environment resulting in high pressure on margins.
FMCG companies, on their part, are doubtful of certain business models of modern retailers. For instance,
most retailers such as Subhiksha and Reliance Fresh have their presence in close proximity to each other.
"Organised retailers are competing for a limited density of population in a crowded market space.
Hence, they have a low velocity in movement of goods and are facing payment issues," explains an
executive from a leading FMCG company who has also curtailed supplies to select stores and
More selling points in the sale outlet means more shopping opportunities for continuous growth. The
best part in FMCG sector is that the substitutes here are found within the sector itself so if the
customers change their consumption pattern then too the effect will be on the company but the
the business. The feasible approach to identify the important environmental factors is to
test each factor with regard to its impact on the business of the organization and the
probability of such an impact. The issue priority matrix shelps in doing the same i.e.
The Issue Priority Matrix is a simple diagramming technique that helps you choose which activities to
prioritize (and which ones you should drop) if you want to make the most of your time and
opportunities.It is useful because by choosing activities intelligently, you can make the very most of
your time and opportunities. However by choosing badly, you can quickly bog yourself down in low-
yield, time-consuming projects that close down opportunities and stop you moving forwards
ISSUE PRIORITY MATRIX OF FMCG INDUSTRY
Our Issue Priority Matrix shows three levels of probability of occurrence of an event: high,
medium, and low. On the other axis it shows the impact of this event on the business in three
categories: high, medium, and low. Business is expected to remediate issues in priority order: first
Despite rising input price rises and high inflation, fast-moving consumer goods FMCG
companies are expected to post a strong topline growth in the second quarter of the financial
year 2008-09. According to industry projections, the sector is expected to post a 15-17%
topline revenue growth in the July-September quarter, riding on price hikes and higher focus
on value-for-money products.
Demand in the fast moving goods may get impacted if there is a prolonged liquidity crisis
but as of now there is no witnessing of any dip in sales. The current financial scenario does
not have an immediate relevance to the FMCG sector, as the sector is, to some extent,
insulated.
2. CREDIT CRUNCH
Major fast moving consumer goods (FMCG) companies such as Godrej, Marico and Dabur
have curtailed supplies to select leading modern trade retailers, following default in
payments."We have curtailed supplies to those modern retailers who are not paying
according to terms of the contract," confirmed Adi Godrej, chairman, Godrej Group.
Marico's Chief Executive Officer (Consumer Products Business) Saugata Gupta, too,
affirmed that his company was being cautious in dealings with such retailers. FMCG
companies work on tight credit cycles. Due to the economic slowdown and tight credit
squeeze, a few retailers are seeing their working capital cycles get stretched as they
struggle with high real estate, rental prices and face a slowdown in business offtake. The
working capital for retailers is normally stuck for one or two months as retailers expand
Imported finished products in the segment may get more expensive with the FM levying an
additional import duty of 4%, a step that will add more cheer to the domestic FMCG sector. With the
Industrial Analysis
Industrial Analysis (FMCG Sector)
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