Analysis of FMCG Industry

Table of Contents
Industry overview Critical Success Factors Role of Power Brands Personal Care Overall Personal Care Trends Category Analysis Bath and Shower Hair Care Mens Grooming Oral Care Skin-Care Soft Drinks and Biscuits Category Analysis Carbonated Drinks Bottled Water Biscuits Competitive Positioning of Players in Personal Care 2

Industry Overview

Size of the FMCG industry is about Rs. 200,000 crores in FY 2013. About 40% of the FMCG sales are in Rural areas.
FMCG INDUSTRY : SIZE AND GROWTH RATE FMCG Industry Size Figures in Rs. bn
2000 2000 1831 16% 1671 1800 1600 1300 6% 1400 1160 1200 1020 860 1000 710 800 585 540 500 600 490 400 200 0 FY02 FY04 FY FY FY FY12 06 08 10
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FMCG INDUSTRY : CHARACTERISTICS

One of the extremely competitive industry. Very difficult for new players to enter and make a big impact. (ITC is yet to become profitable in their FMCG business even after 10 years) Very diverse industry. Analysis should happen on category by category basis because trends, brands and players differ significantly across the categories. There are strong MNCs and also strong Indian players. In the last 5 years the growth rates has been 16%. It has picked up compared to the previous 10 years. This sector is relatively immune to recession. The growth in FMCG depends on several factors - Penetration levels, Per capita consumption, Per capita income increase, Urban and Rural proportion
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Opportunities in Low Penetration and Low-per Capita Consumption Categories There is immense opportunities in several categories on account of low penetration level and low per capita consumption. Despite having high penetration level, categories like detergent soap, personal soap and washing powder have low per capita consumption therefore change in the consumption pattern will drive these categories. Apart from this, categories like oral care, shampoo, skin cream, deodorant and packaged juice etc where penetration level and per capita consumption both is low. Therefore, these categories have enormous opportunity to grow through addition in consumer base as well as change in the consumption pattern.
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Penetration levels of many FMCG products like Ketchups, juices etc are much less than even 10% PENETRATION LEVEL OF MAJOR FMCG PRODUCTS

PER CAPITA CONSUMPTION OF KEY FMCG PRODUCTS: COMPARISON WITH GLOBAL TRENDS Tea ( kg) Toothpaste ( kg)

PER CAPITA CONSUMPTION OF KEY FMCG PRODUCTS: COMPARISON WITH GLOBAL TRENDS Shampoo ( kg) Skincare ( Rs)

PER CAPITA CONSUMPTION OF KEY FMCG PRODUCTS: COMPARISON WITH GLOBAL TRENDS Ice-creams ( litre) Fabric Wash ( kg)

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CRITICAL SUCCESS FACTORS: RIVER ANALYSIS

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RIVER ANALYSIS Range Brands range (coverage of price points and wide variety) should be considered as a key trait. HULs leadership in soaps, detergent, skin care, shampoo market is owing to strong range of its products. In each of the category HUL has 2-3 brands with each brand having +10 variations; so this provides large option for customers. InnovationInnovation is the key for any industry and FMCG industry is not an exception. Although, the innovations what we want to mention here are the consistent improvement in look, packaging, usability and quality. Couple of innovation in soaps industry that consumers adopted well. Typical square size of soap has changed to oval and round shapes. Purpose of soaps has shifted from typical germs care (like Lifebuoy, Cinthol and Dettol) to skincare (Like Dove, Pears and FairGlow) and fragrance (like Liril, Lux and Breeze).

RIVER ANALYSIS Liquid form of soap is again a good innovation but consumer acceptability is still lower as it is not well marketed by the manufacturers. This innovation has good potential as it reduces the waste and improves the consumer ease. Value weightage The large part of consumers buying was depending on value for money concept. However, we have observed slight change in consumers buying post the success of plastic money and modern trade. Now consumer buys through a mathematical matrix that calculates each items weight in the monthly expense. Due to the low weightage in the monthly budget consumer shifts towards the better price product. The importance of brand plays a key role in choosing products. HUL through higher focus on branding created wide range of brands in home care and personal care that provides high value proposition for its consumers.

RIVER ANALYSIS
Engage There was a time when consumers were used to stick with one brand for lifetime and that case was largely with soaps, oral care and hair care categories. Our observation states that consumers brand loyalty has been reducing over period of time and consistent change in brands have been witnessed. Now it is difficult for a consumer to stick with one brand for whole life. However, in our opinion, variety in the product portfolio can engage consumer to buy through the same company if not the brand. The same consumer can buy low price Lifebuoy at certain age and with the rise in income and change in the life style can move towards expensive soaps like Dove and Liril. So in our opinion, companies should aggressively look at the change in consumers profile and should try to give the required product to fulfill the new demand. So the consumer canbe engaged with the company; if not with the brand through improvement in features, packing,quality and better schemes.

RIVER ANALYSIS

REACH It is a proven fact that long term survival of any brand depends on its reach to the customers. Good companies consistently develop their distribution channel and always wait for opportunities to come to beat the competitor. HUL has lost market share in soap category and we believe it is largely on account of better reach of its competitors. Wipro isstrong in the Southern India while Godrej consumers (GCPL) in the North India. Strong regional hold of Wipro and GCPL has resulted in ~600bps and ~200bps expansion in valuemarket share in the past 5 years.

Role of Power Brands

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It is important to have multiple power brands.

Significance of Power Brands - over dependence is risky The over dependence on a brand or few brands can create trouble for the company in the long term. Classification of companies based on their profitability dependence on power brands. High Dependence : Nestle, Marico and Jyothy Labs Medium Dependence : Emami and Colgate Low Dependence : HUL and Dabur However, risk exposure would be higher for those companies where volume growth of power brand is slowing down. Parachute and Ujala Supreme is already growing at single digit and expectation is further muted for volume growth. This can create high risk scenario for these two companies. However, post acquisition of Henkel India, next two years' scenario would be very different for Jyothy Labs and dependence on Ujala Supreme will reduce substantially. Nestle is also highly dependent on Maggi brand while high volume growth expectation reduces the risk exposure. But going forward Maggi's price power will reduce on account of higher competitive intensity. 17

It is important to have multiple power brands. Company Dependence on Power Brand

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PERSONAL CARE

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OVERALL PERSONAL CARE TRENDS

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Multi-benefits Emerges As the New Mantra

Manufacturers continued to introduce products with dual benefits to gain a competitive advantage by offering value for money. This trend, introduced with the launch of shampoos with conditioner and oils under the brands Garnier and Pantene, continued to grow in 2012. The 2-in-1 trend started to shift gradually towards skin care products, such as Fair & Lovely skin cream, which offers moisturising properties together with whitening.

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Current impact
During 2012, the trend of 2-in-1 products witnessed huge acceptance amongst consumers, and encouraged manufacturers to come up with several other different multi-benefit products across skin care and colour cosmetics to make value gains. In line with this trend, manufacturers such as Nivea and Vaseline also introduced moisturising body lotion with whitening properties. Nivea introduced Nivea Whitening Body Lotion, and Vaseline introduced Vaseline Healthy White Skin Lightening lotion in 2012. With most of the new launches offering dual or multi-benefits, the trend significantly increased over the review period.

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Outlook
Manufacturers are expected to gain a competitive advantage by coming up with products with multi-benefits, which, whilst offering a higher price margins for the manufacturers, will also attract price-conscious consumers, who will be searching for multi-benefits blended into one product. The trend is likely to be even stronger in skin care, particularly anti-agers. Such 2-in-1 products will also allow manufacturers to increase average unit prices due to their added-value.

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Future impact
This trend is likely to impact the growth of existing anti-agers and other facial care products during the forecast period. Consumers are likely to become increasingly price-conscious, and will move towards multi-benefit products. Consequently, manufacturers are likely to introduce new products with multibenefits to leverage the trend going forward .

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Natural and Premium Go Hand-in-hand

Herbal and natural beauty care started to merge with premium beauty care, driven by growing acceptance amongst urban consumers in 2012. Companies such as Forest Essentials gained tremendous popularity, establishing a presence in the beauty environment. However, natural and herbal products from such companies are popular only amongst a niche group of consumers who willingly spend more to buy herbal products.

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Current impact
In 2012, consumers increasingly looked for natural and herbal products which were chemical-free, and hence considered harmless. To leverage this trend, manufacturers introduced products with natural ingredients such as honey, tea tree oil and cucumber, which claim to offer specific benefits. For instance, companies such as Forest Essentials focused only on natural products, which are priced 10 times higher than the average price of standard products. Although natural products constituted a very small share in terms of value sales in 2012, such products continued to gain share due to rapid acceptance amongst consumers.

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Outlook
Premiumisation is likely to remain associated with herbal and natural products, and is expected to increase during the forecast period. Further growth is likely to come from new consumers who will move towards herbal and natural brands to replace synthetic products. However, economic slowdown in the near future might negatively affect consumer sentiment and threaten uptake by new consumers. However, existing consumers and consumers in the high-income group are likely to continue to purchase premium natural products.

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Future impact
With consumers increasingly likely to shift to natural products, premium companies such as Este Lauder are expected to focus on natural products. This trend will be significantly stronger in skin care and facial care, mainly because consumers pay more attention to skin and facial products amongst all beauty products. In addition, bath and shower is likely to witness the launch of natural and herbal products.

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Bottom of the Pyramid Sets Beauty and Personal Care on A Roll

Rural consumers increasingly purchased products such as shampoos and toothpaste in 2012. This shift was driven by consumer awareness campaigns organised by manufacturers including Colgate-Palmolive to promote such products. In addition, the growing aspirations of rural consumers to look like their urban counterparts supported growth.

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Current impact
With continuous efforts by manufacturers to tap into the potential of the bottom of the pyramid, the rural contribution to overall value sales increased, reaching 31% in 2012. Beauty creams such as Ponds White Beauty and expensive shampoos such as Dove grew by double-digits in rural India. To leverage this trend, manufacturers launched small pack sizes at affordable price points to attract consumers in smaller cities such as Kanpur, and also consumers in rural areas.

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Outlook
The rural contribution to overall volume and value sales of beauty and personal care products is expected to continue to increase year-on-year. Manufacturers are likely to come up with new strategies to drive sales in smaller cities. Strategies such as smaller packaging and promotions are likely to gain strength and play a significant role in encouraging rural consumers to spend more on beauty and personal care products. In addition, consumers in rural areas are likely to start purchasing new products such as mouthwashes/dental rinses, stimulated by the educational campaigns organised by leading manufacturers such as Hindustan Unilever.
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Future impact
Growth in the value contribution of rural consumers in beauty and personal care is likely to significantly drive the overall value sales in the market. The majority of the increase is likely to come from significant growth in bath and shower, mens grooming and oral care during the forecast period. The growth in the rural contribution is likely to impact the competitive scenario for many product ranges. Leading manufacturers including Hindustan Unilever and Procter & Gamble Home Products, with strong distribution networks due to their long-established presence in India, are likely to be in an advantageous position to gain share.

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Beauty and Personal Care Goes Gender-specific

Leveraging the growing needs of Indian men, who were increasingly looking for male-specific products, manufacturers continued to launch male-specific beauty products in 2012. Men were increasingly seen to move away from the rough and tough image towards a clean and fresh look during the review period. Such shifting preferences opened up huge opportunities for manufacturers such as ITC and Hindustan Unilever to tap into the hidden potential of Indian men.

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Current impact
Manufacturers such as ITC and Hindustan Unilever introduced ranges of new products to cash-in on the growing grooming trend amongst men in 2012. For instance, Fiama Di Wills launched Aqua Pulse Shower Gel and Fiama Di Wills Bathing Bar in 2012. In 2012, mens deodorants and mens skin care witnessed the fastest growth in mens grooming, mainly due to the increasing uptake of male-specific skin whitening creams and new launches in deodorants which performed well. Since there are only a few manufacturers operating in mens grooming, it continued to offer huge opportunities to manufacturers.

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Outlook
The trend of mens grooming is likely to continue to see strong growth during the forecast period, mainly due to the rapid uptake of male-specific products. Manufacturers such as Hindustan Unilever and ITC are likely to launch new skin care products and bath and shower products to increase their sales. Average unit prices are unlikely to rise, and manufacturers will continue to offer affordable products to gain penetration in non-urban areas and second-tier cities.

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Future impact
Huge growth in mens grooming is likely to strongly drive overall sales in beauty and personal care. Mens skin care, including anti-agers and whitening creams in particular, is likely to witness significant growth during the forecast period. Male-specific skin care and bath and shower products are the two key types of launches expected during the forecast period.

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PERSONAL CARE: RURAL VS URBAN KEY TRENDS AND DEVELOPMENTS

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Trends
The rural/urban divide is gradually disappearing, with rural consumers increasingly choosing brands such as Dove, which are considered to be slightly more expensive than mass brands such as Sunsilk in shampoos. The higher uptake is partly due to manufacturers push to leverage the untapped potential of the bottom of the pyramid. The rural contribution to value sales increased to 31% in 2012, mainly due to the growing use of products such as shampoos and toothpaste. Manufacturers introduced small packs at lower price points of Rs5 and Rs10, and also distributed free samples to increase penetration. Sachet marketing continued to be the leading strategy to penetrate rural areas. Rural India is shifting to products other than mass brands at a rapid rate. The tremendous growth in upscale brands such as Dove and Ponds White Beauty hints at the aspirations of rural consumers, who want to look like urban consumers.

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Competitive landscape
Hindustan Unilever, ITC, Godrej Consumer Products and Dabur India continue to have a significant presence in rural and semi-urban areas. The companies enjoy a strong distribution network which allows them to reach rural areas where kirana stores are the main channel for sales. Since price is the key factor in the purchasing decision, manufacturers compete on price differences. Rural consumers always look for value for money alternatives, and opt for the best deal.

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Prospects
The differences between the aspirations of rural and urban consumers are likely to disappear during the forecast period. In addition, consumers in rural and semi-urban areas will start to choose premium products. Counterfeit products are the biggest threat to growth amongst rural consumers, as they are likely to be easily confused by look-alike products. Counterfeit products are likely to grow even further if they remain unnoticed. Manufacturers such as Hindustan Unilever are likely to come up with strategies focused on rural consumers to increase their penetration. Consumer awareness campaigns focused on educating consumers will allow manufacturers to introduce new products such as mouthwashes/dental rinses. Competition for value share is likely to remain stable during the forecast period. Tapping the rural market requires deeper distribution networks, which are enjoyed only by the large multinationals, including Hindustan Unilever and Dabur India.
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Category Sales and Growth

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Personal care industry is Rs. 40,000 crores. Bath and Shower, HairCare, Oral and Skin care constitute about 80% of the overall personal care value. OVERVIEW Overall Size : Rs. 40,000 crores Share of Major segments in Personal Care : Bath and Shower: 30% Hair care: 25% Oral Care: 14% Skin Care: 13% Mens grooming: 8% Color cosmetics: 6% Others : 5% (others include Baby and child specific products, Deodrants, Depilatories, Fragrances, Sun care
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etc)

BATH AND SHOWER IN INDIA - CATEGORY ANALYSIS

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88% of the products in bath and shower are bar soap. The contribution of shower gel and liquid soap are less than 3%
BATH AND SHOWER : CATEGORY BREAK-UP

Products Bar soap Body wash and Shower Gel Liquid Soap Talcum Powder Total

Value (in Rs. Mn) 106674 993 2287 11408 121362

% of Total Category Value 88% 1% 2% 9% 100%

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HUL, GCPL, Reckitts and Wipro holds more than 75% share

BATH AND SHOWER : COMPANY MARKET SHARES

Market Shares Company Losers HUL Nirma Gainers Reckitts Benckiser Wipro ITC Anchor GCPL
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Though HUL is the market leader with almost 50% share, it has lost close 3% share along with other major loser Nirma which also lost 3% share. Reckitts, ITC, Anchor (Dyna brand), Godrej and Wipro are the major gainers.

2007 53.5% 6.60%

2012 49.8% 3.90%

5% 7.3% 0% 0% 8.90%

9% 8% 3.60% 2% 10%

Reckitts share increase is due to launch of new dettol soap variants, liquid wash and awareness campaign Proper Handwashing campaigns.

Top 6 brands constitute 50% of the bath and shower category.

BATH AND SHOWER : BRAND SHARES

Brand

Company

Market Shares 2007 2012 13.1% 11.8% 9.1% 8.1% 6% 4.3%

Lux Lifebuoy Dettol Santoor Godrej No.1 Dove

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HUL HUL Reckitt Benckiser Wipro GCPL HUL

15.3% 13.3% 5.5% 7.1% 5.4% 1.5%

Though the overall growth is expected to slow down, liquid soap will still grow at impressive rate.
BATH AND SHOWER : GROWTH

Category 2007-12 Bar Soap Body Wash & Shower Gel Liquid Soap Overall Bath and Shower 13.8% 15.9% 33.5% 13%

CAGR 2012-17 3.7% 7.3% 15.3% 0.9% 3.8%

Talcum Powder 5.2%

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TRENDS
Driven by increasing health and hygiene concerns, consumers continued to move towards liquid soap, including hand sanitisers, in 2012. Most of the leading companies, including Reckitt Benckiser and Dabur India, continued to cash-in on this growing trend by running campaigns to promote the germicidal properties of liquid soap. For instance, in 2012 Dabur India launched Fem Safe Handz, an instant hand sanitiser which offers protection against bacteria and viruses. In 2012, current value growth in bath and shower was 16%, which was comparatively faster than the review period CAGR. This faster growth was mainly due to booming sales of liquid soap, which is still at a nascent stage in the country. Body wash/shower gel is also catching up rapidly; however, it contributes only a small share to overall value sales.

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TRENDS
Liquid soap continued to increase at a rapid pace, registering current value growth of 43% in 2012. Sales of liquid soap, including hand sanitiser, were driven mainly by growing hygiene concerns and increasing awareness amongst consumers. In addition to liquid soap, body wash/shower gel also saw double-digit growth in 2012. Average unit prices continued to increase in 2012, mainly due to commodity inflation, which led to increases in the prices of the main ingredients of such products, including oils and glycerine. In addition, strong growth in liquid soap and body wash/shower gel, which are comparatively more expensive than other products, pushed unit prices even higher. Categories including body wash/shower gel and liquid soap continued to outperform bath and shower in 2012.

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TRENDS
Such products are seeing increasing penetration mainly due to growing acceptance amongst health and beauty-conscious urban consumers. In 2012, manufacturers focused on combination products to position their products as better-value offerings. However, this trend remained restricted to the addition of whitening and moisturising ingredients to offer extra benefits. For instance, extra moisturising bar soaps such as Dove continued to perform well, and hand sanitisers with moisturiser, such as Lifebuoy, picked up well in 2012. Natural and organic ingredients continued to have a limited presence in bath and shower in 2012. Traditionally, two herbal bar soap brands, Margo and Medimix, enjoyed huge popularity amongst mass consumers due to their affordability.

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TRENDS
However, the concept of natural and herbal continued to move towards the premium end in 2012. Premium natural brands such as Forest Essentials started to gain popularity amongst high-end consumers. Exfoliators and scrubs started to emerge as key features in shower gels and body washes in 2012. The trend was even stronger in mens bath and shower products, such as Aqua Pulse Men Shower Gel from Fiama Di Wills. Exfoliators, which are known for their property of removing dead skin cells, picked up well in 2012. Interestingly, most of the launches in bath and shower in 2012 were targeted towards men. Male- specific product launches allowed manufacturers to cash-in on the growing grooming trend amongst men in urban areas. For instance, Nivea India and ITC launched new shower gels Nivea and Fiama Di Wills Aqua Pulse for men in 2012.
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TRENDS
Bath and shower continued to be dominated by mass products, with premium products accounting for only a 1% share of value sales in 2012. Although premium shower gels such as Este Lauder remained niche, premium brands started to witness growing acceptance amongst consumers in 2012. Intimate washes and intimate wipes continued to be restricted mainly to high-end consumers. However, with growing hygiene concerns and increasing awareness, sales of intimate washes and intimate wipes started to pick up during 2012. Direct sellers such as Oriflame and other manufacturers also leveraged this trend, and launched new brand such as clean and dry to gain sales.

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COMPETITIVE LANDSCAPE
Hindustan Unilever continued to dominate bath and shower in 2012 with its brands Lux and Lifebuoy. The company accounted for a value share of 50%, mainly due to the brand equity that Lux and Lifebuoy have enjoyed for years. In addition, Lux enjoys a strong presence in bar soap and body wash/shower gel, and Lifebuoy has an established presence in bar soap and liquid soap. Reckitt Benckiser (India) witnessed the biggest increase in value share in 2012, to reach a 9% share of value sales in bath and shower. The increase was mainly due to the growth in Dettols share, attributed to the launch of new Dettol soap variants, and awareness campaigns including the Proper Handwashing Campaign to create awareness about best hygiene practice amongst consumers. Multinationals such as Hindustan Unilever continued to dominate bath and shower in 2012, and other international brands, such as Park Avenue, continued to have a very small presence.
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COMPETITIVE LANDSCAPE
Bath and shower witnessed many new launches in 2012, with the most notable being in liquid soap and body wash/shower gel. For instance, Reckitt Benckisers Dettol brand launched a new hand wash in an automatic dispenser, and Dabur launched Fem Safe Handz hand sanitiser. In addition, Nivea launched 2-in-1 shower gel for men, and Fiama Di Wills launched Aqua Pulse Shower Gel in 2012. Many of the leading manufacturers, including ITC and Dabur, promoted their brands by introducing attractive advertisements on television. Many companies also moved to social media websites such as Facebook to promote their brands. For instance, The Himalaya Drug Co rolled out an innovative marketing campaign on Facebook to promote its brand PureHands.

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COMPETITIVE LANDSCAPE
The company invited young and creative minds to make a video highlighting the product benefits, and announced Rs1 lakh as the prize money for the best video. Reckitt Benckiser innovated and introduced Dettol hand wash in a new automatic dispenser with a sensor which ensures it releases a fixed amount of hand wash every time it senses a hand nearby. Other manufacturers are also likely to repackage their products to create differentiation. Bath and shower products, including soap, continued to be dominated by mass brands such as Lux and Lifebuoy, and premium brands accounted for a small value share in 2012. In addition, private label producers launched new products and competed on price. For instance, Future Groups Sach soap, which is endorsed by Sachin Tendulkar, has been well-received by consumers.

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PROSPECTS
Bath and shower is expected to be driven by growth in liquid soap and body wash/shower gel during the forecast period. Growing grooming needs and increasing health-consciousness are likely to continuously push sales of bath and shower products during the forecast period. Consumers are likely to continue to pamper themselves by switching to shower gels with different fragrances and rejuvenating properties. Bath and shower is expected to increase by a constant value CAGR of 4% during the forecast period, compared with a review period CAGR 3% in constant value terms. The faster growth in the forecast period was mainly due to the tremendous growth in bar soap, which is the largest contributor to bath and shower.

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PROSPECTS
Bath and shower is not likely to face any major threats to growth during the forecast period. However, premium bath and shower, which remains a niche segment, might witness a slowdown in growth due to the weak consumer sentiment because of economic slowdown. Liquid soap is expected to increase by a CAGR of 15% during the forecast period, mainly due to growing awareness and hygiene concerns. Hand sanitisers with bactericidal properties are expected to witness significant growth during the forecast period. Average unit prices of many mass products, such as bar soap and liquid soap, are expected to continue to increase marginally.

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PROSPECTS
However, manufacturers are making efforts to offer extra value by adding whitening and exfoliating agents to shower gels, and are likely to increase the prices of products targeted towards consumers who are ready to spend more. New launches in emerging areas such as hand sanitisers and shower gel are expected to perform well in the near future, mainly due to less competition and the rapid uptake of products. There are only a few players in these emerging areas, and consumers are still in the experimental phase and do not follow any specific brand. Leading players such as ITC are likely to focus on adding value to products to introduce higher-priced ranges of products. Most manufacturers will focus on offering products at every price point to leverage the diversity of purchasing power of different target groups.

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HAIR CARE - CATEGORY ANALYSIS

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Hair Oils/ Conditioners and Shampoos constitute more than 77% of the Hair-Care category.
HAIR-CARE : CATEGORY BREAK-UP

Products Hair Oils/Conditioners Shampoos Colourants Saloon Hair Care and Styling agents Total
Note:

Value in Rs.mn 40,445 36,726 15,420 5,512 98,103

%of Total Category Value 41% 37% 16% 6% 100%

1. Others include Salon Hair care, Hair-loss treatments, styling agents etc.
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Hair care category is quite fragmented. Top 7 companies put together account for only 65% of the share.
HAIR-CARE : COMPANY MARKET SHARES Company 2007 HUL Dabur Marico L'Oral India Pvt Ltd Procter & Gamble GCPL Cavinkare 18.3% 11.1% 9.8% 5.8% 7.3% 4.2% 4.7% 17.9% 11.2% 9.5% 8% 7.7% 5.8% 4% Market Shares 2012

LOreals increase is due to its strong presence in Saloon Hair Care (56%) and Colourants (10%) GCPLs increase is due to growth of Godrej Hair Dye and Bryl cream brands. 61

Clinic Plus, Dabur and Parachute are the 3 biggest brands.

HAIR-CARE : BRAND SHARES

Brand Clinic Plus Dabur Parachute Heads & Shoulders Sun silk

Company HUL Dabur India Marico P&G HUL 9.1% 5.4% 4.8% 4.6% 4.4%

Market Shares 2007 7.6% 5.6% 5.3% 4.2% 4.1% 2012

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Colourants, Saloon Hair care, Styling products will drive the growth in the Hair-Care category.
HAIR-CARE : GROWTH

CAGR Category Hair Oils/Conditioners Shampoos Colourants Saloon Hair Care and Styling agents Total 2007-12 12.8% 12.3% 21.9% 25.2% 14.3% 2012-17 10.5% 3.8% 17.2% 14.5% 9.7%

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TRENDS
Hair styling continued to grow, and facilitated growth in salon hair care in 2012. In addition, young consumers continued to pick up do it yourself (DIY) styling gels and colourants to style their hair themselves. The DIY trend was also picked up by budget-conscious consumers, who consider such products an affordable option. In 2012 hair care increased by 20% in current value terms to outperform the review period CAGR, due to the rapid growth in salon hair care and other hair care products, including colourants, conditioners and styling agents. The faster growth was also driven by increasing penetration of products such as shampoos and conditioners in rural areas. Conditioners remained the largest contributor to value sales in 2012, accounting for a value share of 41%. Colourants and styling agents emerged as the fastest growth categories in 2012, mainly due to the growing preference for DIY products in hair care.
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TRENDS
The growing desire to look good encouraged budget-conscious consumers to accept DIY products, which are considerably cheaper than salon products. Average unit prices increased by 10% in 2012, mainly due to higher manufacturing costs and growing acceptance of premium products. Hair care categories including styling agents and colourants continued to outperform overall hair care, mainly due to the growing acceptance of DIY products. Styling agents increased by 30% and colourants grew by 32% in current value terms, increasing their value contribution to overall hair care in 2012. Premium hair care brands, mainly sold through salons, continued to gain value share in 2012. However, hair care continues to be dominated by mass brands, including Clinic Plus, Dabur and Sunsilk, mainly due to their affordability and availability in sachets. Such mass brands also enjoy an established presence and strong distribution networks to reach out to consumers across the country.
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TRENDS
In 2012, value sales of gel in styling agents increased significantly, eating into the shares of styling cream and wax. Gel was successful in increasing its contribution to 71% of overall value sales of styling agents in 2012, compared with only 69% in 2010. Anti-dandruff formulae continued to grow, as the climatic conditions led to a high occurrence of dandruff amongst consumers. Furthermore, media campaigns pushed the uptake of anti-dandruff shampoos amongst consumers. Manufacturers such as LOral and Garnier introduced DIY colourants with variants suitable for Indian hair. DIY hair care products started to increase, in addition to salon hair care products, which continued to make significant gains, but remained restricted to consumers who were ready to pay more.

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TRENDS
Salon hair care increased by 25% in 2012, driven mainly by increasingly styleconscious youngsters, who want to keep changing their hairstyles on a frequent basis. With an increasing number of urban consumers choosing salon hair care products over DIY products, salon hair care promises huge potential for growth during the forecast period. Medicated shampoos continued to grow, such as Dr Batra for hair loss treatment, as people are becoming increasingly conscious of their hair. Other medicated shampoos, including anti-dandruff shampoos, also witnessed rapid uptake by consumers to cure dandruff problems in 2012.

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COMPETITIVE LANDSCAPE
Hindustan Unilever continued to dominate hair care with a value share of 18% in 2012. The company enjoys a well-established presence, with a very strong distribution network across the country. LOral India witnessed a significant increase in sales to account for a value share of 8% in hair care in 2012. The increase in the share was mainly due to tremendous growth in sales of colourants and shampoos, driven by increased promotion and advertising campaigns by the company. On the other hand, Hindustan Unilevers Clinic Plus brand lost one percentage point of value share to reach 8% during the same year. International brands accounted for over 40% of value sales in hair care in 2012. In addition, direct sellers including Amway, Oriflame and Avon witnessed an increase in sales, mainly due to the launch of a range of variants in hair care.

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COMPETITIVE LANDSCAPE
Most of the launches in hair care were in shampoos, with Dove Intense Moisturising and Dove Intensive Repair being the most notable. To promote the brands, the company launched television commercials which positioned Dove as the only shampoo which understands the different needs of different types of hair. Curvy bottles for shampoo and hair oils emerged as new packaging formats in 2012. However, sachets continued to remain the fastest selling packaging format. Mass brands, including Clinic Plus, Dabur Vatika and Pantene, continued to dominate hair care in 2012. Private label brands, including Health & Glow, and beauty specialist retailers including The Body Shop, launched ranges of hair care products to gain market share. Such private label brands offered natural and herbal hair care products at affordable prices to attract consumers.

69

PROSPECTS
The increasing number of consumers going to salons for hair styling and rising uptake of DIY colourants and styling gels will continue to drive growth in hair care during the forecast period. Hair care is expected to increase by a constant value CAGR of 10% during the forecast period 2012-2016. The forecast growth is slightly faster than the review period growth, mainly due to the significant growth expected in salon hair care. Furthermore, sales in hair care categories including colourants, styling agents and conditioners are expected to maintain high growth during the forecast period. Although economic slowdown is not expected to impact hair care, it is likely to affect the growth in salon hair care. Since salon hair care products will continue to be slightly more expensive, budgetconscious consumers might start moving towards DIY products, including colourants and conditioners.
70

PROSPECTS
Salon hair care is expected to increase by a CAGR of 14% in constant value terms during the forecast period. The faster growth in salon hair care will be driven by the increasing number of females going to salons for hair care. In addition, growing looks-consciousness amongst Indian men is likely to drive growth in salon hair care even further. Colourants is expected to increase by a constant value CAGR of 17% during the forecast period 2012-2016, mainly due to the growing use of DIY hair colours, which are considered to be cheaper than salon colourants. Average unit prices of hair care products are expected to increase during the forecast period. The launch of new variants which claim to offer multi-benefits and growing acceptance of premium brands are likely to drive up unit prices during the forecast period 2012-2016.
71

PROSPECTS
New launches which claim different benefits, such as moisturising and repair, are already being purchased, and are expected to do well during the forecast period. Other manufacturers, such as Procter & Gamble, are likely to come up with new products and different claims which will encourage consumers to try out new products. Hair care is expected to witness the entry of international companies in salon hair care. Such companies are likely to launch salon hair care products which are likely to do well during the forecast period.

72

MEN'S GROOMING IN INDIA CATEGORY ANALYSIS

73

KEY POINTERS
Mens grooming increases by 24% in current value terms in 2012, to reach Rs30.9 billion Changing lifestyles and the desire to look good fuel sales in mens grooming, accompanied by a plethora of new launches in 2012 Mens deodorants increases by 46% in current value terms, emerging as the fastest growth category in 2012 Average unit prices increase by 10% in 2012, mainly due to the launch of upscale products Mens grooming is a very consolidated category, with Gillette India as the clear leader, accounting for a value share of 30% in 2012 Mens grooming is expected to increase by a constant value CAGR of 11% during the forecast period, to reach Rs52.7 billion by 2016

74

TRENDS
Rough and tough stopped being in vogue, and urban men continued to shift towards a fresh look in 2012. The growing desire amongst urban men to look good and fresh was used to the advantage of the leading companies, which launched a plethora of products targeted towards men. For instance, ITC launched Fiama Di Wills Aqua Pulse Shower Gel, and Nivea introduced Nivea moisturising lotion for men in 2012. In 2012 mens grooming saw current value growth of 24%, which was much higher than the review period CAGR. Growth was driven mainly by the strong increase in mens toiletries. Growth in skin care and deodorants propelled growth in 2012, due to growing looksconsciousness amongst men. Mens deodorants surpassed mens skin care, growing by 45% in current value terms in 2012.

75

TRENDS
The faster growth was mainly due to significant media promotions and brand campaigns by leading brands such as Garnier and Axe to promote the use of deodorants amongst men. In addition, mens skin care increased by 32%, mainly due the growing usage of skin creams for whitening and spot removal by men. Average unit prices increased in 2012, mainly due to the addition of a range of upscale products targeted towards looks-conscious urban men, who were willing to spend more. The launch of new expensive products such as spot removal creams by Garnier supported growth in unit prices. Indian men increasingly started to pamper themselves by taking facials in salons and using skin creams to look fresh in 2012. This trend evolved from being restricted to men in the age group 18-30 in 2010, to include older men in 2012.

76

TRENDS
Urban men who used to be limited to razors and blades are increasingly spending on deodorants and skin care products, which were previously considered to be feminine. Manufacturers focusing on mens grooming products started to mimic popular female product ranges, including skin whitening and exfoliating face washes in 2012. For instance, Vaseline Lotion, which offers moisturising benefits, launched a different variant for exclusive use by men. Brands such as Olay also launched sophisticated products, including toners, undereye gels and dark spot removers for men in 2012. In 2012, systems continued to be the most popular type of razors and blades, and registered tremendous growth to account for a 32% share of value sales of razors and blades. Disposables also increased rapidly, and accounted for a 27% share of overall value sales of razors and blades.

77

COMPETITIVE LANDSCAPE
Gillette India continued to lead mens grooming with a value share of 30% in 2012; however, it is gradually losing share to other players. Gillette enjoys an established presence in the country, mainly due to its strong share in mens shaving, which remained the largest contributor to sales in mens grooming in 2012. Hindustan Unilever witnessed significant increase in value sales to account for a share of 11% in 2012. The increase was mainly due to strong growth of its brand Axe, which enjoyed huge popularity amongst men in 2012. Men hair care is dominated by international manufacturers; however, domestic manufacturers such as Hindustan Unilever and ITC are catching up rapidly by launching new products to gain share.

78

COMPETITIVE LANDSCAPE
Mens grooming witnessed a range of new launches in 2012, mainly in skin care. Manufacturers introduced new 2-in-1 shower gels, such as Beiersdorf under the brand Nivea. Gillette India launched a new skin care range and promoted it with television commercials which highlighted that Gillette helps to remove excess oil and dirt from mens skin. During the same year, Gillette launched Gillette Fusion razor, and promoted it by launching campaigns in malls in cities including Bangalore. Men were given free Gillette Fusion razors and free shaves to promote sales. Mass brands continued to dominate mens grooming in 2012, which is still in its early growth phase. Premium brands are prominent only in fragrances, which are used mainly to flaunt style and status. Private label, on the other hand, is not present in mens grooming so far.
79

PROSPECTS
The growing desire to look metrosexual will continue to drive mens grooming during the forecast period. Urban men who are increasingly looking for male-specific grooming products are likely to push sales in mens grooming even further. To cash-in on the trend, Lakm launched the first unisex salon in 2012 under the name Lakm Ivana. Furthermore, the increasing uptake of male-specific products by men in second-tier and third-tier cities will bring further growth. Mens grooming is expected to increase by a constant value CAGR of 11% during the forecast period. This growth is slightly faster than the growth in the review period mainly due to the growing contribution of deodorants and skin care. Mens grooming does not have any significant threats to growth, and is likely to grow significantly during the forecast period.

80

PROSPECTS
Mens skin care is expected to increase by a constant value CAGR of 25% during the forecast period 2012-2016, mainly due to the growing desire amongst men to use skin whitening creams, moisturisers, exfoliators and under-eye gels. Indian companies are also likely to come up with more sophisticated products, such as male-specific antiagers, and this is expected to drive sales in mens skin care. In addition, deodorants are expected to register rapid growth. Average unit prices in mens grooming are likely to increase slightly, along with the launch of new masstige products by manufacturers. The increasing uptake of premium brands is also likely to fuel average unit prices.

81

PROSPECTS
New product launches in mens grooming are likely to do well during the forecast period, mainly due to the presence of only a few brands. However, manufacturers are likely to offer brand extensions and launch a range of products under existing brands. The launch of male-specific products by manufacturers such as ITC, which want to leverage the growing trend amongst men to look good, is the most likely trend during the forecast period. In particular, mens skin care and mens bath and shower are expected to witness many notable launches, and the entry of new players is another likely event during the forecast period.

82

ORAL CARE IN INDIA CATEGORY ANALYSIS

83

KEY POINTERS
Oral care in India increases by 17% in current value terms in 2012, to reach Rs55.5 billion Growing hygiene-consciousness and low penetration offer huge growth opportunities for oral care in 2012 Mouthwashes/dental rinses remains the fastest growth category in 2012, increasing by 55% in current value terms to reach Rs1.1 billion Average unit prices in oral care witnesses a marginal rise in 2012 Oral care remains consolidated, with the top three players accounting for a combined 77% share of value sales in 2012 Oral care is expected to increase by a constant value CAGR of 5% during the forecast period, to reach Rs71.0billion in by 2016

84

TRENDS
Increasing consciousness of oral hygiene amongst consumers propelled significant growth in oral care in 2012. Increasing educational campaigns by companies such as Colgate-Palmolive India helped to increase awareness amongst rural consumers, and fuelled growth in rural areas of the country in 2012. In 2012 oral care increased at a faster rate compared with the review period CAGR, registering current value growth of 17%. This growth was driven by mouthwashes/dental rinses, which increased in line with growing oral hygiene concerns. Mouthwashes/dental rinses saw the fastest growth of 55% in current value terms in 2012, due to growing awareness of preventative oral care amongst urban consumers.

85

TRENDS
In 2012 companies organised brand campaigns to educate consumers about the advantages of an oral care routine. For instance, Listerine, which pioneered sales of mouthwashes in India, launched the 21 Day Challenge to encourage consumers to experience the benefits of mouthwash. The campaign proved to be a huge success in promoting the use of mouthwashes/dental rinses. Average unit prices showed a marginal rise in 2012, as manufacturers continued to focus on volume sales to make gains by increasing penetration. The small rise in unit prices was mainly due to the growing use of new products such as mouthwashes/dental rinses. Natural/organic/herbal toothpaste continued to grow, and increased its share to 12% of overall value sales of toothpaste in 2012.

86

TRENDS
Other 2-in-1 and multi-benefit toothpastes, such as whitening toothpaste, also witnessed huge acceptance country-wide. Manufacturers also leveraged the trend by launching a range of new toothpastes focused on providing different benefits. For instance, GlaxoSmithKline Consumer Healthcare introduced Sensodyne to treat sensitive teeth in 2012. Standard/traditional toothpaste maintained its leading share of value sales in toothpaste in 2012, mainly because of rapid growth in rural India. The shares of complete care and whitening toothpaste increased to 15% and 7% respectively in 2012.

87

COMPETITIVE LANDSCAPE
Colgate-Palmolive India maintained its lead in oral care in 2012, accounting for a value share of 46%. Hindustan Unilever held second position with a 19% share of value sales, and was followed distantly by Dabur India with a share of 11%. The reason behind Colgate-Palmolives leadership is its strong product mix, and the brand equity it has gained over the years. Procter & Gamble Co, The witnessed the biggest increase in value share mainly due to the growing preference for its brand Braun Oral-B. This brand has gained a significant share in toothpaste. Domestic manufacturers such as Colgate-Palmolive India continued to dominate oral care in 2012, and international brands have a negligible presence in the country. Manufacturers are focusing on launching toothpastes specific for oral health conditions such as sensitivity.

88

COMPETITIVE LANDSCAPE
GlaxoSmithKline Consumer Healthcare launched Sensodyne to help consumers to remove sensitivity in 2012. In addition, companies continued to focus on pushing their existing products through solid media campaigns. For instance, Listerine launched its 21 Day Challenge, offering free mouthwashes/dental rinses to consumers to test its claims. Since oral care products are used and positioned as pure hygiene products, only economy brands are available so far. However, manufacturers have started to introduce high-end masstige brands, such as the launch of Sensodyne Repair & Protect by GlaxoSmithKline Consumer Healthcare in 2012. Private label, on the other hand, started to show some movement, with the launch of Sach by Future Group in 2010.

89

PROSPECTS
Driven by increasing hygiene concerns, urban consumers are likely to increase the uptake of products such as mouthwashes/dental rinses. However, the bulk of growth is likely to come from increasing penetration in rural areas and second-tier and third-tier cities, which offer huge potential. Oral care is expected to witness a rise in value growth during the forecast period. This is likely to be contributed by new growth from rural areas and growing uptake of newer products such as mouthwashes/dental rinses by consumers. Rural consumers could stick with home-made oral care products such as dental powders and neem sticks, and this might threaten the growth of oral care during the forecast period. Mouthwashes/dental rinses is expected to see the fastest growth rate during the forecast period, mainly due growing hygiene concerns and advertising.

90

PROSPECTS
In addition to media campaigns such as the Listerine 21 day Challenge, dentists are likely to influence the purchasing patterns of consumers. Unit prices are likely to increase marginally in current value terms mainly due to the launch of products such as Sensodyne, which are comparatively higher-priced. However, intense competition during the forecast period is likely to keep a check on any major spikes in unit prices. With increasing awareness about oral hygiene amongst consumers, new launches are expected to do well during the forecast period. Leveraging the growing uptake of oral hygiene products, manufacturers are likely to introduce new products in different flavours and with various claims. New innovations in packaging and new launches in mouthwashes/dental rinses by the leading manufacturers are expected during the forecast period.

91

SKIN CARE IN INDIA - CATEGORY ANALYSIS

92

Biscuit category is about Rs. 15,600 crores and Plain biscuits are the biggest selling product category
BISCUITS : CATEGORY BREAK-UP

Products Cookies Plain Biscuits Filled and Sandwich Biscuits

Value in Rs.mn 33,776 85,814 23087

%of Total Category Value

22%

55% 15%

Savoury Biscuits and Crackers Total

13490 156167

9% 100%

93

Parle and Britannia are the two strong players with ITC increasing their share over the last few years.
BISCUITS : COMPANY MARKET SHARES Company 2007 Parle 35.7% 36% 7.9% 4.1% Market Shares 2012 35.4% 33% 13.2% 4.5%

Britannia ITC Surya Foods

94

BISCUITS : BRAND SHARES

Brand Parle Britannia SunFeast Anmol Priyagold

Company Parle Britannia ITC Anmol Surya

Market Shares 2007 31.4% 36.2%

7.9%

2012 33.1% 32.8%

13.2%

3.6% 2

3 2.1%

Cookies will be the fastest growing product category in biscuits.

BISCUITS : GROWTH

CAGR Products Cookies Plain Biscuits Filled and Sandwich Biscuits Overall Biscuits 2007-12 32% 15.6% 23% 18.6% 12% 6% 9% 8.2% 8% 2012-17

Savoury Biscuits and Crackers 14.3%

96

 Skin care in India registers current value growth of 25% in 2012, to reach Rs51.0 billion Skin care product benefits no longer remain restricted to skin lightening, with product offerings with additional benefits helping manufacturers to gain share Firming/anti-cellulite body care increases by 45% in current value terms to remain the fastest growth category in 2012. Average unit prices continue to increase, mainly due to consumers increasingly moving to premium facial care and anti-cellulite body care products Hindustan Unilever continues to dominate skin care with a value share of 56% in 2012. Other players have small shares Skin care in India is expected to increase by a CAGR of 10% over the forecast period 2012-2016, to reach Rs81.5 billion by 2016

KEY POINTERS

97

TRENDS
In 2012, whitening continued to be the key trend; however, it was no longer restricted to females. In addition, manufacturers started to focus on mens skin care, which is the next major area with potential. Furthermore, the skin whitening attribute in skin care products started to become stronger, with products for a light skin tone. In 2012 current value growth in skin care was 25%, which was much faster than the review period CAGR. The majority of growth was due to firming/anti-cellulite body care products and anti-agers, which picked up well in 2012. The growing desire to lose weight and look slim continued to fuel growth in firming/anti-cellulite body care, which increased by 46% in 2012. Oriflame and Amway continued to be the leading brands which pushed growth.

98

TRENDS
Average unit prices increased by 10% in 2012, mainly due to the increasing uptake of premium products and rising penetration of slightly more expensive products, such as firming/anti-cellulite body care. Mass brands such as Lakm, Fair & Lovely and Ponds continued to dominate skin care, and continued to account for a significant value share in 2012. Premium brands such as Forest Essential also started to pick up; however, they continued to be popular amongst a very small consumer base. Skin whitening continued to be a key trend, particularly in facial moisturisers. Fair & Lovely by Hindustan Unilever alone accounted for a 43% value share in skin care in 2012. In addition to being sold as an added benefit in anti-agers and facial cleansers, whitening emerged as a major trend in face masks.

99

TRENDS
For instance, The Himalaya Drug Co launched face masks for skin whitening, which proved to be successful. In 2012, acne treatments gained popularity; however, it remained a niche category. Interestingly, the use of anti-acne ingredients such as tea tree oil and neem in face washes and toners increased at a rapid pace. However, acne treatments continued to be at a nascent stage in India, with many consumers still dependent on home-made remedies for acne treatments. Most of the facial cleansers available in the country focused on whitening as the main benefit, although a few players, including The Himalaya Drug Co, started to offer facial cleansers and masks specific for oily skin. Whitening, followed by anti-acne and oily skin, were the leading claims in 2012.

100

COMPETITIVE LANDSCAPE
Hindustan Unilever continued to dominate skin care with a share of 56% in 2012. The company enjoys a leading position with established brands such as Fair & Lovely and Ponds, which have enjoyed an established presence in the country for years. Skin care remained fairly stable in 2012, with leading companies witnessing marginal shifts in share. However, The Himalaya Drug Co witnessed an increase of nearly 36% in value sales mainly due to the growing preference for herbal and natural products in 2012. Skin care continued to be dominated by domestic manufacturers such as Hindustan Unilever in 2012, mainly due to its brand presence, which has been established for years. However, international brands such as Neutrogena are picking up rapidly, driven by the brand equity that Johnson & Johnson (India) enjoys in the country.

101

COMPETITIVE LANDSCAPE
Skin care witnessed many launches in 2012, with the most notable in face masks and moisturisers. Most of the companies launched advertising campaigns to differentiate their products and push them to end consumers. For instance, Procter & Gamble used Bollywood diva Madhuri Dixit to launch Olay Regenerist in anti-agers. Another international brand, LOral, signed up leading actress Priyanka Chopra as the new face for Garnier television campaigns, with heavy publicity for Garnier Light fairness moisturiser with the claim No Sweat No Oil Moisturiser. Mass brands continued to dominate skin care in 2012. International brands continued to have a negligible presence in skin care; however, they are expected to grow. Private label brands such as Health & Glow and VLCC, on the other hand, witnessed a rapid increase in sales due to their affordability.

102

PROSPECTS
Manufacturers are likely to launch innovations and new offerings focused on providing other benefits, such as brighter skin, in addition to skin whitening. Skin whitening products will continue to evolve and offer enhanced benefits over the forecast period. In addition, the launch of male-specific skin care products, including facial moisturisers, face washes and anti-agers is likely. There are no major threats to growth in skin care; however, an economic slowdown is likely to negatively affect consumer sentiment and impact the growth of premium skin care, which remains niche. Firming/anti-cellulite body care is expected to increase by a constant value CAGR of 23% during the forecast period. This higher growth is likely due to the growing desire amongst consumers to look slim.

103

PROSPECTS
In addition, anti-agers are expected to increase at a rapid pace during the forecast period. Average unit prices are expected to increase during the forecast period. This will be due to the entry of international brands and the growing uptake of masstige and premium skin care products. New launches in skin care are likely to witness rapid growth, mainly due to the growing uptake of products. Indian consumers are still at the stage of experimenting with different brands, and do not show any loyalty to brands, and like to try emerging products. Manufacturers of skin care products are likely to launch new products with different claims. Furthermore, international players are likely to foray into Indian regions to leverage the growing use and uptake of skin care products in these areas.

104

Soft Drinks

105

Bottled water, Carbonates, Fruits and Vegetable juices constitute about 95% of the soft drinks market.
SOFT DRINKS : CATEGORY BREAK-UP

Products Bottled Water Carbonates Fruits and vegetable Juices Others Total

Value in Rs.mn 128773 156119 54031 12549 351472

%of Total Category Value 37% 44% 15% 4% 100%

Note: Others include Concentrates, Sports and Energy Drinks,

106

Almost half of Soft drinks sales by value are to on-trade channel.

SOFT DRINKS : OFF-TRADE VS ON-TRADE

Products Bottled Water Carbonates Fruits and vegetable Juices Others Total

Off-trade 51% 41% 75% 40% 51%

On-trade 49% 59% 25% 60% 49%

Note: 1. On-trade is selling to hotels , restaurants, pubs. 2. Off-trade is sales to the end customers through retail outlets.
107

Carbonated Drinks

108

Cola and Lime carbonates corms more than 70% of the category.

CARBONATES : CATEGORY BREAK-UP

Products Regular Cola Carbonates Low Calorie Cola Carbonates Lemonade / Lime Carbonates Orange Carbonates Other Non-Cola Carbonates Total
109

Value in Rs.mn 63133 1235 49242 23462 19047 156119

%of Total Category Value 40% 1% 32% 15% 12% 100%

Non cola carbonates especially lime based are the major drivers of growth.
CARBONATES : GROWTH Products

CAGR 2007-12 2012-17 7.5% 10.2% 16% 4% 15.5% 10.1% 10.5% 10.7% 14.5% 4.3% 15.5% 10.5%

Regular Cola Carbonates Low Calorie Cola Carbonates Lemonade / Lime Carbonates Orange Carbonates Other Non-Cola Carbonates Overall
110

Non cola carbonates especially lime based are the major drivers of growth.
CARBONATES : GROWTH Products

CAGR 2007-12 2012-17 7.5% 10.2% 16% 4% 15.5% 10.1% 10.5% 10.7% 14.5% 4.3% 15.5% 10.5%

Regular Cola Carbonates Low Calorie Cola Carbonates Lemonade / Lime Carbonates Orange Carbonates Other Non-Cola Carbonates Overall
111

Carbonates is effectively a 2 player category. Coca cola gained 3 % share between 2007-12.
CARBONATES : COMPANY MARKET SHARES Company 2007 Coca-Cola 56.2% 39.6% 2.6% Market Shares 2012 60% 37.2% 1.6%

Pepsi Co Others

112

Coca-Colas brands dominate 4 of the top 6 carbonates brands.

CARBONATES : BRAND SHARES

Brand Sprite Thums Up Pepsi Coca Cola Limca Mirinda

Company
Coca-Cola

Market Shares 2007

12.3% 14.9% 14.5% 8.7% 8.6% 9.6%

2012
16.5% 16.5% 15% 8.8% 8.3% 7.6%

Coca-cola Pepsi Co Coca-cola Coca-cola Pepsi Co

TRENDS
Total value sales growth of 11% in 2011 takes carbonates sales to Rs156 billion Convenience leads to consumers shifting from traditional drinks to carbonates. Other non-cola carbonates continues to lead growth, at 19% in total value terms in 2011 Carbonates register a 1% rise in average unit price in 2011 Coca-Cola India Pvt Ltd retains its leadership position in the face of fierce competition in 2011 Carbonates are expected to grow at a CAGR of 10% in total volume terms over the forecast period

114

TRENDS
With the growth in the number of modern retail outlets, the pattern of Indian consumer purchases has also changed. Traditional Indian drinks such as nimbu pani and aam panna are being replaced by lime carbonates and orange carbonates respectively. Convenience is driving change in the category. People prefer to serve packaged drinks instead of making drinks from scratch. This has paved the way for many players such as Dabur India Ltd and Aje Group to enter carbonates in 2011. Carbonates grew by 11% in total volume terms in 2011. While this growth rate was slower than the 12% seen in 2010, it was nevertheless strong growth. The slower growth could be attributed to a mild summer and early monsoon in 2011. A minor shift from carbonates to non-carbonates was seen in urban centres among increasingly health-conscious consumers. Carbonates manufacturers recognised this trend, with new launches outside the category.
115

TRENDS
However, Indian youths, who are the main consumers of carbonates, remain some way from being concerned about the calories they consume, thus the sector witnessed double-digit growth in 2011. Non-cola carbonates, driven by lemonade/lime and other non-cola carbonates, posted the strongest total volume and value growth in 2011. The growth was mainly driven by the robust performance of brands such as Sprite from Coca-Cola India Pvt Ltd, alongside 7-Up and Mountain Dew from PepsiCo India Holdings Pvt Ltd. These brands were heavily advertised and had increased visibility in 2011. Catchy taglines such as Ekdum asli Indian (Like an original Indian) and Bilkul ghar jaisa (Just like home-made) were used by manufacturers to support the brands. Coca-Cola India ran aggressive campaigns across all media and PepsiCo India Holdings enlisted Bollywood actors Salman Khan and Sharman Joshi to endorse Mountain Dew and 7-Up.
116

TRENDS
Since carbonates are dependent on high volume sales, national players refrained from escalating unit prices to any significant degree during the review period. Some consumers in urban areas have started to shift from carbonates to soft drinks options perceived as more healthy, such as fruit/vegetable juice and dairy products, which saw rapid growth in 2011. With rising health and wellness awareness among consumers, the amount of juice content in products has increased; 100% juice and nectars are becoming popular and eating into the share of carbonates. Off-trade value sales of carbonates saw stronger growth than on-trade in 2011. This reflects a trend for entertaining in the home, amongst other factors. Sales of carbonates are highly dependent on weather conditions particularly in the on-trade channel. Companies are seeking to hedge this risk by encouraging consumption at home.

117

TRENDS
Coca-Cola India is aiming to increase its share of in-home consumption so that it is not impacted by weather; 2-litre bottles offered at discounted prices were introduced to drive off-trade sales. On-trade sales of carbonates are largely through pubs and restaurants, where they are also used as mixers. Companies are focusing on channels such as cinemas and shopping centres to drive on-trade consumption. PepsiCo India Holdings and Coca-Cola India also have supply deals with chained fast food operators to build on-trade sales. Products within the low calorie carbonates sector have been present in India since prior to the review period but in 2011 contributed less than 1% of total carbonates volume sales. They have failed to generate interest amongst consumers, reflecting a lack of substantial attempts by manufacturers to market or create awareness about the products.
118

TRENDS
PepsiCo India Holdings made an attempt to gain a strong position through the low calorie cola carbonates category but was not successful with the launch of Pepsi Max, which had to be withdrawn in less than one year since its launch in August 2010. Coca-Cola Indias Diet Coke gained share and first ranking at the expense of Diet Pepsi over the review period. The key consumers for carbonates remain young adults, including college students. Children are also keen consumers; however parents may restrict the consumption of carbonates by their children for health reasons. In the on-trade channel, carbonates are mainly consumed in pubs and restaurants, often as mixers, as well in fast food outlets.

119

COMPETITIVE LANDSCAPE
Coca-Cola India Pvt Ltd remained the outright leader in carbonates in 2011, accounting for 60% of off-trade volume sales. Comprising a stable offering that includes the top two brands (Sprite and Thums Up) it maintains a strong position. PepsiCo India Holdings Pvt Ltd was the only other significant player in the category with a 37% off-trade volume share in 2011. PepsiCo India Holdings saw a slightly stronger rise in value sales in 2011. This increase was attributable to the strong performance of Pepsi,7-Up, Mountain Dew and Mirinda. Together these brands account for 31% of total volume sales of carbonates. These brands were strongly advertised and visible throughout the year. Bollywood stars were enlisted as brand ambassadors to attract young consumers. The company raised its manufacturing capacity and distributed coolers to strengthen its reach in rural parts of India.

120

COMPETITIVE LANDSCAPE
Sprite from Coca-Cola India and Mountain Dew from PepsiCo India Holdings were the best performing brands in terms of off-trade volume growth in 2011. Coca-Cola India Pvt Ltd and PepsiCo India Holdings Pvt Ltd continue to compete aggressively in this category by increasing the visibility of their brands Sprite, Limca and 7-Up respectively. Catchy taglines were used by manufacturers to generate consumer interest, alongside aggressive campaigns using Bollywood actors. The cola wars in India are unlikely to remain restricted to PepsiCo India Holdings and Coca-Cola India. Latin American company Aje Group entered the Indian market in early 2011 with its brand Big Cola. This product is expected to present strong stiff competition to the cola giants, if the product is marketed well. The product was initially launched in West Indian states Maharashtra and Gujarat.
121

COMPETITIVE LANDSCAPE
The company plans to strengthen its foothold on Indian soil by launching nationally. This will pose a threat to the cola giants, but their firm grip is expected to be far from shaken. The company will be launching Big Cola as the first caffeine free cola in the Indian market in 2011 With Coca-Cola India, PepsiCo India Holdings and Dr Pepper Snapple Group Inc accounting for 98% of off-trade value sales in 2011, carbonates are highly concentrated in terms of national players. Dr Pepper Snapple Group is only present in the mixers category. Parle Agro Pvt Ltd, the only notable domestic manufacturer in carbonates, has yet to establish a strong share for its brands Appy Fizz and Appy in other non-cola carbonates, as this category was dominated by Mountain Dew in 2011. 2011 was a good year for new players to enter the carbonates category.

122

COMPETITIVE LANDSCAPE
Dabur India Ltd entered the category with the launch of Burrst Fizz, which is a carbonated juice-based drink introduced for the first time in India. This brand was launched in Lemon Fizz and Apple Fizz variants. Peru-based Aje Group also entered the Indian market with the first caffeine-free cola brand named Big Cola to compete with the brands of PepsiCo India Holdings and Coca-Cola India. Pepsi India Holdings also launched the Dukes range of beverages with exotic new flavours such as raspberry, masala soda, ginger ale and ice-cream soda in the year 2011. The company plans to present the product in a retro-design pack and strengthen its presence in lemonade/lime carbonates, which is currently dominated by Coca-Cola India brands Sprite and Limca.

123

COMPETITIVE LANDSCAPE
PepsiCo India Holdings and Coca-Cola India signed up sports personalities as brand ambassadors to connect with young consumers, especially during the Cricket World Cup 2011. Coca-Cola India launched aggressive marketing with its new brand ambassador Sachin Tendulkar, whereas PepsiCo India Holdings rolled out a high-profile television campaign featuring cricket stars MS Dhoni, Harbhajan Singh and Virender Sehwag. More brands moved towards large pack sizes in a bid to drive off-trade sales and mitigate seasonality. Coca-Cola India introduced large packs of 2 litres of its brand Thums Up and named them Fridge Packs, to drive in-home consumption of carbonates. The company also launched Diwali packs, which contained cans of Sprite and CocaCola bundled as gift packs. The company also altered labels on Coca-Cola PET bottles to give a different and a more personal image to the product.
124

PROSPECTS
While established brands such as Coca-Cola and Pepsi will continue to grow, cola carbonates as a sector is expected to see a slowdown in growth over the forecast period posting a total volume CAGR of 7%. Lemonade/lime carbonates are expected to see stronger growth, at a total volume CAGR of 16%. Orange carbonates will be the slowest growing drinks within carbonates, although this will still post a CAGR of 3% in total volume terms. Carbonates as a whole is projected to grow at a CAGR of 10% in total volume terms over the forecast period. Growth will be driven by rural areas as the urban areas are facing a degree of saturation, as well as shifting towards healthier options such as fruit/vegetable juice and bottled water. Companies are targeting rural areas to build share.

125

PROSPECTS
Coca-Cola India is launching eKoCool, a solar-powered cooler which is at the pilot stage, a part of the companys strategy to increase sales in rural India. Developing health awareness among the general population represents a threat to carbonates, as more of the consumer base is expected to move towards fruit/vegetable juice and bottled water after considering health factors. The intermittence of the electricity supply in rural areas, making the sale of chilled beverages difficult, could pose a threat to the sector,which is already facing saturation in urban areas. As food inflation rates often reached 10% in 2011, sugar prices saw a strong rise. As a result, carbonates manufacturers could be forced to increase unit prices at some point in the forecast period, possibly alienating some consumers. Carbonates growth will be driven by lemonade/lime and other non-cola carbonates, which are expected to grow at a CAGR of 16% and 15% respectively in total volume terms.
126

PROSPECTS
As in the review period, both these categories will continue to expand due to the presence of well-established brands and their better suitability to local tastes and trends than cola carbonates. The intense competition between Coca-Cola India and PepsiCo India Holdings will ensure that constant unit prices gradually come down over the forecast period. However, small price increases by one competitor may give others an opportunity to relieve pressure on their profit margins by increasing their unit prices. Dabur Indias Burrst Fizz is not expected to gain substantial traction in the category. This is because people who are health conscious are less likely to opt for carbonates, despite higher juice content. People who are not concerned about calorie intake are more likely to opt for a traditional carbonates brand.

127

PROSPECTS
Aje Groups Big Cola is expected to garner slight share but it will be very difficult to break the duopoly of Pepsi and Coca-Cola without a substantial and successful marketing campaign. Coca-Cola India is planning to strengthen its presence in the Indian market by investing US$2 billion over the forecast period. This is intended to make the Indian market among the top 10 for the company. The investment will present tough competition to the companys rival PepsiCo India Holdings, which is also planning to strengthen its presence in India by building a new soft drinks plant in Punjab.

128

Bottled Water

129

Top 3 players have gained about 8% market shares mainly at the cost of regional players.
BOTTLED WATER : COMPANY MARKET SHARES Company 2007 Parle Bisleri 37.5% 13.5% 9.2% 9% 28% Market Shares 2012 42.8% 14.9% 11.3% 8% 20%

Pepsico Coca Cola Dhariwal Co Others (Small and regional play

130

Bisleri is the biggest brand by huge margin follwed by Acquafina and Kinley
BOTTLED WATER : BRAND SHARES

Brand Bisleri Acquafina Kinley Oxyrich

Company
Parle Bisleri

Market Shares 2007

37.5% 13.5% 9.2% 9%

2012
42.8% 14.9% 11.3% 8%

Pepsico Coca Cola Dhariwal Co

Bottled water has been and will be one of the fastest growing category.
BOTTLED WATER : GROWTH

Period 2007-12 2012-17

Growth (CAGR 28% 24%

KEY POINTERS
Total value sales grow by 30% in 2011 to reach Rs129 billion High awareness of safety and hygiene and increasing incidences of waterborne diseases are driving bottled water sales Still bottled water continues to be the only bottled water category of note in 2011 Off-trade unit price increases by 2% in 2011 Parle Bisleri Ltd, PepsiCo India Holdings Pvt Ltd and Coca-Cola India Pvt Ltd continue to lead the category with a combined off-trade value share of 72% in 2011 Bottled water is expected to record a strong CAGR of 24% in total volume terms over the forecast period

133

TRENDS
Traditionally, the bottled water market in India was driven by sales to upper-income consumers; however buying patterns have changed. Sales of bottled water are no longer restricted to affluent consumers, as they are growing rapidly among middle- and lower-income consumers as well. Tourists and travellers are also supporting sales of bottled water because tap water in India is considered unsafe; bottled water has become an essential feature of travel in the country. The growth in bottled water sales is also attributed to the waterborne diseases that affect Indian consumers every year. There is an increasing awareness, even in rural areas and small towns, of the need for safe drinking water, which coupled with the acute water shortage in many areas in the country, is also supporting bottled water sales. Although the off-trade current value growth of 33% in 2011 was lower than the 39% rise recorded in 2010, it was nevertheless strong growth.
134

TRENDS
The key drivers of sales in the country are rising disposable income, growing awareness of the health benefits of consuming water and the limited availability of safe drinking water. Multinational giants like PepsiCo and Coca-Cola controlling water and the distribution of bottled water is also driving the sales of bottled water due to their strong distribution network. Sales of still bottled water, the only notable category within bottled water, grew by 33% in 2011. This was mainly due to its availability, even in remote areas. Companies such as Parle Bisleri Ltd PepsiCo India Holdings and Parle Bisleri CocaCola India Pvt Ltd have a wide distribution network which facilitates the easy availability of bottled water across the country. Higher awareness and the high incidence of waterborne diseases have led to consumers becoming more careful about the quality of the water they consume.
135

TRENDS
This, in turn, has led to the growth of still bottled water in India. The average unit price of bottled water increased by just 2% in 2011. This was much lower than 15% rise in unit price in 2011. This was because of the intense competition in the category. Bottled water is subject to very low brand loyalty, hence a drastic increase in unit price could lead to consumers simply switching to lower-cost brands. Manufacturers therefore opted not to increase the unit prices significantly in 2011. Bottled water accounts for a 37% off-trade value share of soft drinks as a whole. Sales of bottled water are growing at a faster pace than other soft drinks categories, such as carbonates and concentrates. This is because consumers are becoming increasingly health conscious and are shifting to healthier products, such as fruit/vegetable juice and bottled water.

136

TRENDS
Another major reason for the growth of bottled water is the Governments failure to address the need for basic services in the country; even in the major cities, there are some parts that do not have access to a water supply for over two hours a day. Off-trade volume sales accounted for a 70% share of total volume sales in 2011. However, on-trade sales are growing at a marginally faster pace than off-trade sales, as income levels rise. Sales are no longer restricted to urban consumers; rural sales accounted for a 16% offtrade volume share in 2011. Manufacturers have also established exclusive supply agreements with supermarkets and hypermarkets so that these outlets sell only their brand, for which supermarkets and hypermarkets charge a higher margin. On-trade value sales grew at a marginally faster pace than off-trade value sales in 2011.

137

TRENDS
However, this has not been the case over the review period as a whole, when offtrade value growth was stronger. Strong growth in on-trade channel is mainly attributable to the increase in distribution network in various on-trade outlets. Bars/cafs place bottled water on tables, even without customers ordering the water; for example, Caf Coffee Day has Qua on its tables. Bisleri and Aquafina, by Parle Bisleri Ltd and PepsiCo India Holdings respectively are by far the strongest brand in the on-trade channel. Manufacturers are trying to push still natural mineral water through high-end establishments. This is because the on-trade outlets can achieve higher margins with these brands compared to other more popular brands. Consumers in such establishments are prepared to pay a higher price for such brands.
138

TRENDS
Direct selling was responsible for an 18% off-trade volume share of distribution in 2011. Bulk water sales are becoming popular in many parts of India, especially in cities such as Chennai where there is an acute shortage of drinking water. Regional brands such as Hello by Hello Mineral Water Pvt Ltd have significant presence in terms of bulk bottled water sales, being delivered directly to the homes of consumers. Sales of carbonated, flavoured and functional bottled water were all negligible in 2011. Although players such as DS Foods Ltd and Narang Hospitality Services Pvt Ltd have tried to introduce flavoured and functional bottled water, such variants did not perform well in the Indian market as the market for fortified water had not evolved.

139

TRENDS
Nevertheless, Parle Bisleri plans to enter the flavoured bottled water category as the company feels that consumers are becoming increasingly health conscious, with many prepared to pay a premium for a product they perceive to be a healthy alternative. Demand for sports water in India is negligible; it is a very new concept in the Indian market and it is expected to take a number of years before it is widely accepted. Functional water is slowly gaining a presence on supermarket shelves. NourishCo, a joint venture between PepsiCo India Holdings Pvt Ltd and Tata Global Beverages Ltd launched Tata Water Plus, in February 2012 which is the first bottled water with added nutrients available in the Indian market. The product, in zinc and chromium variants, was test marketed in Tamil Nadu. The company believes that India is moving towards a preference for healthy beverages, hence it has immense potential for a wide acceptance of such products.

140

TRENDS
Still natural mineral water is performing better than still spring water; however, both categories combined do not account for 1% of total bottled water volume or value sales in 2011. DS Foods Ltd is the only notable player in still spring bottled water, while Mount Everest Mineral Waters Ltd and Narangs Hospitality Services Pvt Ltd are the dominant players in still natural mineral water. Still natural mineral water is gaining popularity over standard bottled water among more affluent consumers, as awareness about the benefits of essential minerals is increasing. However, it is priced significantly higher than standard bottled water and is performing well in the on-trade channel. Sheelpe Enterprises Pvt Ltd launched Aava Natural Mineral water in the on-trade channel in Goa in January 2012.

141

COMPETITIVE LANDSCAPE
The Indian bottled water category is led by Parle Bisleri Ltd, which held a 43% offtrade volume share in 2011. It was followed by PepsiCo India Holdings (15%) and Coca-Cola India (11%). Bisleri, Aquafina and Kinley (Parle Bisleri Ltd, PepsiCo India Holdings and CocaCola India respectively) are the dominant brands, accounting for a 69% off-trade volume share in 2011. Bisleri led sales in 2011 due to its strong distribution network and strong brand image. In 2011 Parle Bisleri launched Bisleri hubs to drive consumption, with local stationery shops and dairies exclusively selling the Bisleri brand. The Bisleri brand recorded the strongest rise in share, with an increase of three percentage points, compared with two percentage points for Kinley. This was mainly due to the strong distribution and visibility the brand enjoyed in the year 2011.
142

COMPETITIVE LANDSCAPE
The Kinley brand by Coca-Cola India recorded the second biggest increase in value sales in 2011. Coca-Cola India introduced eKoCool, a solar-powered cooler, which is at the pilot stage. eKoCool is a part of the companys strategy to increase sales in rural India. This is how the company is reaching out to rural areas to enhance both its carbonates and bottled water sales. International players such as PepsiCo India Holdings and Coca-Cola India are enhancing their presence in the bottled water category through their strong distribution networks, largely as a result of their strong showing in carbonates. This has led to regional players such as Parle Bisleri Ltd increase their presence in the market. This company saw the strongest rise in share in 2011, in both value and volume terms. DS Foods Ltd on the other hand showed a weaker performance. Many international brands such as Evian and Perrier distributed by Narang Group have entered still natural mineral water and are proving popular with the expat population.
143

COMPETITIVE LANDSCAPE
DS Foods Ltd on the other hand showed a weaker performance. Many international brands such as Evian and Perrier distributed by Narang Group have entered still natural mineral water and are proving popular with the expat population. Groupe Danone is planning to enter functional bottled water in India. It has established a joint venture with The Narang Group to form Danone Narang Beverages for the manufacture and marketing of flavoured mineral water. The company has launched Blue, a functional bottled water product in India. Meanwhile, Parle Bisleri worked with the advertising agency Red Lion to produce a new campaign for the Bisleri brand that features the new Stay Protected concept. The company suggests that protection from disease is the main reason for consuming bottled water, but it has given this notion a new dimension by making consumers visualise the dangers in the form of a monster.

144

COMPETITIVE LANDSCAPE
This television advertisement has already attracted the attention of many consumers and the company claims it has helped to increase brand loyalty among consumers. This campaign/product launch responsible for the companys strong rise in share in 2011. Still bottled water continues to be reliant on PET bottle packaging due to the portability and light weight of this format with a leading pack size of 1 litre. Premium brands such as Evian, Qua and Perrier were offered in smaller packaging formats of 250ml and 350ml in 2011. Qua was also launched in a different-shaped PET bottle, designed to give the brand a premium look.
145

COMPETITIVE LANDSCAPE
The majority of the leading still bottled water brands were positioned in the standard segment in 2011. Premium brands such as Evian and Perrier cater to higher-income consumers and tend to perform well in the on-trade channel. Brands such as Kinley, Bisleri and Aquafina compete on price and their operators seek to differentiate them through strong brand image and distribution networks. Overall the bottled water category is relatively fragmented with low margins.

146

PROSPECTS
Throughout the forecast period, the bottled water category is expected to continue to register double-digit volume growth. While consumers have started to understand the difference between natural mineral water and still bottled water, growth will be driven by still bottled water, which is considered both safe and reasonably priced. The category has low brand loyalty, with price being the main factor influencing the purchasing decision. During the forecast period, manufacturers are expected to lower unit prices and enhance their distribution networks in order to reach the smaller cities and expand their presence. Off-trade volume sales of bottled water are expected to grow at a CAGR of 24% over the forecast period. Growth will be mainly driven by consumers need to drink safe water as the quality of municipal water is not improving.
147

PROSPECTS
Companies cannot sell water without Bureau of Indian Standards (BIS) certification; this is leading to the strong multinational players gaining share at the expense of local operators, due to their greater financial resources and economies of scale. This trend set to continue throughout the forecast period as well While off-trade volume sales will continue to account for the largest share of sales over the forecast period, on-trade volume sales will see stronger growth. Higher awareness about health and hygiene and the prevalence of water-borne diseases will led to an increased demand for bottled water, especially in on trade channel where consumers want to be safe. There has been an increase in the number of counterfeit bottled water cases in India. For example, in February 2012 Gurgaon police arrested a group for the supply of fake Aquafina bottles. Counterfeit products are becoming more prevalent in terms of direct sales of 20-litre bottles.
148

PROSPECTS
Such a situation could lead to consumers increasing use of water purifiers at home. A water purifier might be expensive initially, but in the long term, it may prove more cost effective and convenient. The falling prices of domestic use RO and UV water purifiers is driving consumers towards installing such products in their homes rather than spending on bottled drinking water for daily domestic consumption. Tata Chemicals Ltd, a relatively new entrant into the bottled water category, launched the worlds lowest-cost purifier brand Swach for the low- to middle-income segment in 2010. These factors are expected to negatively impact off-trade bottled water sales. Natural mineral water is expected to grow at a faster rate than natural spring water, but the highest growth will be from still bottled water. Leading companies are using a range of strategies to retain share. Parle Bisleri Ltd is planning to set up its own exclusive retail outlets, Bisleri Shopees, in India as it looks to counter the trend of retail outlets pushing rival brands.
149

PROSPECTS
Coca-Cola India and PepsiCo India Holdings have production enhancement plans, reflecting their intent to capture greater share. Coca-Cola India has plans to improve its focus on product availability and distribution for its Kinley brand, while PepsiCo India Holdings plans to set up multiple manufacturing facilities across the country to achieve better economies of scale and gain a stronger consumer base among mass consumers. Domestic operator Rajkot Municipal Corporation has plans to launch the Jalam brand of bottled water to compete with brands such as Kinley, Aquafina and Oxyrich (Dhariwal Industries Ltd). Unit prices are set to fall in constant value terms. This will be because of intense competition in the category. Increases in the price of PET bottles and rising transportation costs will lead to a marginal increase in prices. However, manufacturers are hedging the risk by operating plants in every state, thus the prices will see a slight decline.
150

PROSPECTS
Acute water shortages in places such as Chennai and Mumbai are leading to a reduction in price, especially for 20-litre formats, in a bid to drive consumption. Eureka Forbes Ltd is also planning to enter the bottled water category, rolling out a product on a pan-?India basis by 2012. The company is planning to sell the product under the brand name AquaSure, available in 20-?litre and 1-?litre PET bottles. Luthra Water Systems Ltd, producer of Mulshi Springs, plans to invest Rs 300-350 million in its third natural spring water plant. Sheelpe Enterprises, meanwhile, has plans to launch Aava, a functional bottled water, fortified with vitamins in India. The company has formed an agreement with Reliance Fresh Stores and Star Bazaar to market the brand.

151

Category Analysis : Biscuits

152

Biscuit category is about Rs. 15,600 crores and Plain biscuits are the biggest selling product category
BISCUITS : CATEGORY BREAK-UP

Products Cookies Plain Biscuits Filled and Sandwich Biscuits

Value in Rs.mn 33,776 85,814 23087

%of Total Category Value

22%

55% 15%

Savoury Biscuits and Crackers Total

13490 156167

9% 100%

153

Parle and Britannia are the two strong players with ITC increasing their share over the last few years.
BISCUITS : COMPANY MARKET SHARES Company 2007 Parle 35.7% 36% 7.9% 4.1% Market Shares 2012 35.4% 33% 13.2% 4.5%

Britannia ITC Surya Foods

154

BISCUITS : BRAND SHARES

Brand Parle Britannia SunFeast Anmol Priyagold

Company Parle Britannia ITC Anmol Surya

Market Shares 2007 31.4% 36.2%

7.9%

2012 33.1% 32.8%

13.2%

3.6% 2

3 2.1%

Cookies will be the fastest growing product category in biscuits.

BISCUITS : GROWTH

CAGR Products Cookies Plain Biscuits Filled and Sandwich Biscuits Overall Biscuits 2007-12 32% 15.6% 23% 18.6% 12% 6% 9% 8.2% 8% 2012-17

Savoury Biscuits and Crackers 14.3%

156

KEY POINTERS
Biscuits sales are likely to grow by 21% in current terms to reach Rs156 billion in 2011 Biscuits sees increased product innovation due to strong competition among manufacturers Cookies is expected to register the strongest value growth (40%) in 2011 Average unit prices increase in accordance with rising production costs Parle Products leads biscuits with a 35% value share in 2010 Biscuits sales are expected to post a CAGR of 9% in constant value terms over the forecast period

157

TRENDS
During the last two years of the review period, the industry witnessed considerable innovation in savoury biscuits and crackers. The launch of Aliva by Frito-?Lay, the snack food division of PepsiCo in 2009, introduced baked crackers to consumers. Parle Products introduced sugar-free cream crackers. Consumers are moving towards savoury biscuits and crackers which have added health benefits. Regional brands (such as Anmol, Bisk Farm and Priya in Eastern India) are providing strong completion to national players such as Britannia Industries, Parle Products and ITC. Apart from offering competition, regional brands also inspired the national brands in product innovation. Thus Top, a popular variant from Bisk Farm, was also introduced by Parle Products and Britannia Industries, who have extended these on a national level following success in the region.
158

TRENDS
Biscuits value sales are expected to continue recording double-digit growth in 2011 with a slightly lower growth rate than in 2010. The driving factors are the increase in population and the simultaneous growth of modern retail. Consumers considered biscuits as a cheaper indulgence and nourishing products and an alternative to higher-priced cakes, pastries, and sweets. Diverse flavours and new products have made biscuits a more attractive snack for young consumers. Value sales of cookies registered the fastest growth of 40% in 2011, driven by higher consumption and a preference of cookies among children. The expansion of chained grocery stores and increase in product offerings, such as more imported brands on retailers shelves, was another key driver behind growth in cookies.

159

TRENDS
There were also a growing number of specialist retailers in cookies in urban areas, especially in shopping centres, which attracted high-end consumers with freshly made cookies. However, these stores mainly serve the more affluent consumers. The average unit price of biscuits is expected to rise significantly in 2011 - by as much as 9% - due to the continued rise in input costs, such as those of milk, sugar, fuel and packaging. Manufacturers were under pressure to raise prices to maintain profit margin. However, they tried to keep price increases to a minimum and sometimes offset some of the price increase with promotions and discounts. Biscuit prices are heading northward. Leading biscuit makers such as ITC, Britannia Industries and Parle Products raised the prices of their biscuits between 2% and 10% in October 2011 to capture festival demand.
160

TRENDS
According to these biscuit producers, they did not foresee any dip in consumption despite the price hikes, as entry-level price points such as Rs5 and Rs10 remained constant. Moreover, the prices of packs that went up largely did not target value-conscious consumers. The biscuits category in India was still dominated by sweet biscuits in 2011, which also saw faster growth than savoury biscuits. This is because Indian consumers traditionally prefer sweet biscuits and are not as open to the concept of savoury alternatives. As savoury biscuits are often consumed alongside a savoury spread, such as cheese or other savoury food, it may be too much hassle for consumers, especially those looking for quick snacks.

161

TRENDS
Among sweet biscuits, plain biscuits was the largest category in terms of current value sales, followed by cookies. The popularity of plain biscuits was mainly due to their affordability. However, its growth was slowest among sweet biscuits as plain biscuits is relatively mature and there was less product innovation in this category. On the other hand, cookies and filled biscuits saw rapid growth because cookies are particularly appealing to children and filled biscuits are growing from a small base. With the rise in lifestyle related diseases including diabetes, hypertension and obesity, health has become a key factor and leading manufacturers have started offering biscuits positioned on the health and wellness platform including sugar free, diabetic-friendly products, oat or wholegrain based. Diabetic and health conscious affluent households are the leading consumers of low sugarised biscuit brands in urban markets.

162

COMPETITIVE LANDSCAPE
Parle Products led sales with a 35% value share in 2010. Its leading position is attributed to the long-standing presence of the company in biscuits. Parles flagship brand Parle Krackjack enjoys strong customer loyalty and penetration in cities such as Hyderabad and Bangalore. It was the leading manufacturer of plain biscuits due to the affordability of its ParleG plain biscuits. It also has an extensive distribution network, extending to rural areas. The scale of the company enabled it to keep prices competitive despite rising costs. ITC saw the largest increase in value share in 2010. The company drove the growth of its biscuit business by vitalising its brand Sunfeast through product innovation, contemporary packaging and targeted brand communication. It also created new biscuit variants in categories that were relevant to consumers.

163

COMPETITIVE LANDSCAPE
The positioning of the marketing mix was worked upon to drive consumption by creating convenient price points or by differentiating product propositions. Biscuit manufacturers are moving into the premium category to meet rapidly growing demand from the more affluent consumers. The manufacturers also had their eyes set on consumer cravings for variety. Other factors motivating the move included heightened competition from international players and the need to improve margins. Over the review period, the prices of key raw materials wheat, sugar and milk have risen significantly. Yet there was less scope for manufacturers to pass on the hike at the lower end of the market. Premium products would give manufacturers higher margins. Biscuits is dominated by domestic players, such as Parle Products, Britannia Industries and ITC.
164

COMPETITIVE LANDSCAPE
International companies, such as Cadbury and GlaxoSmithKline, are the most visible international companies, but they faced challenges in capturing more market share. This is because their target market is smaller than that of domestic players. Parle Products and Britannia Industries offered the entire range of biscuits, while international players focused on premium products (such as cookies) and failed to go into the glucose or digestive market because of low profit margins. The cookies category heated up in 2011 with a host of new players entering the market and the older ones ramping up presence in response to the rising consumption of cookies. Cadbury launched Krafts global brand Oreo in 2011. It will be manufactured in India and priced at Rs5, Rs10 and Rs20, significantly cheaper than the Oreo biscuits available through importers. According to Cadbury, the company will use Cadburys wide distribution network to market the biscuit, while Oreo could help it penetrate the premium biscuits market.
165

COMPETITIVE LANDSCAPE
In 2011, PepsiCo started rolling out its global Quaker Oats brand of premium cookies at a price point of Rs30, and national players such as Britannia Industries, Parle Products and ITC were all looking to launch more premium offerings. In 2010-2011, ITC launched two products under its Sunfeast brand, Dark Fantasy Choco Fills and Dark Fantasy cream biscuits, which were priced Rs30 and Rs20 respectively. Britannia also launched a cream biscuit brand, Treat-O, in addition to its other premium launches such as Diabetes Friendly Essentials and Chocodecker. The launches in the premium segment are expected to be successful, because urban consumers are increasingly looking for varieties and better quality products. In conjunction with the launch of Oreo in India, Cadbury launched its Oreo-Time marketing initiative in June 2011.

166

COMPETITIVE LANDSCAPE
As part of the initiative, a fully branded Oreotogetherness Bus travelled across nine cities including New Delhi, Mumbai and Bangalore. Special activities were planned in and around the bus. Parents were encouraged to take the Oreo Pledge, which stands for a promise to spend more time with the children. There were various interactive activities based on Oreos much-loved ritual of Twist-Lick and Dunk. The company also organised below-the-line activities and trade outlet promotions. As biscuits were usually cluttered in one place in large store formats, Cadbury created special Oreo panels, called the wall of blue, to make the brand more visible. Biscuits packaging is still dominated by flexible packaging, particularly for small pack sizes.

167

COMPETITIVE LANDSCAPE
There was no significant packaging innovation in 2011. The value share of other private label was very low at less than 1% in 2010 changing little from the previous year. Pantaloon Retails flagship brand Tasty Treat was the leading private label. There is limited potential for private label to grow, because the Indian biscuits category is fragmented and competitive. The leading low-end brands, Parle-G and Britannia Tiger target mass consumers and are easily affordable. Furthermore, the biscuits category benefits from high customer brand loyalty and retention rates making it a challenge to persuade consumers to switch from established brands to private label.

168

PROSPECTS
As plain biscuits approaches maturity over the forecast period, a large proportion of the growth in the biscuits category will come from mid-price products, such as cookies and sandwich biscuits. Consumers will upgrade to mid-priced offers, as they are ready to pay for good quality and tasty products. This trend is expected to continue alongside an upward trend in disposable income and increasing exposure to imported premium brands. As such, manufacturers will increasingly look at growing the more profitable products, such as cookies, cream biscuits, crackers and niche products on the health platform. In constant value terms, biscuits is projected to post a CAGR of 9% over the forecast period. Growth will be driven by more value-added biscuits, consumers upgrading from plain biscuits, and emerging variants such as chocolate-coated biscuits.
169

PROSPECTS
However, the forecast CAGR will be lower than that for the review period, because one of the key categories, plain biscuits, is expected to slow down significantly with demand becoming more saturated. Other categories will also experience a slow down, as growth will be from a larger base. Biscuits will also face competition from other snacks, especially bread, cakes and pastries which have similar price points as biscuits. For high-income demographics, they may switch to healthier snacks, such as snack bars. Cookies is expected to post the fastest growth over the forecast period with a constant value CAGR of 14%. This will be followed by filled biscuits. The projected strong performance of these two categories will be due to growth in disposable incomes driving demand for premium products and more impulse purchases.
170

PROSPECTS
Population growth, especially the projected increase in the number of children, will also boost demand for cookies, one of childrens favourite snacks. In 2011, many manufacturers were already entering the premium biscuit segment and over the forecast period, consumers will see more offerings in cookies and filled biscuits. The average unit price of biscuits is set to grow at a 2% constant value CAGR over the forecast period. Prices of commodities such as wheat, sugar, and milk are expected to remain high, causing manufacturers to raise their prices. However, this will be partly offset by promotions and other discounting strategies, such as value packs, to encourage purchases. Independent small grocery retailers will remain the most important distribution channel, especially for entry level products and economy brands.

171

PROSPECTS
Nonetheless, chained modern grocery retailers such as supermarkets/hypermarkets, are expected to become more important over the forecast period, as they offer a greater variety of products and are more likely to launch in-store promotions than small grocery retailers. With more foreign brands expected to enter the market, these imported brands will most likely target urban markets and distribute through supermarkets/ hypermarkets first. This will contribute to sales through chained grocery retailers. \ According to industry sources, the three largest biscuits manufacturers (ITC, Britannia Industries and Parle Products) will increase television and print advertising expenditure. Local and regional television networks along with classified will be their core marketing and promoting platforms.

172

PROSPECTS
With strong competition among domestic manufacturers, the leading players are also expected to drive rural consumption of economy brands. Affordability and smaller pack size will be the primary focus of companies for rural areas. There were several new launches in the premium category in 2011, both from domestic and international manufacturers. These products are expected to perform well over the forecast period as they inject novelty into the market and will meet consumer demand for more high end products. Brands, such as Oreo, had already gained popularity among Indians when they had only previously been available through importers, but their official launch will boost sales as these products will now be made available at lower prices.

173

Competitive Positioning of Players in Personal Care

174

CAVINKARE PVT LTD IN BEAUTY AND PERSONAL CARE (INDIA)

175

Strategic Direction
CavinKare is focused on expanding its institutional hair care product portfolio in South India. In December 2012 the company enhanced its institutional hair care product portfolio by introducing a variant of Raaga Professional massage oil. In addition the company is putting effort into increasing its penetration in rural areas and third-tier cities.

176

Competitive Positioning

177

Competitive Positioning
CavinKares share of value sales in beauty and personal care remained only 2% in 2012. It was ranked 13th in 2012, and had a presence in bath and shower, deodorants, hair care and skin care, with brands such as Chik, Fairever, Spinz, Indica, Meera and Nyle. The largest contributors to value sales are hair care and skin care. The companys share in beauty and personal care remained steady in 2010 and 2012. It is continuing to expand its distribution outside South India. In addition, CavinKare has strengthened its grip in South India by focusing on region-specific characteristics, such as its jasmine flavour variant of Chik shampoo, which is popular in Tamil Nadu, and its Karthika brand of shampoo, which is popular in Andhra Pradesh, as it contains certain traditional herbal hair cleansing ingredients. CavinKare benefits from the fact that its two largest contributors to value sales hair care and skin care are still dynamic categories.

178

Competitive Positioning
However, value growth in shampoos slowed down in 2010, as the leading companies were pushing volume sales by offering bigger pack sizes at the same price, as high inflation impacted India. However, the company expanded its portfolio towards more high-growth products, such as deodorants, to reduce the impact of the declining popularity of talcum powder in India. The company has quite a wide product portfolio, including shampoos, colourants, talcum powder, deodorants (including mens deodorants) and skin care products. The companys main target consumer group is still mostly less well-off consumers, with its offer of value for money products. For example, the bulk of the companys sales in shampoos still come from sachet products, with the company being a pioneer of the sachet format in India. The company is focused on the low-end of the market, with rural consumers as the main target group. The company keeps innovating with new strategies to penetrate rural areas. For instance, the company pioneered the sachet concept in the country.
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CavinKare Pvt Ltd: Competitive Position 2012

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COLGATE-PALMOLIVE INDIA LTD IN BEAUTY AND PERSONAL CARE (INDIA)

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Strategic Direction
Colgate-Palmolive India aims to drive growth through a focus on understanding the changing needs of customers, working with dental professionals and retail customers, and driving innovation throughout the business in the pursuit of efficiency, effectiveness and leadership competency. The company is expected to retain its focus on oral care over the forecast period, with the aim of increasing the frequency of usage of its oral care products in urban areas through campaigns such as Brush twice a day, and increasing rural penetration across India. The company ensures that it has offerings at every price point to meet the needs of every consumer group. With such a move, it is trying to reach out to consumers through extending its brand portfolio and promotional events.

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Summary 9 Colgate-Palmolive India Ltd: Operational Indicators

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Competitive Positioning
Colgate-Palmolive India ranked second in beauty and personal care in 2012, with a value share of 7%. This leadership is primarily attributed to its dominance in oral care, in which the companys contribution stood at 46% in 2012 double the share of its nearest competitor. The companys leading brand, Colgate, has become more or less synonymous with toothpaste and toothbrushes. Although the company retains its overall strong position, its value share has fluctuated, as rivals ramped up activity over the review period. Companies including Gillette India increased their shares rapidly, with increasing sales of the Oral B brand and a focus on rural sales of toothpaste, whilst in mouthwashes/dental rinses, Johnson & Johnson (India)s Listerine brand rapidly gained share from Colgate Plax. Consequently, the companys market share was eroded slightly in 2012.
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Competitive Positioning
Colgate-Palmolive India is well-positioned in all the growth channels, with a significant presence in chained supermarkets/hypermarkets. It is benefiting from the expansion of this format into smaller cities across India. This is crucial, as major cities such as Mumbai and Delhi are saturated, and growth, not just for toothpaste, but also for value-added products such as Colgate Plax, will increasingly come from smaller cities. The company has diversified its portfolio over the years, having defined its market as oral care rather than more narrowly as toothpaste, for which it was best-known. Its range now includes oral care, personal care products such as hand and body washes, and Axion, its professional care line. It also has products across a range of price points.

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Competitive Positioning
The largest contributors to value sales are still toothbrushes and toothpaste which target the low-end to middle of the market; however, the company is still wellpositioned for growth in oral care, as the penetration of toothbrushes and toothpaste is still relatively urban-oriented, and there is significant scope for growth in rural areas. In addition, its recent launch in mouthwashes/dental rinses strengthened the companys position, whilst its push of value-added formats in toothpaste should increase profit margins. The company positions itself towards middle-income consumers; however, it is making efforts to penetrate the rural market.

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Competitive Positioning Summary 10 Colgate-Palmolive India Ltd: Competitive Position 2012

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DABUR INDIA LTD IN BEAUTY AND PERSONAL CARE (INDIA)

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Strategic Direction
With a view to increasing its share in beauty and personal care, Dabur India is venturing into new categories and strengthening its existing portfolio with new launches. In 2012 the company entered hand sanitisers with the launch of Fem Safe Handz, and also ventured into professional grooming. The company is also focusing on strengthening its international presence by setting up new units in other countries. In 2012 the company opened a subsidiary in Sri Lanka, and is also planning to set up new plants in South Africa, Egypt, Nigeria and Kenya by the end of 2012.

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Summary 14 Dabur India Ltd: Operational Indicators

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Competitive Positioning
With a value share of 5% in 2012, Dabur India ranked as the third largest company in beauty and personal care in the country. Hair care remains the largest contributor to the value sales of Dabur, accounting for a 56% share of its value sales in beauty and personal care in 2012, followed by oral care with a 31% share. Its sales in other categories, such as baby and child-specific products, depilatories and bath and shower, are relatively small. Daburs overall share in beauty and personal care witnessed a small increase in 2012mainly due to organic expansion and increasing penetration in rural India. In December 2012 the company made a foray into salon care with the launch of a range of facial for skin care under its brand Fem.

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Competitive Positioning
Dabur has a long-established presence in India, and has a strong presence in hair care, baby and child-specific products, oral care and depilatories. The company is likely to witness huge growth in oral care and depilatories, categories which are being driven by growing awareness amongst rural consumers. Building on a legacy of quality and experience for 125 years, Dabur India operates a wide portfolio in key consumer products categories such as hair care, oral care and skin care. The bulk of the companys value sales come from mature categories such as hair oil, toothpaste and shampoo, which could impact the companys top-line growth over the forecast period. In 2012 the company expanded its portfolio by introducing a range of facial care kits to mark its entry into professional grooming.

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Competitive Positioning
The company offers mid-priced and low-priced products targeted towards middleand low-income consumers. For instance, Dabur continues to be only major company that offers dental powders targeted towards rural consumers. In addition, the company is putting effort into increasing its penetration in smaller towns and second-tier cities. Dabur India with its leading brand Fem was the leader in depilatories in 2012. The company is known for offering affordable products which are targeted towards mass consumers, constituting the majority of its consumers.

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Summary 16 Dabur India Ltd: Competitive Position 2012

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GODREJ CONSUMER PRODUCTS LTD IN BEAUTY AND PERSONAL CARE (INDIA)

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Strategic Direction
Godrej Consumer Products is focusing on increasing its brand presence in Asia, Africa and Latin America through hair care and body wash/shower gel. The company also intends to strengthen its portfolio by extending into adjacent categories. The company also took over leading detergent brands Genteel and Swastik to extend its lead in detergents.

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Summary 18 Godrej Consumer Products Ltd: Operational Indicators

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Competitive Positioning
Godrej Consumer Products accounted for a 5% value share in beauty and personal care in 2012, placing it in fourth position in India, competing closely with Dabur India and Colgate-Palmolive India. The company has leading brands in beauty and personal care, such as Godrej No 1, Cinthol and Godrej Hair Dye, which are amongst the top brands in bar soap and colourants. Godrejs share witnessed a small decline in value share in 2012, mainly due to the stagnant or declining situation in bar soap and hair colourants. Within bath and shower the company operates in the mature and stable categories of bar soap and talcum powder, and as such, driving growth is a difficult proposition.

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Competitive Positioning
However, over the review period the company attempted to diversify, with the acquisition of brands outside beauty and personal care, such as Genteel in laundry care and also with the development of Godrej Protekt, a new launch in hand sanitisers, taking advantage of the new-found awareness of hygiene following the swine flu outbreak in early 2010. The company is positioned as a mass-market player, and continues to prioritise low prices to increase its penetration, rather than targeting high-income consumers. The company is a well-established player in the beauty and personal care market. Whilst it cannot be said to be an innovator in terms of creating new niches or categories, it is certainly a strong rival to other companies in the mass-market segment.

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Summary 19 Godrej Consumer Products Ltd: Competitive Position 2012

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HINDUSTAN UNILEVER LTD IN BEAUTY AND PERSONAL CARE (INDIA)

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Strategic Direction
With a strong presence in most beauty and personal care categories. Hindustan Unilever is making efforts to increase its volume sales. The company has a wide product portfolio, from mass to masstige products, particularly in bath and shower, skin care and hair care. The company is expected to push volume sales amongst the mass segment, whilst at the same time developing sales of masstige products such as Dove, to leverage rising disposable incomes and more sophistication in grooming in the forecast period.

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Summary 26 Hindustan Unilever Ltd: Operational Indicators

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Competitive Positioning
Hindustan Unilever continued to lead overall beauty and personal care in India in 2012, accounting for a 32% share of value sales. This was mainly due to its strong product portfolio, as well as the depth of distribution of the company. Bath and shower is the main contributor to sales, with around 50% of the companys sales in beauty and personal care. The other main contributors to sales are skin care and hair care. Hindustan Unilevers share in beauty and personal care continued to decline to reach 32% in 2012, mainly due to declining shares in hair care and bath and shower. The company lost share to LOral in hair care and Reckitt Benckiser in bath and shower. The company holds a wide portfolio of personal care products, including bath and shower, skin care and hair care products.

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Competitive Positioning
The company has a wide range of products, from low-end mass products to masstige products. For instance, within bar soap, Lifebuoy caters to lower-income consumers, whereas Dove is targeted towards more affluent consumers. With this wide portfolio, coupled with its strong distribution across India, the company is able to target a wide demographic in the country. With such a wide product portfolio, the company has a presence in some of the fastest growth categories, such as deodorants, skin care, colour cosmetics and mens grooming. However, it is also present in some rather mature categories, such as bar soap, toothpaste and shampoo. In particular, it is over-reliant on the saturated bar soap category, which slowed down the overall growth of the company in the review period.

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Competitive Positioning
The bulk of the companys value sales in beauty and personal care still come from mass products such as bar soap, for example Lifebuoy and Lux; shampoo, for example Clinic Plus; and skin care, for example Fair & Lovely fairness cream. Thus, with the current increasing cost pressures, the companys profits have been under pressure. Nonetheless, the company has benefited from growth in masstige brands such as Dove, as well as value-added products such as Ponds Gold and Fair & Lovely Anti Marks Eraser. The company launched Dove shampoo in new packaging and Ponds Dreamflower talc in a new fragrance in 2012. The company also launched a new range of Lakm make-up under the brand Lakm Absolute, which helped the company to maintain its share in colour cosmetics.

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Summary 27 Hindustan Unilever Ltd: Competitive Position 2012

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L'ORAL INDIA PVT LTD IN BEAUTY AND PERSONAL CARE (INDIA)

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Strategic Direction
LOral India intends to place India high on the LOral global map, by leveraging its global brands, customising its marketing strategy to India, and ensuring high visibility, with a clear positioning for each of its brands. This will be supported by the expected expansion of modern retail channels, whereby the company will promote both its mass and premium brands in India over the forecast period.

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Competitive Positioning
LOral India held a value share of 4% in beauty and personal care in India in 2012, mainly due to its strong presence in colour cosmetics under the brands Maybelline and LOral. The company held a value share of 13% in colour cosmetics in 2012. It is ranked amongst the top 10 companies in beauty and personal care in India. The companys share witnessed a small increase in value share in 2012 mainly due to growth in eye make-up. LOrals colour cosmetics faced tough competition from Lakm due to the launch of Lakms long-lasting make-up under the brand Lakm Absolute in 2012. The company is in a good position to build on its base in India, as it is present in rapidly growing categories such as hair care and skin care.

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Competitive Positioning
LOral India has a very wide portfolio across the main growth categories, and is generally a leader in terms of introducing the latest international styles or promotions in India. The bulk of its sales still come from hair care, skin care and colour cosmetics in India. The company has an all-India presence, with its products targeted towards masstige consumers and available in the major store-based retailers. The emergence and rapid expansion of modern retail channels, including supermarkets/hypermarkets, department stores and malls in almost every key city in India, has considerably helped its sales of premium products.

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Summary 29 LOral India Pvt Ltd: Competitive Position 2012

212

BABY AND CHILD-SPECIFIC PRODUCTS IN INDIA CATEGORY ANALYSIS

213

HEADLINES
Baby and child-specific products increases by 14% in current value terms in 2012, to reach Rs6.7 billion Baby and child-specific products is driven mainly by rising penetration in secondtier and third-tier cities Unit prices of baby and child-specific products increase by 9% in 2012 Johnson & Johnson (India) continues to be the largest player in baby and childspecific products, accounting for three quarters of value sales in 2012 Baby and child-specific products is expected to increase by a constant value CAGR of 5% during the forecast period 2012-2016

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TRENDS
New pockets of demand in second-tier and third-tier cities such as Jaipur and Kanpur, and growing acceptance amongst rural consumers due to increased awareness, propelled sales of baby and child-specific products in 2012. Media and promotional campaigns by companies such as Johnson & Johnson (India) played a significant role in pushing these products to rural consumers. In addition, urban consumers started to switch to organic and herbal products, due to growing concerns about their babies health. Baby and child-specific products increased by 14% in current value terms in 2012, compared with a CAGR of 10% over the review period. The higher growth in 2012 was mainly due to the growing acceptance and use of baby and child-specific products in second-tier and third-tier cities. Moreover, the higher birth rate in 2012 compared with the review period pushed sales even higher.

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TRENDS
Baby wipes continued to grow at the fastest followed by baby and child-specific toiletries in 2012. The fatser growth in baby wipes was mainly attributed to the growing hygiene concerns amongst urban mothers. Addtionally, toiletries witnessed high growth due to the growing use of baby and child-specific toiletries in second-tier and third-tier cities and the strong push from rural areas. Average unit prices of baby and child-specific products continuously increased due to the launch of premium products, which are readily being accepted by consumers. The launch of herbal and organic products in baby care pushed unit prices even higher. Baby wipes continued to perform well in 2012 due to growing hygiene concerns amongst females which lead to the increased uptake of baby wipes. However, the use of baby wipes remains largely restricted to urban consumers.

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TRENDS
Mass brands such as Johnsons Baby and Dabur continued to dominate baby and child-specific products in 2012. Premium baby and child-specific products remained a niche in India; however, it picked up at a rapid pace in 2012. Premium organic baby and child-specific toiletries witnessed widespread acceptance in urban areas, facilitated by growing purchasing power amongst urban women. Childrens soaps such as Doy Care from VVF performed well; however, they registered slower growth compared with baby care products. Manufacturers focused more on baby care products compared with child-specific products.
217

TRENDS
However, other manufacturers, such as Emami, announced plans to launch childspecific products by 2013. The company also announced plans to test-market talcum powder for children under its flagship brand Boroplus in 2012. With Indian consumers shifting to herbal brands, natural and organic baby care started to pick up rapidly in 2012. For instance, companies such as Kruter Healthcare, which focus on herbal baby products, witnessed rapid growth despite higher prices.

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COMPETITIVE LANDSCAPE
Johnson & Johnson (India) continued to lead baby and child-specific products, accounting for a 75% value share in 2012. The company pioneered baby products in India, and it still benefits from the trust that it has built over the years. Smaller brands, including Kimberly-Clark Levers Huggies brand and Pigeon witnessed the biggest increase in value share in 2012. This can be attributed to the rapid increase in sales of baby wipes by Huggies, driven by growing health and hygiene concerns amongst urban consumers. International manufacturers such as Johnson & Johnson continued to rule baby and child-specific products in 2012. However, domestic manufacturers, including The Himalaya Drug Co and Kruter Healthcare, continued to launch new products in toiletries, and increased rapidly.

219

COMPETITIVE LANDSCAPE
Emami launched a range including baby massage oil, baby shampoo and baby powder in June 2012. The entire range of products is based on ayurvedic ingredients, which outperformed overall baby care. No significant advertising campaigns were carried out to promote baby care products, and baby care relies more on trust and word of mouth marketing. However, Johnson & Johnson organised an awareness campaign to educate consumers in rural areas in 2012. Packaging in baby and child-specific products remained the same in 2012. Most childrens soaps continued to be packaged in attractive colours, and baby care products continued to be light-coloured to give them a gentle appearance.

220

COMPETITIVE LANDSCAPE
Baby care continued to be dominated by mass products in 2012. Indian consumers are much more familiar with mass brands such as Johnsons Baby and Himalaya, and these mass baby care brands have long been trusted by Indian families in terms of their quality. However, premium baby care products, including products such as Garfield Baby India from Zen Hygiene have started to pick up gradually in urban areas such as Mumbai.

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PROSPECTS
With baby and child-specific products moving towards premium and herbal products, the category is likely to witness a range of new launches from international players. The leading players in herbal baby care products, including Kruter Healthcare, are expected to increase strongly, in line with the growth in herbal baby care. Many international players are likely to make a foray into the category to leverage the potential growth in the forecast period. This potential growth is well-supported by demographic and socioeconomic factors, including a healthy birth rate and an increasing number of consumers willing to spend more on baby and child-specific products. Baby and child-specific products is expected to increase by a constant value CAGR of 11.4% in the forecast period, compared with a current value CAGR of 10% in the review period.

222

PROSPECTS
Growth during the forecast period is likely to be driven by faster growth in baby skin care and baby toiletries. The availability of cheaper alternatives in baby toiletries, such as home-made oils, coupled with the traditional consumer mindset, which discourages the use of chemical-based products for babies, might threaten growth in baby and child-specific products during the forecast period. Baby skin care is expected to outperform overall baby and child-specific products in terms of constant value growth in the forecast period, largely due to the growing shift towards premium and organic baby skin care products amongst urban consumers. Urban consumers are moving away from chemical-based products, especially for the skin, which is considered to be very sensitive and delicate. Average unit prices are likely to continue rising during the forecast period, mainly due to the launch of organic and premium brands in baby care.

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PROSPECTS
Since Emami enjoys brand equity in India, and in Calcutta in particular, new launches by the company are expected to perform well. The new range of products is ayurvedic, and is available at lower prices, further driving sales. Herbal baby care is picking up rapidly, and other existing herbal baby care manufacturers, such as The Himalaya Drug Co and Kruter Healthcare are expected to launch new products. Leading companies such as Johnson & Johnson and Hindustan Unilever are likely to make efforts to penetrate rural India, which has huge growth potential. Such companies will start initiatives to educate rural consumers on child hygiene and care in order to penetrate rural India. In addition, companies such as Emami are likely to launch products specific for children above the age of five, to leverage the existing gap in baby and child-specific products.
224