Escolar Documentos
Profissional Documentos
Cultura Documentos
SUBMITTED BY
GROUP 4
A Report
on
Analysis of FMCG Sector
By:
Name
Sumit Agarwal
Ayushi Agarwal
Amit Gunjan
Aditya Jain
Abhay Nigam
Kaushik Cheekotey
CLK Kiran
ID
13A3HP029
13A2HP010
13A2HP019
13A1Hp046
13A1HP027
13A1HP010
13A3HP053
Approved BY:
Mr. Nitin Gupta
Acknowledgement
Our Team would like to express the gratitude to Dr. Nitin Gupta, Associate Professor and
Area Coordinator-Marketing, Institute of Management Technology Hyderabad for allowing
us to present this report on FMCG Sector and we would also like to thank him for introducing
us to the format of report writing, giving us guidance in understanding formal report and
provided materials in order to present it in a systematic way.
We would also like to thank our batch mates who helped in providing us the inner view of
FMCG sector and constantly motivated us in completing this report.
Table Of Contents
Acknowledgement
Abstract
1. Introduction
1.1 Size Of FMCG Sector
1.2 History of FMCG Sector in India
2. Growth Rate of the FMCG Sector
3. Top 10 Companies in Sector with Turnover
4. Major Players in FMCG
5. Growth Drivers and Challenges for FMCG Sector
5.1 Growth Drivers
5.2 Supply Side Drivers
5.3 Systemic Drivers for Sectorial Growth
5.4 Challenges
6. Top Personalities Of FMCG Sector
7. FMCG Trends
7.1 Introduction
7.2 Features and benefits
7.3Merger And Acquisition
8. Conclusions
Abstract
This report provides an overview on FMCG Sector, which is one of the multimillion dollar
sectors. It spans over other specific sectors such as household care, personal care, food and
beverages and health care. We have also tries to focus on percentage growth rate of FMCG,
the growth drivers involved for this growth rate. Also, details about top market players and
their strategy to capture Indian market, then to sustain in this competitive environment. The
emphasis was also laid on top personalities, market trend, merger and acquisition,
peculiarities and profitability.
Introduction
Fast Moving Consumer goods are also called as consumer packaged goods that are sold quickly
and relatively at low cost. FMCG is probably the most classic case of low margin/ high volume
business. The Indian FMCG sector is the fourth largest sector in the economy with an estimated
size of more than Rs1300 billion. Indias FMCG market is highly fragmented and considerable
part of market comprise of unorganised players selling unbranded and unpackaged products.
FMCG Sector has four main segments:
FMCG
Household Care
Fabric Wash,
Household
Cleaners
Personal Care
Food &
Beverages
Health Care
Health Beverages,
Staples/ Cereals,
Bakery Products,
Snacks, Chocolates,
Ice cream,
Tea/coffee/soft
drinks, processed
fruits & Vegetables,
Dairy Products
OTC Products
and Ethicals
Company Name
Rs.19,401 crores
Nestle India
GCCMF(Amul)
Dabur
The companies mentioned in Exhibit I, are the leaders in their respective sectors. The
personal care category has the largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy,
Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs.
3,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top 100
FMCG sales, and just below the personal care category. ITC alone accounts for 60% volume
market share and 70% by value of all filter cigarettes in India.
The foods category in FMCG is gaining popularity with a swing of launches by HLL, ITC,
Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle
and Amul slug it out in the powders segment. The food category has also seen innovations
like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both
GCMMF and Godrej Pillsbury. This category seems to have faster development than the
stagnating personal care category. Amul, India's largest foods company, has a good presence
in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also
ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a series
of products at various prices.
In the household care category (like mosquito repellents), Godrej and Reckitt are two players.
Goodknight from Godrej, is worth above Rs 217 crore, followed by Reckitt's Mortein at Rs
149 crore. In the shampoo category, HLL's Clinic and Sunsilk make it to the top 100,
although P&G's Head and Shoulders and Pantene are also trying hard to be positioned on top.
Clinic is nearly double the size of Sunsilk.
Dabur is among the top five FMCG companies in India and is a herbal specialist. With a
turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like
Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Asian Paints is enjoying a
formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East, South
Pacific, Caribbean, Africa and Europe. Asian Paints is India's largest paint company, with a
turnover of Rs.22.6 billion (around USD 513 million). Forbes Global magazine, USA, ranked
Asian Paints among the 200 Best Small Companies in the World.
Cadbury India is the market leader in the chocolate confectionery market with a 70% market
share and is ranked number two in the total food drinks market. Its popular brands include
Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380 Million)
Marico is a leading Indian group in consumer products and services in the Global Beauty and
Wellness space.
CAGR- 17.3%
25
20
15
10
5
0
2006
2007
2008
2009
2010
2011
Food products are the leading segment, accounting for 43 per cent of the overall market.
Personal care (22 per cent) and fabric care (12 per cent) are the other leading segments.
Growing awareness, easier access, and changing lifestyles have been the key growth drivers
for the sector. Rural demand is set to rise with rising incomes and greater awareness of
brands.
The Government of India has been supporting the rural population with higher minimum
support prices (MSPs), loan waivers, and disbursements through the National Rural
Employment Guarantee Act (NREGA) program. These measures have helped in reducing
poverty in rural India and have thus propped up rural purchasing power.
With rise in disposable incomes, mid- and high-income consumers in urban areas have
shifted their purchasing trend from essential to premium products. In response, firms have
started enhancing their premium products portfolio. Indian and multinational FMCG players
are leveraging India as a strategic sourcing hub for cost-competitive product development and
manufacturing to cater to international markets.
Food products and personal care together make up two-thirds of the sectors revenues
Food products is the leading segment, accounting for 43.0 per cent of the overall market
Personal care (22.0 per cent) and fabric care (12.0 per cent) are the other leading segments
Food
Products
43%
Fabric Care
12%
Personal Care
22%
Source: Dabur, Aranca Research
urban segment is the largest contributor to the sector, accounting for over two-thirds of
total revenue
Semi-urban
and rural segments are growing at a rapid pace; they currently account for 33.5 per
cent of revenues
FMCG
URBAN
RURAL
66.5
70
60
50
40
30
20
10
0
URBAN
RURAL
Source: AC Nielson, Aranca Research
The burgeoning middle class Indian population, as well as the rural sector, presents a huge
potential for this sector. The FMCG sector in India is at present, the fourth largest sector with
a total market size in excess of USD 13 billion as of 2012. This sector is expected to grow to
a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the year 2025.
This sector is characterized by strong MNC presence and a well established distribution
network. In India the easy availability of raw materials as well as cheap labour makes it an
ideal destination for this sector. There is also intense competition between the organized and
unorganized segments and the fight to keep operational costs low.
Others
Hair Oil
42 %
15%
8%
24%
10%
23%
13%
5%
Shampoo
46%
Oral
Care
6%
50%
Skin
Care
59%
7%
7%
6%
Fruit
Juice
52%
35%
Company
Sales* in
MN $
3921.5
Segments
Amul India
1771.1
Nestle India
1155.4
ITC**
305.7
Britannia
759.9
Food Products
Dabur
635.9
Marico
Industries
GSK
Consumers
Cadbury
Industry
Colgate
Palmolive
P&G
449.3
447.9
430.1
Food Products
391.8
388.5
Godrej
280.5
HUL
ITC
Overview
ITC Limited is an Indian public conglomerate company (25.4% owned by British
corporation, British American Tobacco) headquartered in Kolkata, West Bengal, India. Its
diversified business includes four segments:
Fast Moving Consumer Goods (FMCG)
Hotels, Paperboards
Paper & Packaging
Agri Business
ITC's annual turnover stood at $7 billion and market capitalization of over $34 billion. The
company has its registered office in Kolkata. It started off as the Imperial Tobacco Company,
and shares ancestry with Imperial Tobacco of the United Kingdom, but it is now fully
independent, and was rechristened to Indian Tobacco Company in 1970 and then to I.T.C.
Limited in 1974. It employs over 29,000 people at more than 60 locations across India and is
listed on Forbes 2000. ITC Limited completed 100 years on 24 August 2010.
ITC has a diversified presence in FMCG (Fast Moving Consumer Goods), Hotels,
Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology.
While ITC is an outstanding market leader in its traditional businesses of Hotels,
Paperboards, Packaging, Agri-Exports and Cigarettes, it is rapidly gaining market share even
in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal
Care and Stationery.
Marico
Overview
Marico is an Indian consumer goods company providing consumer products and services in
the areas of Health and Beauty based in Mumbai. Marico's own manufacturing facilities are
located at Goa, Kanjikode, Jalgaon, Pondicherry, Dehradun, Baddi, Paonta Sahib and Daman.
Key brands: Parachute, Saffola, Hair&Care, Nihar, Mediker, Revive, Manjal, Kaya Skin
Clinic, Aromatic, Fiancee, HairCode, Eclipse, Xmen, Hercules, Caivil, Code 78 and Black
Chic.
The Board of Directors of Marico has approved the restructuring of businesses, corporate
entities and the organization involving a) the demerger of Kaya Skin Care Solutions (Kaya)
into a separate company by the name Marico Kaya Enterprises Ltd (Make) and b) formation
of an unified FMCG business with operations in India and abroad, headed by a single CEO.
The restructuring plan would be effective from April 1, 2013.
Kaya to be demerged into a separate listed company: As per the proposed demerger plan for
Kaya, Make will become the holding company of Kaya Ltd (India) and Kaya entities in the
Middle East and South East. Currently the promoters of Marico have a 60% stake in the
company (Marico); post demerger the shareholding structure of Make will be identical to
Maricos current shareholding structure. Shareholders of Marico will be allotted one share of
MaKE for every 50 shares held in Marico. Marico will not hold any stake in Make post
demerger. The equity shares of MaKE will be listed after all the statutory approvals are
obtained.
Formation of a unified FMCG business: Marico currently has three business verticals namely
a) Indian consumer products b) The international FMCG business and c) Kaya with
operations in India and abroad. Post the restructuring, Kaya would operate as a separate listed
entity (Make). The Indian and International FMCG businesses, which were till date headed
by two different CEOs, will be unified and headed by a single CEO.
Britannia Industries
Overview
Britannia is one of the foremost food companies in India. The company is present across the
biscuits, dairy products and breads segments and has recently forayed into the breakfast
cereals category with the launch of Healthy Start. Britannia derives ~85% of its revenue from
the biscuits segment, where it has formidable brands such as Tiger (glucose biscuits), Treat
(cream biscuits), 50-50 (crackers), Good Day (premium cookies and the company's highest
selling brand) and NutriChoice (premium high-fibre biscuits). During the first quarter of
2012, Britannia launched Bourbon, Cappuccino, Pure Magic Praline and a new range of
creamy flavours for Treat.
Systemic Drivers:
Favourable Changes in
Government Policies.
Infrastructure Development
2001-02
(000 HH)
61351
70196
26159
12797
2258
10727
2005-06
(000HH)
52410
79225
33721
16251
3250
16251
Growth
(05-06/01-02)
-15%
13%
29%
27%
44%
51%
2009-10
(000 HH)
34623
79678
49050
21307
4883
28409
Growth
(09-10/05-06)
-34%
1%
45%
31%
50%
75%
1000+
Source: NCAER
753
2235
197%
3995
79%
Private Consumption
US$ 708 Bn (61%)
Health Care
Transport
Communication
Recreation
Cultural Services
Education
Rent Utilities
Other Services
Rising Urbanization:
India has 70% of its population living in rural areas. With rising urbanization, more people
will have exposure to modern products and brands and thus shift to branded and packaged
goods and products.
80%
70%
60%
50%
Urban
40%
Rural
30%
20%
10%
0%
2007
2015
By 2015, An additional 25 million consumer will have moved into cities, not only buying
FMCG for themselves but also serving as a conduit for information and goods for their
families still in rural India.
Source: Technopak Analysis
800
700
600
535
500
410
400
300
200
100
0
Year 2008
Year 2013
Year 2018
2766
2500
2000
1500
1301
1000
500
89
188
210
China
Thailand
0
India
Taiwan
US
Challenges:
There are many challenges faced by the FMCG sector in todays world. In India there are
many complicated policies and regulation, by the government, which are very difficult to
follow and also structure of the market is totally different from comparison to other well
developed countries. Here are some key challenges which are faced by the FMCG Sector in
India are:1. Tax Structure - Complicated tax structure, high indirect tax, lack of uniformity, high octroi
& entry tax and changing tax policies.
2. Infrastructural Bottlenecks - Agriculture infrastructure, power cost, transportation
infrastructure and cost of infrastructure.
3. Counterfeits and Pass-offs
4. Emergence of Private Labels
5. Regulatory Constraints
6. Price of Inputs
1.Tax Structure:
i. Complicated Tax Structure - In India, problems are exacerbated by the complicated tax
structure. There is a VAT which is to be levied at state level, there are other state taxes such
as octroi and entry taxes and then centre levies excise duties and service tax. As a result, no
product cost is exactly the same from one state to the next.
ii. High Indirect Tax - Indirect Tax levels are quite high, especially in light of the fact that the
sector provides goods meant for daily consumption. China, for instance, levies a tax of
10%(Source: Mr.RajanVerma, CFO, Dabur India Ltd) on average,whereas in India, the
average is around 30%.
iii. Lack of uniformity - Despite VAT states does not implement rates and procedures
uniformly. Each state still continues to approach taxation differently, and thus moving goods
from one state to another is like moving them from one country into another. The taxation
rate policies on many FMCG goods differ from state to state and centre to state. Centre has
classified many FMCGproducts under Merit (VAT exempt) list, such as processed foods,
tooth powder, sanitary napkins but states levy on the same products high rate of
12.5%(Source:Mr. Krishnan S, Parle Agro).
iv. High Octroi& Entry Tax - There are Octroi and Entry Tax at city and state entry points in
a few states, which leads to an increase in pricing and affords opportunities for arbitrage. For
instance, Mumbai has octroi of 4-6% on goods produced outside of Mumbai. Thus, a bottle of
mineral water produced by Coke or Pepsi which have their plants in Thane, which is
considered outside the city limits of Mumbai, have to pay this extra charge, while Parle,
which has a bottling plant within the city limits does not. So Bisleri is sold in Mumbai for Rs.
12, while Kinley or Aquafina cost Rs. 13,just because of the factory location. This opens up
possible arbitrage opportunities, apart from causing a genuine grievance to the consumer.
v. Changing Tax Policies - Tax policies keep changing which makes it difficult to plan for the
long term. For instance, tax havens were created in J&K some years ago and many
companies opened facilities there. However, recently part of the exemption was withdrawn
by the government, thusleading to a sudden hike in costs.
2. Infrastructural Bottlenecks:
i. Agricultural Infrastructure - Agriculture infrastructure in India is particularly weak. Firstly,
irrigation and modern farming methods are not widespread and thus agriculture in India is at
the mercy of nature. Thus, it makes for grossly varying amounts of harvest of critically
needed inputs into FMCG manufacture, from one season to the next and one year to the next.
ii. Power Costs - Power costs in India are very high and they contribute substantially to cost
of goods sold. They are 3-4 times the optimal costs.
iii. Transportation Infrastructure - To compound this problem is the poor transportation and
roadways infrastructure many of the villages are extremely poorly connected with means of
transportation either road, rail or sea so the amount of time it takes for the harvest to be
transported to the FMCG manufacturers is unpredictable, and results in substantial spoilage
of the goods. For example, it costs nearly 12 days to transport goods from Baddi in Himachal
Pradesh to South India, a distance of 3000 km. The lack of a cold chain adds to this problem,
because it means a tremendous amount of farm output actually rots or gets spoiled in transit.
Nearly 8% -10% of dairy produce is lost to pilferage.
iv. Cost of Infrastructure - It takes almost Rs. 7- 8 crores to lay 1km. of road. Along with this
problems in land acquisition due to fragmented land holding further delay development of
road and rail infrastructure increasing the cost associated.
3. Counterfeit and Pass-offs:
Counterfeit products are another issue for the FMCG sector. Taking advantage of the lack of
literacy and consumer knowledge, several small manufacturers churn out spurious products
which they label akin to the big brands, Lifebuoy or Lax soap or Fivestar chocolate bars,
Vicky balm, for instance. Thesespurious pass off products affect large, high quality brands
which have actually invested money in research and development to create their products and
build brand equity. These account for almost 10% - 15% (Source:ICCI-BPC initiated ORG
study)of the total sector revenue and pose serious challenge to its growth and also impact
governments tax revenue significantly. But the only recourse available to FMCG
manufacturers against counterfeit and pass off products is to file an FIR. There are no Bureau
of Industrial Standards norms laid out for each product category which could help prevent the
mushrooming of counterfeit products. And an FIR results only in local action, if at all, while
the source of the counterfeit products continues to remain in existence.
of supply of materials.As a result, the entire supply chain dynamics need to be constantly
planned afresh with the changing prices.
ii. Indian consumers are more price-sensitive and value conscious, making it difficult for
FMCG firms to pass on the inc
Mr. Nitin Paranjpe- Mr. Paranjpe was appointed as the Managing Director and Chief
Executive Officer of the Company in April 2008. He is also an Executive Vice President of
Unilever Companies in South Asia. Mr. Paranjpe holds a Bachelor Degree in Engineering
(Mechanical) and MBA in Marketing from JBIMS, Mumbai. Mr. Paranjpe is a member of the
Nomination & Remuneration Committee, Stakeholder Relationship Committee and
Corporate Social Responsibility Committee of the Company.
FMCG TRENDS
Introduction
India is changing rapidly as a society and as a consumer culture. An understanding of these
changes and the causes behind them will be key to success for a FMCG player in India, so as
to focus on the key trends, product categories and consumer segments, to profit the most from
the
positive
economic
climate.
Features
and
benefits
- India specific insights that help derive a richer appreciation of the nature and direction of
Indian
consumerism
- Tracks seven key trends that will define the Indian FMCG industry's growth trajectory, in
terms
of
product,
market
and
consumer-related
aspects
- Insights from an annual consumer survey among Indians respondents, coupled with macroeconomic indicators, to showcase market potential
Facts & Future
Fast moving consumer goods will become a Rs 400,000-crore industry by 2020. A Booz &
Company study finds out the trends that will shape its future
Consider this. The anti-ageing skincare category grew five times between 2007 and 2008. Its
today the fastest-growing segment in the skincare market. Olay, Procter & Gambles
premium anti-ageing skincare brand, captured 20 per cent of the market within a year of its
launch in 2007 and today dominates it with 37 per cent share. Who could have thought of
ready acceptance for anti-ageing creams and lotions some ten years ago? For that matter, who
could have thought Indian consumers would take oral hygiene so seriously? Mouth-rinsing
seems to be picking up as a habit mouthwash penetration is growing at 35 per cent a year.
More so, who could have thought rural consumers would fall for shampoos? Rural
penetration of shampoos increased to 46 per cent last year, way up from 16 per cent in 2001.
Consumption patterns have evolved rapidly in the last five to ten years. The consumer is
trading up to experience the new or what he hasnt. Hes looking for products with better
functionality, quality, value, and so on. What he needs is fast getting replaced with what he
wants. A new report by Booz & Company for the Confederation of Indian Industry (CII),
called FMCG Roadmap to 2020: The Game Changers, spells out the key growth drivers for
the Indian fast moving consumer goods (FMCG) industry in the past ten years and identifies
the big trends and factors that will impact its future.
The report estimates the FMCG sector witnessed robust year-on-year growth of
approximately 11 per cent in the last decade, almost tripling in size from Rs 47,000 crore in
2000-01 to Rs 130,000 crore now (it accounts for 2.2 per cent of the countrys GDP). Growth
was even faster in the past five years almost 17 per cent annually since 2005. It identifies
robust GDP growth, opening up of rural markets, increased income in rural areas, growing
urbanisation along with evolving consumer lifestyles and buying behaviours as the key
drivers of this growth.
The report further estimates that the FMCG industry will grow at least 12 per cent annually to
become Rs 400,000 crore in size by 2020. Additionally, if some of the factors play out
favourably, say, GDP grows a little faster, the government removes bottlenecks such as the
goods and services tax (GST), infrastructure investments pick up, there is more efficient
spending on government subsidy and so on, growth can be significantly higher. It could be as
high as 17 per cent, leading to an overall industry size of Rs 620,000 crore by 2020.
Conclusions
This sector will continue to see growth as it depends on ever increasing internal market for
consumption and demand remains more or less constant, irrespective of recession or inflation.
Hence the sector will grow though it may not continue at same pace, due to the present
worldwide economic slowdown, rising inflation and fall of rupee. The sectors hiring will
continue to remain robust.