A Study of Cost

Structure of FMCG
Industry
Presented by
Shikha Meena

Scope of the study

Cost is the most important factor which effect the
profitability of every organization

The study helps to determine how do the

different costs affect the profit of the organization

Reason to chose the topic

It helps to analyse the companies cost structure which will help

every company to know (their day-to-day expenses) and to
analysis the sales trends of the companies.
The research is based on nine FMCG companies of FMCG
sensex

Introduction
Cost Structure refers to the types and relative proportions of fixed and variable costs
that a business incur
Profit of an organization is largely dependent of the cost incurs in various activities
Business cost structure have two classes: Cost Driven and Value Driven
Cost Driven structure is focused on using and investing less amount of money at
each step from manufacturing the goods to distribution channels
This study is focused on analyzing the cost structure of the various companies

Segment of FMCG sector

Household Care; 10% Lighting; 2%
Tobacco; 15%
Food and Beverages; 53%

Personal Care; 20%

Objectives
To analyze the cost structure of the companies
To study the sales trend analysis of the company
To summarize the main findings of the study

Hypothesis
The cost structure of the FMCG companies is uniform
The trend of the sales of the FMCG companies is uniform
Both the hypothesis has been rejected after the Anova Analysis

Methodology
The study in conducted purely on the basis of secondary data
Financial statements of 9 FMCG companies has been collected
The data which has been collected is for 5 years from 2008 to 2013
Anova analysis has been done on the data collected from the various sources

Companies included in the study

Dabur India Limited

Marico Limited

Godrej Consume Products Ltd

United Sprits Limited

Hindustan Unilever Ltd

Nestle India Ltd

ITC Limited

United Breweries Limited

Tata Global Beverages Limited

Tools used

Methodology
EXCEL
SPSS

The average of the all cost of last 5 years is

calculated in excel and the further analysis
is done on the data obtained from it
Once the data has been obtained the Anova
analysis have been done for all the type of
costs incurred

Type of Data and sources of data

Data which is used in this research is basically the financial statement
of the companies included in the study for the period of 2008 to 2013
Data is obtained from various websites which are as follows
www.accountingtools.com
www.referenceforbusiness.com

Analysis
Anova Analysis of different costs has been done for the companies
included in the study and significance level has been checked
The costs which has been analyzed are as follows
Raw Material Cost

Salaries and Wages

Indirect Taxes

Power and Fuel

Depreciation Cost

Financial Charges

Administration, Selling ,Distribution and other expenses

The results of Anova
analysis for Raw Material
cost is shown in the table
The null hypothesis has
been rejected as the F
value is greater than Fcritical. Similarly,analysis
is done for other costs

Source

of Sum of df

variation

squares

Between

14395.9

groups

11

Within

5422.0

groups
total

19817.9
11

Mean

square
8

1799.489

36

150.611

44

F
critical

11.9 4.06
48

Conclusion
Raw Material Cost is the most influencing
factor in FMCG Industry
To increase the profitability the companies
need to take proper measure to reduce
this cost
The average raw material cost is higher
for ITC and lowest for UBL
There is a significant difference in the
elements of the costs of FMCG Industry
units considered in the research

Limitations
The research is conducted on the
basis of secondary data so it is
dependent on the authenticity of
the data collected by concerned
organization
The research is limited to the
analysis of 9 companies and
hence it can be conducted taking
data of more organization