FMCG SECTOR ANALYSIS THE BISCUIT INDUSTRY

CONTENTS
Introduction

Overview of the Indian Biscuit Industry Top Players

Stake-holders Competitors Back End Supply Chain Vendors Front end Distribution Chain Primary Regulatory Framework & STEEP Analysis Secondary Trend Analysis Stakeholders Investors Advertising Agencies

OVERVIEW OF THE INDIAN BISCUIT INDUSTRY

Contribution of 8000 crore to the FMCG Industry Per Capita consumption of Biscuits less than 2.1 kg Classified into 2 sectors Organized 70% Unorganized 30% BIG 3 Britannia, Parle, ITC (Sunfeast) 150 smaller biscuit factories Current problems relating to increase in price of raw material Govt increased VAT to 12.5% States with larger intake of biscuits Maharashtra, WB, AP, Karnataka and UP Steady growth of 15% in the next 15 years according to FBMI (Federation of Biscuit Manufacturers of India) Export of biscuits surpassing the target and hitting the global market successfully

CONTD
Organized Segment 1.30 million tonnes Britannia and Parle account to 70% of the industry Revenue of Britannia 27 billion Parle derives a large portion of its revenues from its low priced biscuits Britannia derives from the medium and the higher priced segments

TOP PLAYERS

According to www.marketresearchdata.org

Stake-holders
Different Segments of Consumers Employees of the company Shareholders Government People staying around the biscuit factory Farmers Raw Material suppliers Distributors Retailers/Wholesalers

COMPETITORS/CONSUMERS

..\..\..\Sector analysis.xlsx

BACK END SUPPLY CHAIN & VENDORS

Tier 3
Wheat : raw wheat supplier Sugar : Sugar cane, preservatives Edible oil : raw seeds supplier Wheat flour: B.H. Modi, Tanna Commercials Private Limited sugar: Mawana sugar Edible vegetable oils: Godrej, Wipro, Olivia Impex Private Limited Hydrogenated vegetable oils: Meghadoot oil mills Invert syrup: Sai Sugar Products, Taste Agro Foods Pvt Liquid glucose :Devson Impex Private Limited, A. B. Enterprises, Mumbai. Packaging : ITC Parle ITC Britannia

Tier 2

Tier 1

FRONT END DISTRIBUTION CHAIN

BRANCHES 2 way info flow CIRCLES
Consist of 1-3 sectors

GODOWN/WSP

SECTORS
Consist of 5-8 warehouse distributors

CUSTOMER

Physical movement of goods WAREHOUSE DISTRIBUTOR

RETAIL STORE

Contd
Margin for Authorized Distributor 4.5% - 5% After expenses(Labour, Transportation) 2.2% - 2.5% Wholesale Distributor 1%(of his margin) i.e Wholesaler distributor given a discount of 1% on the billing rate Wholesalers supplied directly by the distributor Discounts and schemes Margin 1% - 2% (given by the distributor) Bulk purchases Margin can go upto 2.5%of the billing rate

Retailer Supply from either the distributor or the wholesaler Distinction is done on the basis of the size of the retailer Big retailers supplied twice a week by distributors Small retailers small quantities bought from the distributors

REGULATORY FRAMEWORK
The Indian Parliament has passed the Food Safety and Standards Act, 2006 that overrides all other food related laws. It will specifically repeal eight laws:
The Prevention of Food Adulteration Act, 1954 The Fruit Products Order, 1955 The Meat Food Products Order, 1973 The Vegetable Oil Products (Control) Order, 1947 The Edible Oils Packaging (Regulation) Order, 1998 The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order, 1967 The Milk and Milk Products Order, 1992 Essential Commodities Act, 1955 relating to food

The Act establishes a new national regulatory body, the Food Safety and Standards Authority of India, to develop science based standards for food and to regulate and monitor the manufacture, processing, storage, distribution, sale and import of food so as to ensure the availability of safe and wholesome food for human consumption.

Contd
Additions to the Existing act: Printing of Nutritional Value Compulsory Printing of Name, Address, Tel. No

STEEP ANALYSIS
SOCIAL
Worlds 3rd largest producer of biscuits

Age
Lifestyle Perception Catering to the local flavours

STEEP ANALYSIS
TECHNOLOGICAL
Certain processes are automated

RFID used in Retail stores to avoid stock-outs

Retina analysis used in stores R&D Use of Enzyme technology

STEEP ANALYSIS
ENVIRONMENTAL
Eco-Friendly practices

Initiatives like Planting trees

Rain-water Harvesting

STEEP ANALYSIS
ECONOMICAL
Increase in per capita Income

Food Inflation reduced to 9.42%

Indias GDP growing at 8.4%

STEEP ANALYSIS
POLITICAL
Taxes

Production and Distribution licenses

TREND ANALYSIS
FMCG honchos eyeing market of the high street stores investing in stand alone stores (reason being higher visibility and less cost) Healthy living more preference shown towards multigrain, low calorie, fiber biscuits etc Britannia is the pioneering leader Increased presence of foreign players UNIBIC, BISKFARM, UNITED BISCUITS Foray of non-biscuit companies into the biscuit market Cadbury, GSK Companies facing extremely high and unprecedented cost scenario, Result Huge pricing pressure with a limitation on price hike and a shrinking profit pool Increase in prices of Oil, Wheat leading to increase in price of packaging, freight and production costs

INVESTORS
BRITANNIA

Shareholding of Promoter and Promoter Group 51% shares

ITC

Banks, Financial Institutions, Insurance Companies, Mutual Fund 37% Foreign Companies 31.6% Foreign Institutional Investor 13.4%

Public Shareholding (Institutional) 27%

Public Shareholding (Non-institutional) 22%

Public and Others 12.9%

Corporate Bodies 5.1%

ADVERTISING AGENCIES

KINDS OF ADVERTISING
PRINT MEDIA
Newspapers Magazines Brochures Fliers

OUTDOOR

Billboards Kiosks Trade shows Events

BROADCAST PUBLIC SERVICE CELEBRITY

Television Radio Internet Advertising for Social Causes

Through Brand ambassadors and celebrities

PAIN POINTS
Britannia
Increased cost of the product Decreased nutritional value of the product Industry and technology requires high investment Regular usage of processed food can cause alteration to health.

Parle
Too much dependence on retailers and grocery stores for display and sale of the product. Too much dependence on the brand Parle G

Sunfeast ITC
Not that established a brand as compared to Britannia and Parle

New competitor