Introduction to FMCG IndustryFMCG Concept and Definition:

The term FMCG (fast moving consumer goods), although popular and frequently

used does not have a standard definition and is generally used in India to refer to products

of everyday use. Conceptually, however, the term refers to relatively fast moving items

that are used directly by the consumer. Thus, a significant gap exists between the general

use and the conceptual meaning of the term FMCG.

Further, difficulties crop up when attempts to devise a definition for FMCG. The

problem arises because the concept has a retail orientation and distinguishes between

consumer products on the basis of how quickly they move at the retailer’s shelves. The

moot question therefore, is what industry turnaround threshold should be for the item to

qualify as an FMCG. Should the turnaround happen daily, weekly, or monthly?

One of the factors on which the turnaround depends is the purchase cycle.

However, the purchase cycle for the same product tend to vary across population

segments. Many low-income households are forced to buy certain products more

frequently because of lack of liquidity and storage space while relatively high-income

households buy the same products more infrequently. Similarly, the purchase cycle also

tends to vary because of cultural factors. Most Indians, typically, prefer fresh food

articles and therefore to buy relatively small quantities more frequently. This is in sharp

contrast with what happens in most western countries, where the practice of buying and

socking foods for relatively longer period is more prevalent. Thus, should the inventory

turnaround threshold be universal, or should it allow for income, cultural and behavioral

nuances?

Characteristics of FMCG Products:

Individual items are of small value. But all FMCG products put together account

for a significant part of the consumer's budget.

The consumer keeps limited inventory of these products and prefers to purchase

them frequently, as and when required. Many of these products are perishable.

The consumer spends little time on the purchase decision. Rarely does he/she

look for technical specifications (in contrast to industrial goods). Brand loyalties

or recommendations of reliable retailer/dealer drive purchase decisions.

Trial of a new product i.e. brand switching is often induced by heavy

advertisement, recommendation of the retailer or neighbors/friends.

These products cater to necessities, comforts as well as luxuries. They meet the

demands of the entire cross section of population. Price and income elasticity of

demand varies across products and consumers.

ABOUT THE INDUSTRY IN INDIA

FMCG in India has a strong and competitive MNC presence across the entire value chain.

It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from

US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian

population are the most promising market for FMCG, and give brand makers the

opportunity to convert them to branded products. Most of the product categories like

jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as

well as low penetration level, but the potential for growth is huge.

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid

urbanization, increased literacy levels, and rising per capita income.

The big firms are growing bigger and small-time companies are catching up as well.

According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by

MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,

and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by

Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola

(8) and Parle (9). These are figures the soft drink and cigarette companies have always

shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest

categories in FMCG. Between them, they account for 35 of the top 100 brands

According to a report by the Federation of Indian Chambers of Commerce and Industry

(FICCI), several FMCG registered double-digit growth in value terms, for example,

shaving cream (20%), deodorant (40%), branded coconut oil (10%), anti-dandruff

shampoos (15%), hair dyes (25%) and cleaners and repellents (20%). On the contrary,

negative growth of up to 8% was registered in products such as personal healthcare,

laundry soaps, dish wash, toilet soap, toothpaste and toothpowder.

Industry Category and Products

Household CarePersonal Wash:-

The market size of personal wash is estimated to be around Rs. 8,300 Cr. The

personal wash can be segregated into three segments: Premium, Economy

and Popular. The penetration level of soaps is ~92 per cent. It is available in 5

million retail stores, out of which, 75 per cent are in the rural areas. HUL is the

leader with market share of ~53 per cent; Godrej occupies second position

with market share of ~10 per cent.

Detergents:-

The size of the detergent market is estimated to be Rs. 12,000 Cr. Household

care segment is characterized by high degree of competition and high level of

penetration. In washing powder HUL is the leader with ~38 per cent of

mar-ket share. Other major players are Nirma, Henkel and Proctor & Gamble.

Personal CareSkin Care:-

The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care

market is at a primary stage in India. The penetration level of this segment in

India is around 20 per cent.. The major players in this segment are Hindustan

Unilever with a market share of ~54 per cent, fol-lowed by CavinKare with a

market share of ~12 per cent and Godrej with a market share of ~3 per cent.

Hair Care:-

The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care

market can be segmented into hair oils, shampoos, hair colorants &

conditioners, and hair gels. Marico is the leader in Hair Oil segment with

market share of ~ 33 per cent; Dabur occu-pies second position at ~17 per cent.

Shampoos:-

The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the

penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of

the total shampoo sale. It has low penetration level even in metros. Again the

market is dominated by HUL with around ~47 per cent market share; P&G

occupies second position with market share of around ~23 per cent. Antidandruff

segment constitutes around 15 per cent of the total shampoo market.

The market is further expected to increase due to increased marketing by

players and availability of shampoos in affordable sachets.

Oral Care:-

The oral care market can be segmented into toothpaste - 60 per cent;

toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste

market is estimated to be around Rs. 3,500 Cr. The penetration level of

toothpowder/toothpaste in urban areas is three times that of rural areas. This

segment is dominated by Colgate-Palmolive with market share of ~49 per cent,

while HUL occupies second position with market share of ~30 per cent. In

toothpowders market, Colgate and Dabur are the major players. The oral care

market, es-pecially toothpastes, remains under penetrated in India with

penetration level ~50 per cent.

Food & BeveragesFood Segment :-

The foods category in FMCG is gaining popularity with a swing of launches

by HUL, ITC, Godrej, and others. This category has 18 major brands

aggregating Rs. 4,600 Cr. Nestle and Amul slug it out in the powders segment.

The food category has also seen innovations like softies in ice creams, ready to

eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury.

Tea :-

The major share of tea market is dominated by unorganized players. More

than 50 per cent of the market share is capture by unorganized players.

Leading branded tea players are HUL and Tata Tea.

Coffee :-

The Indian beverage industry faces over supply in segments like coffee and

tea. However, more than 50 per cent of the market share is in unpacked or

loose form. The major players in this segment are Nestlé, HUL and Tata Tea.

PESTLE Analysis

Growth DriversThe current economic trend, exhibiting modest demand and supply is likely to have a

medium-term impact on the demand for FMCG products but promises revival and higher

growth in the long term based on the following fundamentals:

1. Expanding purchase basket resulting in higher penetration of products

2. Increased consumption with higher disposable household family income

3. More consumers entering the market place (Rural and urban base of pyramid)

For these developments to catalyse faster there are two sides of the equation that need to

come together demand and supply along with other systemic factors.

1. Demand-side Drivers Consistent GDP Growth

The Indian economy has been consistently growing over the last few years. The growth

rate in 2008-09 was lower (6.7%) compared to previous year.

Increasing Consumer Income

Increase in incomes is largely an outcome of economic growth across sectors. Over the

past few years,India has seen increased economic growth, with a continuing and

substantial impact on consumer disposable incomes enabling good growth for the FMCG

sector, among others.

High Private Consumption

The Indian economy, unlike most Asian economies, has a very high rate of private

consumption (61%). Of that, a further 60% is due to retail spends – goods and products

that people consumer, as opposed to services or essential consumption items like rent and

education

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 By 2015, an additional 75 million consumers will have

moved into cities, not only buying FMCG products for themselves but also serving as a

conduit for information and goods to their families still in rural India

Increasing Discretionary Spends

Another encouraging factor is the falling spends on basic food items which frees up

consumer income for other categories of FMCG products. This trend is noticeable among

both urban and rural consumers.

Low labor cost

India has by far the lowest labor cost compared to many emerging countries giving it an

edge for establishing manufacturing base for both Domestic and International FMCG

brands. Average labor cost in India is ~US$ 90/month compared to US$190/month in

China, US$ 210/month in Thailand and even higher US$1,300/month in Taiwan.

Systemic Drivers for Sectoral GrowthSeveral other factors are also encouraging for FMCG sector growth in the long run, such

as policy change and investments in infrastructure development.

Favorable changes in Government Policies

The Indian government has been trying to foster the growth of various categories of

FMCG by way of making policy changes. Some of the policy changes include:

• Automatic investment approval (including foreign technology agreements within

specified norms), up to 100 per cent foreign equity for most of the food processing sector

• Quantitative restrictions removed

• Five-year tax holiday for new food processing units in fruits and vegetable processing

• Customs duties reduced on plant and equipment, raw materials and intermediates,

especially for export production

• Capital goods freely importable, including second hand ones

• De-reservation of most FMCG categories from SSI

• Many states have also begun competing with each other to offer incentives to different

sectors including FMCG, in the form of tax holidays, fiscal incentives, land at

concessional rates and subsidies to encourage economic development.

Infrastructure Development

The government has invested a considerable amount in the Golden quadrilateral project

to connect the four corners of the country, of which over 96% has been completed. 50%

of existing highways are being improved and expanded. An outlay of Rs. 59,000 crores

was earmarked for road development projects in the 10th Plan, between the

aforementioned projects as well as projects to develop the National highways

(Primary system), the state highways (secondary system), major district roads and rural

roads. The railways are also increasing capacity through increasing tracks, improving

existing tracks and adding more freight compartments to enable better carrying of goods

and products.

Challenges

With the growth drivers in place, there are many issues and challenges the sector grapples

with.

The key challenges faced by FMCG sector players in India are as follows:

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 and Pass-offs.

3. Emergence of Private Labels.

4. Regulatory Constraints

5. Price of Inputs.

Tax Structurei. 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 entry taxes and then centre levies excise duties and service tax. As a result, no

product cost isexactly 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%19 on average, whereas in India, the average is around 30%.

iii. Lack of uniformity - Despite VAT states do 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 FMCG products 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%

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, thus leading to a sudden hike in costs.

.Infrastructural Bottlenecksi. 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.

Emergence of Private LabelsApart from the pressure on margins, the biggest fear of FMCG players when facing MR

is the introduction of private labels or own brands. The fear is justified because world

over, private labels have served to lower the consumer’s price points, particularly at the

mass level. Moreover, there are inevitable conflicts of interest when a retail chain has its

own label whose packaging looks like category leaders’ and stocks brands of other

manufacturers, in terms of display space, promotions etc.

Regulatory Constraintsi. State borders cause a lot of delays and it is common for 2-3 days of finished

goods inventory out of 20 -30 days’ total stuck on various state borders due to a

requirement for multiplicity of permits and licenses.

ii. The Indian labour laws were drafted in the 1940s and take no note of modern

manufacturing methods and strategies. They need to be changed on a more

dynamic basis to reflect present realities.

iii. There is lack of uniformity in definitions, and these do not follow international

norms either. Currently, drugs and cosmetics come under the same set of laws

when in fact they need to be treated differently. Weights and Measures used under

FDA do not conform to those under the Weights and Measures Act followed in

India. Some products come under the OTC category internationally but come

under Schedule H drugs in India, requiring doctor’s prescription and require to be

distributed only in drug licensed stores

iv. Acquiring manufacturing licenses is a long and painful process, beset with red

tape and corruption. It takes 10-12 months to get multiple licenses and to set up a

manufacturing unit.

v. Reservation of jobs for employees creates many problems. For instance, Himachal

Pradesh has a reservation of 70% of jobs for people domiciled in Himachal Pradesh.

Since they are few in number, attrition happens for as little as Rs. 50 pm, and it becomes

a problem to maintain the requisite labour force.

vi. Export procedures are cumbersome and lengthy. There is no single-party interface so

multiple departments and officers have to be followed up with to get the requisite

licenses. A transport permit has to be sourced for each consignment rather than assigning

a blanket permit for a period of time.

Social

At present, urban India accounts for 66% of total FMCG consumption, with rural India

accounting for the remaining 34%. However, rural India accounts for more than 40%

consumption in major FMCG categories such as personal care, fabric care, and hot

beverages. In urban areas, home and personal care category, including skin care,

household care and feminine hygiene, will keep growing at relatively attractive rates.

Within the foods segment, it is estimated that processed foods, bakery, and dairy are

long-term growth categories in both rural and urban areas.

Demographic

With the presence of 12.2% of the world population in the villages of India, the Indian

rural FMCG market is something no one can overlook. Increased focus on farm sector

will boost rural incomes, hence providing better growth prospects to the FMCG

companies. Better infrastructure facilities will improve their supply chain.

Because of the low per capita consumption for almost all the products in the country,

FMCG companies have immense possibilities for growth. And if the companies are able

to change the mindset of the consumers, i.e. if they are able to take the consumers to

branded products and offer new generation products, they would be able to generate

higher growth in the near future.

However, the demand in urban areas would be the key growth driver over the long term.

Also, increase in the urban population, along with increase in income levels and the

availability of new categories, would help the urban areas maintain their position in terms

of consumption.

SWOT ANALYSIS Of INDUSTRY

Strengths

Well established distribution network.

Extending to the rural areas.

low cost operations .

Presence of well-known brands in FMCG sector

Weakness

1. Lower scope of investing in technology and achieving economies of

scale, especially in small sectors

2. Low exports levels

3. "Me-tooʺ products, which illegally mimic the labels of the established

brands. These products narrow the scope of FMCG products in rural

and semi-urban market.

Opportunities

1. Untapped rural market

2. Rising income levels, i.e. increase in purchasing power of consumers

3. Large domestic market- a population of over one billion.

4. Export potential

5. High consumer goods spending

Threats

1. Removal of import restrictions resulting in replacing of domestic

brands

2. Import policies.

3. Tax and regulatory structures

4. slow down in rural demand .

5. Growth of unorganized markets.

Key players

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid

urbanization, increased literacy levels, and rising per capita income.

The big firms are growing bigger and small-time companies are catching up as well.

According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by

MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,

and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by

Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola

(8) and Parle (9). These are figures the soft drink and cigarette companies have always

shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest

categories in FMCG. Between them, they account for 35 of the top 100 brands.

S. NO. Companies

1. Hindustan Unilever Ltd.

2. ITC (Indian Tobacco Company)

3. Nestlé India

4. GCMMF (AMUL)

5. Dabur India

6. Asian Paints (India)

7. Cadbury India

8. Britannia Industries

9. Procter & Gamble Hygiene and Health Care

10. Marico Industrie

A brief introduction about major FMCG

companies in India

Hindustan Unilever LimitedThis Company is earlier known as Hindustan Lever Ltd. This is India's largest FMCG

sector company with all type of household products available with it. It has Home &

Personal Care products, and also food and Water Purifier available with it. According to

Brand Equity, HUL has largest no of brands in most trusted brands list 16 of HUL's

brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an

annual survey.

Products of HUL are:

Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair & Lovely;

Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surfexcel;

Vaseline; Wheel.

Recent Stratergies Unilever is lowering its expenditure on packaging across its portfolio of food brands

as part of a wider cost-cutting drive. HUL has pared down the colour palette used for

print-ing across many products. The system has been used to reduce printed

packaging costs for Unileverʹs products. It is also eco-friendly because it reduces

waste in the printing process. HUL is taking different steps to reduce the cost and

increase the margin.

HUL prioritized opportunities which build upon the existing assets and capabilities. It

avoided spreading their management thinly. For example: HUL first made its sales

and distribution channel & supply chain management in manufacturing and selling

wheat flour and utilized it into the selling breads produced by wheat flour.

HUL is more focused on the innovations Example: In 1995 launched KISSAN

ANNAPURNA staple foods with the message “staple food including iodized salt”

Serving Rural population: In 2000 the 32% of the sales were from rural sector but in

2010 it is more than 50%.

It follows direct communication from the customers.

It believes in expanding the portfolio.

Each category has a different set of supply chain, production and consumer decision

making process issuing associated with it.

Strategic Shifts In the past 10 years, HUL has made four shifts in its business strategy,

targeted at boosting growth and reach

POWER BRANDS: Strategy in 2000. Focusing on fewer brands, 30 of them, and

showering marketing attention on them.

MASSTIGE: Strategy in 2005-06. Making premium brands (prestige) attainable for a

larger section of consumers (mass).

ONE UNILEVER: Strategy in 2007. Building leadership position in fast-growing

markets.

PUMP UP THE VOLUMES: Strategy in 2010. Global CEO Paul Polman is pushing the

Indian operations chasing value growth to deliver on the volumes as well

Strengths• CPIL and HUL are projected to share a

substantial combined market share of

nearly80% of India’s toothpaste segment

(in 2009).

• Has the highest total revenue and net

profit of INR21,059.20cr and

INR2,504.51cr respectively among India’s

top 5 FMCG companies.

• Its shampoo segment has powerful brand

portfolio that accommodates consumers’

needs from different income group -

Clinic is a mass market brand, Sunsilk

falls into to the mid-price market while

Dove is in the

premium segment.

• Issued bonus debentures with face value

of INR6 (with annual interest rate of 9%

payable annually).

• HUL’s INR1cr challenge advertising

campaign aims to promote Rin’s superior

value to its consumers

WeaknessesEngaged in price war with P&G - HUL’s

stock was downgraded by a majority of

brokerage firms in March 2010 as analysts

estimated that its detergent segment could

be rendered

if the detergent price war intensifies.

• Current operating margin of 14% is

lower

than its peak operating margin of 18% in

2002.

Opportunities• Its Fair & Lovely brand is the leader in

India’s whitening cream segment and

serves 250mn consumers across 30

countries. This product was also rated as

the 12th Most Trusted Brand in India by

ACNielsen ORG-MARG in

2003.

ThreatsCompetes with P&G in the detergent

segment, in which this segment accounts

for 10-12% of the company’s earnings

before income tax.

• Detergent price war with its rival P&G

will erode profit margins.

• Small players like Dabur is chipping

away HUL’s market share in the oral care,

hair care, soaps segment. During April-

June 2009, Dabur’s shampoo segment

grew by 7.3% while HUL’s share with

Sunsilk brand fell 50% (45.4% in value

terms).

• HUL’s share in the toothpaste segment

fell from 29.6% to 28% during April-June

2008

while Dabur’s share increased from 9.3%

to 10% and CPIL’s share grew from

47.7% to 49.5%.

• Calcutta High Court passed an interim

order that restrains HUL’s television

commercial that directly compares the

performance of its Rin with P&G’s Tide

Procter & Gamble Hygiene & Health Care Limited (P&G)

Procter & Gamble was founded in 1837 by William Procter, a British citizen who

immigrated to the United States. The company first sold candles. Procter & Gamble Co.

(P&G, NYSE: PG ) is a Fortune 500 American multinational corporation headquartered

in Downtown Cincinnati, Ohio that manufactures a wide range of consumer goods. As of

mid 2010, P&G is the 6th most profitable corporation in the world, and the 5th largest

corporation in the United States by market capitalization, surpassed only by Apple,

Exxon Mobil, Microsoft, and Wal-Mart. It is 6th in Fortune's Most Admired Companies

2010 list P&G is credited with many business innovations including brand management

and the soap opera.

According to the Nielsen Company, in 2007 P&G spent more on U.S. advertising than

any other company; the $2.62 billion spent by P&G is almost twice as much as that spent

by General Motors, the next company on the Nielsen list. P&G was named 2008

Advertiser of the Year by Cannes International Advertising Festival. Proctor & Gamble

is a leading member of the U.S. Global Leadership Coalition, a Washington D.C.-based

coalition of over 400 major companies and NGOs that advocates for a larger International

Affairs Budget, which funds American diplomatic and development efforts abroad.

Major products of P&G Coconut-based cleaning and

food products

Laundry and personal cleansing

products

Purico Tide

Star DariCreme

Perla Primex

Sunshine Safeguard

Camay Ariel

Mayon Gain

PMC Bonus

Victor Daz

Ola Lava

Agro Mr. Clean

Fresco Prell

Health care Crest

Vicks Zest

Fibresure Moncler

Thermacare Ivory

Pepto Bismol Laundry, personal care and hair

care

Hair care and laundry categories Secret

Pampers Safeguard

Whisper Ascend

Rejoice Ariel

Tide Old Spice

Max Factor Zest

Vidal Sassoon Clairol

Ivory Nice n Easy

Pantene Wella

Dishwashing, fabric care and food categories Camay

Joy

Mr. Clean

Downy

Alldays

Pringles

STRATEGIES OF P&G

Consumer Understanding

No company in the world has invested more in consumer and market research than P&G.

We interact with more than five million consumers each year in nearly 60 countries

around the world. P&G invest more than $350 million a year in consumer understanding.

This results in insights that tell us where the innovation opportunities are and how to

serve and communicate with consumers.

Innovation

P&G is the innovation leader in this industry. Virtually all the organic sales growth

delivered in the past nine years has come from new brands and new or improved product

innovation. We continually strengthen our innovation capability and pipeline by investing

two times more, on average, than our major competitors. In addition, we multiply our

internal innovation capability with a global network of innovation partners outside P&G.

More than half of all product innovation coming from P&G today includes at least one

major component from an external partner. The IRI New Product Pacesetter Report ranks

the best-selling new products in our industry in the U.S. every year. Over the past 14

years, P&G has had 114 top 25 Pacesetters—more than our six largest competitors

combined. In the last year alone, P&G had five of the top 10 new product launches in the

U.S. and 10 of the top 25.

Brand-Building

P&G is the brand-building leader of this industry. It has built the strongest portfolio of

brands in the industry with 22 billion-dollar brands and 20 half-billion-dollar brands.

Eleven of the billion-dollar brands are the #1 global market share leaders of their

categories. The majority of the balances are #2.

Go-to-Market Capabilities

It has established industry-leading go-to-market capabilities. P&G is consistently ranked

by leading retailers in industry surveys as a preferred supplier and as the industry leader

in a wide range of capabilities including clearest company strategy, brands most

important to retailers, strong business fundamentals and innovative marketing programs

Scale

Over the decades, we have also established significant scale advantages as a total

company and in individual categories, countries and retail channels. P&G’s scale

advantage is driven as much by knowledge-sharing, common systems and processes, and

best practices as it is by size and scope. These scale benefits enable us to deliver

consistently superior consumer and shareholder value.

P&G follows Connect + Develop strategy which enables to bring innovations to life

faster, more economically and more sustainably.

• The Company has 21 product categories out of which only 8 product have presence in

India. The company is planning to launch the rest 13 product in India. The company

expects to see a growth in other categories.

• The company has an aggressive plan to set up 20 new factories across the World out of

which 19 is expected to come in emerging markets and most of them would be seen in

Brazil, Russia, India, and China (BRIC) nations.

• Whisper which is one of the company’s power brands has recorded 50

per cent market share in urban India.

Strength Weaknesses:

Diversification: Product diversification

with about 300 products.

Research and development: P&G invests 3

- 4 % of Net outside Sales in research and

development (R&D). This amount easily

exceeds their leading competitors, among

consumer products companies.

Strong brands: P&G has 13 Billion-Dollar

Sales Brands such as: Always, Ariel,

Bounty, Charmin, Crest, Downy/Lenor,

Folgers, Iams, Pampers, Pantene, Pringle's

and Tide. The total sales of these thirteen

‘billion dollar brands’ taken together,

would make a Fortune 100 company in

itself.

Wide distribution network: P&G markets

its products in 160 countries with

manufacturing capacities in 40 countries.

Leading market position: P&G is the

world's largest consumer products

company. P&G is the global leader in all its

5 broad business segments.

Non-profitable products: Running products

which may not be profitable but still had to

do it because of keeping up with the market

presence strategy. Few such products are

Crest as toothpaste, Always hygiene pads,

Dawn dishwashing bar.

Inadequate quality control: With large

number of product profile, the quality

control of all the products has deteriorated.

· Mass appeal products at premium price:

Some mass appeal products like Pringles

are priced very high as compared to its

competitor’s products.

Opportunity:

Developing markets: The economies of

China and India are growing at a very fast

pace. The company currently competes in

only about 10 of its top 25 categories in

Threat

Small players like Dabur is chipping away

p&g market share in the oral care, hair

care, soaps segment.

most developing countries. This provides

P&G with an opportunity to enhance its

market share as well as expand its presence

in other categories.

flavored or unflavored water from their

home water filter. P&G could leverage its

position in the bottled water segment to

capitalize on the growing demand for

packaged and flavored water.

· Changing consumer preference: With the

consumer preferences and choices, P&G

because of its huge R&D base and Connect

+ Develop program is well placed to come

up with new and innovative products that

may suit the customer needs.

Large no of competitors are entering

FMCG secot

Godrej Consumer Products Limited (Godrej)

• The Board of Directors of Godrej Consumer Products Limited (GCPL) has approved

the acquisition of 50 per cent stake of its joint venture partner SCA Hygiene Products’

stake in Godrej SCA Hygiene Limited.

After the transaction, the Joint Venture which owns the ‘Snuggy’ brand of baby diapers

will become a 100 per cent subsidiary of GCPL.

• Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group

Limited, South Africa. Kinky is among one of the largest brand into hair segment with

product portfolio.

Jan,

CHANGING TRENDS IN FMCG INDUSTRY

Introduction

Recent trends seen:Food Inflation

As a result of the 2010 food price crisis, international food prices reached its peak in

2010 but fell drastically a year later. Developing countries were largely affected

by the hike in food prices, where share of expenditure on food accounts for a large

proportion of total consumer spending. According to Chart 3, developing countries such

as Indonesia, India and China each spent 41.9%, 34.9% and 33.0% of their

consumer spending on food in 2010. In 2010, due to speculation that the Indian

central bank may hike interest rates after instructing banks to raise more cash

reserves, the nation’s food prices inflated for a second week. An index that measures

wholesales prices of lentils, rice, vegetables and other food products jumped 17.56% in

the week to January 23 over the previous year. In addition, food inflation hiked 19.95%

in the week to December 5, 2009, indicating the most significant increase since

December 1998. Inevitably, high food inflation could restrict consumers’ demand and

pricing flexibility for FMCG while lowering consumers’ purchasing power that

diverts purchases away from certain FMCG.

Health Food

People are becoming conscious about health and hygienic. There is a change in

the mind set of the Consumer and now looking at “Money for Value” rather

than “Value for Money”. We have seen willingness in consumers to move to

evolved products/ brands, because of changing lifestyles, rising disposable

income etc. Consumers are switching from economy to premium product even

we have witnessed a sharp increase in the sales of packaged water and water

purifier.

FMCG companies forayed into India’s growing branded health food sector. Hindustan

Unilever Ltd’s (HUL) health food brand - Kissan Amaze is being marketed on

a trial basis in three southern states in India. Meanwhile, joint venture partnership

between Godrej Food & Beverages Ltd and Hershey Company - Godrej Hershey Foods

& Beverages Ltd (GHFBL) has plans to introduce several brands from its

international portfolio into the Indian branded health food sector.

Household Care

As a result of rapid urbanisation and emergence of small packs and sachets, this

segment saw high level of penetration, in which it is projected to grow at a CAGR of

2% from 2005 to 2010. Detergent production in India expanded 66.92% from 639,472

tonnes in 1999 to 1,067,415 tonnes in 2007 before contracting 6.18% to 1,001,454

tonnes a year later. In 2010, Procter & Gamble (P&G) and HUL were engaged in a price

war. With the lower priced version of Tide introduced by P&G, HUL retaliated by

slashing prices by 10-30% for its detergent products, namely Rin and

Surf where HUL cut the price for Rin from INR70 to INR50 per pack. As for Surf Excel

Blue, prices were brought down from INR91 to INR82 for a 500gm pack. Contributing

close to one-fourth (in FY2009) of its total sales, the detergent segment remains a key

market for HUL. With P&G’s new urgency in this segment, the company promoted Tide

Natural with smart advertising as well as through volume discounts.

personal care segmentThe key trend in the personal care segmentis moving away from health products towards

beauty products, hence consumers are switching demand from basic products (such

as soaps, shampoos, hair oils and etc.) to specialized products (such as skin whitening

cream, anti-ageing products, sun block lotions and etc.). With rising disposable

income from USD2,720 in 2008 to an estimated USD3,482 in 2012 as well as

growing female population (2008: 178mn; 2012: estimated 191mn) between the age

group 25-44 years will definitely boost this market segment.

Sales of whitening cream outpaced those of Coca-Cola and tea in India as most Indians

consider having fair-complexions an asset.

With increase in disposable incomes,

growth in rural demand is expected to increase because consumers are

moving up towards premium products. However, in the recent past there has

not been much change in the volume of premium soaps in proportion to

economy soaps, because increase in prices has led some consumers to look for

cheaper substitutes.

Outsourcing

Outsourcing the manufacturing or processing of certain range of products to small

vendors is gaining importance among FMCG players. With such initiatives, the

companies can focus on front-end marketing initiatives more effectively

Reducing carbon footprint

Of the energy used in PepsiCo India’s beverage business, 38 per cent comes from

renewable resources. Dabur has 30 per cent of its steam generation fired by renewable

resources. Hindustan Unilever Limited and ITC have earned Voluntary Emission

Reduction (VER) and Certified Emission Reduction (CER) credits for their work,

respectively. HUL was awarded 52,000 VER credits for developing a new soap-making

process called Plough Share Mixer, which eliminates the need for steam altogether

Ready to Eat

Becasue of changing lifestyles, busy jobs etc marketers are coming up with Jet Age

consumer products.

Ready to Eat

a) Con Flakes/ Oats

b) Pastas

c) Biscuits

d) Noodles

e) Pizzas

f) Burgers

Ready to Drink

a) Energy Drinks

b) Non-Cola Drinks (Juices)

Ready to Cook

a) Cut Vegetables

b) Soups

c) Paranthas/ Rotis

d) Snacks

Evolved Product Forms: 20 years back consumers had limited choices to pick from.

The days of Tortoise Mosquito repellent coils are gone. This is the age of aerosols with

value added functionality. I have picked up some examples, were we have seen a change

in the product forms. Here is the list:

Dish Wash: Powder to Bar to Liquid

Shaving: Creams to Foams/ Gels

Repellents: Coils to Aerosols/ Body Creams/ Gels

Air Freshners: Sprays to Electric

Toilet Cleaner: Acid to Harpic to In-Cistern

With rapid urbanization, emergence of small pack size and

sachets, the demand for the household care products is flourishing. The

demand for detergents has been growing but the regional and small

unorganized players account for a major share of the total volume of the

detergent market.

28

22

0

5

10

15

20

25

30

Series1

Series1 28 22

yes no

Data Analysis

CONSUMERS1. Do you buy same brand for any specific product?

Interpretation:

The objective behind the formation of this question is to know the level of brand

loyalty of the consumers towards the brands available in the market. The above figure

shows that on 56% of the respondents are loyal to their brands of detergent/soap. FMCG

are such a market where the level of loyalty remains low and this is because of many

reasons.

Particulars Respondents

Yes 28

No 22

respondent

4 4

126

23

105

10152025

Route More thanonce aweek

Weekly Fortnightly Monthly Less thanonce amonth

2. How often do you carry out your main grocery shopping i.e.excluding short

visits for top-up groceries?

Interpretation:

With increase in urbanization, and increase in economic growth, monthly income of

consumer is increase; therefore there is increase in disposable income. thus

consumer are ready to spend more . Also the buying behavior of consumer has

changed over time. Over a period of time it has been seen that in urban area, there is

increase in consumer buying FMCG products weekly, fortnightly.

particular respondentRoute 4More than once a week 4Weekly 12Fortnightly 6Monthly 23Less than once a month 1

3. While Buying a product which factor influences the most

Particular ResponseBrand 21Price 29

Interpretation:

The objective behind this question is to know the effect of influencing factors in the

purchase decision of the soaps and detergent powders. It mainly contains the factors like,

quality which players an important role in the purchase decision of the soaps and

detergents both.

If we look at the graph it shows price as the most influencing factors in the purchase

decision while quality is also an important for purchase decision

4. Do you consider promotional scheme while purchasing any product?

Interpretation:

Answer of this question will give idea about the effect of promotional schemes in

the purchase decisions. Such types of schemes always attract more and more consumers

towards particular brand. Simultaneously it gives idea about the factors which consumers

look most in the product before they make final decision.

Here as the graph shows that 39 out of 50 consumers are looking for such

schemes before they make purchase.

Particular ResponseYes 39No 11

5. Which promotional Schemes attract you the most?

Particular ResponseCoupon 8Priceoff 42Freebies 12Scratch Card 6Luckydraw 5Bundling 15Extraquantity 22

Interpretation:

The above stated question clearly states the awareness of promotional schemes offered in

the market by the marketers to attract more and more consumers.

The results show that price off and extra quantity is the two main offers/schemes which

consumers have came across at the time of purchase. It will help the manufacturers and

marketers too how too launch their new products in the market with which schemes

Response

27

23

20

22

24

26

28

Normal Multigrain

6. Which sought of pasta/ biscuit would you prefer

Interpretation: The above stated question clearly indicate the increasing percentage of consumer

towards healthy food product over normal food product.With more income in their

hands consumer are moving toward healthy food product.

Particular ResponseNormal 27Multigrain 23

Response

2822

05

1015202530

§       Different variety ofproduct for each family

member.

§       Same product for wholefamily.

7. Do you buy:-

Particular Response§       Different variety of product for each family member. 28§       Same product for whole family. 22

Interpretation: companies are not leaving any opportunity to micro segment the market. I can forsee

that we are here to see further segments in different categories. Here are some

examples:

Age

a) Junior Horlicks

b) Junior Chyawanprash

c) Pepsodent Barbie for Kids/ Colgate Strawberry

Sex

a) Women’s Horlicks

b) Male fairness cream

Specialized Household Cleaners

Response

12

38

0

10

20

30

40

regularly Irregularly

a) Kitchen Cleaner: Mr. Muscle

b) Power Cleaner (Rust): Easy Off Bang

8. What is the frequency to buy Ready to Eat products:-

Interpretation: Although the number of respondent having ready to eat product is low, but, Becasue of

changing lifestyles, busy jobs etc marketers are coming up with Jet Age consumer

products.

Particular Responseregularly 12Irregularly 38

Response

16

34

0

10

20

30

40

Yes No

9. Does product packaging influence your buying behavior?

Interpretation: Packaging is the not influencing factors in the purchase decision. Consumer is more

oriented towards quality.

Particular ResponseYes 16No 34

Response

34

16

0

10

20

30

40

Yes No

10. Does age anxiety affect your buying behaviour?

Interpretation: The above graph shows that age anxiety plays a crucial role in buying decion.consumer

while purchasing a personal product become more conciousness of such factors. “No”

respondent mainly include teenagers. companies are not leaving any opportunity to micro

segment the market. Here are some examples:Age:Junior Horlicks, Junior Chyawanprash,

Pepsodent Barbie for Kids/ Colgate Strawberry. Sex a) Women’s Horlicks b) Male

fairness cream

Particular ResponseYes 34No 16

Response

15

35

0

10

20

30

40

Yes No

11. Does celebrity endorsement effect the buying decision of product?

Interpretation: This question gives stress on the media habit of the people and through which the product

should be launch or they think it would be better than other Medias.

It has been seen that TV as the best media to market the product which will cover

majority of the viewer ship. On the second place it shows news papers as the media to

promote the product in the market. In media large number of consumer says that

celebrity endorsement doesn’t effect their buying decision, it is the quality of product that

matters.

Particular ResponseYes 15No 35

Response

38

12

0

10

20

30

40

Sachet of same brandedproduct

Cheaper substitute

12. During inflation(price hike), you go for

Particular ResponseSachet of same branded product 38Cheaper substitute 12

Interpretation: The above graph clearly shows that even during inflation ,price hike consumer would go

for sachet of same branded product, rather than going for a cheaper substitute. this shows

quality, brand loyalty effect the mind of consumer the most. companies have come with

lower quantity SKUs and make consumers switch from higher to lower SKUs and not

from premium to popular brands (like Dove to Lux International). Just to give you an

example, Henkel instead of increasing the price of their Henkwl detergent from Rs. 46 to

Rs. 50, they have launched a new SKU of 400gms for Rs. 40. During the time of

inflation, people shift to sachets of their brands. Sales numbers of FMCG companies are

quite robust.

FMCG spend now comprises a smaller share of consumer’s wallet

Response

37

13

0

10

20

30

40

Yes No

13. If you get an attractive promotional offer in the product other than of your

choice will you switch over?

Particular ResponseYes 37No 13

Interpretation:

It shows the level of brand loyalty among the consumers. The result clearly shows

that out of 50, 37 people are ready to switch over to another brand if they find better

promotional schemes which suits their budget means more qyt + less cost + quality.

Combination of all these schemes will run better in the market. when reason were ask for

the same it shows that extra quantity with less or same price, more satisfaction, quality

and other factors influence consumers to switch over too other brands.

Response

47

30

10

20

30

40

50

Yes No

14. Do you prefer to buy a product which is more eco friendly?

Interpretation:It shows the level of aware of awareness among consumer toward environment.As more

consumer are oriented towards green products, carbon free products. Companies are also

moving towards carbon blueprint.

Particulars Respondents

Yes 47

No 3

Findings of the report: FMCG are such a market where the level of loyalty remains low and this is

because of many reasons.

Quality as the most influencing factors in the purchase decision while price is also

an important for purchase decision.

Schemes always attract more and more consumers towards particular brand. Simultaneously it gives idea about the factors which consumers look most in the product before they make final decision

Price off and extra quantity is the two main offers/schemes which consumers have came across at the time of purchase

People are not much aware of the schemes which continue in the market it may be because of the present stock of the product at their place.

1+1 or 2+1 or other free schemes are more demanded and more aware schemes in

the market.

People are ready to switch over to another brand if they find better promotional schemes which suits their budget means more qyt + less cost + quality.

Extra quantity with less or same price, more satisfaction, quality and other factors influence consumers to switch over too other brands.

People are more quality and price oriented.

Consumer remember that name of the product by the company name and also from the past performance of that company

Consumer remembers that name of the product by the company name and also from the past performance of that company

Customers are looking for any type of the promotions on the product before them going to purchase.

Price off, product bundling and extra quantity are more demanded by the

consumers over others schemes

Limitations of the study

I considered only Preet Vihar region only because of limited time duration.

Due to this, my sample size is only 50, which is not very large.

All the respondents could not fill their questionnaire on their own due to language

problem and also problem of time and lack of positive behavior.

Respondent may give biased answer due to some lack of information about other

brands.

Findings of the study are based on the assumption that the respondents have given

correct information.

BibliographyBOOKS

Ø Philip Kotler, “Marketing Management”, 11th edition, Pearson education Asia

Publication.

Ø C.R.Kothari, “Research Methodology methods & techniques”,New Age International(p)ltd.publishers,2nd edition.

WEBSITESØ http://www.hul.co.in_files

Ø http://www.pg-india_files

Ø http://www.godrej_files

Ø http://fmcgmarketers.blogspot.com/