Indian fmcg sector

FMCG Industry INDIA

Presented By: Vikalp Mehta 221167 Shambhavi Singh 221132

Saptarshi Chakraborty 221130 Utkarsh Kumar Singh 221156

Srishti Narang 221149 Vipul Sachdeva 221170

FMCG!!

consumed in shorter duration

Also known as consumer packaged goods Excluding groceries and pulses.

For example: toilet soaps , detergents , shampoo , toothpaste , shaving product , shoe polish , packaged foodstuff house hold accessories and certain electronic items which are meant for frequent food consumption

ClassificationFMCG

Health care

Food and BeveragesHousehold Care Personal Care

Fabric wash, household cleaner

Oral care , skin care , cosmetics , perfumes , paper products

Health beverages , bakery , snacks , chocolates , ice cream , soft drinks , juices , dairy products

OTC products

FMCG sector India

44.9 billion dollars size of Indian FMCG sector in 2013

69% share of food products and personal care

135 billions dollars Estimated market size in 2020 ( optimistic conditions , growth rate 2013-202- 17%)

GDP share 2.4%

Rural market share 33%

Growth pattern

2006 2007 2008 2009 2010 2011 2012 20130

1020304050

15.7 17.8 21.3 24.230.2 34.8

41.1 44.9Revenue (billions)

revenue

1. Sector grew with CAGR of 16.2% during 2006-13.2. 4th largest in India3. Increase in consumption , change in life style and disposable income are the

drivers.4. Last year it saw some moderate growth (9.24%) because of reduced GDP growth

and high inflation.

Source: Dabur, AC Nielsen, The Economic Times, Aranca analysis

Composition ( Rural vs. Urban)

33%

67%

Percentage Share

RuralUrban

Total FMCG : 44.9 billion USD Growth in Urban segment: 8% (in 2013)Growth in Rural segment : 12.2% (in 2013)

Rural market to reach 100 billion USD by 2025

Huge opportunity!

Source: The Hindu Business Line, Business Standard, Aranca analysis

The cash cow (Rural sector)

2009 2010 2011 2012 20130

5

10

15

20

Rural FMCG (USD billion)

Rural FMCG (USD bil-lion)

•Rural market expended with CAGR of 13.3% to USD 14.8 billion.

•Growth was accounted by various development schemes like NAREGA which worked a lot to empower rural masses

•It also motivating FMCG giants like HUL , ITC , Dabur to move and tap this segment effectively.

Source:Dabur investor presentation: February 2013, The Economic Times, AC Nielsen, Spark Capital report, Aranca analysis

FMCG Revenues by segment

47%

5%10%

16%

22%

% share

Food productshousehold careothersTobaccopersonal care

Total 44.9 Billion USD

Source: AC Nielsen report, The Economic Times, Industry estimates, Aranca analysis

Largest FMCG segments : Food products Personal care

New Trends and trivia

Premiumization

Despite slow down consumers are willing to buy premium product at higher prices.

Sales of cornflakes , museli , baked potatoes ,

green tea is increasing.

FMCG giants , HUL , DABUR , ITC

are launching products in this

category

Development of customized

productsNeed for customized product is increasing

People are preferring products according to their specific needs

Shampoo with large variants for example : for short hairs , long hairs, etc.

Rural growth

Rural is growing at faster rate than Urban segment

Currently rural contribute around 33% in total FMCG revenues.

Sale of packaged fruit juices , ready to eat products is rising fast in rural areasExpected to contribute 45% -50% by 2020.

Globalisation

Many foreign players have operated successfully in India , because of the liberated policies.

Competition will increase from local players.

Indian Firms will continue to expand globally

Competitive Landscape

43%

32%

25%

Market structure By ownership

Indian Private companiesListed companiesUnlisted MNC's

Highly fragmented with private players selling packaged and unpackaged products

MNCs share a majority holding in different FMCG segments.

A combination of stronger Brand Equity , Premium Products and international expertise is pushing these companies ahead of domestic ones.

Source: Spark Capital December 2013 report, The Hindu Business Line, Aranca analysis

Policy frameworks and growth Drivers

Some Policies Frameworks for FMCG

GST (Goods and service Tax)

It will replace the multiple indirect tax system with uniform and single point taxation system.

It will reduce prices and will increase consumption

Food Security BillScheme in which rice wheat will be provided per month per person at very subsidized rate like rs 1 , 2 per kg.

Households will now focus on other FMCG products for consumption

This will further increase consumption in Rural India.

FDI100% is allowed in food processing and 51 and 100 % FDI is allowed in multi brand and single brand retail.

Will increase employment and logistics facility

Increase in consumer spending and new product launches

Advantage India

Growing Demand

Rising Incomes Brand Consciousness

Rural push

Attractive Opportunities

Lower Penetration in Rural

Growing concern for premium products

Increasing Investments

Increasing FDI inflows Regional Brand acquisition

Policy support

GST

FDI regulations 51% multi brand

100% single brand retail

Growth

Selected FMCG trends in India

Products must offer value for

money

Uptrading in some categories (e.g.

Skin Care)

Demand for new categories (e.g.

men’s grooming)

Entry of new brands, brand/line

extension

DDifferent

DNA

NNew Structures

And products

AAlign

Partnerships

• Invest resources in devising a USP that is innovative and radically different.

• Don’t approach under-served consumers in the same way you would approach target consumers: their needs wary!

• Create strong distribution networks and skills to deliver to the last mile• Enter into partnerships that help you reach your market,

such as those which could explore new market opportunities

• Offer under served consumers a product which is new and transformational

• Determine the best way to source , create, procure, partner with and deliver the product to under served consumers.

Selected FMCG Trends In India

FMCG growth Drivers

Rising income levels

Evolving consumer lifestyles

New product launches

Growth of modern

trade

Availability of online channel

Greater awareness of products and brands

Broad Classification

• Salty snacks was the fastest growing FMCG category in 2013 with a growth rate of 25%.

• categories such as packaged atta, chocolates, and non-refined oil grew over 20% in 2013, due to increasing penetration in rural markets

Market share :: Category Based

Personal Care Industry in India (1/3)

Segmentation (Majorly)Skin CareHair CareOral Care

Low penetration in rural market (major

opportunity for growth segment)

Growing portion of working women, aspiration for international brands and growing men

grooming section is driving consumption in India.

Industry Overview Market Size (USD in Billion)

Market Penetration Growth Rates (2007 – 2012)

Source :-Morgan Stanley „India Consumer & Retail‟, Feb 2013

Skin Care Overview Key Skin Care Companies - 2012

Bath & Shower - Overview Bath & Shower Companies - 2012

Market in India is estimated at $1.3

billion

Skin care in India majorly is facial care (Body and hand care less)

CAGR of 13% from 2000-12


billion

Bath & Shower - bar soap, body

wash, shower gel and talcum powder

CAGR of 8.7% from 2000-12

Source: UBS Research Report


Hair Care Overview Key Hair Care Companies - 2012

Oral Care Overview Key Oral Care Companies - 2012


billion

Hair-care consists of shampoos,

conditioners, hair oils etc.


Shampoo - 31% perfumed oil - 27% coconut based oil-

25%


billion

Oral-care consists of toothpaste, toothbrushes,

mouthwash etc.


Source: UBS Research Report


Home Care Industry in India (1/2)

Segmentation (Majorly) Air Care, Dish Washing, Toilet Cleaner, Laundry Care, Polishes, Insecticides etc.

The home care market in India is estimated at $3.8 billion

This industry segment is a volume driven market with low margins and is marked with stiff competition.

Industry Overview Segment Overview - size and CAGR

Market Penetration Market Share

Source -Spark Capital “Indian FMCG Sector”, June 2011

Future of the industry

International brands have entered India

Scope for reputed Chinese, Japanese,

European and American cosmetic brands with

differentiated positioning

Foreign Players entering India via M&A route.

Recently the parent company of HUL

decided to raise its stake in HUL (Indian subsidiary)

to 75%, as growth in home markets is slow

high margins, good cash flow and low leverage

business models : Attractive for PE players

Recent investment in CavinKare by ChrysCapital

(10% stake for ~Rs 250 crores)

The overall packaged food industry reached US$25.4 billion and is

forecast to grow to US$38.5 billion by

2016.

West India region has the highest value sales of packaged

foods in India.

Consumer awareness of packaged foods is

also high in North India, which is one the most affluent

regions in the country

East and Northeast India are the smallest markets in India for

packaged food,

Food and Beverage Industry

• Growing at a compound annual growth rate (CAGR) is 17 per cent annually.

• The organized food retailing and food services are other emerging areas growing with the annual growth rate of 25 percent.

• Fruits and vegetables, Dairy products, Marine and fish, Meat and poultry, Edible oils, staples, Alcoholic and non alcoholic beverages, breads and bakery, confectionary and packaged foods are the key sectors in the industry.

40

511

20

25

Food Processing segment and market share(FY12)

Meat, Fish, Fruits, Vegetables Dairy ProductsGrain Mill Products BeveragesOther Food Products

Value Chain

Branded Products Vs. Private Labels

• the expenditure on private labels is estimated to reach USD500 million in 2015, growing at a CAGR of 49.5% during 2011–15.

• The top five FMCG categories in private labels in India for 2012–13 were tissue paper, floor cleaners, packaged rice, packaged atta, and packagedpure ghee

Huge Potential

• India has extremely low per capita consumption levels compared with other emerging economies.

• Per capita consumption of skincare products (USD0.3), shampoos (USD0.3), and toothpastes (USD0.4) offers huge opportunity to the

• FMCG market, indicating high potential for FMCG companies to expand their reach.

Huge opportunity:: Rural India

• There are enormous opportunities in several categories on the back of low penetration levels and low per capita consumption.

• Despite having high penetration level, categories such as soap, shampoo, hair oil, mosquito repellents, and toothpaste have low per capita consumption. Hence, any change in consumption pattern would drive growth in these segments.

• Segments such as skin cream, chocolates, sauce, soft drinks, etc., have low penetration level as well as per capita consumption, but have huge opportunities in the future.

• Categories such as oats, conditioners, liquid fabric conditioners, liquid soaps, and face wash are witnessing increased focus by FMCG companies

FDI::Inflow

• The cumulative FDI inflow to India‟s FMCG sector from April 2000 to February 2014 is USD7,830mn. This constitutes ~3.7% of the total FDI inflows.

• Among FMCG‟s different sub-sectors, food processing industries had the largest share (~71%) of FDI.• Paper and pulp accounted for 11% of FDI, while soaps, cosmetics, and toilet preparations had a 9.4%

share

• PE activity in the FMCG sector increased during 2010–12, with the number of deals increasing at a CAGR of ~66% from four in 2010 to 11 in 2012. The growth was driven by the need for more expansion capital to drive growth of the FMCG companies.

• On the other hand, M&A deals declined 32% to 12 in 2012 from 26 in 2010

2 Companies: A Comparitive Discussion

Business Model

HUL Business Model has 3 Key

Inputs

Brands

Operations

People

Output of the Model are:

Sustained Growth

Lower Environment

Impact

Positive Social Impact

Source : HUL Annual Report

Product Line Segment

Product Line

Food & Drink

Personal Care

Home Care

Water Purifier

Bru Kissan Knor Broke Bond Red

Level

Taj Mahal

Anupurna

Active Wheel

CIF Domex Magic Comfort Fabric Conditioner

Sunlight

Pureit

Aviance AXE Breeze ClearElle 18 Clinic Plus Lakme Lifebuoy

Close Up Pepsodent Pond's Rexona


Soaps & Detergents Personal Products

Turnover(Rs. Crores)

12461Turnover(Rs. Crores)

7309

Sales Growth 19%Sales Growth 13%

Volume growth 8%Volume growth 6%

Beverages Packaged Foods

Turnover(Rs. Crores)

2914Turnover(Rs. Crores)

1474

Sales Growth 13%Sales Growth 10%

Volume growth 5%Volume growth 3%


Soaps n Detergent Personal Products

8

9.2

Home & Personal Care (% Growth)

Beverages Packaged Foods

0

2

4

6

8

10

12

14 12.4

10

Food & beverage (% Growth)

Food Industry Growth – 10% CAGRIndustry Growth Rate – 7% CAGR


Market Share

46

24

10

6

14

Shampoo

HUL P&G CavinKareDabur Others

59

7

7

6

21

Skin Care

HUL Dabur Emami Loreal OthersSource : HUL Annual Report

ITC Business Model

ITC intent is to secure long term growth by synergizing and blending the diverse pool of competencies

Using the resources from these business units and utilizing it to develop it’s FMCG Sector.

Source : ITC Annual Report

ITC Business Portfolio

FMCG

Cigarettes Foods Personal Care StationarySafety

Matches & Incense Sticks


0

500

1000

1500

2000

2500

3000 2786

1841 1711

1028

468 420154 96

No. Cigarettes Per Capita Per Annum

Although India accounts for 17% of world population, it’s share of world cigarette consumption is just 1.8%ITC – India’s largest buyer, processor, consumer & exporter of cigarettes tobaccos

5th largest leaf tobacco exporter in the world


Personal Care Product Portfolio

Personal Wash (soaps, shower

gel)Deodorants

Skin Care(Skin Cream, Face

Wash)

Hair Care(Shampoo,

Conditioner)Talc

Major Brands

Essenza Di Wills Fiama Di Wills Vivel Superia Engage


Competitive Brand PositionCategory Brand/Product Brand Position

Atta(Wheat Flour) Aashirvaad #1 in branded packaged Atta among national players

Biscuits Sunfeast #3 All India

Noodles & Pasta Sunfeast Yippie #2 All India

Savoury Snacks Bingo #2 All India

Cenfectionary Mint-O & Candyman #3 in Sugar Confectionary


Segment Revenue2012-13(Rs crores)

2013-14(Rs crores)

GOLY(%) Common Size(2013-14)

FMCG

Cigarettes 13970 15456 10.6 41.4

Others 6983 8099 16.0 21.7

Total FMCG 20953 23555 12.4 63.1

Hotels 1074 1133 5.5 3.0

Agri Business 7201 7752 7.7 20.8

Paperboards 4237 4861 14.7 13.0

Total 33465 37301 11.5 100.0


A COMPARISON

ITC

HUL

Nestle India

Dabur

Britannia

0 1000 2000 3000 4000 5000 6000 7000

6039

46511556

1206

1034

By Sales(USD Million)

ITC

HUL

Nestle India

Dabur

Brittania

0 10,000 20,000 30,000 40,000 50,000

4779821149

7518

5330

4778

By Market Cap(USD Million)

Sour

ce: M

oney

Cont

rol.c

om, C

ompa

ny a

nnua

l rep

orts

, Ara

nca

anal

ysis

ITC

Nestle

Godrej

HUL

Marico

0 200 400 600 800 100012001400160018002000

1846

608

502

444

440

By Assets(USD Million)

ITC

HUL

Nestle

GSK

Dabur

0 200 400 600 800 1000 1200 1400

1358

642

191

112

111.6

By Net Profit(USD Million)

2010 2011 2012 2013 2014

1776

9.12

1973

5.51

2211

6.37

2581

0.21

2801

9.13

1856

7.45

2112

0.83

2509

0.11 29

901.

27

3323

8.6

Net Sales

HUL ITC

2010-11 2011-12 2012-13 2013-140.00

5.00

10.00

15.00

20.00

25.00

11.07 12.06

16.70

8.56

13.75

18.79 19.18

11.16

Net Sales Growth

Hul ITC

Industry Growth Rate = 8%


2008 2009 2010 2011 2012 2013 2014

9

7.56.5 6.5

7.5 7.5

13

3.5 3.7

10

4.45 4.55.25

6

Dividend PAyout

HUL ITC


ISSUES & FUTURE

Take a look!!!!

• The anti-ageing skincare category grew five times between 2007 and 2008 and is the fastest-growing segment in the skincare market.(37 per cent market share)

• Mouth-rinsing seems to be picking up as a habit — mouthwash penetration is growing at 35 per cent a year

• Rural penetration of shampoos increased to 46 per cent last year, way up from 16 per cent in 2001

What he ‘needs’ is fast getting replaced with what he ‘wants’.

Source: http://www.business-standard.com/article/management/the-future-of-fmcg-110112900006_1.html

Emerging trends in FMCG

Rural and new consumer segments

Govt schemes to increase consumption like FSB and DCT

New launches and expansion

MNC are increasing their portfolios of products to ensure better penetration

P&G is expanding from its current 14 categories

Premiumization

Despite the slow down consumer are willing to pay for premium goods.

Sale of products which are considered as healthy are gaining grounds.

Emerging segments and trade channels

Growth will come from fringes i.e categories which are not main frame like liquid soaps , oats , fabric conditioners

New trade channels ( retail stores , hypermarket will thrive across the tier 2-3 cities)

Focusing Rural

New marketing techniques andcorrect brand portfolio

P&G is trying new SKU’s in 4000 villages of UP.

Also it is beefing up its distribution network to ensure deep reach over market.

ITC is using its E-Choupal network for further boosting distribution for its new products like shampoo sachet and soap bars. Apart from cigarettes.

Issues In FMCG

Complex tax Structure

Complex system of taxes makes price variations across states.

Like VAT is different in different states.

Plagiarism issues

Small manufacturers take advantage of consumer illiteracy and ignorance and they spuriously tailor the brand name of MNCs and sell their product

Affects revenues and taxes

Infrastructure Bottlenecks

Lack of agriculture infrastructure is causing variation in amount of critical harvest to FMCG Manufacturers.

Logistics is also a serious problem causing supply chain problems.

High Inflation

Resulting in increasing cost of inputs

THANK YOU

Date post:	10-Dec-2014
Category:	Marketing
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