ECONOMICS PROJECT

Name – garima

Class – X B

Roll no. – 9

PROJECT TOPICTo take a fast moving consumer good

(FMCG) like washing machine detergent. Analyze the factors that determine the demand of this product. Present your findings in form of a class presentation.

WHAT IS FMCG ?

Fast Moving Consumer Goods (FMCG) – or Consumer Packaged Goods (CPG) – are products that are

sold quickly and at relatively low cost. Examples include non-durable goods such as soft

drinks, toiletries, and grocery items. Though the absolute profit made on FMCG products is relatively small, they generally sell in large quantities, so the cumulative profit on such products can be substantial. Hence the profit in FMCG goods always translates to the number of good sold .ITC Limited, Procter & Gamble and Unilever are the three biggest consumer goods company that operate across the globe.

The term FMCGs refers to those retail goods that are generally replaced or fully used up over a short period of days, weeks, or months, and within one year. This is either because of the high consumer demand or because they tend to deteriorate rapidly.

CHARACTERISTICS OF FMCG FROM CONSUMER’S VIEW POINT

Frequent purchaseLow involvement (little or no effort to

choose the item – products with strong brand loyalty are exceptions to this rule)

Low price

CHARACTERISTICS FROM THE PRODUCER’S VIEWPOINT

High volumesLow contribution marginsExtensive distribution networksHigh stock turnover

INDIA AND FMCG MARKET The Indian FMCG sector is an important contributor to

the country's GDP. The Indian FMCG sector with a market size of US $ 14.8 billion is the fourth largest sector in the economy and is responsible for 5% of the total factory employment in India. The lower-middle income group accounts for over 60% of the sector's sales. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%.The growing incline of rural and semi-urban folks for FMCG products will be mainly responsible for the growth in this sector , as manufacturers will have to deepen their concentration for higher sales volumes. Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage. FMCG sector will witness more than 60 percent growth in rural and semi-urban India.

ADVANTAGES

Cumulative Profits For a retailer's bottom line, the key benefit of CPGs/FMCGs

is the cumulative profit they provide. CPGs/FMCGs have low profit margins, which means that a small percentage of each each unit sale represents profit. However, CPGs/FMCGs also sell in very high quantities. This means that those small profits add up and can form a significant portion of a retailer's total profits for a fiscal period. This profit serve any number of financial purposes in the business.

Cross Merchandising Opportunities Retailers thrive when customers buy multiple items on

each visit. CPGs/FMCGs provide opportunities for cross merchandising, which occurs when a business places two products from different categories close to one another in a strategic arrangement. For example, an electronics retailer may sell remote controls that have high profit margins but don't fall into the CPG/FMCG category. A shelf of batteries (which are CPGs/FMCGs) next to those remotes provides a chance to boost sales and earn profit on two items when customers choose to buy the batteries they will need to operate their new remotes at the same time.

Brand Appeal When a retailer offers CPGs/FMCGs, it can rely on the brand

appeal that they generate to drive sales. Most CPGs/FMCGs come from brands that advertise heavily. This means that when customers see CPGs/FMCGs on store shelves they have pre-existing emotional relationships with those brands, which may not be true of the other items that the retailer sells. Seeing recognizable brands may build trust between the customer and retailer or lead to an additional purchase based on brand awareness, with no special effort from the retailer.

Diversification Selling CPGs/FMCGs spreads a retailer's revenue sources

over a broader spectrum of goods. The profits can help offset slow sales for other products during seasonal dips in demand or periods of reduced consumer confidence. In the category of CPGs/FMCGs, retailers can choose from among an almost unlimited range of product types including pharmaceuticals, food items, beverages, household products and disposable items. The range is so broad that some retailers, such as grocery stores and convenience markets, stay in business selling them exclusively.

DISADVANTAGES

Basically there are only three disadvantages of the fmcg :

Since these goods are cheap in nature that is they have a low price , they are not capable of provididng immediate profit result . To obtain results a long period of time is required and the profits are cumulative in nature

A lot of money is spent on advertizing and making the brand name popular in order to avail huge profits . This increase the cost price considerably .

It is not possible to store these goods for future supply because these are homogenous good and are a part of the perfect competition market . Thus it is not possible to hoard these goods in expectation of higher profits in future becauese both the sellers and buyers are generally the price takers.

MARKET SHARE OF MAJOR PLAYERS

Company

Hindustan Unilever ltd.

Indian Tobacco company

Nestle Britania

Dabur others

Market Share

36.4 % 30 % 8.2 % 6 % 4.3 % 15.1 %

HUL ltd .ITCNestleBritaniaDaburOthers

LAYS – A PEPSICO PRODUCT

INTRODUCTION Lays is a brand name for a number of

potato chip varieties as well as the name of the company that founded the chip brand in the year 1938. Lay’s chips are marketed as a division of Frito lay, a company owned by PepsiCo . Inc since 1965. other brand names under this name include pretzels , Doritos, kurkure , ruffles , cheetos etc.

HISTORY In 1932, salesman Herman Lay opened a

snack food operation in Nashville, Tennessee and, in 1938, he purchased the Atlanta, Georgia potato chip manufacturer "Barrett Food Company, " renaming it "H.W. Lay Lingo & Company."[citation needed] Lay criss-crossed the southern United States selling the product from the trunk of his car. In 1942, Lay introduced the first continuous potato processor, resulting in the first large-scale production of the product.

T Y P E P O T A T O – C H I P S

CURRENT OWNER PEPSICO

RELATED BRANDS FRITO LAYS, WAVY LAYS , PRINGLES

PREVIOUS OWNERS 1932 - HERMAN W. LAY 1936 - THE FRITO COMPANY AND LAYS COMPANY MERGED TOGETHER TO FORM FRITO - LAYS1965 - FRITOLAY MERGED WITH THE PEPSI COLA COMPANY TO FORM PEPSICO. INC

TAG LINES / SLOGANS HAPPINESS IS SIMPLE ( 2009 ) SIMPLY MADE. SIMPLY GOOD.( 2009) ANOTHER REASON TO SMILE! ( 2007) FOOD FOR THE FUN OF IT ( 2007) LAYS ! WANT SOME ? ( 2006 ) BETCHA CAN’T EAT JUST ONE ( 196Os –

2006 ) BE A LITTLE DILLOGICAL

GROWTH INCOME Lays markets hundreds of brands in

approximately 200 countries and territories around the world . The customers have spent an estimated of 107 billion US $ on the products of the same .

Pepsico has 18 megabrands that generate $ 1 billion or more each year in annual retail sales. It’s economic reach is deep and sustainable .

LAYS AS AN FMCG PRODUCT

from consumer’s view point : it is frequently purchased Consumer has low involvement in its purchase

(little or no effort to choose the item – products with strong brand loyalty are exceptions to this rule)

Low price

FROM PRODUCER’S VIEW POINT :

It is sold in High volumes It has Low contribution margins It has Extensive distribution networksProvides a High stock turnover

FACTORS THAT DETERMINE IT’S DEMAND ARE: Brand name : lays is a very popular brand

name and trusted among most of the people. This influences its demand on a huge scale.

Quality product : Lays is a product of standard quality having registered itself with the indian health standards and thus is trusted by all .

Taste and preferences : the taste and preferences of a consumer affects the demand of a product hugely . Since the lays potato chips come in a huge variety of flavors it covers the demand of a huge percentage of the population

Hot ‘n’ sweet Magic masala Sweet onion sauce Hot ‘n’ lime twist Green chilli American cheese and garlic

Price : lays has a nominal price ( Rs. 10 ) , and thus is affordable by a huge range of people . It also follows the law of demand because of which it’s demand is more since it’s price is less.

Population : lays is a form of potato chips which is consumed by the people of all ages , be it senior citizens or students.

Government policy : there are no government restrictions imposed on lays as such because of which it can produce in order to meet the demands.

Advertisements : of all the factors mentioned advertisements are the most important determinant. Since potato chips are a homogenous product by increasing the ads, it’s polpularity can be increased .