fmcg procurement

8/3/2019 Fmcg Procurement

1/13


2/13

WHAT IS FMCG?

Products which have a quick turnover, and

relatively low cost are known as Fast Moving

Consumer Goods (FMCG).

FMCG products are those that get replaced

within a year.

Examples of FMCG generally include a wide

range of frequently purchased consumer

products such as food that are ready to eat,

ready to serve etc.

2


3/13

CONT

Toiletries, soap, cosmetics, tooth cleaning

products, shaving products and detergents, as

well as other non-durables such as glassware,

bulbs, batteries, paper products, and plastic

goods.

FMCG may also include pharmaceuticals,

consumer electronics, packaged food products,soft drinks, tissue paper, and chocolate bars.

3


4/13

FMCG INDUSTRY IN INDIA

Present

Fourth largest sector in the economy

Size - US$13.1 billion

Strong MNC PresenceWell established distribution network

Competition between organized and unorganizedsector

Low Costs of labour and Easy availability of keyraw materials

4


5/13

TOP FMCG COMPANIES IN

2010

S. NO. Companies

1 Hindustan Unilever Ltd.

2 ITC (Indian Tobacco Company)

3 Nestl 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 Industry

5


6/13

HISTORICAL GROWTH OF FMCG

INDUSTRY

0

200

400

600

800

1000

1200

1400

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10E

470 490500

540585

710

860

1020

1160

1300

Golden years for FMCG industry GDP growthof 8% rural markets opened up

+17%

+6%

GDP growth of 5% annually

IN INR BILLION

6


7/13

STRENGTHS:

Low operational costs

Presence of established distribution networks in both

urban and rural areas

Presence of well-known brands in FMCG sector

WEAKNESSES:

Lower scope of investing in technology and achieving

economies of scale, especially in small sectors

Low exports levels

"Me-too 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:

Untapped rural market

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

consumers

Large domestic market- a population of over one billion.

Export potential

High consumer goods spending

THREATS:

Removal of import restrictions resulting in replacing of

domestic brands

Slowdown in rural demand

Tax and regulatory structure

7


8/13

RISK INVOLVED IN FMCG

SECTOR

Three key areas concern the risk managerproduction,

marketing and distribution.

Risk of FMCG products also depends upon the

agricultural commodities procured from the farm alsoand the losses or damage happened in the farm level.

Some of the losses or damages are caused due to:-

1. Parasitic Diseases2. Mechanical energy

3. Physiological deterioration

8


9/13

CONT

FMCG sector involves bakery in which biscuit

manufacturing is the most fast moving good for

consumers to use.

In biscuit manufacturing industry procurement of good

material like maida, salt, colour, preservatives,vanaspati, sugar, flavours etc.

9


10/13

CONT

The risk in FMCG companies involve at every level or stages

in the market starting from procurement level to consumer

level because of these reasons:-

Heavy competition

Durability of the product.

Lower cost margin at every level.

Perishability of the product especially in food sector.

Hedging of the raw material at commodity exchange.

Less wastage to reduce cost in manufacturing the product.

Supply chain also creates risk. Longer the supply chain greater

will be risk and vice-versa.

10


11/13

OTHER RISKS

1. Tax Structure - Complicated tax structure, highindirect tax, lack of uniformity, high octroi & entry tax

and changing tax policies.

2. Infrastructural Bottlenecks - Agricultureinfrastructure, power cost, transportation infrastructure

and cost of infrastructure.

3. Counterfeits and Pass-offs - Counterfeit products are

another issue for the FMCG sector. Taking advantage of the lackof literacy and consumer knowledge, several small manufacturers

churn out spurious products which they label akin to the big

brands, Lifeboy or Lax soap or Fivestare chocolate bars, Vicky

balm, for instance

11


12/13

CONT

4. Emergence of Private Labels - Apart from the pressure onmargins, 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 consumers price points.

5. Regulatory Constraints - 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.

6. Price of Inputs - Commodity prices fluctuate, which make it

difficult to finalize raw material prices, affecting the final price of

the product.

12


13/13

13

fmcg procurement

Documents