fmcg sector
TRANSCRIPT
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FMCG SECTORFMCG SECTOR
PRESENTED BY:PRESENTED BY:ABHIJEET BELTHARIAABHIJEET BELTHARIA
MANIKANT SINHAMANIKANT SINHASHIVANGI BARIARSHIVANGI BARIAR
DWARKA NATH GUPTADWARKA NATH GUPTAABHISHEK KUMARABHISHEK KUMARRADHA KUMARIRADHA KUMARI
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ABOUT FMCGABOUT FMCG
• Products having a quick turnover and relatively low cost.
•They get replaced within a year.
•Also known as consumer packaged goods.
•They cater to 3 very distinct aspects- necessity, comfort,
luxury.
•Consumer spends little time on the purchase decision.
•Limited inventory of these products are kept.
• Brand switching is often induced by heavy advertisement,
recommendation of the retailer or word of mouth.
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INDIAN FMCG SECTOR IN 2003INDIAN FMCG SECTOR IN 2003
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ABOUT FMCG SECTORABOUT FMCG SECTOR
fourth largest sector of Indian economy with total market size in fourth largest sector of Indian economy with total market size in
excess of $14.7 billion in Oct 2009.excess of $14.7 billion in Oct 2009.
Characterized by:Characterized by:
Well established distribution networkWell established distribution network
Intense competition between organised & unorganised segmentsIntense competition between organised & unorganised segments
Low operational costLow operational cost
Strong brandingStrong branding
directly related to the population directly related to the population
expected to grow by over 60% by 2010 (as per HSBC report)expected to grow by over 60% by 2010 (as per HSBC report)
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INDUSTRY SEGMENTSINDUSTRY SEGMENTS
Personal Care Household
Care
Spirits and Tobacco
Branded & packaged food and
beverages
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Major PlayersMajor Players
Segment Major Players
Household careHUL, Nirma, Godrej consumer products, ITC,
P&G, Dabur, Reckitt & Colman
Personal careColgate-Palmolive, HUL, Dabur, Lakme, Marico,
Emami, P&G, Himalaya ITC
Food & beverages
Parle Agro, Britannia, ITC, Nestle, Cadbury India, Dabur Pepsico; United Breweries,
Coca-Cola, GlaxoSmithKline
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Market sizeMarket size
Market size of various segments in Rs. Crores
8300
120003400
3800
2700
3500
4600 Personal wash
Detergent
Skincare
Haircare
Shampoos
Oral care(toothpaste)
Food segment
Source: UN Population Division: Medium variant
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Some FactsSome Facts
Urban Rural
Population 2001-02 (mn household)53 135
Population 2009-10(mn household)69 153
% Distribution (2001-02)28 72
Market (Towns/Villages)3768 627000
Universe of Outlets (mn)1 3.3
Source: Statistical Outline of India (2001-02), NCAER
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Top 10 FMCG Companies
Hindustan Unilever Ltd.
ITC (Indian Tobacco Company)
Nestlé India
GCMMF (AMUL)
Dabur India
Asian Paints (India)
Cadbury India
Britannia Industries
Procter & Gamble Hygiene and Health Care
Marico Industries
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FMCG – EvolutionFMCG – Evolution
1950’s-80’s – Low Investment in the sector1950’s-80’s – Low Investment in the sector
Low purchasing powerLow purchasing power
Govt’s emphasis on small scale sectorGovt’s emphasis on small scale sector
HLL and other company’s urbane focusHLL and other company’s urbane focus
Post liberalizationPost liberalization
Entry of MNCsEntry of MNCs
Focus shifted to getting to rural consumer firstFocus shifted to getting to rural consumer first
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Strengths:Strengths:
Low operational costsLow operational costs Presence of established distribution Presence of established distribution
networks in both urban and rural areasnetworks in both urban and rural areas Presence of well-known brands in FMCG Presence of well-known brands in FMCG
sectorsector
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Weaknesses:
Low exports levelsLow exports levels products which illegally mimic the labels products which illegally mimic the labels
of the established brands narrow the of the established brands narrow the scope of FMCG products in rural and scope of FMCG products in rural and semi-urban market.semi-urban market.
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Opportunities:
Untapped rural marketUntapped rural market Rising income levels, i.e. increase in Rising income levels, i.e. increase in
purchasing power of consumerspurchasing power of consumers Large domestic market- a population of Large domestic market- a population of
over one billion.over one billion. Export potentialExport potential High consumer goods spendingHigh consumer goods spending
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ThreatsThreats::
Removal of import restrictions resulting in Removal of import restrictions resulting in replacing of domestic brandsreplacing of domestic brands
Tax and regulatory structure Tax and regulatory structure
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Porter’s Five Forces ModelPorter’s Five Forces Model
Threat of New
Entrants
Bargaining Power of Buyers
Threat of Substitute Products
Bargaining Power of Suppliers
Rivalry Among Competing Firms in
Industry
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Implication of Porter’s Model to FMCG Implication of Porter’s Model to FMCG sectorsector
Barriers to Entry Huge investments in promoting brands setting up distribution networks intense competition
Bargaining Power of Suppliers
Some of the companies are integrated backwards, which reduces the supplier's clout.
Manufacturing is largely outsourced.
Bargaining Power of Customers
In case of branded products, there is little that the consumer can influence, but intense competition within the FMCG companies results in value for money deals for consumers (e.g. buy one, get one free concept).
Competition Competition is faced from both domestic, MNCs and also from cheaper imports.
Price wars are a common phenomenon.
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PASTPAST
FMCG sales grew by 14.8 per cent in the April to September period & by seven per cent in the October-November 2009 period.
top 10 players saw a deceleration in sales growth from 9.9% in Apr-Sep to 3.3% in Oct-Nov period.
registered a 12% growth in 2009 despite the economic downturn The Sector accounted for 5 per cent of the total factory employment and
created employment for over 3 million people in downstream activities in 2007
Source: AC Nielsen data
Morgan Stanley report
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Source: Rural Marketing Association of India
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Rural per capita consumption to equal Rural per capita consumption to equal current urban levels by 2017current urban levels by 2017
Industry analysis expect the FMCG Industry analysis expect the FMCG sector in rural areas to grow 40% against sector in rural areas to grow 40% against 25% in urban25% in urban
Source: Rural Marketing Association of India
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Pattern of salesPattern of sales
sales of HUL in various segments
05
101520253035404550
April 2009( %)
April 2010 ( %)
Source: Nielsen data
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FDI PolicyFDI Policy Automatic investment approval up to 100 per cent foreignAutomatic investment approval up to 100 per cent foreign
equity or 100 per cent for NRI and Overseas Corporate Bodiesequity or 100 per cent for NRI and Overseas Corporate Bodies
(OCBs) investment allowed for most of the food processing(OCBs) investment allowed for most of the food processing
sector ; exceptions:-sector ; exceptions:-
malted food,malted food,
alcoholic beverages and alcoholic beverages and
those reserved for small scale industries (SSI). those reserved for small scale industries (SSI).
24 per cent foreign equity is permitted in the small-scale sector.24 per cent foreign equity is permitted in the small-scale sector.
Temporary approvals for imports for test marketing can also be Temporary approvals for imports for test marketing can also be
obtained from the Director General of Foreign Trade.obtained from the Director General of Foreign Trade.
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PRESENTPRESENT
Strong volume and price hikes led to the Strong volume and price hikes led to the sector grow at a strong 12% growth in sector grow at a strong 12% growth in 2009 2009
April 2010 recorded the highest sales April 2010 recorded the highest sales growth in eight months. growth in eight months.
data from market researcher Nielsen.
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FMCG in rural IndiaFMCG in rural India
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Expected revenue growth for Expected revenue growth for 44thth quarter quarter
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Cost competitiveness of IndiaCost competitiveness of India (in terms of labour cost)(in terms of labour cost)
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Income level of FMCG sectorIncome level of FMCG sector
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UNION BUDGET & FMCG UNION BUDGET & FMCG SECTORSECTOR
Budget measuresBudget measures ImpactImpact
Allocation of Rs 661 bn toward Allocation of Rs 661 bn toward rural infrastructure development .rural infrastructure development .
help provide FMCG companies help provide FMCG companies better access to the rural heartlandsbetter access to the rural heartlands
Adjustment in income tax slabs Adjustment in income tax slabs increase the disposable income in increase the disposable income in
the hands of urban consumersthe hands of urban consumers Reduction in duty of replaceable Reduction in duty of replaceable kits for household type water filters kits for household type water filters
positive for HUL which has positive for HUL which has launched a water filter nationally. launched a water filter nationally.
Decrease in excise duty on Decrease in excise duty on
corrugated boxes and cartonscorrugated boxes and cartons reduced packaging costs reduced packaging costs
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Contd…Contd…
Increase in excise duty for Increase in excise duty for cigarettes and tobacco cigarettes and tobacco
negative for companies like ITC, negative for companies like ITC, VST and Godfrey Phillips as it will VST and Godfrey Phillips as it will increase the price of cigarettes. increase the price of cigarettes.
Spending on roads and Spending on roads and concessions for setting up concessions for setting up warehousing and cold storages warehousing and cold storages
positive for companies like Nestle, positive for companies like Nestle, HUL, ITC and Britannia as it would HUL, ITC and Britannia as it would help provide better logistics and lower help provide better logistics and lower wastages. wastages.
Allocation of Rs 401 bn towards Allocation of Rs 401 bn towards MNREGSMNREGS
improved living standards & improved living standards & spending abilitiesspending abilities
Focus on rural spending Focus on rural spending big positive for most FMCG big positive for most FMCG companies that have started targeting companies that have started targeting the rural sector the rural sector
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futurefuture
expected to register a 15% growth in 2010 expected to register a 15% growth in 2010 by 2030 India’s population will be around 1.450 Billionby 2030 India’s population will be around 1.450 Billion FMCG Industry which is directly related to the FMCG Industry which is directly related to the
population is expected to maintain a robust growth population is expected to maintain a robust growth rate.rate.
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FutureFutureSegmentSegment OpportunitiesOpportunities
Dairy Based Products only around 15 per cent of milk is processed. The organized liquid milk business is in its infancy & has large long-term growth potential.
Packaged Food Only about 10-12 % of output is processed & consumed in packaged form, thus highlighting the huge potential for expansion.
Beverages More than 50% of market share is capture by unorganized players highlighting high potential for organized players.
Oral Care remains under penetrated in India with penetration rate around 50%
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Company Prospects Company Prospects
Hindustan Unilever Limited
lowering its expenditure on packaging across its portfolio of food brands as part of
a wider cost-cutting drive.
Unilever’s product - Pureit (a water purifier) has received the UNESCO Water
Digest Water Award 2008-2009.
Procter & Gamble Hygiene & Health Care Limited (P&G)
21 product categories out of which only 8 product have presence in India
planning to launch the rest 13 product in India.
aggressive plan to set up 20 new factories across the World out of which 19 is
expected to come in emerging markets (BRIC)
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Godrej Consumer Products Limited (Godrej)
acquired 100 per cent stake in the Kinky Group Limited, South Africa (hair
segment)
Dabur India Limited (Dabur)
entered into the malted food drink market with the launch of a new health drink
“Dabur Chyawan Junior “
acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL) for Rs 203.7 Crores
got approval from Government of Himachal Pradesh to set up a medicine
manufacturing unit .
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Reasons to consider a Reasons to consider a career in FMCGcareer in FMCG
1. Its a stable industry
2. Its a high profile industry
3. You get a depth of experience very quickly
4. You can get a wide range of experience
5. Its an industry that thrives on innovation
6. There are opportunities nationwide, both urban and rural
8. Lots of choices and opportunities for advancement