indian fmcg sector
DESCRIPTION
Analysis of Indian FMCG sectorTRANSCRIPT
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
Market in India is estimated at $2.8
billion
Bath & Shower - bar soap, body
wash, shower gel and talcum powder
CAGR of 8.7% from 2000-12
Source: UBS Research Report
Personal Care Industry in India (2/3)
Hair Care Overview Key Hair Care Companies - 2012
Oral Care Overview Key Oral Care Companies - 2012
Market in India is estimated at $2.4
billion
Hair-care consists of shampoos,
conditioners, hair oils etc.
CAGR of 12% from 2000-12
Shampoo - 31% perfumed oil - 27% coconut based oil-
25%
Market in India is estimated at $1.3
billion
Oral-care consists of toothpaste, toothbrushes,
mouthwash etc.
CAGR of 8% from 2000-12
Source: UBS Research Report
Personal Care Industry in India (3/3)
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
Source : HUL Annual Report
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%
Source : HUL Annual Report
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
Source : HUL Annual Report
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
Source : ITC Annual Report
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
Source : ITC Annual Report
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
Source : ITC Annual Report
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
Source : ITC Annual Report
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
Source : ITC Annual Report
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%
Source : ITC Annual Report
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
Source : ITC Annual Report
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
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