Business Strategy and Simulations Group 2 Submission 2.pptx

case study

1. Business strategy

2. Group-3 Rajat Maheshwari-2021JULB02006 Sakshi-2021JULB07003 Alisha Khunger-2021JULB02017 Bindu Madhavi-2021JULB03002 Shanmukh-2021JULB02009 Keshav Kumar-2021JULB07044 Jagannath Reddy-2021JULB02057

3. Agenda (submission I) Industry Analysis Size of industry Key Market Players Market Share of Company Growth rate over past 3-5 years Expected growth rate in future Industry specific growth drivers Segmental Analysis Key Operating Metrics

4. India's FMCG market was valued at 110 billion U.S. dollars in 2020. Compared to 2012, the market size of fast-moving consumer goods had tripled. FMCG is the fourth-largest sector in the Indian economy. There are three main segments in the: Food and beverages accounts for 19%. H ealthcare accounts for 31% . H ousehold and personal care accounts of 50% share The urban segment contributes to about 55% of the revenue share, while the rural segment accounts for 45%. Size of the industry

5. KEY MARKET PLAYERS The Coca-cola Company Dr Pepper Snapple Group, Inc. Johnson & Johnson Kimberly-clark Corporation Nestle Patanjali Ayurved Ltd. Pepsico , Inc. Procter And Gamble Revlon, Inc. Unilever Group

6. Market Share of Companies by Revenue Company’s Name Market Share(%) ITC 30% Hindustan Unilever(HUL) 14% Nestle 5% Britannia 1% Patanjali Ayurved 4% Dabur 2% Godrej Group 2% Marico 5% GlaxoSmithKline(GSK) 1% Colgate-Palmolive 1% Emami 2% Amul 4% Parle Products 7% The Indian online grocery market is estimated to exceed sales of about US$ 17.12 billion by 2026, at a CAGR of 28.99%.  The E-commerce market is estimated to reach US$ 200 billion in 2026 from US$ 38.5 billion in 2017, backed by growth in online users from 622 million in 2017 to 900 million in 2025.  Growing awareness, easier access, and changing lifestyle are the key growth drivers for the consumer market.

7. Growth rate over past 3-5 years The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020. The Indian FMCG industry grew by 16% in CY21 a 9-year high, despite nationwide lockdowns. The rural market registered an increase of 14.6% in the same quarter and metro markets recorded positive growth after two quarters. Final consumption expenditure increased at a CAGR of 5.2% during 2015-20.  In September 2021, rural consumption of FMCG increased 58.2% YoY; this is 2x more than the urban consumption (27.7%). The Indian processed food market is projected to expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20

8. Industry Specific Growth Drivers Shifting of Economic Power: The emerging markets are ticket to major growth. From 2010 to 2020, they will account for about 70 percent of the worldwide growth in consumer spending and about 50 percent of total consumer spending. For many FMCG companies, their emerging-market focus has been all about the BRICs (Brazil, Russia, India and China)—which makes sense, considering they‘re expected to deliver about half of the worldwide growth.

9. Rural consumption Rural areas are expected to be the major driver for FMCG, as growth continues to be high in these regions till some years ago. Rural India is estimated to account for more than 700 million consumers or 70 percent of the Indian population and 40 percent of the total FMCG market. (Figure -7)This market has immense potential, enticing FMCG growth .Rural FMCG market size is expected to touch USD100 billion by 2025 The Fast-Moving Consumer Goods (FMCG) sector in rural and semi-urban India is estimated to cross USD100 billion by 2025

10. Premiumization The rising income of customers has accelerated the trend towards ‗premiumization‘ in India. The trend can be observed significantly in the top three income groups , the globe's strivers and seekers The globes are eager to satisfy their exclusive feel and emotional value with premium products and their behavior is near to consumers of developed economies. They are well-informed for various products, and willing to purchase products which suit their style. The strivers and seekers wishes to parallel the rich and do up-trading lavish products which offer better functional benefits and experience relative to products offered for mass consumption

11. Key Operating Metrics For The Industry OUT OF STOCK RATE (OOS) Measure your ability to meet customer demand

12. DELIVERED ON-TIME & IN-FULL (OTIF) Do you receive your exact orders on-time? The OTIF measures the delivery performance within a supply chain: On-Time, In-Full delivery. It measures several levels of delivery: if the right product was delivered to the quality standards agreed upon, in the quantity ordered, at the place agreed on, and at the time expected by the customer – often with a tolerance range predefined . FCMG KPI - Compare the performance of your suppliers: how often do they provide you with what you want, when you need it. It is usually calculated as a percentage according to the following formula: OTIF = (number of deliveries “OTIF” ÷ total deliveries)*100. The “OTIF” deliveries used to calculate this percentage should answer a couple of requirements: they have a delivery date, they measure the date and hour of said delivery, archive it in the system, and maintain a track record of the reasons behind an order not “OTIF”.

13. CASH-TO-CASH CYCLE TIME This FMCG KPI combines 3 ratios: the days of inventory (DOI), the days of payables (DOP), and the days of receivables (DOR). It represents the time period needed between the moment a business pays cash to its suppliers and receives cash from its customers. It is also referred to as “cash conversion cycle” and is useful when you need to determine the amount of cash needed to fund ongoing operations. For fast moving goods, estimating the financing requirements is crucial for smooth operations. The formula used to calculate the cash-to-cash cycle is the following: Cash-to-Cash Cycle = DOI + DOP – DOR. A cycle of 40 days means that a business must support its expenses for 40 days – not more. This is a useful calculation for forecasting or trying to address an expensive debt for instance. Analyze and monitor how long you need to convert resources into cash flows

14. Agenda (submission II) Industry Analysis Dynamics of the Industry Critical Success Factors Regulations that affect the industry Recent Events Analysis of Cost and Profitability Major Costs Margins and Profitability

15. Strategic challenges for the Consumer Goods industry

16. Primary Factors Understand consumer changes and the way my company adapts to these changes Generation of an organizational model based on four main axes: Shared targets. Centralized functions. Search for motivation through values. Understanding the reality of each market and organizing resources by adapting to needs.

17. Tackle commercial management from the following areas: Set up a commercial policy that shows a fairness across the different channels. Boost commercial alliances or collaborative formulas that enable margin to increase, brand equity to be raised or be a partner for the client. True innovation, understanding this as innovation throughout the entire value chain and not only focused on the product.8. Take advantage of function clustering by multinational companies to fill the gap with local knowledge.

18. Secondary factors

19. Critical success factors for profitable FMCG business growth Sustainable Competitive Advantage Good growth in volumes and realizations. End of demonetization woes for FMCG. No more internecine competitive wars. A sharp fall in agricultural commodities. There is a big rural market and rising purchasing power. GST has been quite benign and favorable for FMCG companies .

20. Trends & Innovations that are affecting the FMCG Industry The Fast-Moving Consumer Goods (FMCG) industry is undergoing a significant transformation in response to the demand for more convenience, the COVID-19 pandemic, and changes in customer behavior. The major FMCG industry trends that address these changes involve sustainable product development and packaging, solutions improving customer experience, and digitization. The Top 10 Trends and Innovations affecting the FMCGindustry are : Sustainability Customer Experience Digitalization E-commerce Data Anal ytics Artificial Intelligence Direct Distribution Internet of Things Blockchain 3D Printing

21. C onvenient legal compliance tools for FMCG companies Governments are setting new standards, better practices and higher measures more than ever in the Fast Moving Consumer Goods (FMCG) industry as public health, environmental, sustainability and societal concerns increase. This is creating a mammoth task for legal, risk and compliance professionals to keep informed and compliant with their latest applicable law. Three  convenient tools to manage legal obligations quickly and easily are: Customized legal registers configured for individual operations. Stay in the loop with legal update notifications. Compliance confidence across multiple sites.

22. Stakes, Mergers & Acquisitions that are Disrupting the Indian FMCG Industry

23. Reasons for the sudden flurry of M&A activity Consumers control the market. Renewed interest from investors. Industry headwinds. Relaxation of Rules and low entry barriers. FMCG companies invest in other FMCG companies.

24. Reasons for the sudden flurry of M&A activity Consumers control the market. Renewed interest from investors. Industry headwinds. Relaxation of Rules and low entry barriers. FMCG companies invest in other FMCG companies.

25. Analysis of Cost and Profitability Major Costs Sales Tax Retailer and distribution Margin Raw material Packaging material Excise duties Depreciation Advertising Royalties Freight etc. Margins and Profitability In terms of profit margins, the FMCG business has a very thin margin overall. Profit margins can range from 2% to 25%. Due to the numerous steps the products go through before reaching the store and the customer, the profit margin in this industry is very low. In the FMCG industry, all products have very slim profit margins. Nevertheless, baby care products, cosmetics, bakery, and frozen foods have the highest profit margins, ranging from 10% to 25% at most

26. Business Models of the key players Hindustan Unilever Limited

27. ITC Nestle

28. Hindustan Unilever Ltd ITC Ltd Nestle India Ltd Revenue 524,460,000 579,309,300 Rs. 146,337,200 Market Cap(Cr.) 5,32,076 3,39,690 1,55,173 Sales Growth (3Yrs) 6.89% 7.25% 11.37% P/E 59.93 22.31 72.35 Net Income 88,790,000 148,024,400 21,448,600 Segment Home Care, Beauty and Personal Care, Foods and Refreshments, and Others. FMCG, hotels, software, packaging, paperboards, specialty papers and agribusiness. Milk Product and nutrition, beverages, chocolate and confectioneries.

29. Share Price(5 Years)

30. Hindustan Unilever

31. ITC

32. Nestle

33. HUL Strengths Weaknesses High Demand and Preferred Brand  Market Leader in FMCG Market Creative FMCG Company Comprehensive and automated delivery chain High brand awareness Declining market share Large range of brands in various categories of products No Ayurvedic Products Opportunities Threats Market expansion Consumer goods use price awareness Growing income levels Ayurvedic  Products Market competition Price of raw material Buyer control Changing Norms and Regulations

34. ITC SWOT Strengths Weaknesses Brand Image Global perspective and deep expertise in food retailing Social Initiatives Leading in other sectors Inefficient Cost Management System Highly dependent on Tobacco Incremental tax burden on the Cigarette Business Opportunities Threats Harnessing India’s Growth Core Brand Extension Online Community for Farmers Competition from Other Sectors Governments are tightening laws on Tobacco Industry Uncertain profit margin

35. Nestle Strengths Weaknesses Unmatched research and development capability Strong geographic presence, with one of the best geographically diversified revenue sources Unrivaled product and brand portfolio Environmental sustainability efforts Ownership of some of the most recognizable brands in the world Criticism over high water usage, selling contaminated food, anti-unionism, forced child labor and using other unethical practices Contaminated food recalls Opportunities Threats Clear and accurate labelling indicating of any harmful products Transparency in material sourcing Growing number of small Silicon Valley based food startups Growing ready-to-drink (RTD) tea and RTD coffee markets Poor quality water and its scarcity Increased competition in the beverage and food industries The price of coffee beans could significantly rise due to major weather disasters

36. Future Outlook With household goods and personal care products amounting to up to 50 percent of FMCG sales in the country, the FMCG sector has proven to be India's fourth-largest income-generating sector. The evolution in the lifestyle of Indians across the semi-urban and rural segments has primarily contributed to the surge in revenue generated by the FMCG sector in the country. While the urban segment of India contributes to almost 55 percent of FMCG sales, there has been a faster and broader growth for the FMCG sector in rural India. As a result, almost 50 percent of the money spent in rural India has been spent on an FMCG product. With a growth rate of 14.7 percent, the FMCG sector has been projected to grow to a market size of almost US$ 220 billion by 2025. Furthermore, with the sudden change in the corporate working world, where work from home has become a reality for many, the FMCG sector is also experiencing a change. It is estimated that India will gain US$ 15 billion a year by implementing GST. GST and demonetization are expected to drive demand, both in the rural and urban areas, and economic growth in a structured manner in the long term and improved performance of companies within the sector.