Market overview for FMCG

FMCG brief

1. FMCG Market

2. Household Care Personal Care Food & Beverages •Fabric wash (laundry soaps and synthetic detergents) •Household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish) •Oral care • Hair care • Skin care • Personal wash (soaps) •Cosmetics • Toiletries •Perfumes • Deodorants •Feminine hygiene •Health beverages •Soft drinks •Staples/cereals •Bakery products (biscuits, bread, cakes) •Snack food •Chocolates •Ice cream •Tea & Coffee •Processed fruits & vegetables •Dairy products •Bottled water •Branded flour •Branded rice •Branded sugar •Juices FMCG

3. Main characteristics of FMCGs From the consumers' perspective: Frequent purchase Low involvement (little or no effort to choose the item) Low price From the marketers' angle: High volumes Low contribution margins Extensive distribution networks High stock turnover

4. FMCG Market potential Favorable demographics: Overall FMCG market is expected to expand at a CAGR of 20.6% to USD 103 billion during 2016F to 2020F Total consumption expenditure: increase to a whooping USD 3600 billion by 2020 Rise of Rural market: to speed at a CAGR of 18% and cross 100 billion

5. Top 10 FMCG companies Rank Name Revenue ( mn ) Profit ( mn ) Market ( mn ) Globally known brands 1 Procter and Gamble 71280 $ 9078 $ 21259 $ 65 2 Nestle SA 89673 $ 9562 $ 23275 $ 21 3 Johnson & Johnson 70074 $ 15409 $ 31245 $ 42 4 Philip Morris International 73908 $ 6873 $ 15350 $ 20 5 Pepsico 63056 $ 5452 $ 14576 $ 19 6 Unilever 57870 $ 5713 $ 12761 $ 142 7 AB InBev 43604 $ 9867 $ 19640 $ 54 8 The Coca-Cola Company 44294 $ 7351 $ 19243 $ 24 9 Mondelez International 29636 $ 7267 $ 6711 $ 50 10 L'Oreal 28288 $ 4913 $ 8850 $ 32

6. FMCG in India FMCG is the fourth largest sector in India. Household care being the leader , accounting for 50% Healthcare stands at 32% Food and beverages accounts for 18% Retail market in India is expected to reach USD 1 trillion by 2020 from USD 600 billion last year(2015) Modern trade expected to grow by 20% per annum which give unlimited opportunities to boost sales for FMCG companies

7. Top 10 FMCG companies in India Rank Name Revenue INR Crores Net Income INR Crores 1  ITC 36837 9845 2 HUL 31987 4082 3 Britannia 7948 749 4 Nestle India 7961 444 5   Dabur 5750 940 6 Marico 4947 702 7 Patanjali 5000 500 8 Godrej Consumer Products Ltd 4812 740 9 GlaxoSmithKline Consumer Healthcare 4309 687 10 Colgate-Palmolive 4162 577

8. SWOT analysis on Indian FMCG Strengths Weaknesses 1. Low operational costs 2. Presence of established distribution networks in both urban and rural areas 3. Presence of well-known brands in FMCG sector 4. Deep roots in local culture & great understanding of consumer needs 1. Lower scope of investing in technology and achieving economies of scale,        especially in small sectors 2. Low exports levels 3. Counterfeit Products. These products narrow the scope of FMCG products in rural and semi-urban market.  Opportunities Threats 1. Untapped rural market 2. Rising income levels, i.e. increase in purchasing power of consumers 3. Large domestic market- a population of over one billion. 4. Export potential 5. High consumer goods spending  1. Removal of import restrictions resulting in replacing of domestic brands 2. Slowdown in rural demand 3.Tax and regulatory structure

9. Growth strategies adopted by FMCG’s

10. 1.Multibrand Strategy Marketing of two or more similar and competing products by the same firm. The main rationale behind this strategy is to capture as much of the market share as possible by trying to cover as many segments as possible, as it is not possible for one brand to cater to the entire market. This also enables the company to lock up more distributer shelf space. Example : Hindustan Lever . It has Dove in the ultra premium segment, Lifebuoy for the economy segment and brands like Rexona , Liril , Lux , Le Sancy for the intervening segment .

11. 2.Product Flanking Refers to the introduction of different combinations of products at different prices, to cover as many market segments as possible. The idea behind this concept is to flank the core product by offering different variations of size and price so that the consumer finds some brand to choose from. Example: Vicks the cough and cold relieving medicine is now available in small containers and also as inhalers, cough drops and cough syrups.

12. 3.Brand Extensions Companies make brand extensions in the hope that the extensions will be able to ride on the equity of successful brands A well respected brand name gives the new product instant recognition and easier acceptance. It enables the company to enter new product categories more easily. Example: Amul . With the success of its first product, Amul milk powder , the company came out with Amul ghee, Amul butter, Amul cheese, Cheese spread, and finally added Amul chocolates to its portfolio.

13. 4.Building Product Lines Some companies add related new product lines to give the consumer all the products he/she would like to buy under one umbrella. Example: Britannia has adopted a similar strategy. It has introduced different kinds of biscuits and backed foods in the past few years. By adding a number of flavours in each product line the company grew in the industry.

14. 5.New Product Development A company can add new products through the acquisition of other companies or by devoting one’s own efforts on new product development. With the help of new products a company can enter a growing market for the first time, and supplement its existing product lines. Example: Dove by HLL is an example of creating an entirely new premium segment. For the first time in India, a soap with One-fourth moisturiser was offered to the consumer. # It has been positioned for the super premium segment as a skin care product not as a soap.

15. 6.Innovations in Core Products Owing to short lifecycle for products, It is prudent for a marketer to innovate from time to time both by technological expertise as well as from the consumer’s or dealer’s feedback. Such innovations are tried out around the core products of a company.

16. 7.Long term outlook A perfect example is of Kellogg’s in Mexico. The concept of cornflakes for breakfast promoted by Kellogg’s is entirely American in nature and in Mexico which is culturally so different from America, could not accept. Kellogg’s with its long term outlook took 28 years before finally breaking even. Today is the market leader in the breakfast cereals market, enjoying an unparalleled monopoly.

17. 8.Extending the PLC Economic conditions change, competitors launch new assaults, and the products encounters new types of buyers and new requirements are situations in which a FMCG company try to extend the PLC. Example: Existing models in products like automobiles, motorcycles, watches and cameras in India have experienced a good demand whenever new options were offered.

18. 9.Expanding markets by usage A company usually expands the market for its brand in two ways, either to increase the number of customers or by encouraging more consumption per intake. The usage rate of the consumers can be increased in 3 ways : It may try to educate or persuade customers to use the product more frequently. The Company can try to induce users to consume more of the product on each occasion. The company can try to discover new product uses and convince customers to use the product in more varied ways.

19. 10.Wide distribution network A very simple way of increasing FMCG company’s market share is by developing a strong distribution network, preferably in terms of more locations. An extensive distribution system can be developed over time, or the company many acquire another company which has an extensive distribution network. Example: Brooke Bond, Asian Paints, Hindustan Lever, Union Carbide have developed a good distribution network.

20. 11.Monitoring the pulse of the consumers Companies spend considerable effort to find out the what, where, how and when of their consumers. Well known companies frequently undertake marketing research to find out more about their consumers and how to satisfy their needs and wants in a better manner. Example: We may cite here the famous Marketing Research about instant coffee.

21. 12.Advertising and Media coverage Advertising is required to build awareness about an FMCG or brand which is available in the market but not many people might know about it. Informative, persuasive and reminding advertisements Example: Expensive four colour Coca-Cola ads in magazines tries to remind people to purchase it.

22. 13.Sales promotion Sales promotions offer a direct incentive to buy more in the short term. They are designed to stimulate quicker and/or greater purchase of particular products by consumers or the trade. Example : Pepsi has been doing a large amount of promotions since the time it entered India. Pepsi cassettes and T-shirts have been offered to young people all over the country.