Changing Trends in FMCG Sector

ASSIGNMENT ON

CHANGING TRENDS IN FMCG INDUSTRY IN INDIA

By Shubhangi Sood MDU-MBA(Victor)

Under the Guidance and Supervision of PROF: ALOK ANAND

Introduction to FMCG Industry FMCG Concept and Definition:

The term FMCG (fast moving consumer goods), although popular and frequently used does not have a standard definition and is generally used in India to refer to products of everyday use. Conceptually, however, the term refers to relatively fast moving items that are used directly by the consumer. Thus, a significant gap exists between the general use and the conceptual meaning of the term FMCG.

Further, difficulties crop up when attempts to devise a definition for FMCG. The problem arises because the concept has a retail orientation and distinguishes between consumer products on the basis of how quickly they move at the retailer’s shelves. The moot question therefore, is what industry turnaround threshold should be for the item to qualify as an FMCG. Should the turnaround happen daily, weekly, or monthly? One of the factors on which the turnaround depends is the purchase cycle. However, the purchase cycle for the same product tend to vary across population segments.

Many low-income households are forced to buy certain products more

frequently because of lack of liquidity and storage space while relatively high-income households buy the same products more infrequently. Similarly, the purchase cycle also tends to vary because of cultural factors. Most Indians, typically, prefer fresh food articles and therefore to buy relatively small quantities more frequently. This is in sharp contrast with what happens in most western countries, where the practice of buying and socking foods for relatively longer period is more prevalent. Thus, should the inventory turnaround threshold be universal, or should it allow for income, cultural and behavioral nuances?

Characteristics of FMCG Products: •

Individual items are of small value. But all FMCG products put together account

for a significant part of the consumer's budget. •

The consumer keeps limited inventory of these products and prefers to purchase

them frequently, as and when required. Many of these products are perishable. •

The consumer spends little time on the purchase decision. Rarely does he/she

look for technical specifications (in contrast to industrial goods). Brand loyalties or recommendations of reliable retailer/dealer drive purchase decisions. •

Trial of a new product i.e. brand switching is often induced by heavy

advertisement, recommendation of the retailer or neighbors/friends. •

These products cater to necessities, comforts as well as luxuries. They meet the

demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers.

ABOUT THE INDUSTRY IN INDIA FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge. The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,

and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands According to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI), several FMCG registered double-digit growth in value terms, for example, shaving cream (20%), deodorant (40%), branded coconut oil (10%), anti-dandruff shampoos (15%), hair dyes (25%) and cleaners and repellents (20%). On the contrary, negative growth of up to 8% was registered in products such as personal healthcare, laundry soaps, dish wash, toilet soap, toothpaste and toothpowder.

Industry Category and Products Household Care Personal Wash:The market size of personal wash is estimated to be around Rs. 8,300 Cr. The personal wash can be segregated into three segments: Premium, Economy and Popular. The penetration level of soaps is ~92 per cent. It is available in 5 million retail stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market share of ~53 per cent; Godrej occupies second position with market share of ~10 per cent. Detergents:The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care segment is characterized by high degree of competition and high level of penetration. In washing powder HUL is the leader with ~38 per cent of mar-ket share. Other major players are Nirma, Henkel and Proctor & Gamble.

Personal Care Skin Care:The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care market is at a primary stage in India. The penetration level of this segment in India is around 20 per cent.. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent, fol-lowed by CavinKare with a market share of ~12 per cent and Godrej with a market share of ~3 per cent. Hair Care:The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. Marico is the leader in Hair Oil segment with market share of ~ 33 per cent; Dabur occu-pies second position at ~17 per cent. Shampoos:The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the total shampoo sale. It has low penetration level even in metros. Again the market is dominated by HUL with around ~47 per cent market share; P&G occupies second position with market share of around ~23 per cent. Antidandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to increase due to increased marketing by players and availability of shampoos in affordable sachets. Oral Care:The oral care market can be segmented into toothpaste - 60 per cent; toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste market is estimated to be around Rs. 3,500 Cr. The penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. This segment is dominated by Colgate-Palmolive with market share of ~49 per cent, while HUL occupies second position with market share of ~30 per cent. In

toothpowders market, Colgate and Dabur are the major players. The oral care market, es-pecially toothpastes, remains under penetrated in India with penetration level ~50 per cent.

Food & Beverages Food Segment :The foods category in FMCG is gaining popularity with a swing of launches by HUL, ITC, Godrej, and others. This category has 18 major brands aggregating Rs. 4,600 Cr. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, ready to eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury. Tea :The major share of tea market is dominated by unorganized players. More than 50 per cent of the market share is capture by unorganized players. Leading branded tea players are HUL and Tata Tea. Coffee :The Indian beverage industry faces over supply in segments like coffee and tea. However, more than 50 per cent of the market share is in unpacked or loose form. The major players in this segment are Nestlé, HUL and Tata Tea.

PESTLE Analysis Growth Drivers The current economic trend, exhibiting modest demand and supply is likely to have a medium-term impact on the demand for FMCG products but promises revival and higher growth in the long term based on the following fundamentals: 1. Expanding purchase basket resulting in higher penetration of products 2. Increased consumption with higher disposable household family income 3. More consumers entering the market place (Rural and urban base of pyramid) For these developments to catalyse faster there are two sides of the equation that need to come together demand and supply along with other systemic factors.

1. Demand-side Drivers Consistent GDP Growth The Indian economy has been consistently growing over the last few years. The growth rate in 2008-09 was lower (6.7%) compared to previous year. Increasing Consumer Income Increase in incomes is largely an outcome of economic growth across sectors. Over the past few years,India has seen increased economic growth, with a continuing and substantial impact on consumer disposable incomes enabling good growth for the FMCG sector, among others. High Private Consumption The Indian economy, unlike most Asian economies, has a very high rate of private consumption (61%). Of that, a further 60% is due to retail spends – goods and products that people consumer, as opposed to services or essential consumption items like rent and education Rising Urbanization

India has 70% of its population living in rural areas. With rising urbanization, more people will have exposure to modern products and brands and thus shift to branded and packaged goods and products By 2015, an additional 75 million consumers will have moved into cities, not only buying FMCG products for themselves but also serving as a conduit for information and goods to their families still in rural India Increasing Discretionary Spends Another encouraging factor is the falling spends on basic food items which frees up consumer income for other categories of FMCG products. This trend is noticeable among both urban and rural consumers. Low labor cost India has by far the lowest labor cost compared to many emerging countries giving it an edge for establishing manufacturing base for both Domestic and International FMCG brands. Average labor cost in India is ~US$ 90/month compared to US$190/month in China, US$ 210/month in Thailand and even higher US$1,300/month in Taiwan.

Systemic Drivers for Sectoral Growth Several other factors are also encouraging for FMCG sector growth in the long run, such as policy change and investments in infrastructure development. Favorable changes in Government Policies The Indian government has been trying to foster the growth of various categories of FMCG by way of making policy changes. Some of the policy changes include: • Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity for most of the food processing sector • Quantitative restrictions removed • Five-year tax holiday for new food processing units in fruits and vegetable processing • Customs duties reduced on plant and equipment, raw materials and intermediates, especially for export production • Capital goods freely importable, including second hand ones

• De-reservation of most FMCG categories from SSI • Many states have also begun competing with each other to offer incentives to different sectors including FMCG, in the form of tax holidays, fiscal incentives, land at concessional rates and subsidies to encourage economic development. Infrastructure Development The government has invested a considerable amount in the Golden quadrilateral project to connect the four corners of the country, of which over 96% has been completed. 50% of existing highways are being improved and expanded. An outlay of Rs. 59,000 crores was earmarked for road development projects in the 10th Plan, between the aforementioned projects as well as projects to develop the National highways (Primary system), the state highways (secondary system), major district roads and rural roads. The railways are also increasing capacity through increasing tracks, improving existing tracks and adding more freight compartments to enable better carrying of goods and products. Challenges With the growth drivers in place, there are many issues and challenges the sector grapples with. The key challenges faced by FMCG sector players in India are as follows: 1. Tax Structure - Complicated tax structure, high indirect tax, lack of uniformity, high octroi & entry tax and changing tax policies. 2. Infrastructural Bottlenecks - Agriculture infrastructure, power cost, transportation infrastructure and cost of infrastructure and Pass-offs. 3. Emergence of Private Labels. 4. Regulatory Constraints 5. Price of Inputs.

Tax Structure i. Complicated Tax Structure - In India, problems are exacerbated by the complicated tax structure.There is a VAT which is to be levied at state level, there are other state taxes such as entry taxes and then centre levies excise duties and service tax. As a result, no product cost isexactly the same from one state to the next. ii. High Indirect Tax - Indirect Tax levels are quite high, especially in light of the fact that the sector provides goods meant for daily consumption. China, for instance, levies a tax of 10%19 on average, whereas in India, the average is around 30%. iii. Lack of uniformity - Despite VAT states do not implement rates and procedures uniformly. Each state still continues to approach taxation differently, and thus moving goods from one state to another is like moving them from one country into another. The taxation rate policies on many FMCG goods differ from state to state and centre to state. Centre has classified many FMCG products under Merit (VAT exempt) list, such as processed foods, tooth powder, sanitary napkins but states levy on the same products high rate of 12.5% iv. High Octroi & Entry Tax - There are Octroi and Entry Tax at city and state entry points in a few states, which leads to an increase in pricing and affords opportunities for arbitrage. For instance, Mumbai has octroi of 4-6% on goods produced outside of Mumbai. Thus, a bottle of mineral water produced by Coke or Pepsi which have their plants in Thane, which is considered outside the city limits of Mumbai, have to pay this extra charge, while Parle, which has a bottling plant within the city limits does not. So Bisleri is sold in Mumbai for Rs. 12, while Kinley or Aquafina cost Rs. 13, just because of the factory location. This opens up possible arbitrage opportunities, apart from causing a genuine grievance to the consumer. v. Changing Tax Policies - Tax policies keep changing which makes it difficult to plan for the long term. For instance, tax havens were created in J&K some years ago and many

companies opened facilities there. However, recently part of the exemption was withdrawn by the government, thus leading to a sudden hike in costs.

.Infrastructural Bottlenecks i. Agricultural Infrastructure - Agriculture infrastructure in India is particularly weak. Firstly, irrigation and modern farming methods are not widespread and thus agriculture in India is at the mercy of nature. Thus, it makes for grossly varying amounts of harvest of critically needed inputs into FMCG manufacture, from one season to the next and one year to the next. ii. Power Costs - Power costs in India are very high and they contribute substantially to cost of goods sold. They are 3-4 times the optimal costs. iii. Transportation Infrastructure - To compound this problem is the poor transportation and roadways infrastructure – many of the villages are extremely poorly connected with means of transportation – either road, rail or sea – so the amount of time it takes for the harvest to be transported to the FMCG manufacturers is unpredictable, and results in substantial spoilage of the goods. For example, it costs nearly 12 days to transport goods from Baddi in Himachal Pradesh to South India, a distance of 3000 km. The lack of a cold chain adds to this problem, because it means a tremendous amount of farm output actually rots or gets spoiled in transit. Nearly 8% - 10% of dairy produce is lost to pilferage. iv. Cost of Infrastructure - It takes almost Rs. 7- 8 crores to lay 1km. of road. Along with this problems in land acquisition due to fragmented land holding further delay development of road and rail infrastructure increasing the cost associated.

Emergence of Private Labels Apart from the pressure on margins, 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 consumer’s price points, particularly at the

mass level. Moreover, there are inevitable conflicts of interest when a retail chain has its own label whose packaging looks like category leaders’ and stocks brands of other manufacturers, in terms of display space, promotions etc.

Regulatory Constraints i. 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. ii. The Indian labour laws were drafted in the 1940s and take no note of modern manufacturing methods and strategies. They need to be changed on a more dynamic basis to reflect present realities. iii. There is lack of uniformity in definitions, and these do not follow international norms either. Currently, drugs and cosmetics come under the same set of laws when in fact they need to be treated differently. Weights and Measures used under FDA do not conform to those under the Weights and Measures Act followed in India. Some products come under the OTC category internationally but come under Schedule H drugs in India, requiring doctor’s prescription and require to be distributed only in drug licensed stores iv.

Acquiring manufacturing licenses is a long and painful process, beset with red

tape and corruption. It takes 10-12 months to get multiple licenses and to set up a manufacturing unit. v. Reservation of jobs for employees creates many problems. For instance, Himachal Pradesh has a reservation of 70% of jobs for people domiciled in Himachal Pradesh. Since they are few in number, attrition happens for as little as Rs. 50 pm, and it becomes a problem to maintain the requisite labour force.

vi. Export procedures are cumbersome and lengthy. There is no single-party interface so multiple departments and officers have to be followed up with to get the requisite licenses. A transport permit has to be sourced for each consignment rather than assigning a blanket permit for a period of time.

Social At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are longterm growth categories in both rural and urban areas.

Demographic With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption.

SWOT ANALYSIS Of INDUSTRY

Strengths well established distribution network . extending to the rural areas. low cost operations . Presence of well-known brands in FMCG sector Weakness 1.

Lower scope of investing in technology and achieving economies of

scale, especially in small sectors 2.

Low exports levels

3.

"Me-tooʺ 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 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

Threats 1. Removal of import restrictions resulting in replacing of domestic brands 2. Import policies.

3. Tax and regulatory structures 4. slow down in rural demand . 5.

Growth of unorganized markets.

Key players

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands. S. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

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 Industrie

A brief introduction about major FMCG companies in India Hindustan Unilever Limited

This Company is earlier known as Hindustan Lever Ltd. This is India's largest FMCG sector company with all type of household products available with it. It has Home & Personal Care products, and also food and Water Purifier available with it. According to Brand Equity, HUL has largest no of brands in most trusted brands list 16 of HUL's brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an annual survey. Products of HUL are: Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair & Lovely; Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surfexcel; Vaseline; Wheel.

Recent Stratergies •

Unilever is lowering its expenditure on packaging across its portfolio of food brands as part of a wider cost-cutting drive. HUL has pared down the colour palette used for print-ing across many products. The system has been used to reduce printed packaging costs for Unileverʹs products. It is also eco-friendly because it reduces waste in the printing process. HUL is taking different steps to reduce the cost and increase the margin.

•

HUL prioritized opportunities which build upon the existing assets and capabilities. It avoided spreading their management thinly. For example: HUL first made its sales and distribution channel & supply chain management in manufacturing and selling wheat flour and utilized it into the selling breads produced by wheat flour.

•

HUL is more focused on the innovations Example: In 1995 launched KISSAN ANNAPURNA staple foods with the message “staple food including iodized salt” Serving Rural population: In 2000 the 32% of the sales were from rural sector but in 2010 it is more than 50%.

•

It follows direct communication from the customers.

•

It believes in expanding the portfolio.

•

Each category has a different set of supply chain, production and consumer decision making process issuing associated with it.

Strategic Shifts In the past 10 years, HUL has made four shifts in its business strategy, targeted at boosting growth and reach POWER BRANDS: Strategy in 2000. Focusing on fewer brands, 30 of them, and showering marketing attention on them. MASSTIGE: Strategy in 2005-06. Making premium brands (prestige) attainable for a larger section of consumers (mass). ONE UNILEVER: Strategy in 2007. Building leadership position in fast-growing markets. PUMP UP THE VOLUMES: Strategy in 2010. Global CEO Paul Polman is pushing the Indian operations chasing value growth to deliver on the volumes as well

Strengths

Weaknesses

• CPIL and HUL are projected to share a

Engaged in price war with P&G - HUL’s

substantial combined market share of

stock was downgraded by a majority of

nearly80% of India’s toothpaste segment

brokerage firms in March 2010 as analysts

(in 2009).

estimated that its detergent segment could

• Has the highest total revenue and net

be rendered

profit of INR21,059.20cr and

if the detergent price war intensifies.

INR2,504.51cr respectively among India’s

• Current operating margin of 14% is lower

top 5 FMCG companies.

than its peak operating margin of 18% in

• Its shampoo segment has powerful brand

2002.

portfolio that accommodates consumers’ needs from different income group - Clinic is a mass market brand, Sunsilk falls into to

the mid-price market while Dove is in the premium segment. • Issued bonus debentures with face value of INR6 (with annual interest rate of 9% payable annually). • HUL’s INR1cr challenge advertising campaign aims to promote Rin’s superior value to its consumers

Opportunities

Threats

• Its Fair & Lovely brand is the leader in

Competes with P&G in the detergent

India’s whitening cream segment and

segment, in which this segment accounts

serves 250mn consumers across 30

for 10-12% of the company’s earnings

countries. This product was also rated as

before income tax.

the 12th Most Trusted Brand in India by

• Detergent price war with its rival P&G

ACNielsen ORG-MARG in

will erode profit margins.

2003.

• Small players like Dabur is chipping away HUL’s market share in the oral care, hair care, soaps segment. During AprilJune 2009, Dabur’s shampoo segment grew by 7.3% while HUL’s share with Sunsilk brand fell 50% (45.4% in value terms). • HUL’s share in the toothpaste segment fell from 29.6% to 28% during April-June 2008 while Dabur’s share increased from 9.3% to 10% and CPIL’s share grew from 47.7% to 49.5%. • Calcutta High Court passed an interim order that restrains HUL’s television commercial that directly compares the performance of its Rin with P&G’s Tide

Procter & Gamble Hygiene & Health Care Limited (P&G) Procter & Gamble was founded in 1837 by William Procter, a British citizen who immigrated to the United States. The company first sold candles. Procter & Gamble Co. (P&G, NYSE: PG ) is a Fortune 500 American multinational corporation headquartered in Downtown Cincinnati, Ohio that manufactures a wide range of consumer goods. As of mid 2010, P&G is the 6th most profitable corporation in the world, and the 5th largest corporation in the United States by market capitalization, surpassed only by Apple, Exxon Mobil, Microsoft, and Wal-Mart. It is 6th in Fortune's Most Admired Companies 2010 list P&G is credited with many business innovations including brand management and the soap opera. According to the Nielsen Company, in 2007 P&G spent more on U.S. advertising than any other company; the $2.62 billion spent by P&G is almost twice as much as that spent by General Motors, the next company on the Nielsen list. P&G was named 2008 Advertiser of the Year by Cannes International Advertising Festival. Proctor & Gamble is a leading member of the U.S. Global Leadership Coalition, a Washington D.C.-based coalition of over 400 major companies and NGOs that advocates for a larger International Affairs Budget, which funds American diplomatic and development efforts abroad.

Major products of P&G Coconut-based cleaning and

Laundry and personal cleansing

food products Purico Star Perla Sunshine Camay Mayon PMC Victor Ola Agro Fresco Health care

products Tide DariCreme Primex Safeguard Ariel Gain Bonus Daz Lava Mr. Clean Prell Crest

Vicks Fibresure Thermacare Pepto Bismol

Zest Moncler Ivory Laundry, personal care and hair

Hair care and laundry categories Pampers Whisper Rejoice Tide Max Factor Vidal Sassoon Ivory Pantene Dishwashing, fabric care and food categories

care Secret Safeguard Ascend Ariel Old Spice Zest Clairol Nice n Easy Wella Camay

Joy Mr. Clean Downy Alldays Pringles

STRATEGIES OF P&G Consumer Understanding No company in the world has invested more in consumer and market research than P&G. We interact with more than five million consumers each year in nearly 60 countries around the world. P&G invest more than $350 million a year in consumer understanding. This results in insights that tell us where the innovation opportunities are and how to serve and communicate with consumers. Innovation P&G is the innovation leader in this industry. Virtually all the organic sales growth delivered in the past nine years has come from new brands and new or improved product innovation. We continually strengthen our innovation capability and pipeline by investing two times more, on average, than our major competitors. In addition, we multiply our internal innovation capability with a global network of innovation partners outside P&G. More than half of all product innovation coming from P&G today includes at least one major component from an external partner. The IRI New Product Pacesetter Report ranks

the best-selling new products in our industry in the U.S. every year. Over the past 14 years, P&G has had 114 top 25 Pacesetters—more than our six largest competitors combined. In the last year alone, P&G had five of the top 10 new product launches in the U.S. and 10 of the top 25. Brand-Building P&G is the brand-building leader of this industry. It has built the strongest portfolio of brands in the industry with 22 billion-dollar brands and 20 half-billion-dollar brands. Eleven of the billion-dollar brands are the #1 global market share leaders of their categories. The majority of the balances are #2. Go-to-Market Capabilities It has established industry-leading go-to-market capabilities. P&G is consistently ranked by leading retailers in industry surveys as a preferred supplier and as the industry leader in a wide range of capabilities including clearest company strategy, brands most important to retailers, strong business fundamentals and innovative marketing programs Scale Over the decades, we have also established significant scale advantages as a total company and in individual categories, countries and retail channels. P&G’s scale advantage is driven as much by knowledge-sharing, common systems and processes, and best practices as it is by size and scope. These scale benefits enable us to deliver consistently superior consumer and shareholder value. P&G follows Connect + Develop strategy which enables to bring innovations to life faster, more economically and more sustainably.

• The Company has 21 product categories out of which only 8 product have presence in India. The company is planning to launch the rest 13 product in India. The company expects to see a growth in other categories.

• The company has an aggressive plan to set up 20 new factories across the World out of which 19 is expected to come in emerging markets and most of them would be seen in Brazil, Russia, India, and China (BRIC) nations. • Whisper which is one of the company’s power brands has recorded 50 per cent market share in urban India. Strength

Weaknesses:

Diversification: Product diversification

Non-profitable products: Running products

with about 300 products.

which may not be profitable but still had to do it because of keeping up with the market

Research and development: P&G invests 3

presence strategy. Few such products are

- 4 % of Net outside Sales in research and

Crest as toothpaste, Always hygiene pads,

development (R&D). This amount easily

Dawn dishwashing bar.

exceeds their leading competitors, among

Inadequate quality control: With large

consumer products companies.

number of product profile, the quality control of all the products has deteriorated.

Strong brands: P&G has 13 Billion-Dollar Sales Brands such as: Always, Ariel,

· Mass appeal products at premium price:

Bounty, Charmin, Crest, Downy/Lenor,

Some mass appeal products like Pringles

Folgers, Iams, Pampers, Pantene, Pringle's

are priced very high as compared to its

and Tide. The total sales of these thirteen

competitor’s products.

‘billion dollar brands’ taken together, would make a Fortune 100 company in itself. Wide distribution network: P&G markets its products in 160 countries with manufacturing capacities in 40 countries. Leading market position: P&G is the world's largest consumer products

company. P&G is the global leader in all its 5 broad business segments. Opportunity:

Threat

Developing markets: The economies of

Small players like Dabur is chipping away

China and India are growing at a very fast

p&g market share in the oral care, hair

pace. The company currently competes in

care, soaps segment.

only about 10 of its top 25 categories in most developing countries. This provides

Large no of competitors are entering

P&G with an opportunity to enhance its

FMCG secot

market share as well as expand its presence in other categories. flavored or unflavored water from their home water filter. P&G could leverage its position in the bottled water segment to capitalize on the growing demand for packaged and flavored water. · Changing consumer preference: With the consumer preferences and choices, P&G because of its huge R&D base and Connect + Develop program is well placed to come up with new and innovative products that may suit the customer needs.

Godrej Consumer Products Limited (Godrej)

• The Board of Directors of Godrej Consumer Products Limited (GCPL) has approved the acquisition of 50 per cent stake of its joint venture partner SCA Hygiene Products’ stake in Godrej SCA Hygiene Limited. After the transaction, the Joint Venture which owns the ‘Snuggy’ brand of baby diapers will become a 100 per cent subsidiary of GCPL. • Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group Limited, South Africa. Kinky is among one of the largest brand into hair segment with product portfolio. Jan,

CHANGING TRENDS IN FMCG INDUSTRY Introduction Recent trends seen: Food Inflation As a result of the 2010 food price crisis, international food prices reached its peak in 2010 but fell drastically a year later. Developing countries were largely affected by the hike in food prices, where share of expenditure on food accounts for a large proportion of total consumer spending. According to Chart 3, developing countries such as Indonesia, India and China each spent 41.9%, 34.9% and 33.0% of their consumer spending on food in 2010. In 2010, due to speculation that the Indian central bank may hike interest rates after instructing banks to raise more cash reserves, the nation’s food prices inflated for a second week. An index that measures wholesales prices of lentils, rice, vegetables and other food products jumped 17.56% in the week to January 23 over the previous year. In addition, food inflation hiked 19.95% in the week to December 5, 2009, indicating the most significant increase since December 1998. Inevitably, high food inflation could restrict consumers’ demand and pricing flexibility for FMCG while lowering consumers’ purchasing power that diverts purchases away from certain FMCG. Health Food People are becoming conscious about health and hygienic. There is a change in the mind set of the Consumer and now looking at “Money for Value” rather than “Value for Money”. We have seen willingness in consumers to move to evolved products/ brands, because of changing lifestyles, rising disposable income etc. Consumers are switching from economy to premium product even we have witnessed a sharp increase in the sales of packaged water and water

purifier. FMCG companies forayed into India’s growing branded health food sector. Hindustan Unilever Ltd’s (HUL) health food brand - Kissan Amaze is being marketed on a trial basis in three southern states in India. Meanwhile, joint venture partnership between Godrej Food & Beverages Ltd and Hershey Company - Godrej Hershey Foods & Beverages Ltd (GHFBL) has plans to introduce several brands from its international portfolio into the Indian branded health food sector. Household Care As a result of rapid urbanisation and emergence of small packs and sachets, this segment saw high level of penetration, in which it is projected to grow at a CAGR of 2% from 2005 to 2010. Detergent production in India expanded 66.92% from 639,472 tonnes in 1999 to 1,067,415 tonnes in 2007 before contracting 6.18% to 1,001,454 tonnes a year later. In 2010, Procter & Gamble (P&G) and HUL were engaged in a price war. With the lower priced version of Tide introduced by P&G, HUL retaliated by slashing prices by 10-30% for its detergent products, namely Rin and Surf where HUL cut the price for Rin from INR70 to INR50 per pack. As for Surf Excel Blue, prices were brought down from INR91 to INR82 for a 500gm pack. Contributing close to one-fourth (in FY2009) of its total sales, the detergent segment remains a key market for HUL. With P&G’s new urgency in this segment, the company promoted Tide Natural with smart advertising as well as through volume discounts.

personal care segment The key trend in the personal care segmentis moving away from health products towards beauty products, hence consumers are switching demand from basic products (such as soaps, shampoos, hair oils and etc.) to specialized products (such as skin whitening cream, anti-ageing products, sun block lotions and etc.). With rising disposable income from USD2,720 in 2008 to an estimated USD3,482 in 2012 as well as growing female population (2008: 178mn; 2012: estimated 191mn) between the age group 25-44 years will definitely boost this market segment.

Sales of whitening cream outpaced those of Coca-Cola and tea in India as most Indians consider having fair-complexions an asset. With increase in disposable incomes, growth in rural demand is expected to increase because consumers are moving up towards premium products. However, in the recent past there has not been much change in the volume of premium soaps in proportion to economy soaps, because increase in prices has led some consumers to look for cheaper substitutes. Outsourcing Outsourcing the manufacturing or processing of certain range of products to small vendors is gaining importance among FMCG players. With such initiatives, the companies can focus on front-end marketing initiatives more effectively Reducing carbon footprint Of the energy used in PepsiCo India’s beverage business, 38 per cent comes from renewable resources. Dabur has 30 per cent of its steam generation fired by renewable resources. Hindustan Unilever Limited and ITC have earned Voluntary Emission Reduction (VER) and Certified Emission Reduction (CER) credits for their work, respectively. HUL was awarded 52,000 VER credits for developing a new soap-making process called Plough Share Mixer, which eliminates the need for steam altogether Ready to Eat Becasue of changing lifestyles, busy jobs etc marketers are coming up with Jet Age consumer products. Ready to Eat a) Con Flakes/ Oats b) Pastas c) Biscuits

d) Noodles e) Pizzas f) Burgers Ready to Drink a) Energy Drinks b) Non-Cola Drinks (Juices) Ready to Cook a) Cut Vegetables b) Soups c) Paranthas/ Rotis d) Snacks

Evolved Product Forms: 20 years back consumers had limited choices to pick from. The days of Tortoise Mosquito repellent coils are gone. This is the age of aerosols with value added functionality. I have picked up some examples, were we have seen a change in the product forms. Here is the list: Dish Wash: Powder to Bar to Liquid Shaving: Creams to Foams/ Gels Repellents: Coils to Aerosols/ Body Creams/ Gels Air Freshners: Sprays to Electric Toilet Cleaner: Acid to Harpic to In-Cistern

With rapid urbanization, emergence of small pack size and sachets, the demand for the household care products is flourishing. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market.

Data Analysis CONSUMERS Particulars Yes No

Respondents 28 22

1. Do you buy same brand for any specific

product?

30

28

25

22

20 15

Series1

10 5 0 Series1

yes

no

28

22

Interpretation: The objective behind the formation of this question is to know the level of brand loyalty of the consumers towards the brands available in the market. The above figure shows that on 56% of the respondents are loyal to their brands of detergent/soap. FMCG are such a market where the level of loyalty remains low and this is because of many reasons.

particular

respondent

Route More than once a week Weekly Fortnightly Monthly Less than once a month

4 4 12 6 23 1

2. How often do you carry out your main grocery shopping i.e.excluding short visits for top-up groceries?

respondent 25 20 15 10 5 0

23 12 4

4

Route

More than once a week

6

Weekly

Fortnightly

1 Monthly

Less than once a month

Interpretation: With increase in urbanization, and increase in economic growth, monthly income of consumer is increase; therefore there is increase in disposable income. thus consumer are ready to spend more . Also the buying behavior of consumer has

changed over time. Over a period of time it has been seen that in urban area, there is increase in consumer buying FMCG products weekly, fortnightly.

3. While Buying a product which factor influences the most Particular Brand Price

Response 21 29

Response 35 30 25 20 15 10 5 0

29 21 Response

Brand

Price

Interpretation: The objective behind this question is to know the effect of influencing factors in the purchase decision of the soaps and detergent powders. It mainly contains the factors like, quality which players an important role in the purchase decision of the soaps and detergents both. If we look at the graph it shows price as the most influencing factors in the purchase decision while quality is also an important for purchase decision

4. Do you consider promotional scheme while purchasing any product? Particular Yes No Response 50 40

Response 39 11

39

30

Response

20

11

10 0 Yes

No

Interpretation: Answer of this question will give idea about the effect of promotional schemes in the purchase decisions. Such types of schemes always attract more and more consumers towards particular brand. Simultaneously it gives idea about the factors which consumers look most in the product before they make final decision. Here as the graph shows that 39 out of 50 consumers are looking for such schemes before they make purchase. 5. Which promotional Schemes attract you the most?

Particular Coupon Priceoff Freebies Scratch Card Luckydraw Bundling Extraquantity

Response 8 42 12 6 5 15 22

Response 42 22

g ra qu an tit y

5

Ex t

Lu ck yd ra w

ar d C

eb ie s

Sc ra tc h

Fr e

6

15

Bu nd lin

12

8

Pr ice of f

Co up on

50 40 30 20 10 0

Interpretation: The above stated question

Particular Normal Multigrain

Response 27 23

clearly states the awareness of promotional schemes offered in the market by the marketers to attract more and more consumers. The results show that price off and extra quantity is the two main offers/schemes which consumers have came across at the time of purchase. It will help the manufacturers and marketers too how too launch their new products in the market with which schemes 6. Which sought of pasta/ buiscuit would you prefer

Response 28

27

26 24

23

22 20 Normal

Multigrain

Interpretation: The above stated question clearly indicate the increasing percentage of consumer towards healthy food product over normal food product.With more income in their hands consumer are moving toward healthy food product.

7. Do you buy:§ §

Particular Response Different variety of product for each family member. 28 Same product for whole family. 22 Response 28

30 25 20 15 10 5 0

22

§ Different variety of product for each family member.

Interpretation:

§

Same product for whole family.

companies are not leaving any opportunity to micro segment the market. I can forsee that we are here to see further segments in different categories. Here are some examples: Age a) Junior Horlicks b) Junior Chyawanprash c) Pepsodent Barbie for Kids/ Colgate Strawberry Sex a) Women’s Horlicks b) Male fairness cream Specialized Household Cleaners a) Kitchen Cleaner: Mr. Muscle b) Power Cleaner (Rust): Easy Off Bang 8. What is the frequency to buy Ready to Eat products:Particular Response regularly 12 Irregularly 38 Response

38

40 30 20

12

10 0 regularly

Irregularly

Interpretation: Although the number of respondent having ready to eat product is low, but, Becasue of changing lifestyles, busy jobs etc marketers are coming up with Jet Age consumer products.

9. Does product packaging influence your buying behavior? Particular

Response 16 34

Yes No Response 40

34

30 20

16

10 0 Yes

No

Interpretation: Packaging is the not influencing factors in the purchase decision. Consumer is more oriented towards quality.

10. Does age anxiety effect your buying behaviour?

Particular

Response 34 16

Yes No

Response 40

34

30 16

20 10 0 Yes

No

Interpretation: The above graph shows that age anxiety plays a crucial role in buying decion.consumer while purchasing a personal product become more conciousness of such factors. “No” respondent mainly include teenagers. companies are not leaving any opportunity to micro segment the market. Here are some examples:Age:Junior Horlicks, Junior Chyawanprash, Pepsodent Barbie for Kids/ Colgate Strawberry. Sex a) Women’s Horlicks b) Male fairness cream

11. Does celebrity endorsement effect the buying decision of product? Particular

Response 15 35

Yes No Response 40

35

30 20

15

10 0 Yes

No

Interpretation: This question gives stress on the media habit of the people and through which the product should be launch or they think it would be better than other Medias. It has been seen that TV as the best media to market the product which will cover majority of the viewer ship. On the second place it shows news papers as the media to promote the product in the market.

In media large number of consumer says that

celebrity endorsement doesn’t effect their buying decision, it is the quality of product that matters. 12. During inflation(price hike), you go for Particular Sachet of same branded product Cheaper substitute

Response 38 12

Response 40

38

30 20

12

10 0 Sachet of same branded product

Cheaper substitute

Interpretation: The above graph clearly shows that even during inflation ,price hike consumer would go for sachet of same branded product, rather than going for a cheaper substitute. this shows quality, brand loyalty effect the mind of consumer the most. companies have come with lower quantity SKUs and make consumers switch from higher to lower SKUs and not from premium to popular brands (like Dove to Lux International). Just to give you an

example, Henkel instead of increasing the price of their Henkwl detergent from Rs. 46 to Rs. 50, they have launched a new SKU of 400gms for Rs. 40. During the time of inflation, people shift to sachets of their brands. Sales numbers of FMCG companies are quite robust. FMCG spend now comprises a smaller share of consumer’s wallet

13. If you get an attractive promotional offer in the product other than of your choice will you switch over? Particular Yes No

Response 37 13

Response 40

37

30 20

13

10 0 Yes

No

Interpretation: It shows the level of brand loyalty among the consumers. The result clearly shows that out of 50, 37 people are ready to switch over to another brand if they find better promotional schemes which suits their budget means more qyt + less cost + quality. Combination of all these schemes will run better in the market. when reason were ask for the same it shows that extra quantity with less or same price, more satisfaction, quality and other factors influence consumers to switch over too other brands.

Particulars Yes No

Respondents 47 3

14. Do you prefer to buy a product which is more eco friendly?

Response 50

47

40 30 20 10

3

0 Yes

No

Interpretation: It shows the level of aware of awareness among consumer toward environment.As more consumer are oriented towards green products, carbon free products. Companies are also moving towards carbon blueprint.

Findings of the report: •

FMCG are such a market where the level of loyalty remains low and this is because of many reasons.

•

Quality as the most influencing factors in the purchase decision while price is also an important for purchase decision.

•

Schemes always attract more and more consumers towards particular brand. Simultaneously it gives idea about the factors which consumers look most in the product before they make final decision

•

Price off and extra quantity is the two main offers/schemes which consumers have came across at the time of purchase

•

People are not much aware of the schemes which continue in the market it may be because of the present stock of the product at their place.

•

1+1 or 2+1 or other free schemes are more demanded and more aware schemes in the market.

•

People are ready to switch over to another brand if they find better promotional schemes which suits their budget means more qyt + less cost + quality.

•

Extra quantity with less or same price, more satisfaction, quality and other factors influence consumers to switch over too other brands.

•

People are more quality and price oriented.

•

Consumer remember that name of the product by the company name and also from the past performance of that company

•

Consumer remembers that name of the product by the company name and also from the past performance of that company

•

Customers are looking for any type of the promotions on the product before them going to purchase.

•

Price off, product bundling and extra quantity are more demanded by the consumers over others schemes

Limitations of the study •

I considered only Preet Vihar region only because of limited time duration.

•

Due to this, my sample size is only 50, which is not very large.

•

All the respondents could not fill their questionnaire on their own due to language problem and also problem of time and lack of positive behavior.

•

Respondent may give biased answer due to some lack of information about other brands.

•

Findings of the study are based on the assumption that the respondents have given correct information.

Bibliography BOOKS Ø

Philip Kotler, “Marketing Management”, 11th edition, Pearson education

Asia Publication.

Ø

C.R.Kothari, “Research Methodology methods & techniques”,New Age International(p)ltd.publishers,2nd edition.

WEBSITES Ø http://www.hul.co.in_files Ø http://www.pg-india_files Ø http://www.godrej_files Ø http://fmcgmarketers.blogspot.com/