Final

ANALYSIS OF FMCG SECTOR WITH THE REFERENCE OF TOP FIVE COMPANIES
TO WHOME IT MAY CONCERN
2010
This is certify that the Project Study Report ,Titled “ANALYSIS OF FMCG
SECTOR ” -” submitted by Mr Abhay Kumar Mishra as a partial fulfillment of

requirement of the two year PGDM course is a bonafide work carried out by the
student at our Institute.
This Summer Project Study is his original work and has not been submitted to any
other University/Institute.
Project Mentor
Mis-Anuradha
Date-
1
ANALYSIS OF FMCG SECTOR WITH THE REFERENCE OF TOP FIVE COMPANIES 0
1
0
DECLARATION 2
I hereby declare that the project titled “ANALYSIS OF FMCG SECTOR” is

2010
original and confide work carried out by me during the year 2008-2010 under the
able guidance of Mis. Anuradha Bharadwaj in partial fulfillment of the
requirement of Post Graduate Diploma In Management at Mangalmay Institute
of management Studies, Greater Noida
I also declare that this project is a result of my effort and no part of this project has
been published earlier or been submitted as a project by me for any degree or
diploma for any institute or university.
Place-
Abhay Kumar Mishra
Date-
PGDM 2008-10 Batch
2
2010
TABLE OF CONTENT
Acknowledgement…………………………………………………....4
Preface…………………………………………………………...........5
Abstract………………………..………………………………….......7
Introduction…………………………………………………………..8
Project details……………………………………………9
Research design: ……………………………………………..........16

Research topic…………………………………..............17
tools and techniques used for analysis………................19
Limitations………………………………………………………........21
Research Findings……………………………………………………23
Objective Of The Studdy…………………………………………….29
Scope Of The Studdy…………………………………………………35
Suggestion…………………………………………………………….40
Conclusion…………………………………………………………….40
Bibliography………………………………………………………….47
3
2010
ACKNOWLEDGEMENT
It is a matter of great pleasure and honor to work as a with an esteemed organization like MIMS.
And i would like to express my gratitude to MIMS for giving me the opportunity to enhance my
learning in a practical way with the project.
It is a result of meticulous effort put in by many minds that contribute to the final report
formation and this one is no exception. Several people therein have made this report possible
through their valuable inputs.
I would like to thank, with profound gratitude to Mis. Anuradha Bharadwaj, who was my mentor
as well as inspiration during the tenure of my project and with his guidance and expertise it
would not have been possible for me to come with so many vital research finding and complete
this challenging task.
My social gratitude is to Mr. Anupam Nirula (Deans-MIMS) for their support and
encouragement.
It would not have been possible to reach here without their guidance. Invaluable tips, needful
help and timely support are just a few to mention from what I got from them.
4
I would like to express my deep gratitude to Mis. Anuradha Bhardwag for their valuable
support and guidance during my summer internship and various works related to the internship.
These people were not only helpful but also guided me throughout, one way or other.
2010
I would like to thank all my friends and colleagues for all the support that they provided. Their
presence made all the work and hectic schedule easy and fun. I thank them for this great attitude
they showed towards me. I must have missed mentioning some people who helped me directly or
indirectly but i thank all of them.
Finally I would like to thank MIMS, GREATER NOIDA for giving me the opportunity to
enhance my learning in the real practical way by providing me a platform to work with one of
the biggest soft drink company not only in INDIA but in the entire WORLD.
PREFACE
Project is an integral part of management courses. Project experience refers to knowledge and
skills acquired by a student by participation in activities performed by professional. It is
distinct from an education in which theoretical knowledge is acquired.
The ability to develop solutions to practical through application of theoretical knowledge is

acquired by management students in the course of their summer training. It also helps the
students to develop professional competence and related skills as also to imbibe certain ethical
values and norms expected of professionals.
5
The soft drink industry has entered to booming phase and soft drink is available everywhere like
water. To monopolize market powerful projects are undertaken. This project is an endeavor in
that direction.
2010
The development of soft drink market it is necessary to touch all areas and the soft drink should
be available in rural areas as well as in urban sector, now the companies are focusing on rural
market and the strategies for that are made and market research for the promotion is needed
The emphasis in the project is providing the study and an insight into Indian FMCG Business
Scenario. The Project is designed to provide participation of PGDM program as on the job
experience. This has given a chance to try and apply the academic knowledge and gain insight
into corporate culture
This helps in developing decision-making abilities and emphasizes on active participation by the
student.
I gained valuable experience & knowledge during the survey. The Project consists of findings,
data analysis & then SWOT analysis & conclusions were drawn and finally recommendations
were put forward.
6
2010
ABSTRACT
The Research project has been undergone as it is a part of our PGDM course curriculum. The
Research project aims to abreast us to the corporate world, to the practicality of the market and
how the thing goes on in the corporate world. Apart from this the objective of the training is to
let us know about the day to day functioning and processes of the corporate houses.
For the purpose of research, the topic which was given to me is “Analysis of FMCG Sector With
the Reference Of Top Five Companies” as my project.
That contained of a unstructured project actually included of visiting the dealers, customers
and collecting information about the different FMCG Companies categories. .
After the different observations and survey through we can say that FMCG market is in the
position of growing in some area and in the position of introduction in some areas also. And
FMCC Market has one advantage that it has emerged as the market challenger to the players by
offering the best quality products.
7
2010
8
2010
INTRODUCTION
The project is titled as “Analysis Of FMCG Sector wrt to top 5 companies ”. As per the title of
project given by the MIMS, it aims at the competitive analysis of all the players in FMCG
Sector.
The problem for the purpose of the project was to do FMCG product with the competitors like
HUL,Colgate,P&G,Marico etc. and on the basis of outcomes of the survey and analysis
presentation of feasible suggestion and solutions.
The branded FMCG market in the country is estimated to be Rs.60000 Corer in the value terms,
which is broadly shared among HUL,Colgate,P&G..
9
Other than knowing the preference and mentality of the customer, there was a personal interview
of sales man was organized to know the actual condition of the market and
specified areas. Apart from this survey through personal interview there was also a
route riding with the sales agent, the route riding includes all the aspects like
2010
different product range, market analysis, supply chain analysis, customer

relationship management analysis, timely delivery of product analysis,
and many more things have done. It was also focused on knowing the day to day functioning of
the company. Apart from this there are many other solutions and suggestions for the problem
which are discussed in later section of the report
FMCG SECTOR
With the booming economy, India has become the cynosure of all economic attention. The
growth has been visible in all sectors alike; but one sector which has been grabbing attention is
the Fast Moving Consumer Goods (FMCG) sector. This report gives a brief idea about the
FMCG sector and provides information on how it has performed in the past, the factors affecting
its performance and its growth scope.
Overview
FMCG sector is one of the fastest growing sectors in the Indian economy. FMCG goods are also
called the Consumer Packaged Goods (CPG). These products have a quick turnover and
relatively less cost. The cumulative profit is very substantial as these goods sell in large volumes.
The competition in this sector is very high and there is a constant pressure on margins.
10
Typically, these products are bought at least once a month. This is a unique sector of goods
wherein the consumer spends little, if not any, time on the purchase decision. Rarely does the
consumer look for the technical details. The industry notes that ‘Everyone has to eat’ and
‘Everyone has to wash their clothes and brush their teeth’. A prospect may think twice before
2010
buying a computer or a car but not before buying soap or a tooth brush. The needs these products
cater to are eternal.
The above
chart gives an
idea on how
an average
Indian spends
his income.
An average
Indian spends
around 39
percent of his
11
income on grocery and 8 percent on personal care products. This large share of the FMCG
market in the individual spending of an average Indian makes it an important player.
The Indian FMCG sector is an important contributor to the country’s GDP. It is the fourth largest 2010
sector in the Indian economy and is responsible for 5% of the total employment in India1. The
industry also creates employment for 3 million people in downstream activities, much of which
is disbursed in small towns and rural India. This sector is categorized by low operational costs,
presence of well-known brands and the presence of established distribution networks in both
rural and urban areas.
Most Indian FMCG companies focus on urban markets for value and rural markets for volumes.
The total market is in excess of 60,000 crore2. The study concluded that over 70 percent of sale
of FMCG products is driven by middle class households and over 50 percent by middle class in
rural India
Key Players
Some of the key players in Indian FMCG industry are Colgate, Dabur India, Godrej Consumer,
Hindustan Lever, ITC, Marico and Nestle India. A brief profile of the companies is given below.
7 SSKI India research
Colgat
e 10
Dabou
r 11
Godrej 12
HUL 40
ITC 17
Marico 4
Nestle 6
12
2010
Colgate
Colgate started in 1937, when hand-carts were used to distribute Colgate Dental Cream. Colgate-
Palmolive (India) has one of the widest distribution networks in India spanning across 3.5
million retail outlets across the country, of which the Company services 9.40,000 outlets directly.
The Company is estimated to have sales to the tune of 11,242 million rupees in the financial year
FY 07. Colgate is a household name in India with one out of two consumers using its product.
Colgate has been voted as the ‘The Most Trusted Brand’ in India across all brands and categories
for the third consecutive year in the Brand Equity AC Nielson 2005 survey. Colgate has been the
only brand to be ranked in the top three for all the five surveys and to hold the premier position
for three consecutive years.
Dabur India
Dabur India Limited is a leading Consumer Health Division (CHD). Its subsidiary group
13
companies include Dabur Foods, Dabur Nepal and Dabur International. Dabur has 13 ultra-
modern manufacturing units spread around the globe and its products are marketed in over 50
countries. It has wide and deep market penetration with 47 C&F agents, more than 5000
2010
distributors and over 1.5 million retail outlets all over India. consumer goods company in
India. The sales of Dabur are expected to touch 21,722 million rupees in the
financial year FY 07. It has 2 major strategic business units (SBU) - Consumer
Care Division (CCD) and
Godrej Consumer
Godrej Consumer Products Ltd. (GCPL) is a major player in the Indian FMCG and is a market
leader in personal, hair, household and fabric care segments. The sales for Godrej Consumer are
expected to reach 9,535 million rupees in the financial year FY 07. The company employs 950
people and has four state-of-the-art manufacturing facilities at Malanpur (M.P.) Guwahati
(Assam), Silvassa (U.T.) and Baddi (H.P.). It has a state-of-the-art Research Centre based in
Mumbai. Godrej has adopted the Total Quality Management system and our factories have
received ISO certifications.
Hindustan Lever
Hindustan Unilever Limited (HUL) is India's largest fast moving consumer goods company.
HUL's brands, spread across 20 distinct consumer categories and touches the lives of two out of
three Indians. The company has combined volumes of about 4 million ton and the sales are
expected to reach 135,298 million rupees in the financial year FY 07. HUL has 15,300
employees, including about 1,317 managers. HUL’s parent company, Unilever, holds 51.55% of
the equity. A Fortune 500 transnational, Unilever sells Foods and Home and Personal Care
brands in about 100 countries worldwide.
ITC
ITC is one of India's foremost private sector companies. The sales of ITC are expected to soar up
14
to 122,202 million rupees in the financial year FY 07. ITC is rated among the World's Best Big
Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine. It is
also among India's Most Respected Companies by Business World and among India's Most
Valuable Companies by Business Today. ITC also ranks among India's top 10 `Most Valuable
2010
(Company) Brands', in a study conducted by Brand Finance and published by the Economic
Times. ITC has a diversified presence in FMCG ranging from Cigarettes to agarbattis. ITC's
diversified status originates from its corporate strategy and time-tested core competencies such
as unmatched distribution reach,
superior brand-building capabilities, effective supply chain management and acknowledged

service skills.
Marico
Marico is a leading Indian Group in Consumer Products and Services in the Global Beauty and
Wellness space. Marico has generated a Turnover of about Rs.15, 569 million expected in FY
07. Marico is present in the Skin Care Solutions segment through Kaya Skin Clinics (48 in India
and the Middle East) which was awarded the Retailer of The Year Award (for the 2nd
consecutive Year) at India Retail Summit 2006. Marico was also selected in June 2007 as one of
the eight Indian companies in S & P's list of Challenger Companies. Every month, over 70
Million consumer packs from Marico reach approximately 130 Million consumers in about 23
Million households, through a widespread distribution network of more than 2.5 Million outlets
in India and overseas.
Nestle India
Nestlé’s relationship with India dates back to 1912, when it began trading as The Nestlé Anglo-
Swiss Condensed Milk Company (Export) Limited. After India’s independence in 1947, Nestlé
15
responded to India’s aspirations by forming a company in India and set up its first factory in
1961 at Moga, Punjab, where the Government wanted Nestlé to develop the milk economy.
Nestlé has been a partner in India's growth for over nine decades now. The Company's activities
in India have facilitated direct and indirect employment and provides livelihood to about one
2010
million people. Nestle has seen a robust growth in its sales. Its net sales are expected to reach
32,947 million rupees in FY 07.
16
2010
Research Design
The research design used for the research project was exploratory research. A research design is
an arrangement of conditions for collection and analysis of data in a manner that aims to
combine relevance to the research purpose which economy in procedure. In fact research design
is conceptual structural within which research is conducted. It constitute the blueprint for the
collection, measurement and analysis of the data.
As it has been mentioned in the earlier section of this report that the main objective of the
research is to prepare “Analysis of FMCG Sectorz” and know the perception of each and every
parameters in the specified territory.
17
As it was required to collect the information first hand to know the things directly from the
concerned persons, exploratory research design was used in which questionnaire method was
followed for both customers and the consumers
2010
The objectives of the research project are as follows.
Research Topic
“Analysis of FMCG Sector
Data Used In Study
 Secondary data collection method:-
The secondary data are those which have already been collected by someone else and which
have already been passed through the statistical process. Basically secondary data provides a
starting point for research or market survey. The information about marketing routes, selling
procedure, wholesaler dealing, retailer dealing, number of retail shops available, number of
areas present where the sale of Coca-cola and Pepsi is happening, was a secondary source of
information.
The secondary method used for the research project was the data collection from the back
office as well as company people, company and competitors websites. Back office help was
18
taken in collecting the data related to company’s customer base in the last year or in the last
season and number of customer till date.
The other source for the data collection was the product sheet and the product range columns 2010
in the websites.
There are some websites which are used for the data collection as well as used as a main source
for the project elements
Tools and technique used for analysis
The tools used for carrying out the research work has been divided into the following
categories:
Problem Definition
Government Policies
Critocal Factor
 Problem Definition
19
Competition Mapping:-
In the vast day to day scenario of corporate world, it is very necessary for each and every 2010
organization to analyze its competitors to survive in the market. Especially what are the main
things they are doing in the market for increasing sales and what are the main qualities in their
products by which they are getting good market share day by day.
As the first quality of market is dynamism so it becomes very necessary for an organization to
keep an eye over the moves or the strategies followed by the competitors.
In present scenario some organizations are going on their own plans and giving the good
competition to the other players and some of the organizations are doing their work like a
follower and tracking the competition in the market.
Competition mapping has several important roles in strategic planning.
 To help management to understand their competitive advantages and

disadvantages relative to competitors.
 To help management to know their shortcomings as well as strengths and
weaknesses prevailing in the market.
 To know product strategies of the competitors and their product specification also.
20
2010
21
2010
There are certain other factors that are considered critical for the growth of the sector and no
amount of analysis would be complete without these. Some of the critical factors that affect the
sector are:
11. Tax benefits

22. Rising demand
33. Bad monsoon
44. Imports and Exchange rate
55. Advertisement and promotion campaign
6The government policies and regulations discussed in section 4 can also be classified as
22
critically affecting this sector.
The government policies and regulations discussed in section 4 can also be classified as critically
affecting this sector. 2010
Tax Benefits
The tax benefits increase the purchasing power of the consumer and the increase or decrease of
the benefits would affect the sales and thus the sector growth.
Rising demand
The FMCG sector is a sector that thrives on demand. The demand for the products in this sector
is ever increasing. Be it urban or rural, the sales of cosmetics, soaps, detergents etc has increased.
This rising demand has put the sector growth in green. This rising demand is not limited to a
quarter or a year as such and is expected to rise over the years. Today, consumers are willing to
experiment with new products, be it innovation or brand extension.
Bad Monsoon
Bad monsoons have always been a bane for the FMCG sector. Rural areas (including small
towns with populations below two lakhs located near the countryside) account for 30-60 per cent
of the total sales of a host of consumer goods ranging from biscuits to toothpastes, shampoos and
washing powder. The monsoon affects the purchasing power of the rural consumer thus affecting
the sector as a whole. Bad monsoons also affect the FMCG companies because of the decrease in
the raw materials supplied.
23
Imports and Exchange rate
Imports affecting the companies are a spiralling affect of the bad monsoons. Bad monsoons
decrease the production thus increasing the need for imports. With every increase in the import 2010
level the profits of the companies are affected. If the imports increase, then other factors like
foreign exchange rate and regulation policies also come into play.
Advertising and promotion campaign
The products and the profit margins in the sector are such that it becomes paramount for the
companies to hold on to their customers and at the same time attract others. Brand switching is
often induced by heavy advertisement and promotion campaigns. The sector also thrives on the
recommendations of the users. Positive feedback from the current users results in a growth of the
sales
24
2010
25
2010
Depending on product category, the FMCG sector is broadly divided into three verticals:
11. Personal Care - 15

22. Home Care - 20
33. Foods and Beverages 40
44.Saving-25
1 Personal Care
Personal care products mainly consist of Hair Care, Skin Care, Oral Care, Personal Wash
(Soaps), Cosmetic and Toiletries and Feminine Hygiene products. These products contribute
over Rs. 54.6 billion3 towards the FMCG sector. These products are mainly for personal use.
Personal care products are further categorized based on the affordability of the products. Under
this classification, we have the following segments:
Premium segment
The premium segment mainly caters to the high income group and as well as the middle class in
the urban areas. This niche segment has seen growth in recent times, which can be attributed to
26
the growing purchasing power of the Indian consumer coupled with increasing campaign
promotions.
2010
Popular Segment
The popular segment caters to mass segments in both urban and rural markets. Products for this
segment are priced 30-40% lower than those in the premium segment. Margins are realized by
mass consumption resulting in high volume sales.
Home Care Products
This component of the sector focuses on the products used in households and is valued at Rs. 80
billion3. Products in this category include household care products, fabric wash, detergents,
household cleaners, air fresheners, insecticides, mosquito repellents etc.
Foods and Beverages
Food and beverages sector includes branded flour, sugarcane and bakery products such as bread
and biscuits. Milk and dairy products, beverages such as tea, coffee, juices, bottled water also
form a part of this sector which is worth Rs. 3,584 billion, of which Rs. 1,200 billion belongs to
value added food products. The food processing industry is still in its nascent stage – only 2
percent of fruit and
vegetables and 15 percent of milk produced are processed – so the scope for growth in this
industry is high3.
The growth of any sector can be boosted (or for that matter, hampered) by the regulations and
policies of the government. India has enacted policies aiming at attaining international
competitiveness through reduced excise duties, lifting of quantitative restrictions, central and
state initiatives, direct foreign investments and favorable food laws.
27
1 100 percent foreign equity or 100 percent NRI and Overseas Corporate Bodies (OCB)
investments is allowed in most of the food processing sector. Exceptions include alcoholic
beverages and those reserved for small scale industries. The evolution of a more liberal FDI
policy environment in India will increase the competition and hence increase the quality of the
2010
products.
1 Temporary approvals for imports of test marketing can also be approved from the Director
General of Foreign Trade.
2 ‘Package Commodities regulations order’ imposes limitations on pack sizes in terms of
weight.
3 No licensing is present in almost all food and agro-processing industries. Quantitative
restrictions are also absent. This has resulted in a boom in the FMCG market through market
expansion and greater product opportunities.
4 Various state initiatives, mainly through a package of fiscal incentives, have been taken to
encourage companies to set up manufacturing facilities in their regions. This has lead to
increased reach for the organization and provided them with more options and opportunities.
They can set up their manufacturing facilities in regions where the policies are in line with their
organization’s vision.
E.g. Himachal Pradesh government offers tax and power concessions, capital subsidies etc for
setting up a plant in its tax free zones.
1 Many processed food items are totally exempt from excise duties. Customs duties have been
substantially reduced on plant and equipment, as well as on raw materials and intermediates
especially for export production. Capital goods are freely importable, including second-hand
ones in the food processing sector.
 Consumer protection against adulterated food has been brought to the fore by "The
Prevention of Food Adulteration Act (PFA), 1954",which applies to domestic and imported food
commodities, encompassing food color and preservatives, pesticide residues, packaging
2labeling and regulation of sales. This has led to improved quality of the products and more
importantly increased trust from the customers.
28
Besides the normal measures, the union budget is one important policy that affects the sector. If
we look at the Union budget 2007-08, we can observe the following measures that affect the 2010
FMCG sector:
1 Farm sector has been given the top priority.

2 Duty on edible oil has been reduced. Customs duty on crude sunflower oil reduced from
65% to 50% and on refined sunflower oil from 75% to 60%.Exemption from additional CV duty
of 4%. This will have a positive impact on companies like Marico.
3 Customs duty on food processing machinery and their parts is being reduced from 7.5% to
5%.
4 Excise duty has been fully exempted on biscuits of per kilogram retail sale price equivalent
of Rs 50 or less. Exemption of excise on biscuits is positive for Britannia, ITC and Parle.
1 Excise duty on food mixes, including instant food mixes has been reduced from 16% to 8%
or nil. Reduction of excise on food mixes is beneficial to ITC, as this segment is a new growth
area.
2 Specific excise duty on cigarettes has increased by 5%.
3 Free samples and displays are exempt from the purview of FBT. FMCG companies spend a
lot of money on advertising and brand building. Exclusion of samples and displays from FBT
will help them in promoting their products
4 Venture capital investing in dairy industry will get a pass through status.
5 Better rural infrastructure development to be an area of focus.
The measures stated above gives an indication on how the policies affect the growth of the
FMCG sector.
29
2010
30
2010
This transformation has been fed partly by the explosion of new jobs for the young population,
primarily in the services sector. This new found prosperity has further led to consumerism, which
has benefited all the constituents of the FMCG sector. With the growing levels of income and
awareness, it is widely expected that the FMCG sector will prosper. However, care should be
taken before picking an FMCG stock. There should be certain parameters that should be taken
care of before coming to a decision. Some of them are:
31
11. Logistics strength

22. Product folio
33. Competitive strengths
44. Key financials and valuation
2010
55. Inventory control and operational efficiencies

66. Pricing and cost control
1. Logistics Strength
Product awareness is a function of the product reach and its usability. It is in this context that
company’s logistics gain importance. Logistics do not necessarily mean the reach of the product
to retail outlets. It also means the level of sophistication of this distribution reach – how well is
the supply chain managed and geared for the company’s future growth. It is not just necessary to
have your product reach more outlets but equally necessary to aid your growth. If the product is
reaching to more number of outlets but if the stockists are not electronically networked, that
32
would hamper the efficiency. For an FMCG company, once a distribution chain is set up, it is the
quality of the setup that matters.
2010
2. Product Folio
Multinational Companies (MNCs) form almost half of the branded FMCG industry in India. It is
therefore very relevant to look at the commitment of the parent brand before investing in a
subsidiary. But, support and commitment alone would not suffice. The product portfolio of the
parent and its plans for future in India would help in understanding the subsidiary.
For all the companies, be it MNCs or otherwise, a look at the company’s product introduction
track record would help clear matters. If the product launches have been successful and relevant,
the company is one that should be looked at. Also, the number of brands introduced in the initial
years would go a long way in anticipating its future.
3. Competitive Strengths
The success of FMCG companies is often attributed to marketing, branding and advertising. The
initial years of introduction are very crucial as far as the company is concerned. Once the
awareness is increased and the brand is etched in the minds of the people, the future products can
piggy back on the initial success. The company can utilise its brand presence to roll out
successful products. Resource utilisation can be higher if the number of products is more. This is
true for distribution channel, marketing or brand strengths. It is in this context that single or a
few product companies are risky. They have to constantly look over their shoulders for potential
threats from competitors. With respect to the MNCs, the investor should also look at the number
of subsidiaries the parent has in the same country. If the parent has another subsidiary, and is
33
100% owned, then it is likely that it would be inclined to introduce new brands and products.
4. Key Financials and valuation

2010
Numbers do not lie and it helps if one can look at the financials of the company. Some of the key
terms to look at are as follows. Last five year revenue growth and the reasons for the same. If
there is encouraging growth because of continuous product introductions, it is an encouraging
sign. Operating margin trend vis-à-vis its peers and competitors. If it is improving due to
efficiencies in supply chain management then it is encouraging. A look at the companies’ cash
flows and the working capital efficiencies will give an idea about the bargaining powers of the
company. It also is an indicator to the ability of the company to utilise its resources and supply
chain. A look at the Return on Capital Employed (RoCE) will be an indicator of how effectively
the company is optimizing its resources. One should also look at the past record of the company,
its management and its vision for the future. If the management is known to be slow to react to
market conditions, it is a discouraging sign.
5. Inventory control and operational efficiencies
Inventory control plays a major role in any company’s fortune; more so if it is an FMCG
company. The company should make sure that the inventory is maintained at a correct level to
minimize losses and cover the anticipated demand. It is always a tight-rope walk for the
companies because of the high level of losses involved especially if the products are perishable.
The way a company deals with inventory control indicates how well the company is equipped to
meet the variations in supply-demand. Stock availability can be improved by implementing
Supply chain management (SCM) properly. This would also help lowering the supply chain
34
costs. A web-based system, which enables online dissemination of information on orders,

dispatches, etc., ensures that stocks are supplied to stockists and distributors on a continuous
replenishment basis. The system not only ensures freshness of trade stock, but has also helped in
bringing down the level of stock with trade. All these initiatives put together help enhancing
2010
operational efficiencies. An efficient inventory control would pave way to better health of the
company. For example Hindustan Lever Limited HLL improved its SCM by having IT
connectivity extends across the supply chain of about 2,000 suppliers, 80 factories and 7,000
stockists. It has combined backend processes into a common Shared Service infrastructure,
which supports the company’s units across the country. All these initiatives together have
enhanced operational efficiencies of HLL.
6. Pricing and cost control
Gone are the days when companies used to increase prices as and when they like. With
increasing competition in every segment of the sector, companies have to think twice before
changing their price strategy. The control exerted by the company on the pricing strategies and
the way it handles competition gives a clear picture of the company. More often it is seen that a
big brand is countered by its competitors by launching a lower priced product. The big player
may introduce a new product in the lower end to counter the growing competition. This may not
be the case always and sometimes it may have to take decisions based on the market sentiment.
How well the company behaves under pressure of pricing will be an indicator of the company’s
strength. For example, to shield from lower priced products, HLL introduced toothpastes in a
tube at Rs. 5 and shampoo in a bottle at Rs. 5 apart from introducing single use sachets. It thus
became the first company to do so. This has helped in expanding the customer base for many of
35
its products and has been a very effective penetration strategy for skin care products.
2010
36
2010
According to estimates, the Indian FMCG market is set to treble by 2015. This provides a great
potential for the sector which need to be harnessed. An objective analysis of the sector,
considering the factors stated above, shows that the FMCG sector is expected to grow at a steady
rate led by high consumer demand, better lifestyle, favorable demographics, organized retail,
favorable government policies and improved rural penetration. Growth potential for all the
37
FMCG companies is huge since the per capita consumption of almost all the products is amongst
the lowest in the world.
The BRICs report indicates that India’s per capita disposable income will rise, which shows a 2010
rosy future for FMCG sector.
Investments in the sector
The FMCG sector accounts for around 3 percent of the total FDI inflow and roughly 7.3 percent
of the total sectoral investment. Food processing sector attracts the highest FDI while the
vegetable oils and vanaspati sector accounts for the highest domestic investment.
With a major portion of the Indian population living in the villages of India, the rural market
offers tremendous opportunity for the FMCG sector. Around 70% of the total households in
India reside in the rural areas. Rural India has a large consuming class with 58% of the total
disposable income. The rural hinterland is more attractive for the FMCG companies as compared
to tier 1 and tier 2 cities as penetration levels are drastically lower. Thrust on increased
investment in agricultural activities and rural infrastructure would result in better living
conditions for the people and rural empowerment which would in turn lead to increased demand
for the fast moving consumer goods. Technological advances such as the internet and e-
commerce will aid in better logistics and distribution in these areas. Indian corporate have started
taking up social initiatives to expand the rural income and consequently penetrate the market.
The transport system has an important role to play in the FMCG sector. There is no denying the
transport system in India, be it
road, rail or air, leaves a lot to be desired. If the transport system is not improved, the companies
may have to continue bearing the losses due to the delays.
The changing consumer profile in India points to urbanized products and more youth-targeted
38
products. The dominance of unbranded products in Indian markets, change in eating habits and
the increased affordability of the growing Indian population present an opportunity to makers of
branded products to convert consumers using non-branded products into users of branded
products. With the increased awareness among the youth, better lifestyle and increased
2010
disposable income in the urban areas combined with better awareness of health and wellness
platforms and increase in women workforce, offer great scope for health and personal care
products, hygiene and household care products, food processing industry and other related
industries. The emergence of organized retail is expected to help FMCG companies exploit the
increasing inclination of the consumer to spend and drive consumption. Increasing emphasis on
organized retail will also result in improvement in the supply chain. It will also improve the
visibility and branding of various FMCG products and induce the consumers to go for branded
products. The FMCG companies can tie up with the retailing majors to synergize and operate in
a more efficient manner. The negative side of the growth of organized retail is the poaching of
skilled FMCG company employees by the retail sector. The export potential is also tremendous,
since India has a location advantage that can be exploited to use it as a sourcing base for FMCG
exports. South East Asia, which is being catered to by USA and EU, can be sourced from India
due to its lower freight cost. Commodities like dry milk, condensed milk, ghee and certain
cheese varieties that are used as ingredients in foreign countries can also be exported. These
markets can be expanded to include value added ingredients like packaged cheese sauce and
dehydrated cheese powders. The large raw material base suitable for food processing industries
because of the diverse agro-climatic conditions and low cost labor also gives India an advantage
compared to other countries. Government policies promoting infrastructure development can
lead to improved and better supply chain which is more cost and time efficient. This can improve
the margins of the FMCG
companies. All the major FMCG companies will benefit from the removal of samples and
39
displays from the purview of Fringe Benefit Tax. This means that they would be able to spend
more money on advertising and brand building. Stringent quality check would go a long way in
filtering out sub quality and discarded products, benefitting both the manufacturers and
consumers.
2010
40
2010
On the basis of the research work done and the data interpreted the following suggestions are
made to the company:
41
 The company should more emphasize on the selling of the product and they
should do some extra efforts for good selling.
 The effectiveness of distribution channel should be homogeneous i.e. product should
2010
reach in length and breadth of whole area and flow should be in proper no..
 Company should increase sales force and provide proper training for communication or
public relation and professional and experienced sales persons should be hired for the
work.
 If possible dealer and retain margin should be increased belong they are those factor if
they are satisfies or happy with company they can increase the sale of company or
provide maximum demand of market to the company.
 Company should take proper feedback from retails about sales promotional schemes /
supply. For ensuring that company’s sales man distributing schemes in market properly
or not. It was the seen that salesman generally hide the schemes.
 Company executive should visit at least once in a day to dealer of his/her route of
knowing the actual sale of sale man.
 There were many retailers who were saying that they are asking for the banners,
hoardings, umbrella, stands etc. and company people are not paying more attention to
their problems, so company so should do something for it on the mean time.
 As the new entrants in the market has come up, so the company should be ready to face
competition and frame strategies accordingly as the competition is going to be tough
later.
 There is need of proper attention on the sales force.
 The company should more emphasized on the teenagers part and in this way they can
come with new schemes in the market to attract more and more consumers.
 Then the next thing is price factor is very important because there was a statement in the
questionnaire and on the basis of the research this thing point out that in many areas like
42
collage area, Surajpur etc there are many consumers who are quite satisfied with the
price but especially in the Surajpur Area there are some consumers who are totally
disagree with the price.
2010
 Also including this there was some consumers who said that when they come to shop
then they ask for the different flavor of the Nimbooz and then retailers said that he has
not that kind of flavor or they told about supply shortage.
43
2010
After the Research work We can divide my conclousion in three parts ,which is as flows-
1. Past Scenario
44
The FMCG segment has witnessed a growth of around 2% and 1.5% in the year 2003-04 and
2004-05 respectively. Since 2005 things have began to change for the better, with good growth
numbers posted across various categories. The sector registered a growth of 16% in the year
2006-2007. Most of the companies have shown a growth above industry targets and big names
2010
like HLL, Colgate, Dabur etc. have seen a double digit growth. The past slowdown has been
attributed to various factors, the major ones being low income levels, lack of awareness and
unorganized retailing. In the past the main focus of the sector was on the urban and semi-urban
markets. This led to low penetration in the rural market where majority of the population lives.
Weakness in the economy also led to a slowdown in demand for FMCG products. As a result top
line growth of many FMCG majors declined. Resurgent economic numbers in Financial year ’04
(FY04) did nothing to change the scenario. New entrants in the sector heightened competition in
key segments like soaps and detergents, putting pressure on profitability. The infrastructure for
transport of goods in the country has always been a concern for the sector. Also, the fall in
agricultural output continues to hamper FMCG sector's prospects in the short term. Another
reason for slow growth of the FMCG sector is that a large part of the branded market continues
to be threatened by spurious goods and illegal foreign imports.
2. Current Trends
Today, there are various social and economical changes which are taking place and are forcing
45
the companies in the FMCG sector to promulgate strategies which will help them expand their
markets and target their segments more effectively. The companies are taking up various
initiatives such as improved sourcing, technological improvements, implementation of SCM
systems and complete business restructuring in order to compete profitably in the market.
2010
Companies are tying up with major retailers such as Wal-Mart in order to obtain point-of-sale
information which helps them to reduce their inventories and manufacturing lead times across
the supply chain and thus reducing holding time. An increase in the number of nuclear families
and the growing number of working couples has resulted in an increased spending power. Also,
an increase in jobs in the IT/ITES sector has helped in raising the family income which has
boosted the demand for basic necessities such as milk, fruits and vegetables. This is expected to
be a major driver for a strong growth in the FMCG sector over the next decade and will enable
the FMCG companies to enhance their profit margins.
The buzz-word today for all FMCG companies today is rural marketing. With more than 70% of
India's population living in the rural sector in over 6, 00,000 villages, these companies see a huge
potential at this bottom of the pyramid. In recent times, rural sales have been growing at a faster
rate than in the urban areas. The current governments focus on the rural India coupled with
initiatives of the corporate sector, such as e-choupal (ITC) and Shakti (HLL)4 is going to help
farmers in producing the right goods effectively. In order to tap these rural markets, companies
are deploying innovative initiatives like coming up with low cost small packages (sachets),
increasing their brand awareness through TV advertising and improving their distribution
networks. Though the overall outlook of the sector looks bright, there exist a few contentious
areas which the FMCG companies have to deal with. These firms have to deal with various cases
of trademark violation, imitation and false advertising by competitors which have been
challenging your sales, especially in the rural markets where awareness level is lower as
compared to the urban market. Also,
an increase in inflation due to an increase in essential commodities has been a cause of concern.
Packaging Materials too form an essential part of the sector as most of the products are
46
perishable. The companies stand at a risk of extra losses and wastes if the packaging material is
not up to the mark.
4 E-Choupal was initiated by ITC in year 2000. It provides real-time information to the farmer 2010
which helps them to get the best price for their produced commodities. The site also provides
farmers with specialised knowledge for customising their produce to the right consumer
segments. HLL launched project Shakti in 2001 to enable the rural population of India to engage
in income generating activities. 5 Price increased from Rs. 18,132/ton to Rs. 29,246/ton during
the period July’06-07, PalmOil.com. 6 Reported on Bloomberg.com as on 10 Aug’07
The price of palm oil has increased by 61.3 %5 over last year owing to demand for bio-fuels.
This has impacted the profits of companies such as HUL and Godrej (soap players). Prices of
copra and coconut oil have also increased thereby affecting the hair oil major, Marico. Wheat
prices too have been on the uptrend, rising by 77%6 over past year, thereby affecting biscuit
players like Britannia and ITC. However, the FMCG players have taken selective price hikes or
rationalised the packet sizes to offset the rising input costs. Also, since the FMCG sector
produces everyday use products, a growth in sales has taken place due to demographic trends
like increase in population which has somewhat nullified the effect of increase in the input
prices.
3. Sector Performance
The Sector performance can be gauged by various factors. One such factor would be the
performance of the BSE FMCG Index vis-à-vis BSE Sensex. This is because relative
measurement gives you a picture of how the sector is performing and how it needs to improve.
The BSE FMCG Index comprises 15 scripts that include the heavyweights Hindustan Unilever
Limited, ITC Ltd., P&G Hygiene and Healthcare, Nestle India and relatively smaller players like
Tate Tea, United Breweries Ltd and the like.
The stocks in the BSE FMCG index have always underperformed the BSE Sensex. The SSKI
research points to the fact that the BSE FMCG Index has underperformed the BSE Sensex by
more than 33%.
47
Whilst largely, underperformance of the sector is attributable to valuations running ahead of

their time, this partly also had to do with company specific issues such as the VAT overhang in
the case of ITC and slower-than-expected reversal in HLL.
2010
48
2010
49
2010
Print Media – The Economic Times, the Hindu
 CII Webside
 WWW.cii.org
 WWW.cii.in
 3 India Brand Equity Foundation, as on July 19, 2007
50

Final

Încărcat de

Informații document

Descriere originală:

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Final

Încărcat de

Drepturi de autor:

Formate disponibile

ANALYSIS OF FMCG SECTOR WITH THE REFERENCE OF TOP FIVE COMPANIES

TO WHOME IT MAY CONCERN

SECTOR ” -” submitted by Mr Abhay Kumar Mishra as a partial fulfillment of

I hereby declare that the project titled “ANALYSIS OF FMCG SECTOR” is

Research design: ……………………………………………..........16

tools and techniques used for analysis………................19

The ability to develop solutions to practical through application of theoretical knowledge is

different product range, market analysis, supply chain analysis, customer

7 SSKI India research

superior brand-building capabilities, effective supply chain management and acknowledged

“Analysis of FMCG Sector

Data Used In Study

 Secondary data collection method:-

Tools and technique used for analysis

Competition mapping has several important roles in strategic planning.

 To help management to understand their competitive advantages and

11. Tax benefits

critically affecting this sector.

Imports and Exchange rate

Advertising and promotion campaign

11. Personal Care - 15

Home Care Products

Foods and Beverages

1 Farm sector has been given the top priority.

11. Logistics strength

55. Inventory control and operational efficiencies

4. Key Financials and valuation

5. Inventory control and operational efficiencies

costs. A web-based system, which enables online dissemination of information on orders,

6. Pricing and cost control

Investments in the sector

Whilst largely, underperformance of the sector is attributable to valuations running ahead of

Print Media – The Economic Times, the Hindu

S-ar putea să vă placă și