Iitk mba students presentation 23.08.14
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The FMCG Sector in India is large and dynamic. Smaller Indian companies have done well against established MNCs. Find out what makes them tick.
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Iitk mba students presentation 23.08.14
- 1. FMCG Market in India – The Rise of Indian Companies IIT Kanpur – Presentation to MBA Students 23.08.14
- 3. Who are we? • Ex-Unilever, Reckitts and PepsiCo senior managers, providing business advisory services to FMCG and consumer facing business, especially Small and Mid Cap Enterprises (SME’s). • We are 5 years old and comprise of 7 Senior Advisors.
- 4. The Core Team - Seasoned Consumer Professionals Debu Bhatnagar Founder and MD 30 years experience in General Management, Sales and Marketing Hindustan Unilever, Benckiser, ICI, RPG Group, Hemas Sri Lanka, Bajaj Corp IIT Kanpur, IIM Calcutta Ajay Khanna Senior Advisor 24 years experience in General Management, Sales and Marketing and Start-Ups Hindustan Unilever, PepsiCo, Electronic Arts Delhi University, IIM Ahmedabad Rajiv Khurana Senior Advisor 20 years experience in Product / Packaging Development, Quality Assurance and Supply Chain. Reckitt Benckiser Punjab University, Indian Institute of Packaging and Asian Packaging Federation
- 5. Our Services • Management Advisory – strategy formulation and implementation, strategic plan, annual operating plan & KPI’s • Distribution – system design, organization structure and sales training • India Entry – appropriate corporate structure, market mapping, supply chain structure, identification and evaluation of potential distributors/channel partners, staffing and recruitment of key personnel • Human Resources – Search+, Sales Training, Coaching and Mentoring, Development Centres • Supply Chain – identification of contract manufacturers, product/packaging development, techno-commercial feasibility of manufacturing, sourcing, quality assurance
- 7. India FMCG (CPG) Market Food 43% Personal Care 22% Fabric Care 12% Hair Care 8% Household Cleaning 4% OTC 4% Baby 2% Others 5% Valued at $30 Billion growing at 12% CAGR
- 8. Headroom for Growth US$ Per Capita China Indonesia India Skin Care 7.9 4.3 0.8 Shampoo 2.3 2.1 0.6 Ice Cream 3.3 1.7 0.4
- 9. FMCG Growth Drivers Extrinsic Factors Intrinsic Factors Growth in GDP and Disposable Income Increasing Urbanisation Media Explosion Rural Prosperity Government Policy (NREGA, Tax Reform) Growth of Modern Trade Mega Trends in Health/Wellness and Environment Protection Competition leading to: Cost effectiveness and keeping pricing in check Intense market activity (new launches, relaunches, advertising and sales promotion) Innovation in product development, marketing and distribution strategies Increasing usage of IT in FMCG companies Integration of the product and service experience (Lakme, Streak, Kaya) Encouraging Up Trading – HUL in Skin Care
- 10. India: Large, Diverse, Complex • 29 States and 7 Union Territories • 22 Official languages with over 300 dialects • 1.2 Billion population growing at 1.3% per year
- 11. India Demographics Town Class by population Number of towns / villages Population (Million) % to Total Metro (5 Million +) 6 85 7.0 100,000+ 462 180 14.9 Other Urban 7,467 112 9.3 Total Urban 7,935 377 31.1 Total Rural 638,596 833 68.9 Grand Total 646,531 1,210 100.0 • Metros – Mumbai, Delhi, Kolkata, Chennai, Hyderabad and Bangalore account for a large part of the upscale products market size. • The top 20 markets account for close to 60 – 70% of the potential for premium products.
- 12. India Distribution Structure Factory/Importer Depot / State Level Carrying and Forwarding Agent Town Level Distributor (General Trade) Retail Outlets Modern Trade Distribution Centre (Specific Chain) Modern Trade Outlets (Specific Chain) Town Level Distributor (Modern Trade) Modern Trade Distribution Centers Modern Trade Outlets E Commerce Web Sites • Taxes are levied on interstate sales. Hence stocks are transferred to C&FAs in other states. • Distributors tend to specialize in “Modern Trade” or “General Trade.”
- 13. E-Commerce, Small but Growing • India's e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $14 billion in 2012. • About 75% of this is travel related (airline tickets, railway tickets, hotel bookings, online mobile recharge etc.). • Online Retailing comprises about 12.5% ($300 Million as of 2009). • India has close to 10 million online shoppers and is growing at an estimated 30% CAGR vis- à-vis a global growth rate of 8– 10%
- 14. FMCG Players • Entrenched, well established MNCs such as HUL, Reckitt Benckiser, ITC or Nestle who have developed a deep understanding of the Indian Consumer over the years. They are good examples of ‘think global and act local’ Pepsi and Coke also fall into this category though they are later entrants. • Relatively new MNC entrants. Examples such as LÓreal, Amway, Kellogg or P&G. In general these companies tend to be more global in outlook and treat the Indian market as an integral part of their Regional/Global Strategy. • Large Indian companies such as Dabur, Godrej, Marico, Emami and CavinKare. Over the years these companies have grown rapidly in scale and sophistication and the quality of their management is rapidly levelling the playing field. • Single category large Indian companies such as Nirma, Ghari, Power Detergents and Ruchi Soya. • Emerging Indian companies, better known for their brands such as Vasmol, Himgange, Lotus Herbals, Crax, Forest Essentials and others who are currently regional or limited players but are keen to scale up rapidly.
- 15. FMCG - MNC Leader Board Turnover (Rs Cr) HUL 27,408 Nestle 9,062 ITC Consumer 8,122 Colgate Palmolive 3,757 Reckitt Benckiser <2,000 Cadbury <2,000 P&G <1,000 Perfetti <1000 J&J Consumer <1000 Henkel <500 Lotte <500 L’Oreal <500
- 16. The MNC Landscape • HUL is still the ‘Big Daddy’ but is steadily losing dominance. Limited local flexibility • ITC is behaving like a local company in the FMCG space • Reckitt Benckiser and Colgate driven by profit • New MNCs are in focused areas – confectionery and personal care companies have done well • A host of others: Kelloggs, Heinz and many imported brands jostling for space
- 17. Established Indian FMCG Players Turnover (Rs Cr) Britannia 6,232 Nirma Approx 4,200 Dabur 4,870 Marico 3,682 Ghari Detergents Approx 2,500 Godrej 3,581 Emami 1,705 CavinKare Approx 1,200 Jyothy Laboratories 1,260
- 18. Emerging Indian FMCG Players • Sub 500 Cr Companies • Experiencing Rapid Growth especially in the last 7-10 years
- 19. Super Vasmol from Hygienic Research Institute Himgange Cooling Hair Oil Amrutanj an Pain Balm Keo Karpin from Dey’s Medicals Color Mate from Heena Exports Tzinga from Hector Beverages
- 20. What makes them tick?
- 21. The ‘Big Daddy’ Story • Losing Focus: HUL on Detergents – Nirma • Dominance Woes: Nirma in Detergents – Ghari – Power • Money on the Table: Pepsi/Frito in extruded snacks, Reckitt Benckiser in mosquito coils, Colgate in toothpaste – Prakash Snacks with Yellow Diamond Snacks – Bingo Mad Angles from ITC – Bharat Box with Chakravyooh Mosquito Coils – Anchor Toothpaste
- 22. The Indian Market • ‘Bottom of the Pyramid’ – increasing numbers entering the consumption economy • ‘Climb the ladder’ – constant growth in economic power at all levels • ‘Retail and Media Revolution’ – drives consumer choice and information • ‘Dilli Chalo’ – increasing urbanisation ‘The mother of all markets’ – Rapidly increasing demand for ALL classes of products
- 24. Exploitable Categories • ‘Unique to India’ Propositions • ‘Below the radar’ Brands
- 25. ‘Unique to India’ • Legacy – Amrutanjan – Boroline – Jabakusum • ‘Indian’ Categories – Fairness Cream: not any more! – Hair Oil: many times bigger than shampoo • Herbal/Ayurvedic/Unani Products – Shahnaz Husain – Rooh Afza, Safi • Indian Habits and Preferences – Oil Based Hair Dye – Super Vasmol – ‘Cooling’ Hair Oil – Kali Mehndi – Kajal, Bindi, Sindhoor – Chywanprash, Hajmola – Kesh Nikhar • Indian Taste – Indian Namkeens – Masalas – Idli Dosa Batter
- 26. Below the Radar Brands • Exploit “interstitial” spaces that the vast Indian market offers • Regional focus • More wholesale oriented distribution • Tier 2-3-4 towns • Lower price • Higher trade margins • Positive product tweaks – Perfume – Packaging
- 27. Emerging Categories • Ready to Cook/Eat – ID Special; Meatzza • Deodorants, Perfumery and Male Grooming – Park Avenue – Wild Stone – Z Talc
- 28. Vacated Categories • Clothes Blue: Robin – Ujala • Shaving Cream: Erasmic – Vi John
- 29. MNC Woes • In the ‘70s and ‘80s HLL behaved like an Indian Company with Global Systems and People – Rin – Fair & Lovely – Wheel was the last hurrah • They attracted the best talent and there was a vast gap between them and the closest Indian competitor
- 30. Today…. • There is no difference in the quality of people and systems between HUL, Dabur and Marico • HUL is caught in a trap of its own making – Power Brands = Low Innovation – Central Control = Bureaucracy – All things to all people = nothing to nobody – Media vs Market
- 31. David to Goliath… • Courage is being scared to death – but saddling up anyway: John Wayne • Lack of money is no obstacle. Lack of ideas is: Ken Hakuta • Gift Karsanbhai Patel an overhead slide projector: Hindustan Lever in the ‘80s
- 32. Final Thoughts • India is a sea of opportunity. • Indian entrepreneurs have shown that it is possible to beat MNCs at their own game. The FMCG space is only one example. • The best minds in the country are right here in this room. • Don’t only look for a ‘safe’ job with a ‘good’ company. • Strike out on your own!
- 33. Thank You D. Bhatnagar Managing Director, YFactor Marketing Private Limited www.yfactor.in