Indian fmcg sector

FMCG Industry INDIA
Presented By: Vikalp Mehta 221167
Shambhavi Singh 221132
Saptarshi Chakraborty 221130
Utkarsh Kumar Singh 221156
Srishti Narang 221149
Vipul Sachdeva 221170

FMCG!!
consumed in shorter duration
Also known as consumer packaged goods
Excluding groceries and pulses.
For example: toilet soaps , detergents , shampoo , toothpaste , shaving product , shoe
polish , packaged foodstuff house hold accessories and certain electronic items which
are meant for frequent food consumption

Classification
FMCG
Health
care
Food and
Beverages
Household Care Personal Care
Fabric wash,
household
cleaner
Oral care , skin
care ,
cosmetics ,
perfumes ,
paper
products
Health
beverages ,
bakery , snacks
, chocolates ,
ice cream , soft
drinks , juices ,
dairy products
OTC products

FMCG sector India
44.9 billion dollars
size of Indian FMCG
sector in 2013
69% share of
food products
and personal
care
135 billions dollars
Estimated market size in
2020 ( optimistic conditions
, growth rate 2013-202-
17%)
GDP share 2.4%
Rural market share
33%

Growth pattern
60
40
20
0
15.7 17.8 21.3
Revenue (billions)
24.2
30.2 34.8
41.1
44.9
2006 2007 2008 2009 2010 2011 2012 2013
revenue
1. Sector grew with CAGR of 16.2% during 2006-13.
2. 4th largest in India
3. Increase in consumption , change in life style and disposable income are the
drivers.
4. Last year it saw some moderate growth (9.24%) because of reduced GDP growth
and high inflation.
Source: Dabur, AC Nielsen, The Economic Times, Aranca analysis

Composition ( Rural vs. Urban)
Total FMCG : 44.9 billion USD
Percentage Share
33%
67%
Rural
Urban
Growth in Urban segment: 8% (in
2013)
Growth in Rural segment : 12.2%
(in 2013)
Rural market to reach 100
billion USD by 2025
Huge opportunity!
Source: The Hindu Business Line, Business Standard, Aranca analysis

The cash cow (Rural sector)
20
15
10
5
0
Rural FMCG (USD billion)
2009 2010 2011 2012 2013
Rural FMCG (USD
billion)
•Rural market expended with CAGR of 13.3% to USD 14.8 billion.
•Growth was accounted by various development schemes like NAREGA which worked a
lot to empower rural masses
•It also motivating FMCG giants like HUL , ITC , Dabur to move and tap this segment
effectively.
Source:Dabur investor presentation: February 2013, The Economic Times, AC Nielsen, Spark Capital report, Aranca analysis

FMCG Revenues by segment
47%
5%
22%
10%
16%
% share
Food products
household care
others
Tobacco
personal care
Total 44.9 Billion USD
Source: AC Nielsen report, The Economic Times, Industry estimates, Aranca analysis
Largest FMCG segments :
Food products
Personal care

New Trends and trivia
Premiumization
Despite slow
down consumers
are willing to buy
premium product
at higher prices.
Sales of
cornflakes , museli
, baked potatoes ,
green tea is
increasing.
FMCG giants ,
HUL , DABUR , ITC
are launching
products in this
category
Development of
customized
products
Need for
customized
product is
increasing
People are
preferring
products
according to their
specific needs
Shampoo with
large variants for
example : for
short hairs , long
hairs, etc.
Rural growth
Rural is growing
at faster rate than
Urban segment
Currently rural
contribute around
33% in total FMCG
revenues.
Sale of packaged
fruit juices , ready
to eat products is
rising fast in rural
areas
Expected to
contribute 45% -
50% by 2020.
Globalisation
Many foreign
players have
operated
successfully in
India , because of
the liberated
policies.
Competition will
increase from
local players.
Indian Firms will
continue to
expand globally

Competitive Landscape
Market structure By ownership
43%
25%
32%
Indian Private
companies
Listed companies
Unlisted MNC's
Highly fragmented with private players selling packaged and unpackaged products
MNCs share a majority holding in different FMCG segments.
A combination of stronger Brand Equity , Premium Products and international
expertise is pushing these companies ahead of domestic ones.
Source: Spark Capital December 2013 report, The Hindu Business Line, Aranca analysis

Policy frameworks and growth Drivers

Some Policies Frameworks for FMCG
GST
(Goods and service Tax)
It will replace the
multiple indirect tax
system with uniform and
single point taxation
system.
It will reduce prices and
will increase
consumption
Food Security Bill
Scheme in which rice
wheat will be provided
per month per person at
very subsidized rate like
rs 1 , 2 per kg.
Households will now
focus on other FMCG
products for
consumption
This will further increase
consumption in Rural
India.
FDI
100% is allowed in food
processing and 51 and
100 % FDI is allowed in
multi brand and single
brand retail.
Will increase
employment and
logistics facility
Increase in consumer
spending and new
product launches

Advantage India
Growing Demand
Rising Incomes
Brand Consciousness
Rural push
Attractive Opportunities
Lower Penetration in Rural
Growing concern for
premium products
Increasing Investments
Increasing FDI inflows
Regional Brand acquisition
Policy support
GST
FDI regulations
51% multi brand
100% single brand retail
Growth

Selected FMCG trends in India
Products must
offer value for
money
Uptrading in some
categories (e.g.
Skin Care)
Demand for new
categories (e.g.
men’s grooming)
Entry of new
brands, brand/line
extension

D
Different
DNA
N
New Structures
And
products
A
Align
Partnerships
Selected FMCG Trends In India
• Invest resources in devising a USP that is
innovative and radically different.
• Don’t approach under-served consumers
in the same way you would approach
target consumers: their needs wary!
• Offer under served consumers a product
which is new and transformational
• Determine the best way to source , create,
procure, partner with and deliver the
product to under served consumers.
• Create strong distribution networks and
skills to deliver to the last mile
• Enter into partnerships that help you reach your market,
such as those which could explore new market
opportunities

Rising
income
levels
FMCG growth
Drivers
Evolving
consumer
lifestyles
New
product
launches
Growth of
modern
trade
Greater
awareness
of products
and brands
Availability
of online
channel

Market share :: Category Based
• Salty snacks was the fastest growing FMCG category in 2013 with a growth rate of
25%.
• categories such as packaged atta, chocolates, and non-refined oil grew over 20% in
2013, due to increasing penetration in rural markets

Personal Care Industry in India (1/3)
Industry Overview Market Size (USD in Billion)
Segmentation (Majorly)
Skin Care
Hair Care
Oral Care
Low penetration in rural
market (major
opportunity for growth
segment)
Growing portion of working women, aspiration
for international brands and growing men
grooming section is driving consumption in India.
Market Penetration Growth Rates (2007 – 2012)
Source :-Morgan Stanley „India Consumer & Retail‟, Feb 2013

Skin Care Overview Key Skin Care Companies - 2012
Market in India is
estimated at $1.3
billion
Skin care in India
majorly is facial
care (Body and
hand care less)
CAGR of 13% from
2000-12
Bath & Shower - Overview Bath & Shower Companies - 2012
Market in India is
estimated at $2.8
billion
Bath & Shower -
bar soap, body
wash, shower gel
and talcum powder
CAGR of 8.7% from
2000-12
Source: UBS Research Report

Hair Care Overview Key Hair Care Companies - 2012
Market in India is
estimated at $2.4
billion
Hair-care consists
of shampoos,
conditioners, hair
oils etc.
CAGR of 12% from
2000-12
Shampoo - 31%
perfumed oil - 27%
coconut based oil-
25%
Oral Care Overview Key Oral Care Companies - 2012
Market in India is
estimated at $1.3
billion
Oral-care consists
of toothpaste,
toothbrushes,
mouthwash etc.
CAGR of 8% from
2000-12
Source: UBS Research Report

Home Care Industry in India (1/2)
Industry Overview Segment Overview - size and CAGR
Segmentation (Majorly) Air
Care, Dish Washing, Toilet
Cleaner, Laundry Care,
Polishes, Insecticides etc.
The home care
market in India is
estimated at $3.8
billion
This industry segment is a volume driven
market with low margins and is marked with
stiff competition.
Market Penetration Market Share
Source -Spark Capital “Indian FMCG Sector”, June 2011

Future of the industry
International brands have
entered India
Scope for reputed
Chinese, Japanese,
European and American
cosmetic brands with
differentiated positioning
Foreign Players entering
India via M&A route.
Recently the parent
company of HUL
decided to raise its stake
in HUL (Indian subsidiary)
to 75%, as growth in
home markets is slow
high margins, good cash
flow and low leverage
business models :
Attractive for PE players
Recent investment in
CavinKare by ChrysCapital
(10% stake for ~Rs 250
crores)

The overall packaged
food industry reached
US$25.4 billion and is
forecast to grow to
US$38.5 billion by
2016.
West India region has
the highest value
sales of packaged
foods in India.
Consumer awareness
of packaged foods is
also high in North
India, which is one
the most affluent
regions in the country
East and Northeast
India are the smallest
markets in India for
packaged food,
Food and Beverage Industry

• Growing at a compound annual growth
rate (CAGR) is 17 per cent annually.
• The organized food retailing and food
services are other emerging areas
growing with the annual growth rate of
25 percent.
• Fruits and vegetables, Dairy products,
Marine and fish, Meat and poultry,
Edible oils, staples, Alcoholic and non
alcoholic beverages, breads and bakery,
confectionary and packaged foods are
the key sectors in the industry.
Food Processing segment and market
40
5
11
20
25
share(FY12)
Meat, Fish, Fruits, Vegetables Dairy Products
Grain Mill Products Beverages
Other Food Products

Branded Products Vs. Private Labels
• the expenditure on private labels is estimated to reach USD500
million in 2015, growing at a CAGR of 49.5% during 2011–15.
• The top five FMCG categories in private labels in India for 2012–13
were tissue paper, floor cleaners, packaged rice, packaged atta,
and packagedpure ghee

Huge Potential
• India has extremely low per capita consumption levels
compared with other emerging economies.
• Per capita consumption of skincare products (USD0.3),
shampoos (USD0.3), and toothpastes (USD0.4) offers
huge opportunity to the
• FMCG market, indicating high potential for FMCG
companies to expand their reach.

Huge opportunity:: Rural India
• There are enormous opportunities in
several categories on the back of low
penetration levels and low per capita
consumption.
• Despite having high penetration level,
categories such as soap, shampoo, hair oil,
mosquito repellents, and toothpaste have
low per capita consumption. Hence, any
change in consumption pattern would
drive growth in these segments.
• Segments such as skin cream, chocolates,
sauce, soft drinks, etc., have low
penetration level as well as per capita
consumption, but have huge
opportunities in the future.
• Categories such as oats, conditioners,
liquid fabric conditioners, liquid soaps,
and face wash are witnessing increased
focus by FMCG companies

FDI::Inflow
• The cumulative FDI inflow to India‟s FMCG sector from April 2000 to February 2014 is USD7,830mn. This
constitutes ~3.7% of the total FDI inflows.
• Among FMCG‟s different sub-sectors, food processing industries had the largest share (~71%) of FDI.
• Paper and pulp accounted for 11% of FDI, while soaps, cosmetics, and toilet preparations had a 9.4%
share

• PE activity in the FMCG sector increased during 2010–12,
with the number of deals increasing at a CAGR of ~66%
from four in 2010 to 11 in 2012. The growth was driven by
the need for more expansion capital to drive growth of the
FMCG companies.
• On the other hand, M&A deals declined 32% to 12 in 2012
from 26 in 2010

2 Companies: A Comparitive Discussion

Business Model
HUL Business
Model has 3 Key
Inputs
Brands
Operations
People
Output of the
Model are:
Sustained
Growth
Lower
Environment
Impact
Positive
Social Impact
Source : HUL Annual Report

Product Line Segment
Food &
Drink
Product
Line
Personal
Care
Home
Care
Water
Purifier
Bru Kissan Knor Broke
Bond
Red
Level
Taj
Mahal
Anupurna
Active
Wheel
CIF Domex Magic Comfort Fabric
Conditioner
Sunlight
Pureit
Aviance AXE Breeze Clear
Elle 18 Clinic Plus Lakme Lifebuoy
Close Up Pepsodent Pond's Rexona

Soaps & Detergents Personal Products
Turnover(Rs.
Crores)
12461Turnover(Rs.
Crores)
7309
Sales Growth 19%Sales Growth 13%
Volume growth 8%Volume growth 6%
Beverages Packaged Foods
Turnover(Rs.
Crores)
2914Turnover(Rs.
Crores)
1474
Sales Growth 13%Sales Growth 10%
Volume growth 5%Volume growth 3%

HOME & PERSONAL CARE (%
8
9.2
GROWTH)
SOAPS N DETERGENT PERSONAL PRODUCTS
14
12
10
8
6
4
2
0
Food & beverage (%
Beverages Packaged
Foods
12.4
10
Growth)
Food Industry Growth – 10% CAGR
Industry Growth Rate – 7% CAGR

Market Share
46
24
6
10
14
Shampoo
HUL P&G CavinKare Dabur Others
59
7
7
6
21
Skin Care
HUL Dabur Emami Loreal Others

ITC Business Model
ITC intent is to secure long term
growth by synergizing and blending
the diverse pool of competencies
Using the resources from these
business units and utilizing it to
develop it’s FMCG Sector.
Source : ITC Annual Report

ITC Business Portfolio
FMCG
Cigarettes Foods Personal Care Stationary
Safety
Matches &
Incense Sticks

3000
2500
2000
1500
1000
500
0
2786
1841 1711
1028
468 420
154 96
No. Cigarettes Per Capita Per Annum
Although India accounts for 17% of world population, it’s share of world cigarette consumption is just 1.8%
ITC – India’s largest buyer, processor, consumer & exporter of cigarettes tobaccos
5th largest leaf tobacco exporter in the world

Personal Care Product Portfolio
Personal Wash
(soaps, shower
gel)
Deodorants
Skin Care(Skin
Cream, Face
Wash)
Hair
Care(Shampoo,
Conditioner)
Talc
Major Brands
Essenza Di Wills Fiama Di Wills Vivel Superia Engage

Competitive Brand Position
Category Brand/Product Brand Position
Atta(Wheat Flour) Aashirvaad #1 in branded
packaged Atta among
national players
Biscuits Sunfeast #3 All India
Noodles & Pasta Sunfeast Yippie #2 All India
Savoury Snacks Bingo #2 All India
Cenfectionary Mint-O & Candyman #3 in Sugar
Confectionary

Segment Revenue
2012-13(Rs
crores)
2013-14(Rs
crores)
GOLY(%) Common Size(2013-
14)
FMCG
Cigarettes 13970 15456 10.6 41.4
Others 6983 8099 16.0 21.7
Total FMCG 20953 23555 12.4 63.1
Hotels 1074 1133 5.5 3.0
Agri Business 7201 7752 7.7 20.8
Paperboards 4237 4861 14.7 13.0
Total 33465 37301 11.5 100.0

By Sales(USD Million)
1034
1206
0 2000 4000 6000 8000
Britannia
Dabur
Nestle India
HUL
ITC
6039
4651
1556
By Market Cap(USD Million)
4778
5330
0 10,000 20,000 30,000 40,000 50,000
Brittania
Dabur
Nestle India
HUL
ITC
21149 47,798
7518
Source: MoneyControl.com, Company annual reports, Aranca analysis
By Assets(USD Million)
440
502
0 500 1000 1500 2000
Marico
HUL
Godrej
Nestle
ITC
1846
608
444
By Net Profit(USD Million)
111.6
112
0 500 1000 1500
Dabur
GSK
Nestle
HUL
ITC
1358
642
191

17769.12
19735.51
NET SALES
HUL ITC
25090.11
22116.37
29901.27
25810.21
33238.6
28019.13
18567.45
21120.83
2010 2011 2012 2013 2014
Net Sales Growth
11.07 12.06
16.70
8.56
13.75
18.79 19.18
11.16
25.00
20.00
15.00
10.00
5.00
0.00
2010-112011-122012-132013-14
Hul ITC
Industry Growth Rate = 8%

9
7.5
DIVIDEND PAYOUT
10
HUL ITC
6.5 6.5
7.5 7.5
13
3.5 3.7
4.45 4.5
5.25
6
2008 2009 2010 2011 2012 2013 2014

Take a look!!!!
• The anti-ageing skincare category grew five times between 2007 and 2008 and is the
fastest-growing segment in the skincare market.(37 per cent market share)
• Mouth-rinsing seems to be picking up as a habit — mouthwash penetration is
growing at 35 per cent a year
• Rural penetration of shampoos increased to 46 per cent last year, way up from 16
per cent in 2001
What he ‘needs’ is fast getting replaced with what he ‘wants’.
Source: http://www.business-standard.com/article/management/the-future-of-fmcg-110112900006_1.html

Emerging trends in FMCG
Rural and new
consumer
segments
Govt schemes to
increase
consumption
like FSB and DCT
New launches
and expansion
MNC are
increasing their
portfolios of
products to
ensure better
penetration
P&G is
expanding from
its current 14
categories
Premiumization
Despite the slow
down consumer
are willing to
pay for premium
goods.
Sale of products
which are
considered as
healthy are
gaining grounds.
Emerging
segments and
trade channels
Growth will
come from
fringes i.e
categories which
are not main
frame like liquid
soaps , oats ,
fabric
conditioners
New trade
channels ( retail
stores ,
hypermarket will
thrive across the
tier 2-3 cities)

Focusing Rural
New marketing
techniques and
correct brand
portfolio
P&G is trying new
SKU’s in 4000 villages
of UP.
Also it is beefing up
its distribution
network to ensure
deep reach over
market.
ITC is using its E-Choupal
network for
further boosting
distribution for its
new products like
shampoo sachet and
soap bars. Apart from
cigarettes.

Issues In FMCG
Complex tax Structure
Complex system of
taxes makes price
variations across
states.
Like VAT is different in
different states.
Plagiarism issues
Small manufacturers
take advantage of
consumer illiteracy and
ignorance and they
spuriously tailor the
brand name of MNCs
and sell their product
Affects revenues and
taxes
Infrastructure Bottlenecks
Lack of agriculture
infrastructure is causing
variation in amount of
critical harvest to FMCG
Manufacturers.
Logistics is also a serious
problem causing supply
chain problems.
High Inflation
Resulting in
increasing
cost of inputs

Indian fmcg sector

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