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A BRIEF STUDY OF
FMCG SECTOR AND COMEPITION IN FMCG SECTOR
SUBMITTED TO:
Dr. S.K.Pandey
Submitted by : Group 2
ABHILASHA RAMPAL (201004)
ANUBHAV S. GUJRAL (201020)
ARJUN CHHIKARA (201023)
BALDEEP KAUR (201029)
FALAK PURI (201039)
HARSHITA SATIJA (201050)
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Executive summary
The Indian FMCG sector is the fourth largest sector in the economy with a total
market size in excess of US$ 13.1 billion.
It has a strong MNC presence and is characterized by a well-established
distribution network, intense competition between the organized and
unorganized segments and low operational cost. Availability of key raw
materials, cheaper labour costs and presence across the entire value chain
gives India a competitive advantage.
The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4
billion in 2015.Penetration level as well as per capita consumption in most
product categories like jams, toothpaste, skin care, hair wash etc. BurgeoningIndian population, particularly the middle class and the rural segments,
presents an opportunity to makers of branded products to convert consumers
to branded products. Growth is also likely to come from consumer 'upgrading'
in the matured product categories. With 200 million people expected to shift
to processed and packaged food by 2012, India needs around US$ 28 billion of
investment in the food-processing industry.
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CHAPTER 1: INTRODUCTION
Fast moving consumer goods (FMCG) or Consumer Packaged Goods (CPG) are
products that are sold quickly and at relatively low cost. Examples include non-
durable goods such as soft drinks, toiletries, and grocery items. Though theabsolute profit made on FMCG products is relatively small, they generally sell
in large quantities, so the cumulative profit on such products can be
substantial.
FMCG products have quick shelf turnover, are relatively low cost and do not
require a lot of thought, time and financial investment to purchase and are
low involvement products. The following are the main characteristics of
FMCGs:
From the consumers' perspective: Frequent purchase Low involvement (little or no effort to choose the item - products with
strong brand loyalty are exceptions to this rule)
Low priceFrom the marketers' angle:
High volumes Low contribution margins Extensive distribution networks High stock turnover
FMCG Industry mainly deals with production, distribution & marketing of
packaged goods to all consumers. FMCG market size and growth of various
product categories are shown below:
http://en.wikipedia.org/wiki/Low_costhttp://en.wikipedia.org/wiki/Soft_drinkhttp://en.wikipedia.org/wiki/Toiletrieshttp://en.wikipedia.org/wiki/Contribution_marginhttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Contribution_marginhttp://en.wikipedia.org/wiki/Toiletrieshttp://en.wikipedia.org/wiki/Soft_drinkhttp://en.wikipedia.org/wiki/Low_cost -
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FMCG INDUSTRY IN INDIA
Present Scenario:FMCG industry is the fourth largest sector in the economy having a size of
US$13.1 billion. It has a strong MNC Presence and a well established
distribution network. In this sector, there is huge competition between the
organized and the unorganized sector. Moreover, a low cost of labour and easy
availability of key raw materials is vital to this sector for achieving success.
Following graph shows sales growth (in %) of FMCG industry:
Future Scenario:
The FMCG sector is set to reach a size US$ 33.4 billion in 2015. Penetration
levels in several products categories is low, hence providing futureopportunities to explore the untapped market potential.
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India is one of the largest economies in terms of purchasing power with a
middle class of 300mn with rural India providing a huge market which is still to
be tapped. Moreover large part of Indias population still resides in urban areas
which offers great opportunity for FMCG companies to grow and to increase
their market share.
Urban Rural
Population 2001-02 (mn) 53 135
Population 2009 -10 (mn) 69 153
% Distribution 28 72
Markets (Towns/ Villages) 3768 627000
Below graph shows sustainable growth rate (of approx 8%) of FMCG sector and
growth of GDP and per capita income over years in India:
From the above graph it can be seen that growth trend line has significant
upward bias and India embarking on a accelerating growth rate. Per capita
income of India has also doubled in 4 years.
Key Players of FMCG Industry in India
According to the market survey done by BUSINESS TODAY the top 10
companies of FMCG sector are given below.
1. Hindustan Unilever Ltd.
2. ITC
3. Nestl India
4. GCMMF (AMUL)
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5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries9. Procter & Gamble
10. Marico Industries
MARKET SHARE OF FMCG COMPANIES IN INDIA
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Rivalry among Competing Firms
In the FMCG Industry, rivalry among competitors is very fierce. There are
scarce customers because the industry is highly saturated and the companies
try to snatch competitors share of market. For this purpose market players
use all sorts of tactics and activities from intensive advertisement campaigns to
promotional stuff and price wars etc. Hence the intensity of rivalry is very high.
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Potential Entry of New Competitors:
FMCG Industry does not have any measures or methods which can control the
entry of new firms. The resistance into this industry is very low and the
structure of the industry is so complex that new firms can easily enter and also
offer tough competition due to cost effectiveness. Hence potential entry of
new firms is highly viable.
Potential Development of Substitute Products:
There are complex and never ending consumer needs and no firm can satisfy
all sorts of needs alone. There are plenty of substitute goods available in the
market that can be re-placed if consumers are not satisfied with one. The wide
range of choices and needs give a sufficient room for new product
development that can replace existing goods. This leads to higher consumers
expectation.
Bargaining Power of Suppliers:
The bargaining power of suppliers of raw materials and intermediate goods is
not very high. There is ample number of substitute suppliers available and the
raw materials are also readily available and most of the raw materials are
homogeneous which makes suppliers bargaining power low. There is no
monopoly situation on the supplier side because the suppliers are also
competing among themselves.
Bargaining Power of Consumers:
Bargaining power of consumers is very high because in FMCG industry the
switching costs of most of the goods is very low and there is no threat of
buying one product over other. Customers are never reluctant to buy or try
new things off the shelf.
1.1Relevance of StudySince FMCG industry is one of the biggest sector in INDIA, there are many
big players trying their best attract customer base and to constantly
increase their market share. This study is going to look at a few big FMCG
players and analyse the strategy they have been using and how far have
these strategies been successful.
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1.2Literature ReviewThere has been lots of published data available that deals with a particular
companys growth rate and market share. However, there is not much data
available that can be used to compare and contrast to FMCG companiesfrom each other.
1.3Purpose of StudyBased on the literature review, our group decided to look at the domestic
FMCG sector as a whole and analyse their product range and market share.
We also tries to analyse Indian Customer base and the factors that lead to
the growth of the FMCG sector
1.4Objective of StudyObjective of the study include the following:
To get a brief about the major FMCG Player in India Analyse the Indian Customer Base Factors that lead to the growth of the Domestic FMCG Sector Rivalries among the major players Analyse the brand awareness, and Preference
1.5Brief Outline of ChapterChapter 1: Introduction. This chapter Introduces that FMCG sector and its
growth pattern over the years.
Chapter 2: Methodology. This chapter deals with the research methodology
adopted. It clearly defines the universe, locale and sample size of the study.
This chapter also comprises of the techniques used while data collection,
analysis and report writing.
Chapter 3: INDIA AS A CUSTOMER BASE. This chapter analyses the Indian
Customer Base and try and recognise the factors that have led to the
growth of the FMCG sector. It also includes few major domestic FMCG
companies.
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Chapter 4: Deals with the in-depth analysis of the Indian Market Leader in
FMCG Sector, HUL.
Chapter 5: Rivalry among FMCG Companies. This chapter showcases the
rivalry among the major companies and steps taken by them to counter thecompetitors strategy.
Chapter 6:Strategic growth summary of HUL. This chapter summarises the
strategic factors that led to HULs growth as the market leader.
Chapter 7: Conclusion. This chapter concludes the report. We have tried to
highlight certain recommendation that HUL could use to counter the
competitors strategies, in this chapter.
CHAPTER 2: Methodology
In this project we have followed descriptive method of study.
Research instrument
Here project analysis is made by collecting secondary data from different
websites, journals, etc. Secondary datas are pre published and research
datas collected from different websites, journals, newspapers, company
research papers.
These documents and data are very useful for the theoretical, conceptual
and organizational background analysis. Detailed analysis of datas is made
by plotting different graphs and tables which can be easily understandable.
Then by observing these graphs we have made our conclusions and
recommendations.
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CHAPTER 3: INDIA AS A CUSTOMER BASE
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Above graph shows per capita income of INDIANS through out Yr2000-2008. As
over the years per capita income increases, the buying power of consumers
also increases which led to the consumers buying more FMCG products. This
has created and will create opportunities for FMCG companies.
Above graphs shows increased per capita disposable income from Yr2002-2007
It can be observed that the Indian middle class is prospering with around 70
million households earning anywhere between Rs80,000 and Rs18 lakh per
0
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 2006 2007 2008
Percapita income(Rs)
Percapita income(Rs)
424
461
494 505
551
599
0
100
200
300
400
500
600
700
2002 2003 2004 2005 2006 2007Percapita disposible income
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annum. These comprise 34 per cent of the slightly over 200 million middle
class households. The behavior of the consumer is also changing as the Indian
consumer is no longer price obsessed. This can be substantiated from the
increased percentage of disposable income as part of the total income. Indian
consumer goods market is expected to reach $400billion by 2010 .Higher
disposable incomes insinuates to the fact that there is money left over for dailyproducts even after spending on durables.
FMCG Tricks
Main reasons for the revival in the FMCG space is that the wallet share of the
consumer which was being diverted to inspirational products is now coming
back to FMCG products. Indian consumer now indulge in spending sprees even
when shopping for daily use products because of the variety and convenience
being offered these days.
A brief introduction about major FMCG companies and their investments in
India :
1. Dabur India Limited (Dabur) Dabur has entered into the malted food drink market with the launch of a
new health drink Dabur Chyawan Junior. The company expected to capture
a market share of 10 per cent of the Rs. 1,900 crores in malted food drinkmarket over the next two years.
Dabur has acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL), a leading
player in the womens skin care products market, for Rs 203.7 Crores in an all-
cash deal. The Company is expected to create synergy by this deal.
Dabur got approval from Government of Himachal Pradesh to set up another
medicine manufacturing unit. The project has an expected investment of Rs.
130 Crores.
2. Colgate-Palmolive (India) LimitedColgate Palmolive (India) Ltd, which is currently holding 75 per cent of the
share capital of SS Oral Hygiene Products Private Ltd, Hyderabad, has acquired
the remaining 25 per cent share capital from the local shareholders at an
aggregate price of Rs 77.70 lakh. Consequently, SS Oral Hygiene Products has
become a wholly owned subsidiary of the company.
3.
Nestle India Limited
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Nestle is planning to invest Rs 6 billion in India in 2009 for expansion of its
business in the country. The company has allotted an investment of Rs 3 billion
in the Indian market in 2008, doubles the investment in 2009 as part of its
business strategy. Nestle International is reinvesting and expanding in India
and Nestle India will have all the financial resources to expand and grow from
the parent company. Nestle India reported a good increase in its standalone net profit for the
second quarter. During the quarter, the profit of the company rose 26.54% to
Rs 1,210.90 million from Rs 956.90 million in the same quarter, last year. The
company posted earnings of Rs 12.56 a share during the quarter, registering
26.61% growth over prior year period. Net sales for the quarter rose 23.45% to
Rs 10,356.30 million, while total income for the quarter rose 23.78% to Rs
10,423.40 million, when compared with the prior year period.
4. HINDUSTAN UNILEVERHindustan Unilever ltd. Is a leading FMCG company in India and from last three
consecutive years has shown accelerated growth in FMCG portfolio. Customers
in India are also spending more in FMCG as their standard of living is growing.
HUL has placed itself successfully in the position of market leader in FMCG
products. Though there was some downfall in sales and profit of the company
in the beginning of this decade but after that HUL has shown considerable rise
in both sales and profit. The future of the company is also looking bright as
FMCG market in India is still expanding and so we can safely conclude that HULwill be able to secure its number one position in FMCG product.
HUL has also started project SHAKTI that has provided it direct reach to rural
market. This may be considered a revolutionary step since the urban market is
reaching its saturation level and there is a huge scope exploring rural market.
This will also be helpful not only increasing its market share but also fight
competition.
Market share trends
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Sales growth trends:
FMCG Sales Growth Trends
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Total sales growth came in at 14% -highest in last eight months. Volume-
growth acceleration across most categories is the trigger for this sharp pick-
up in growth. This is against the run of play, given food inflation is still high
and it is too early for the normal monsoon outlook to make an impact. We
would wait and watch how the trend moves over next couple of months.We maintain our view of a strong recovery in growth in 2HCY10, led by
price hikes, higher volume growth as food inflation subsides and a normal
monsoon supporting rural growth.
Company Sales Growth Trend
Sales growth (%) in April 2010 Most
companies show a healthy rebound
Godrej 20.4
P&G 18.4
Nestle 14.0
Colgate 12.9
Dabur 7.6
Tata Tea
6.8HUL 3.8
Marico 3.2
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Shampoos Market Share Trend
HUL gained 50bps maintaining a largely positive trend of last one year. P&G
lost 40bp and Dabur lost 20bps in April. HUL (170bps) has gained market
shares since April09 with Dabur losing 70bp and P&G losing 150bp.
Toothpaste Market Share Trend
Colgate continued its volatile movement of market shares with a 20bp gain
in April. During this run of Market share gains, it has managed a 140bps
Market share rise since April09. Dabur gained 10bp and its last 12month
gains are an impressive 90bps. HUL reversed its gains of Mar with a 40bpsdecline in April. Its longer-term performance has been disappointing with
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220bps decline since April09. Lack of mass end brand continues to hurt
HUL in a category that is showing signs of down trading.
Chapter 4: HULSince HUL is the market leader in FMCG sector, so it is relevant to study HUL
along with its major competitors
Facts about HUL:
HULs products touches two out of three Indian everydayReach 80% HouseholdsDirect Coverage of 1mln outlets2000 Suppliers and Associates71 Manufacturing locations15000 Employees1100 managersShelf availability 84% outlets in India
Product Line
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A) HOME AND PERSONAL CARE:
1) Personal wash
Lux Breeze
Lifebuoy Dove
Liril PearsHamam Rexona
2) Laundry 3) Skin Care
Surf Excel Fair and lovely
Rin Ponds
Wheel Aviance
4) Hair care 5) Oral care
Sunsilk naturals Pepsodent
Clinic Close up
6) Deodorants 7)Colour Cosmetics
Axe Lakme
Rexona
8)Ayurvedic Personal and health care:Ayush
B) FOODS
1) Tea 2) Coffee 3) Foods 4) Ice cream
Brooke Bond Brooke Bond Bru Kissan Kwality walls
Lipton Knor
Annapurna
C) WATER PURIFIER
Pureit
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Segment Sub-Segment Brand Comment
Household Care
Fabric Wash
Market Share: 38%
Surf
Patented Technology, Premium
Segment
Rin Largest Selling detergent bar
Sunlight
Unilevers oldest, first brand WB,
Kerala
Wheel Largest Selling Indian detergent
Dish Wash
Market Share: 58% Vim
First & largest selling dish washer
bar
Surface Cleaning Domex
Personal Wash
Market Share: 52%
Lifebuoy Worlds largest selling Soap
Lux Global brand
Dove
Global Brand: Premium, Skin
friendly
Pears Premium Segment
Breeze Basic Segment
Liril
Focuses on young female
population
Hamam South Indian Regional Brand TN
Personal Products
Hair care
Market Share: 47%
Clinic Shampoo
Indias largest selling shampoo
(D,ND)
Dove
Global Brand: Premium, Hair
friendly
Sunsilk Largest beauty shampoo brand
Ayush Herbal - Doing well in South India
Skincare
Market Share: 52%
Ponds Global brand, First mover (1947)
Fair & Lovely
Patented Formulation, Asian
brand
Lakme Skin Care
Bought from Tatas, Salon
Business
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Vaseline
Global brand, Monopoly in Indian
Petro-Jelly
Aviance
Customized Personal care
Solutions
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Segment Sub-Segment Brand Comment
Personal
Products
Toothpaste
Market
Share: 30%
Close-up, Pepsodent
Indias first Gel,
Youth brand
Second largest
selling
toothpaste
Toothbrush
Deodorants
Market
Share: 32% Axe, Rexona
Clear leader in
deodorant
segment
Colour
Cosmetics Lakme
Natural
Colorants
Infant Care Huggies
Feminine
Care Kortex
Late entrant -
Smaller Player
Food &
Beverages
Processed
Foods
Kissan
Jam Squeeze,
Ketchup
Knorr
Soups & Ready
to Cook
Annapurna Salt, Flour
Beverages
Tea
Market Share: 23%
3 Roses
Mindsharp, Taj,
Brooke Bond,
Lipton -
Coffee
Market Share: 45% Bru
Ice Cream &
Bakery
Products Gelato, Quality Walls
Brain Food Amaze
Demographic
advantage of
India
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SWOT ANALYSIS
STRENGTH
Variety of products Distribution Network Brand image Quality Management Innovation and R&D strength
WEAKNESS
Not able to compete with local competitor in the rural market Not focus on upper class population Pricing policy is not good
OPPORTUNITIES
Huge Market Increasing per capital income Increasing consumption pattern
Pure-it
Creating new
markets
Beauty and
Wellness
Lakme Beauty Salons
Moving from
products to
Services inPremium
segments
Ayush Therapy
Centres
Moving from
products to
Services in
Premium
segments
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Potential for making more impact of brand image. Coming in technology e.g. in water purifiers
THREATS
From High Class Competitor Proctor & Gamble Pantene Dabur Babool Dabourlal Dent Manjan Reckitt Benckiser Dettol Palmolive Colgate, Nirma
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HULS DATA : THE COMPARATIVE DATA OF % MARKET SHARE OF HUL AND
ITS COMPETITOR INQUARTER ENDED JUN08
Below data relating to HULs growth, penetration provides a clear
understanding of the nuances of the companys presence in the FMCG sector.
The comparative data of %market share of HUL and its competitors gives an
idea to position HUL as the market leader in almost all the segments in India.
Above graph shows percentage Market share of HUL and its competitor in
different categories of FMCG products.
0
10
20
30
40
50
60
70
80
HUL(MARKET SHARE %)
COMPETITOR (MARKET SHARE
%)
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CHAPTER 5: RIVALRY AMONG FMCG COMPANIES
COMPETITION IN THE FMCG MARKET
Five main competitive strategies are:
Overall low cost leadership strategy
Best cost provider's strategy
Broad differentiation strategy
Focused low cost strategy
Focused differentiation strategy
Here competitive strategy varies from sector to sector and company tocompany. Thus, it is not easy to predict a single or to find a single strategy for
the whole sector. When we come on to FMCG Sector main strategies lay
behind market strategies, cost, and quality strategies. Here in this report you
are going to get information about such type of strategies of FMCG giants.
Competitive Strategies and Comparison with ITC
HUL (Hindustan Unilever Ltd.)
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. For the entire year ending
March - 2009 net turnover of company is Rs. 20'239.33 Crore which is 47.99%
higher than 31st December 2007's Rs. 13675.43 Crore driven mainly by
domestic FMCG's with net profit stood at Rs. 2'496.45 Crore.
ITC Limited
This Company was earlier known as Imperial Tobacco Company of India Ltd. It
is Currently headed by Yogesh Chander Deveshwar. Company mainly operates
in the industry like Tobacco, Foods, Hotels, Stationary and Greeting Cards with
the major products constitutes Cigarettes, packed foods, hotels, and apparels.
For the entire year ending Mar-2009 the turnover of company is at Rs. 15388
Crore which is 10.3% higher than previous year's Rs. 13947.53 Crore, driven
mainly by robust 20% growth in non cigarette FMCG business with net profitstood at Rs. 3324 Crore.
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Analysis of Both Companies
HUL & ITC are major companies in FMCG market in India. When we compare
both companies on the basis of their strategies i.e. , their competitive
strategies in the present market. When we look at the present segment
breakup for both of the companies then we came to know that their differentproducts vary too much in the market.
Now below shows a comparative analysis of both the companies under some
heads:
Product portfolios:
Hindustan Unilever (HUL) is the largest pure-play FMCG Company in the
country and has one of the widest portfolio of products sold via a strong
distribution channel. It owns and markets some of the most popular brands in
the country across various categories, including soaps, detergents, shampoos,
tea and face creams.
ITC is not a pure-play FMCG company, since cigarettes is its primary business. It
is diversifying into non-tobacco. FMCG segments like foods, personal care,
paper products, hotels and agri-business to reduce its exposure to cigarettes.
Performance
After stagnating between 1999 and '04, the company is back on the growth
track. In the past three years, till 2008 HUL's net sales have witnessed a CAGR
of 11%, while net profit has posted a CAGR of 17%. Despite diversification,ITC's reliance on cigarettes is still huge. The tobacco business contributes 40%
to its revenues, and accounts for over 80% of its profit. This cash-generating
business has enabled it to take ambitious, but expensive bets in new segments
and deliver modest profit growth.
Overall Strategy:
HUL always believes in customer friendly products with major emphasis on low
cost overall without compromising on the quality of the product. They are
leveraging the capabilities and scale of the parent company and focusing onthe value of execution. The entire product portfolio is also being tweaked to
include premium offerings such as Pond's Age Miracle and dove shampoo in
skin and hair care. HUL introduced Project Shakti to penetrate the rural
market.
ITC is focusing on delivering value at competitive prices. Its tremendous reach
through extensive distribution chain has been a competitive advantage.
Additionally, the company's e-choupal model for direct procurement is well
known under which ITC partners with over 100,000 farmers for spices and
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wheat procurement and an even larger number for oilseeds. This kind of rural
pedigree is hard to beat.
Growth Drivers
HUL has been launching new products and brand extensions, with investments
being made towards brand-building and increasing its market share. HUL isalso streamlining its various business operations, in line with the One Unilever'
philosophy adopted by the Unilever group worldwide. Introduction of
premium products and addition of new consumers via market expansion will
be HUL's growth drivers.
ITC's backward integration to ensure that its products pass efficiently from the
farms to consumers has helped it to cut down supply and procurement costs.
ITC's non-cigarette FMCG business leverages the large distribution network the
company has developed by selling cigarettes over the years. A rich product
mix, along with ramp-up of investments in its new sectors, will be instrumental
in charting ITC's growth path.
Risk for both the companies
Being an MNC operating in India, HUL is more conservative in its strategies
than its Indian counterparts. Moreover, given increasing competition, it faces
the risk of being overtaken by domestic players in various categories.
Prolonged inflation may lead to margin contraction, in case HUL is not able to
pass on this burden to consumers. The company's large size also poses aproblem, since it does not give HUL the agility to address the competition it
faces from national and regional players.
ITC Increased regulatory clamps on tobacco, along with rising tax burden, pose
a business risk for ITC. So, it has started an ambitious diversification plan,
which has its own set of risks. With its foray into the conventional FMCG space,
ITC has entered the high-clutter branded products market. This will burden its
resources in terms of ad spend and brand-building. Creating brand recall and
building market share in new products are ITC's key challenges. Export ban and
rising crop prices pose a threat for its agri-business, taxing its margins.
HUL AND 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
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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 almosttwice 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 food
products
Laundry and personal cleansing
products
Purico Tide
Star DariCreme
Perla Primex
Sunshine Safeguard
Camay ArielMayon Gain
PMC Bonus
Victor Daz
Ola Lava
Agro Mr. Clean
Fresco Prell
Health care Crest
Vicks Zest
Fibresure MonclerThermacare Ivory
Pepto Bismol Laundry, personal care and hair care
Hair care and laundry categories Secret
Pampers Safeguard
Whisper Ascend
Rejoice Ariel
Tide Old Spice
Max Factor Zest
Vidal Sassoon ClairolIvory Nice n Easy
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Pantene Wella
Dishwashing, fabric care and food
categories
Camay
Joy
Mr. Clean
DownyAlldays
Pringles
STRATEGIES OF P&G
P&G focuses on five core strengths required to win in the consumer products
industry. We are designed to lead in each of these areas.
Consumer Understanding
No company in the world has invested more in consumer and market research
than P&G. They 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
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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 orimproved product innovation. They continually strengthen their innovation
capability and pipeline by investing two times more, on average, than its major
competitors. In addition, they multiply their internal innovation capability with
a global network of innovation partners outside P&G.
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&Gs 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 tolife faster, more economically and more sustainably.
Chapter6: Strategic growth summary of HUL
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
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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 ruralsector 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.
Strategies - market entry:
(Kissan Annapurna iodized salt)
In 1995 HUL launched Kissan Annapurna iodized salt at that time only10% of 6.5 million ton of salts were branded and refined HUL identified
it and launched the KISSAN ANNAPURNA SALT.
Firstly it launched in the few cities of the country for test marketing andthen for all.
Shifted from purity- a product attribute to Health consumer benefit(As a positioning strategy)
Tried to shift the consumers from unbranded to brand. Started Using IODINE as a marketing strategy as there were other salts
including iodine but no one was focused on that. HUL started it.
Started endorsement through trusted government agencies. In 2002 it has made iodine patented in 80 countries. 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 ofthem, and showering marketing attention on them.
MASSTIGE:
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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.
Financial analysis of HUL
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If we analyze this financial statement we can see that the performance of HUL
has decreased over the last two years and the possible reasons for that are:
Higher expenses on the advertisement part. HUL is the king of distribution channel in India but now it is getting full
competition from the P&G and others like ITC, AMUL,DABUR,NESTLE etc One of most important factors is the power branding strategy of HUL
due to which it has ignored most of the brands and just focusing only on
the power brands.
Brand Management at HUL
HUL has a large brand portfolio consisting of nearly 110 bands. In every
product line, it has built a number of brands over a period of time. Quite a few
brands have come to its fold from the parent company. It has also acquired
several ongoing brands from the market. HUL also vigorously pursues brand
extension strategy. And concurrently, HUL undertakes line pruning and brand
restructuring and consolidation, based on marketing compulsions. HUL is also
playing the rejuvenation and re-launch game. With great benefit the
corporate-level endeavors at business expansion and diversification are also
throwing new challenges on the brand strategy front. HUL lends itself for a
proper understanding of the complexity of the brand management task. We
shall examine how HUL handles the complex demands in brand management.
Such an array of brands is the outcome of a conscious corporate strategy byHUL. As a corporate, HUL wants to be a leader in every one of its businesses
and the strategy is to fight on the strength of the competitive advantage
arising from the possession of strong brands. It is this strategy that is getting
reflected in the development of a multitude of strong brands. If we take the
business of bathing soaps, as an example, HUL has the objective of being a
national player (not a niche or a regional marketer) and the leader therein.
HUL also wants about 30 per cent of the corporate income to come from this
line.
So, HUL opted for the strategy of developing quite a few strong brands in thisline, and among them they cover different market segments and price points.
Dove, Lux, Liril, Rexona, Pears and Lifebuoy are the outcome of such a well
planned brand strategy implemented over time. Lifebuoy is 100 years old and
Liril 15 years old. In fact, HUL has about 10 brands of toilet soaps each having
good volume of sale to its credit . The point is that decisions on brand portfolio
are a fundamental expression of the companys objectives and strategy
governing a given business.
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HUL Locates Positioning Opportunities:
HUL methodically goes about the task of developing a brand portfolio across a
product category. It first identifies the various positioning opportunities across
benefits, target groups and price points. Existing brads are mapped across
these positioning opportunities, and gaps for possible new offers are
explored.The company then estimates the likely volumes for each of thepossible opportunity and the financial viability and sustainability of the
propositions in the long term. If some of these gaps look promising, HUL goes
ahead with the plans. It examines the existing set of brands with the company,
the product technologies available, the benefits that can be provided and
other considerations that have a bearing on the companys long term interests
in the business. Finally, if the company decides to go in for the new offer, a
decision has to be taken as to whether new brands should be created or
extensions if existing brands should be preferred or ongoing brands from the
market acquired.
HUL hires brands to capture new opportunities: Towards the close of the
1990s, HUL found that the germicide segment of the soap market was growing
fast, with RCIs Dettol antiseptic soap leading it. HUL did not have suitable offer
in its stable to capture a share of this segment. Lifebuoy was not strictly
meeting the particular benefit. HUL knew that launching and developing a new
brand would take a lot of time and resources, and the company would miss the
market if it chose this route. HUL did not have the product formula either to
enter this segment. It was in this background that HUL decided to hire theSavlon brand from J&J. Savlon was a successful antiseptic lotion, a competitor
to Dettol lotion. Just as the Dettol soap owed its origin to the success of the
Dettol lotion, HUL assessed that a Savlon antiseptic soap could be successfully
extended from the Savlon lotion. It entered into an agreement with J&J for the
use of Savlon brand name and the product formula, and launched the Savlon
antiseptic soap. HUL very deftly managed successfully new brand launch and
merged as a challenger to Dettol soap. J&J secures a good royalty from HUL for
lending the brand. It is a potentially win-win arrangement for both companies.
Repositioning and rebranding HUL has done the process of repositioning the
brands. Few of them as follows;
SUNSILK: Sunsilk co-creations , collaboration with 7 pioneer global hairexperts
BREEZE: New fragrances over the world, new look more colors,packaging
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Rexona: relaunched it with the coconut moistening Lifebuoy hand sanitizer: kills 99.99% germs in 15 seconds Fairness cream: Fair & lovely multivitamin Close-up: peppermint splash Pepsodent toothbrush: 25% flexibility.
HUL AND P&G ADVERTIESMENT WAR
The new campaign started by Rin, a product of Hindustan Unilever Limited. It
is a direct attack on the Tide Naturals product by Procter & Gamble. Note that
when It is said a direct attack it means an uncensored visual shows the
competitor product and then highlights how the other product is better then
the former. The sequence of the ad is as follows
1. Two ladies are standing on a bus stop, waiting to pick their kids from the
school bus.2. Both are carrying their shopping basket/bag with them.
3. Lady 1 has Tide Naturals in her bag.
4. Lady 2 has Rin in her bag
5. Both ladies have a look at each others bag and Lady 1 boasts that Tide has a
good fragrance and provide better whiteness/brightness to the clothes
6. In the meantime, the school bus arrives and its shown that the white shirt
of Lady 2s kid is strikingly brighter and whiter then the Lady 1s kid.
7. Lady 1 gets astonished by the whiteness seen.
8. Lady 2s kid reacts by asking he mother, as to why is the other lady so
observant and amazed
9. There is a disclaimer during the ad that the analysis has been done by an
independent agency
10. Its then claimed that now there is promotional price of Rs. 25 on Rin as
opposed to the earlier Rs. 35.
As it can be noticed, there is a direct mention of the competitor product along
with the visuals. This one seems to be an absolute direct attack. It is difficult to
say if the ad will continue on TV. Tide would definitely come out with a protest.
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However, I think the damage is already done. The main point about the
reduced price of Rin would definitely catch the consumers eye benefiting HUL.
PRICE WAR BETWEEN HUL AND P&G
In the
Year 2010 HUL has reduced 11-17% price in detergents, 7-17% in toilet soaps
and 6-7% in the toothpastes.HUL cut the price of RIN by 30% (price war with P&G). Due to which P&G reacts
by cutting 20% indirect price (25% grammage hike) in TIDE.
CHAPTER 7 : CONCLUSION
HUL's up-and-running business model is a treat for investors seeking exposurein the FMCG segment. The company has delivered in the past and has the
potential to do better in future. In short term. HULs growth story is evolving.
ITC is eyeing the pie which HUL and other FMCG players currently enjoy.
Though risky, the company's business model will pay off in the long run. ITC
has proved its expertise in the cigarettes, hotels, paper and agri-businesses.
Investors who want to bank on its execution ability in FMCG can consider the
stock with a long-term horizon.
According to us the companies should continue with their CSR and also
continue with their strategies. The thing that needs to be changed is that, ITC
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should go for more diversification in Non cigarette segment (FMCG) while HUL
should come up with the new strategies that could take the new product
forward to create a new segment. A recommendation For HUL is that it should
focus on rural area more.
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APPENDICES
Appendix A : Interview Schedule
Survey Questions
1) Which age group do you fall in?o 20-25o 25-30o 30 above
2) When it comes to the general FMCG products such as Washing Powders or Shampoos,generally, which age group people in your family influence the decision?
o 10-15o 15-20o 20-30o 30 above
3) When going for a particular FMCG product, what is the most important thing you look at?o Priceo Brando Qualityo Past Experienceo Others
4) Are you able to recognize the Brand of the FMCG Product you buy?o Alwayso Sometimeso Nevero Do not care
5) Which brand of shampoo are you using?o HULo P&Go ITCo Not Sure
6) Which brand of Washing Detergent are you using for clothes?o HULo P&Go ITCo Not Sure
7) Which brand of Biscuits do you eat?o HULo P&Go ITCo Not Sure
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Appendix B : References
1. Ramanuj Majumdar (2004). Product Management in India. PHI Learning.pp. 2628. ISBN 9788120312524. Retrieved 2010-06-19.
2. Sean Brierley (2002). The advertising handbook By Sean Brierley (2,illustrated ed.). Routledge. p. 14. ISBN 9780415243919.
Appendix C : Bibliography
http://books.google.com/?id=ESJzaCJE3fQC&pg=PA26&dq=what+is+fmcg&q=what%20is%20fmcghttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/9788120312524http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/9780415243919http://en.wikipedia.org/wiki/Special:BookSources/9780415243919http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/9788120312524http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://books.google.com/?id=ESJzaCJE3fQC&pg=PA26&dq=what+is+fmcg&q=what%20is%20fmcg