Industry sector- 1. Strong Distribution Channel 2. Evolving

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Industry Analysis                            Tableof Contents  Serial Number Particulars Page Number   1   Introduction   3   2                                               IndustryAnalysis: FMCG Industry Company Selected:  Introduction AboutFMCG IndustryFastmoving consumer goods (FMCG) or consumer packaged goods (CPG) are products whichcan be sold quickly and low cost at the same time. Many of the FMCG have shortshelf life because of high demand or high perishability.

The profit margin onthe FMCG products is usually low but is sold in large volumes at the same time.The profit, therefore, can still be significant on these products. AnFMCG product touches every aspect of human life. These products are frequentlyused by the Indian masses and they spend a considerable part of their income onthese products. This sector is also one of the important contributors to theGDP of the Indian economy. Over the past few years, it has witnessed enormousgrowth. So much so, that even in the period of recession the FMCG witnessed growth.BurgeoningIndian population, particularly in the middle class and rural areas coupled withthe growing awareness about these products in these areas is a huge opportunityfor the FMCG brands.

In fact, since last few years the rate of growth for the industryhas been more in rural area when compared with the urban area. Everysector on focused on some growth drivers. Same is the case with FMCG sector. Followingare the growth drivers of the FMCG sector-1.    StrongDistribution Channel2.    Evolvingconsumer lifestyle3.    Growthof modern trade 4.    Growthof Rural markets5.

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    Risein personal disposable income6.    NewProduct Launches7.    Governmentpolicies to support FDI inflow8.    Greaterawareness of brands, products    Thesector has its strengths, weaknesses, opportunities and threats, just like any othersector, which are discussed below- Strengths1.    Lowerproduct cost help them to reach a wider population because more and more peoplecan purchase the product2.    Presenceof well-known brands in the FMCG sector helps them to reach easily because ofthe brand strength and brand pull3.

    Highvolume transactions help them in their profits as the margins are usually low  Weaknesses1.    Lowexport levels to other countries reduce the scope of growth2.    Lowscope of investing in technology and achieving economies of scale, especially insmall sectors can again slow down the growth3.    Theproduction of counterfeit products can slow down the growth, especially in therural sector  Opportunities1.

    Thelarge untapped rural market can prove to be a game changer for the FMCG sector2.    Highconsumer goods spending3.    Ifthe export is somehow increased or pushed, the growth can be significant4.    Thepopulation of India will always be an opportunity for any company or sector5.    Socialmedia’s growing popularity can play a big role for the companies in the FMCG sector   Threats1.

    Thetax and regulatory structure can harm the FMCG sector2.    Thegrowing levels of pollution can be a threat to the consumers of this sector becauseit can push to consumers to incline towards organic products         Givenbelow is the CAGR of the FMCG industry from 2016 to 2020  AboutBritanniaBritanniaIndustries is one of India’s leading food companies with a 100 year legacy and annualrevenues in excess of Rs. 9000 Cr. Britannia is among the most trusted food brands,and manufactures India’s favorite brands like Good Day, Tiger, NutriChoice, MilkBikis and Marie Gold which are household names in India. Britannia’s product portfolioincludes Biscuits, Bread, Cakes, Rusk, and Dairy products including Cheese, Beverages,Milk and Yoghurt. Britannia is a brand which many generations of Indians havegrown up with and our brands are cherished and loved in India and the world over.Britannia products are available across the country in close to 5 million retailoutlets and reach over 50% of Indian homes.

Thecompany’s Dairy business contributes close to 5 per cent of revenue and Britanniadairy products directly reach 100,000 outlets.BritanniaBread is the largest brand in the organized bread market with an annual turnoverof over 1 lac tons in volume and Rs.450 crores in value. The business operateswith 13 factories and 4 franchisees selling close to 1 million loaves daily acrossmore than 100 cities and towns of India. Thecompany was established in 1892 with an investment of Rs. 265.      1.

Industry and Competition1.1Market Size and Characteristics ·       FMCGis the 4th largest sector in the Indian Economy.     ·       Thereare mainly 4 main segments into whichFMCG can be divided which are – Food and Beverages – 19% of the market share  Thissegment includes health beverages, cereals, bakery products, snacks, ice cream etc.          Healthcare – 31% of the market shareItincludes OTC products.          Household and PersonalCare – 50% of the market share (combined)Itincludes products for oral care, skin care, hair care, feminine hygiene etc.      ·      From $31.6 billion in 2011, theindustry has grown to $49.6 billion in 2017  ·      Retail market in India is estimatedto reach US$ 1.

1 trillion by 2020 from US$ 672 billion in 2016, with modern tradeexpected to grow at 20 per cent – 25 per cent per annum, which is likely to boostrevenues of FMCG companies.    1.2Characteristics of an FMCG company/product ·     From the customers perspective- 1.    Thefrequency of purchase of the product is very high by the customer. This is dueto the high perishability and non-durability of the product.

So naturally thecustomer buys these products as and when necessary.2.    Theindividual product is of low value. But when these are combined for any household,it may contribute to a significant part of the household expenses.3.    Wordof mouth as well as advertisement plays a major role in the product’s success.   ·     From the company’s angle-1.    Since the price of the product islow, the volume of the transactions is significantly high for the company.

2.    The profit margin per product islow in FMCG products like biscuits etc. but since the transaction volume is high,it results in significant profit for the company.3.    Due to high perishability and non-durability,the stock turnover is quite high for the company. 4.

    The company aims to provide theseproducts to the largest extent possible. So for making this possible the companyrequires extensive distribution networks.      1.

3Trends in the FMCG sector            1.3.1 TRENDS IN THE URBAN AREA ·       Premium Products With the evident rise in the personaldisposable income of the individuals, particularly in the middle-level income households,there has been a shift in the customer taste from essential to premium products. Since the market players have alsostarted to take note of the, they are now focusing on increasing their productportfolio introducing various premium products. Theseplayers have also identified India as a sourcing hub strategically for low costproduct development and manufacturing to cater to the demands of their internationalmarkets.

 ·       Customization Theneed for customized products is increasing as customers now prefer products accordingto their needs and requirements. For example- shampoo for short hair or long hair. ·       Globalization TheIndian firms continue to expand globally. Many international players have alsoset their foot in India who are doing well.

 ·       MajorChunk Theurban area still accounts for almost 60% of the total market share of the FMCGsector. ·       IncreasedHiringTheFMCG companies have increased hiring due to the projected growth, especially fromTier 1 and Tier 2 cities like Kota (Rajasthan) ·       Increasingprivate label penetrationWiththe rise in the number of retail players, private label has become popular inthe FMCG space. These goods are considered substitutes of the premium goods.    ·       Risingimportance of small sized packets Companiesare increasingly keeping smaller stock keeping units at lower prices.

It helpsthem to sustain margins, increase volume from price-conscious customers.  1.3.2 TRENDS IN THE RURAL AREA ·       Surprisingly,rural area has been a major contributor to the growth of the FMCG sector. As amatter of fact, the rural area growth has been more when compared to the urban area. ·       Thisis because there is still a huge potential for growth in the rural market as manyareas or villages are still untapped.

The rural FMCG marketin India is expected to grow at a CAGR of 14.6 per cent, and reach US$ 220 billionby 2025 from US$ 29.4 billion in 2016. ·       In Financial Year 2017, the rural area accountedfor almost 40% of the FMCG market which stresses the importance of increased marketingby the FMCG players in this area.                 1.

4Market Structure The FMCG market of Indiais divided into two sectors-·       Organized sector·       Unorganized sectorThe organizedsector has only few Indian companies and MNCs whereas the unorganized sector iscrowded by many local players. Indian FMCG market accountsfor about $29.4 billion where the market has been highly occupied by local andunbranded products. This has been a challenge for many organized players tosuccessfully launch a product and to occupy the market share. Distribution andsupply chain has also been a challenge as India’s infrastructure and transportsystems not quite helpful with millions of retail outlets in the country. Althoughinfrastructure and transportation system is developing in recent times it is stillconsidered as a challenge by many players.

 The FMCG sector has a widerange of products including confectioneries, beverages, detergents, toothpaste,toilet soaps, shampoos, creams, powders, food products, cigarettes.  The consumer spends littletime on the purchase decision. He seldom ever looks at the technical specifications.Brand loyalties or recommendations of reliable retailer/ dealer drive purchasedecisions.

 Brand switchingis often induced by heavy advertisement, recommendation of the retailer or wordof mouth.  Distinguishing features of Indian FMCG BusinessFMCG companiessell their products directly to consumers. Major features that distinguish thissector from the others include the following: ·       Design and ManufacturingLow CapitalIntensity as most of products in FMCG requires relatively little investment inplan, machinery and other fixed assets.Basic technology required for manufacturing is easilyavailable.Third partymanufacturing is common and the benefits include production and inventory planningflexibility, flexibility in controlling labor costs and logistics. ·       Marketing and DistributionThere is highinitial launch cost with huge investment in product development, market research,test marketing and launch. Creating awareness for a new brand requires enormousinitial expenditure therefore becomes a must these companies.Huge DistributionNetwork as India has millions of retail outlets across the country making the logisticsfunctions difficult for many players.

With differentiation on functional attributes beingdifficult to achieve in this competitive market, branding results in consumer loyaltyand sales growth. Leading FMCG firms like HUL, ITC, Nestle, Proctor & Gambleand GlaxoSmithKline Healthcare–which account for almost 70 per cent of FMCG revenuesin the country–spend almost 10per cent of their turnover on advertising and brandpromotion. The promotion strategy includes tying up with top actors and other celebritybrand ambassadors, besides going in for high-profile launches at leading retailmall and outlets. ·       CompetitionMarket is crowded with many unorganized players. Presenceof many unorganized players and highly capable MNCs provides fierce competitionin the market to launch many new brands. This gives wide range of choice of brandsfor the customers.The easing of the trade barriers encouraged the MNCs to invest in the Indian marketto cater to the needs of the consumers. The living standards rose in the urbansector due to high disposable income along with the rise in the purchasing powerof the rural families which increased the sales volume of various manufacturersof the FMCG products in India.

The large-scale companies such as HLL, Godrej Consumer,Marico, Henkel, Reckitt Benckiser and Colgate have targeted the rural consumersand have also expanded their retail chain in the mid-sized towns and villages. Onthe contrary to this, Nestle has always targeted the market of urban India andfocuses largely upon the value added products for the elite class or upper middleclass population. ·       Contract manufacturing AsFMCG companies concentrate on brand building, product development and creatingdistribution networks, they are at the same time outsourcing their production requirementsto third party manufacturers.

Moreover, with several items reserved for the smallscale industry and with these SSI units enjoying tax incentives, the contract manufacturingroute has grown in importance and popularity.                  Playersin the FMCG market    Characteristicsof CompetitorsQuite evidently, following are thegrowth drivers of the FMCG industry in India-1.    Robustgrowth in GDP of India2.

    Evolvingcustomer life cycle3.    Growthof modern retail4.    Shiftfrom unorganized to organized sector5.    Changingprofile of the customer6.

    Changingtastes and preferences of the customer7.    Increasedincome and consumption in the rural areas 8.    Risein per capita consumption9.    Availabilityof online stores for grocery10. Newproduct launches              

Categories: Branding


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