A Dissertation Report on “ Current Trend in FMCG India ” In the partial fulfillment of degree of Master of Business Administration Submitted By Hatim Saifee Lakdawala (Marketing) Subject code: 402 Under The Guidance of Prof. V. K. Punni. Submitted to Arihant Institute of Business Management, Pune (2013-2015)
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A Dissertation Report on
“ Current Trend in FMCG India ”
In the partial fulfillment of degree of Master of Business Administration
Submitted By Hatim Saifee Lakdawala
(Marketing)
Subject code: 402
Under The Guidance of
Prof. V. K. Punni.
Submitted to
Arihant Institute of Business Management, Pune
(2013-2015)
DECLARATION
I Hatim Lakdawala hereby declare that this Dissertation Report entitled
“ Current Trend in FMCG India ”
Submitted for the award of the master of Business Administration (MBA) Degree, to the University
of Pune, is a bonafide piece of research work carried out by me and no part of this thesis has been
submitted earlier, either to this university our any other institution for fulfillment of the
requirement of any Degree or Diploma.
Hatim Lakdawala
A CKNOWLEDGEMENT
I sincerely acknowledge the valuable and morale support offered by our project guide Prof. PUNNI (Prof. AIBM), Mr. JAGDISH KALE (DM).
Due to his key interest and academic attitude I am able to complete my live project. I take immense pleasure in completing this project and submitting the interim project report.
I am thankful to our Director Dr. G R Shekapure Library Staff and Administrative Staff of the Arihant Institute Of Business Management.
I would like to thank each and everyone who supported and helped me to complete this project during the entire period.
Hatim Lakdawala
CERTIFICATE
Arihant Education Foundation’s
ARHANT INSTITUTE OF BUSINESS MANAGEMENT,S.NO. 276/1/2, 278/2, Bavdhan (Bk), Pune-411021
MBA- ACADEMIC YEAR 2013-15
This is to certify that Mr. Hatim Lakdawla is a bonafide student of MBA course of this
institute for batch 2013-2015.
He/ She has undertaken and completed the project work as prescribed by University of
Pune for partial fulfillment of MBA degree as per details below:
Topic - “ Current trend in FMCG India ”
Prof. V. K. PUNNI Dr. G R Shekapure
(Project Guide) ( Director)
External Examiner
Place: Pune
Date:
SR.
NO.
TOPIC PAGE NO.
1 Abstract 12 Executive Summary 23 Introduction 4
4 Literature Review 12
5 Industry Profile 176 Objective 307 Scope of Research 3111 Research Design 3212 Finding 3613 Conclusion 3714 Bibliography 38
Abstract:
FMCG goods are popularly known as consumer packaged goods. Items in this category include
all consumables (other than groceries/pulses) people buy at regular intervals. The most common
in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,
packaged foodstuff, and household accessories and extends to certain electronic goods. These
items are meant for daily of frequent consumption and have a high return.
FMCG brands would need to focus on R&D and innovation as a means of growth. Companies
that continue to do well would be the ones that have a culture that promotes using customer
insights to create either the next generation of products or in some cases, new product categories.
One area that we see global and local FMCG brands investing more in is health and wellness.
Health and wellness is a mega trend shaping consumer preferences and shopping habits and
FMCG brands are listening. Leading global and Indian food and beverage brands have embraced
this trend and are focused on creating new emerging brands in health and wellness.
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Executive Summary:
The fast moving consumer goods (FMCG) segment is the fourth largest sector in the Indian
economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011
to US$ 74 billion in 2018.Food products is the leading segment, accounting for 43 per cent of the
overall market. Personal care (22 per cent) and fabric care (12 per cent) come next in terms of
market share. Growing awareness, easier access, and changing lifestyles have been the key
growth drivers for the sector.
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged
goods. Items in this category include all consumables (other than groceries/pulses) people buy at
regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste,
shaving products, shoe polish, packaged foodstuff, and household accessories and extends to
certain electronic goods. These items are meant for daily of frequent consumption and have a
high return. 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 labor
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 in India is low indicating the untapped market potential. Burgeoning Indian
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 2010, India needs around US$ 28 billion of
investment in the food-processing industry.
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According to a study by TMW and Marketing Sciences that surveyed 2,000 people
across different age groups ranging, young consumers are the most ‘rational’ and likely to spend
more time weighing up potential purchases. The survey also suggests that younger people are
using recommendations from their peers about products and services in order to make rational
purchase decisions. According to the study, shoppers aged 18 to 24 are 174 per cent more likely
to use recommendations on social media than shoppers aged 25 and over.Another key factor
today is – speed. Today's consumer wants packaged goods that work better, faster, and smarter.
The “ need for speed" trend highlights the importance of speed as a potentially decisive purchase
factor for packaged goods products in a world where distinctions between products are shrinking.
Younger consumers express the greatest need for speed, not a huge surprise for the Smartphone
generation. Data monitor’s 2013 Consumer Survey found that younger consumers those in the
15-24 year old age group were twice as likely to say that "results are achieved quickly" has a
"very high amount of influence" on their health and beauty product choices than consumers in
the oldest age group, those aged 65 or older. Speed matters, and 2014 will almost certainly see
the introduction of new game-changing timesavers.
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Introduction:
The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1
billion. Well-established distribution networks, as well as intense competition between the
organized and unorganized segments are the characteristics of this sector. FMCG in India has a
strong and competitive MNC presence across the entire value chain. It has been predicted that
the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003.16 The
middle class and the rural segments of the Indian population are the most promising market for
FMCG, and give brand makers the opportunity to convert them to branded products. Most of the
product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita
consumption as well as low penetration level, but the potential for growth is huge.20 The Indian
Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased
literacy levels, and rising per capita income. The big firms are growing bigger and small-time
companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the
top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies
own these 62 brands, and 27 of these are owned by Hindustan UniLever. Pepsi is at number three
followed by ThumsUp. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-
Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always
shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest
categories in FMCG. Between them, they account for 35 of the top 100 brands. The companies
mentioned here are the leaders in their respective sectors. The personal care category has the
largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and
Ponds. There are 11 HUL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal
care category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the
personal care category. ITC alone accounts for 60% volume market share and 70% by value of
all filter cigarettes in India. The foods category in FMCG is gaining popularity with a swing of
launches by HUL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs.
4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also
seen innovations like softies in ice creams, chapattis by HUL, ready to eat rice by HUL and
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pizzas by both GCMMF and Godrej Pillsbury. This category seems to have faster development
than the stagnating personal care category. Amul, India's largest foods company, has a good
presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia
also ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a
series of products at various prices. In the household care category (like mosquito repellents),
Godrej and Reckitt are two players. Good knight from Godrej is worth above Rs 217 crore,
followed by Reckitt's Mortein at Rs 149 crore. In the shampoo category, HUL's Clinic and
Sunsilk make it to the top 100, although P&G's Head and Shoulders and Pantene are also trying
hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top
five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion
(approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur
Chawanprash, Vatika, Hajmola and Real. Asian Paints is enjoying a formidable presence in the
Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific, Caribbean, Africa
and Europe. Asian Paints is India's largest paint company, with a turnover of Rs.22.6 billion
(around USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200
Best Small Companies in the World. Cadbury India is the market leader in the chocolate
confectionery market with a 70% market share and is ranked number two in the total food drinks
market. Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6
billion (USD 380 Million) Marico is a leading Indian group in consumer products and services in
the Global Beauty and Wellness space. The Indian fragrances market generated total revenues of
$25.6 million in 2009, representing a compound annual growth rate (CAGR) of 9% for the
period spanning 2005-2009.
• The Indian hair care market generated total revenues of $1.4 billion in 2009, representing a
compound annual growth rate (CAGR) of 15.4% for the period spanning 2005-2009.
• The Indian make-up market generated total revenues of $141.6 million in 2009, representing a
compound annual growth rate (CAGR) of 12.9% for the period spanning 2005-2009.
• The soap and detergent industry covers laundry and toilet soaps and synthetic detergents in the
form of liquids, powders and bars. These are consumer products and their quality, price,
marketing and distribution network determines the success of the units in the sector. The industry
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has developed both in the small scale sector and organized sector. The manufacture of detergents
and toilet soaps has been deli censed
• The Indian personal care market is estimated to be worth US$ 4 Billion (approx. Rs. 20,000
crore) this includes Bath and Shower products, HairCare, Skin Care, Cosmetics, Fragrances and
Deodorants. Bar Soaps also has grown at a growth rate of 5% per anum over the last 5 years and
stands at market size of US$ 1.5 billion (approx Rs. 7500 crores).
• The overall Indian personal care market has the potential to grow at 15-16% per annum and
thereby double to US$ 8 billion (approx 40,000 crore)by 2012.
• Global turnover of Essential Oil Industry business is estimated to around US$14 billion. In this
turnover India’s share is just about 10% though potential is much more. Based on population
ratio, the potential is estimated to be 18%. The lack of coordination is responsible for not
exploiting the potential to the full extent. There are 400,000 plant species of both aromatic and
medicinal plants known to the scientists. Of these about 2000 species come from nearly 60
botanical families of essential oils. Total production of essential oils in the world is over 100,000
tones. India’s share is estimated to be about 15%. This is almost stagnant for quite some time due
to a variety of reasons.
• Aromatherapy is one of the more popular natural therapies across the globe Essential Oils,
which are extracted from flowers, fruits, roots, resins and leaves are some of the earliest recorded
medicines.
• More than 300 essential oils are in use today. Essential oils contain on average 100 chemical
components and have myriad functions. Some are antibacterial, antiseptic or digestive while
others are antidepressant.
• The major drivers for Essential oils and perfumes are Other Mint oils, Peppermint Oil ( Mentha
Piperita), Perfumes and Perfumery Compounds, Other perfumes and Toilet Waters and Synthetic
Perfumery compounds.
6
THE TOP 10 COMPANIES IN FMCG SECTOR
1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestlé India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10. Marico Industries
The personal care category has the largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy,
Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs. 3,799
crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG
sales, and just below the personal care category. ITC alone accounts for 60% volume market
share and 70% by value of all filter cigarettes in India.The foods category in FMCG is gaining
popularity with a swing of launches by ITC, Godrej, and others. This category has 18 major
brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The
food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat
rice by HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have
faster development than the stagnating personal care category. Amul, India's largest foods
7
company, has a good presence in the food category with its ice-creams,curd, milk, butter, cheese,
and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and
has launched a series of products at various prices. In the household care category (like mosquito
repellents), Godrej and Reckitt are two players. Goodnight from Godrej, is worth above Rs 217
crore, followed by Reckitt's Mortein at Rs 149 crore. In the shampoo category, HLL's Clinic and
Sunsilk make it to the top 100, although P&G's Head and Shoulders and Pantene are also trying
hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top
five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion
(approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur
Chyawanprash, Vatika,Hajmola and Real. Asian Paints is enjoying a formidable presence in the
Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific,Caribbean, Africa and
Europe. Asian Paints is India's largest paint company, with a turnover of Rs.22.6 billion (around
USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best
Small Companies in the World Cadbury India is the market leader in the chocolate confectionery
market with a 70% market share and is ranked number two in the total food drinks market.Its
popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion
(USD 380 Million) Marico is a leading Indian group in consumer products and services in the
Global Beauty and Wellness space. India’s GDP unlike that of other emerging developing
countries has a bigger consumer percentage than investment. This is because India’s economic
growth model has not followed the traditional export growth model of the other countries in Asia
like China. This makes India more resilient to external shocks like the Lehman crisis and
provides a more domestic orientation to growth. India has one of the fastest growing economics
in the world and as the per capita income increase consumer companies in India are reaping
outsized rewards. India has a competitive consumer goods market with a number of domestic
and international companies competing in multiple markets and segments. Some of the
companies like HLL which is a subsidiary of the global consumer giant Unilever has become an
Indian company all but in ownership. Fast Moving Consumer Goods (FMCG) companies are
different from Consumer Durables companies. FMGC companies are what is known as
Consumer Non-Discretionary Group of Companies. These Companies sell products of everyday
use and are recession proof in the sense that the products sold by FMCG Manufacturers can’t be
ignored even in times of economic recessions. Fast Moving Consumer Goods Companies have
8
been expanding rapidly in the Indian market and and are set to grow to the next level as India’s
middle class grows bigger and bigger and the existing middle class becomes richer. India’s Fast
Moving Consumer Goods Stocks form a great defensive investment class.T hey not only have
“defensive” characteristics but also growth as well. India’s FMCG sector is expected to grow by
more than 100% in the next 5-6 years as more and more consumers move from unorganized part
of the industry to the organized industry. Though competition has been fierce in India’s Non
Discretionary Consumer Goods Industry with the P&G and Unilever Price War in the Detergent
Segment, the Industry has seen its share of winners with Nestle, Colgate being multiage’s in the
last 10 years giving huge returns to investors. These stocks trade at high multiples justified with
their very high returns, strong brands and low investment requirements. ITC Ltd. – With a
market capitalization of Rs.137, 000 crores, ITC is one of India’s foremost private sector
companies. While ITC is an outstanding market leader in its traditional businesses of Cigarettes,
Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its
nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and
Stationery. ITC is one of the country’s biggest foreign exchange earners (US $ 3.2 billion in the
last decade). The Company’s ‘e-Choupal’ initiative is enabling Indian agriculture significantly
enhance its competitiveness. It earned revenues of Rs.5,000 crores & a net profit margin of 25%
in December 2010. Hindustan Unilever Ltd. - HUL is India’s largest Fast Moving Consumer
Goods Company with categorized business like soaps, detergents, shampoos, skincare,
toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers.
With a market capitalization of Rs. 61,000 crores, the Company is a part of the everyday life of
millions of consumers across India. The company earned revenues of Rs. 5,000 crores with a net
profit margin 12%. Its parent company is Unilever, which holds about 52 % of the equity. Its
portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair
The Fast Moving Consumer Goods (FMCG) Industry in India include segments like cosmetics,
toiletries, glassware, batteries, bulbs, pharmaceuticals, packaged food products, white goods,
house care products, plastic goods, consumer non durables, etc. The FMCG market is highly
concentrated in the urban areas as the rise in the income of the middle-income group is one of the
major factors for the growth of the Indian FMCG market.
The penetration in the rural areas in India is not high as yet and the opportunity of growth in
these areas is huge by means of enhanced penetration in to the rural market and conducting
awareness programs in these areas. The scopes for the growth of the FMCG industry are high as
the per capita consumption of the FMCG products in India is low in comparison to the other
developed countries. The manufacturing of the FMCG goods is concentrated in the western and
southern belt of the country. There are other pockets of FMCG manufacturing hubs.
This is an industry that has proved itself very resilient to recession – with the majority of
companies in the sector weathering the financial storm in a way that very few others have
managed. Why? Well, consumers will always need to buy the products created by FMCG
companies. They may not buy big items like refrigerators or cars in a recession, but floors still
need to be cleaned, clothes need to be laundered and aches and pains still need to be soothed.
17
Market size:
Fast Moving Consumer Goods (FMCG) Industry in India is one of the fastest developing sectors
in the Indian economy. At present the FMCG Industry is worth US$ 13.1 billion and it is the 4th
largest in the Indian Economy. These products have very fast turnaround rate, i.e. the time from
production to the revenue from the sell of the product is very less. In the present economic
scenario, time is regarded as money, so the FMCG companies have to be very fast in
manufacturing and supplying these goods.
A well-established distribution network spread across six million retail outlets (including two
million in 5,160 towns and four million in 627,000 villages) low penetration levels, low
operating costs and intense competition between the organized and unorganized segments are
key characteristics of this sector.
Organized retail has created new channels for FMCG players through diverse retail formats such
as departmental stores, hypermarkets, supermarkets and specialty stores.
Trends in FMCG revenues over the years in IndiaThe FMCG sector in India generated revenues worth US$ 36.8 billion in 2012, a 5.7 per cent rise compared to the previous year.
Market break-up of Indian FMCG industryFood products are the leading segment, accounting for 43 per cent of the overall market in terms of revenue.
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Key players:
Fast Moving Consumer Goods (FMCG) Industry in India - Major Players
Britannia India ltd Dabur India ltd. Haier
Marico Nirma ltd. LG
Cadbury India ltd Nestle Sony
Cargill Coca-cola Samsung
Colgate-Palmolive India Heinz co. Videocon
Unilever Nestle IFB
Pepsi co. Jyoti Laboratories Electrolux
Procter & Gamble TCL Whirlpool
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• It was formed in 1970 by Henry Overton Wills and Yogesh Chander Deveshwar,