The Project is titled as “INDUSTRIAL REVIEW PROJECT” and has been prepared by Chetan.M.Daga, Deepak Lunawat, Deepesh Agarwal and Gaurav Bengani. The Following table gives the detail about the Name, Register Number and Company of a particular Student. Name Register No Company Company Logo Chetan M Daga 08D1246 EMAMI LTD Deepak Lunawat 08D1247 COLGATE PALMOLIVE INDIA LTD Deepesh Agarwal 08D1248 GILLETTE INDIA Gaurav Bengani 08D1249 GLAXOSMITHKLINE CONSUMER AND HEALTHCARE LTD Page | 1
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The Project is titled as “INDUSTRIAL REVIEW PROJECT” and has been prepared by Chetan.M.Daga, Deepak Lunawat, Deepesh Agarwal and Gaurav Bengani.
The Following table gives the detail about the Name, Register Number and Company of a particular Student.
Name Register No Company Company Logo
Chetan M Daga
08D1246 EMAMI LTD
Deepak Lunawat
08D1247 COLGATE PALMOLIVE INDIA LTD
Deepesh Agarwal
08D1248 GILLETTE INDIA
Gaurav Bengani
08D1249 GLAXOSMITHKLINE CONSUMER AND HEALTHCARE LTD
Page | 1
An In troduc t ion to the Ind ian Indus try
Ind i an economy i s one o f t he f a s t e s t g rowing i n t he wor ld . I t s GDP
g rowth r a t e i s 6 . 5% wi th a GDP o f rupees 177000 c ro re , wh i ch i s t he
fou r th l a rge s t i n t he wor ld and t he 12 th l a rge s t e conomy in t he wor ld .
The coun t ry i s f a s t adap t i ng t o i ndus t r i a l i z a t i on , t he speed o f wh ich i s
measu red a s t he s econd f a s t e s t i n t he wor ld . The ma jo r i ndus t r i e s o f
I nd i a a r e au tomob i l e s , c emen t , chemica l s , consumer e l e c t ron i c s , f ood
p roce s s ing , mach ine ry , m in ing , pe t ro l eum, pha rmaceu t i c a l s , s t e e l ,
t r an spo r t a t i on equ ipmen t , and t ex t i l e s .
I n t he pos t l i be r a l i z a t i on e r a t he coun t ry ha s c ap i t a l i s ed on i t s va s t
poo l o f educa t ed , Eng l i sh speak ing manpower t o become a ma jo r power
i n Ou t sou rc ing , I n fo rma t ion Techno logy , f i nanc i a l and b iomed ica l
t e chno logy r e sea r ch , bank ing & in su rance , and r ea l e s t a t e deve lopmen t .
FMCG SECTOR
An In troduc t ion
Fas t Mov ing Consumer Goods (FMCG) goods a r e popu l a r l y named a s
consumer packaged goods . I t ems i n t h i s c a t ego ry i nc lude a l l
consumab le s (o the r t han g roce r i e s / pu l s e s ) peop l e buy a t r egu l a r
i n t e rva l s . The mos t common in t he l i s t a r e t o i l e t soaps , de t e rgen t s ,
shampoos , t oo thpas t e , shav ing p roduc t s , shoe po l i sh , packaged
foods tu f f , and househo ld acce s so r i e s and ex t ends t o c e r t a i n e l e c t ron i c
goods . These i t ems a r e mean t f o r da i l y o f f r equen t consumpt ion and
have a h igh r e tu rn .
A ma jo r po r t i on o f t he mon th ly budge t o f e ach househo ld i s r e se rved
fo r FMCG p roduc t s . The vo lume o f money c i r cu l a t ed i n t he e conomy
aga in s t FMCG p roduc t s i s ve ry h igh , a s t he number o f p roduc t s t he
consumer u se i s ve ry h igh . Compe t i t i on i n t he FMCG sec to r i s ve ry
h igh r e su l t i ng i n h igh p r e s su re on marg in s .
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FMCG compan i e s ma in t a in i n t ense d i s t r i bu t i on ne twork . Compan i e s
spend a l a rge po r t i on o f t he i r budge t on ma in t a in ing d i s t r i bu t i on
ne tworks . New en t r an t s who w i sh t o b r i ng t he i r p roduc t s i n t he na t i ona l
l eve l need t o i nves t huge sums o f money on p romot ing b r ands .
Manufac tu r i ng can be ou t sou rced . A r ecen t phenomenon i n t he s ec to r
was en t ry o f mu l t i na t i ona l s and cheape r impor t s . A l so t he ma rke t i s
more p r e s su r i z ed w i th p r e sence o f l oca l p l aye r s i n ru r a l a r ea s and s t a t e
b r ands .
Overv i ew o f FMCG Sec tor
What a r e FMCGs?
We r egu l a r l y t a l k abou t t h ings l i ke bu t t e r , po t a to ch ip s , t oo thpas t e s ,
r a zo r s , househo ld ca r e p roduc t s , packaged food and beve rages , e t c . Bu t
do we know unde r wh ich ca t ego ry t he se t h ings come? They a r e c a l l ed
FMCGs . FMCG i s an ac ronym fo r Fa s t Mov ing Consumer Goods , wh ich
r e f e r t o t h ings t ha t we buy f rom loca l supe rmarke t s on da i l y ba s i s , t he
t h ings t ha t have h igh t u rnove r and a r e r e l a t i ve ly cheape r .
FMCG Produc t s and Categor i e s
- Pe r sona l Ca re , Ora l Ca re , Ha i r Ca re , Sk in Ca re , Pe r sona l Wash
( soaps ) ;
- Cosme t i c s and t o i l e t r i e s , deodo ran t s , pe r fumes , f emin ine hyg i ene ,
pape r p roduc t s ;
- Househo ld ca r e f ab r i c wash i nc lud ing l aund ry soaps and syn the t i c
de t e rgen t s ; househo ld c l e ane r s , such a s d i sh /u t ens i l c l e ane r s , f l oo r
c l e ane r s , t o i l e t c l e ane r s , a i r f r e shene r s , i n sec t i c i de s and mosqu i t o
r epe l l en t s , me t a l po l i sh and fu rn i t u r e po l i sh ;
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FMCG in 2006
The pe r fo rmance o f t he i ndus t ry was i ncons i s t en t i n t e rms o f s a l e s and
g rowth fo r ove r 4 yea r s . The i nves to r s i n t he s ec to r we re no t ga ine r s a t
pa r w i th o the r booming s ec to r s . Af t e r two yea r s o f s i nk ing pe r fo rmance
o f FMCG sec to r , t he yea r 2005 had w i tne s sed t he FMCGs demand
g rowing . S t rong g rowth was s een ac ros s va r i ous s egmen t s i n FY06 .
Wi th t he r i s e i n d i sposab l e i ncome and t he economy in good hea l t h , t he
u rban consumer s con t i nued w i th t he i r shopp ing sp ree .
- Food and hea l t h beve rages , b r anded f l ou r , b r anded suga rcane , bake ry
p roduc t s such a s b r ead , b i s cu i t s , e t c . , m i lk and da i ry p roduc t s ,
beve rages such a s t e a , co f f ee , j u i c e s , bo t t l ed wa t e r e t c , snack food ,
choco l a t e s , e t c .
- F r equen t l y r ep l aced e l ec t ron i c p roduc t s , such a s aud io equ ipmen t s ,
d ig i t a l c amera s , Lap tops , CTVs ; o the r e l e c t ron i c i t ems such a s
Re f r i ge r a to r , wash ing mach ine s , e t c . coming unde r t he c a t ego ry o f
Whi t e Goods i n FMCG;
Sec to r Ou t look :
FMCG is the fourth largest sector in the Indian Economy with a total market size of
Rs1,25,000crore ($25 billion) crore sales and is expected to grow to Rs 4,50,000 crore ($95
billion) by 2018. This will be a result of GST (Goods & Service Tax) – announced to be
implemented from 1st April, 2010– and possible opening of retail to foreign investment
(FDI), will ensure multi-fold growth for FMCG sector in the next 10 years. FMCG sector
generates 5% of total factory employment in the country and is creating employment for three
million people, especially in small towns and rural India
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Analys i s o f FMCG Sec tor
Strengths:
1. Low operational costs.
2. Presence of established distribution networks in both urban and rural areas.
3. Presence of well-known brands in FMCG sector.
Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors.
2. Low export levels.
3. The "Me-too" products, which illegally mimic the labels of the established brands, narrow the scope of FMCG products in rural and semi-urban market.
4. Huge number of alternatives, leading to confusion in minds of the customers.
Opportunities:
1. Untapped rural markets.
2. Rising income levels; i.e. increase in purchasing power of consumers
3. Large domestic market- a population of over one billion.
4. Export potential
5. High consumer goods spending
Threats:
1. Removal of import restrictions resulting in replacing of domestic brands
2. Slowdown in rural demand.
3. Tax and regulatory structure
4. Heavy competition.
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Scope o f the Sec tor
The Ind i an FMCG sec to r w i th a ma rke t s i z e o f US$25 b i l l i on i s t he
fou r th l a rge s t s ec to r i n t he e conomy . A we l l - e s t ab l i shed d i s t r i bu t i on
ne twork , i n t ense compe t i t i on be tween t he o rgan i zed and uno rgan i zed
s egmen t s cha rac t e r i z e s t he s ec to r . FMCG Sec to r i s expec t ed t o g row by
ove r 60% by 2010 . I t had been e s t ima t ed t ha t FMCG sec to r w i l l r i s e
f rom a round Rs 56 ,500 c ro re s i n 2005 t o Rs 92 ,100 c ro re s i n 2010 . Ha i r
c a r e , househo ld ca r e , ma l e g rooming , f ema le hyg i ene , and t he
choco l a t e s and con fec t i one ry ca t ego r i e s a r e e s t ima t ed t o be t he f a s t e s t
g rowing s egmen t s , s ays an HSBC repo r t . Though t he s ec to r w i tne s sed a
s l ower g rowth i n 2002 -2004 , i t ha s been ab l e t o make a f i ne r e cove ry
s i nce t hen .
Fo r example , H indus t an Un i l eve r L imi t ed (HUL) ha s shown a hea l t hy
g rowth i n t he p r ev ious f ew qua r t e r s . An e s t ima t ed doub l e -d ig i t g rowth
ove r t he nex t f ew yea r s shows t ha t t he good t imes a r e l i ke ly t o
con t i nue .
Growth Prospec t s :
With t he p r e sence o f a round 12 .5% o f t he wor ld popu l a t i on i n t he
v i l l age s o f I nd i a , t he Ind i an ru r a l FMCG marke t i s some th ing no one
can ove r look . I nc r ea sed focus on f a rming s ec to r w i l l boos t r u r a l
i ncomes , hence p rov id ing be t t e r g rowth p rospec t s t o t he FMCG
compan i e s . Be t t e r i n f r a s t ruc tu r e f a c i l i t i e s w i l l improve t he i r supp ly
cha in . FMCG sec to r i s a l so l i ke ly t o bene f i t f r om g rowing demand i n
t he ma rke t . FMCG compan i e s have immense pos s ib i l i t i e s f o r g rowth .
And i f t he compan i e s a r e ab l e t o change t he mindse t o f t he consumer s ,
i . e . i f t hey a r e ab l e t o t ake t he consumer s t o b r anded p roduc t s and o f f e r
new gene ra t i on p roduc t s , t hey wou ld be ab l e t o gene ra t e h ighe r g rowth
i n t he nea r f u tu r e . Howeve r , t he demand i n u rban a r ea s wou ld be t he
key g rowth d r i ve r ove r t he l ong t e rm .
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A l so , i nc r ea se i n t he u rban popu l a t i on , a l ong w i th i nc r ea se i n i ncome
l eve l s and t he ava i l ab i l i t y o f new ca t ego r i e s , wou ld he lp t he u rban
a r ea s ma in t a in t he i r pos i t i on i n t e rms o f consumpt ion . A t p r e sen t ,
u rban Ind i a a ccoun t s f o r 63% o f t o t a l FMCG consumpt ion , w i th ru r a l
I nd i a a ccoun t i ng fo r t he r ema in ing 37%. Howeve r , r u r a l I nd i a a ccoun t s
f o r more t han 41% consumpt ion i n ma jo r FMCG ca t ego r i e s such a s
pe r sona l c a r e , f ab r i c c a r e , and ho t beve rages . I n u rban a r ea s , home and
pe r sona l c a r e c a t ego ry , i nc lud ing sk in ca r e , househo ld ca r e and
f emin ine hyg i ene , w i l l keep g rowing a t r e l a t i ve ly a t t r a c t i ve r a t e s .
Wi th in t he foods s egmen t , i t i s e s t ima t ed t ha t p roce s sed foods , bake ry ,
and da i ry a r e l ong - t e rm g rowth ca t ego r i e s i n bo th ru r a l and u rban
a r ea s .
Fac tors tha t make Ind ia a compet i t i ve p layer in FMCG sec tor :
Ava i lab i l i t y o f raw mater ia l s :
Because o f t he d ive r se ag ro -c l ima t i c cond i t i ons i n Ind i a , t he r e i s a
l a rge r aw ma te r i a l ba se su i t ab l e fo r f ood p roce s s ing i ndus t r i e s . I nd i a i s
t he l a rge s t p roduce r o f l i ve s tock , m i lk , suga rcane , coconu t , sp i ce s and
ca shew and i s t he s econd l a rge s t p roduce r o f r i c e , whea t and f ru i t s
&vege t ab l e s . I nd i a a l so p roduces c aus t i c soda and soda a sh , wh ich a r e
r equ i r ed fo r t he p roduc t i on o f soaps and de t e rgen t s . The ava i l ab i l i t y o f
t he se r aw ma te r i a l s g ive s Ind i a t he l oca t i on advan t age .
Cost o f Labour :
Low cos t l abo r g ive s Ind i a a compe t i t i ve advan t age . I nd i a ' s l abo r cos t
i s amongs t t he l owes t i n t he wor ld , a f t e r Ch ina & Indones i a . Low l abo r
cos t s g ive t he advan t age o f l ow cos t o f p roduc t i on . Many MNC' s have
e s t ab l i shed t he i r p l an t s i n Ind i a t o ou t sou rce fo r domes t i c and expo r t
ma rke t s .
Page | 7
Presence acros s va lue cha in :
Ind i an compan i e s have t he i r p r e sence ac ros s t he va lue cha in o f FMCG
sec to r , r i gh t f r om the supp ly o f r aw ma te r i a l s t o packaged goods i n t he
food -p roce s s ing s ec to r . Th i s b r i ngs Ind i a a more cos t compe t i t i ve
advan t age . Fo r example , Amul supp l i e s m i lk a s we l l a s da i ry p roduc t s
l i ke chee se , bu t t e r , e t c .
7 Reasons why FMCG can be pursued as a Career
Indus try Background
FMCG indus try c r ea t e s a w ide r ange o f j ob oppo r tun i t i e s . Th i s
i ndus t ry i s a s t ab l e , d ive r se , cha l l eng ing and h igh p ro f i l e i ndus t ry
p rov id ing a w ide r ange o f j ob ca t ego r i e s l i ke s a l e s , supp ly cha in ,
f i nance , ma rke t i ng , ope ra t i ons , pu rchas ing , human r e sou rce s , p roduc t
deve lopmen t , and gene ra l managemen t .
FMCG i s one o f t he mos t dynamic doma ins o f t he bus ine s s wor ld . I n
t h i s s ec to r , one needs t o be f a s t i n t r ans l a t i ng t he i dea s i n to new
p roduc t s . The re i s a r equ i r emen t t o c r ea t e t he p roduc t s t ha t peop l e
t r u s t , en joy and u se i n t he i r da i l y l i ve s . Adve r t i s i ng and marke t i ng
have a v i t a l r o l e t o p l ay i n t h i s .
Ski l l s Requ ired
FMCG sec to r r equ i r e s huge amoun t o f commerc i a l awa renes s ; one mus t
have t he sk i l l s o f a t e am p l aye r . Apa r t f r om tha t , good numer i ca l sk i l l s ,
commun ica t i on and o rgan i za t i ona l sk i l l s a r e a l l e s s en t i a l f o r a
succe s s fu l c a r ee r i n t h i s i ndus t ry . Key sk i l l s w i l l a l so depend upon t he
t ype o f pos i t i on you wan t t o pu r sue , i . e . ma rke t i ng , human r e sou rce s ,
f i nance , e t c .
Page | 8
The r ea sons why one shou ld pu r sue one ' s c a r ee r i n FMCG sec to r :
1 . Job s ecur i ty
I t i s a s t ab l e i ndus t ry . Un l ike some o the r i ndus t r i e s , such a s
au tomob i l e s , IT , and av i a t i on , FMCG indus t ry does no t su f f e r f rom
mass l ayo f f s , when t he economy s t a r t s t o d ip . One may d rop t he i dea o f
buy ing a c a r bu t no t t he i dea o f hav ing d inne r . Th i s l ends FMCG a l eve l
o f j ob s ecu r i t y unknown in o the r i ndus t r i e s e spec i a l l y du r ing t he
Cur r en t s l owdown .
2 . A h igh pro f i l e indus try
Ind i a ha s b i l l i ons o f peop l e and a l l a r e consumer s . The re fo re eve ryone
i s a f f ec t ed by FMCG sec to r . Peop l e now a r e ge t t i ng more hea l t h
consc ious and abou t wha t t hey a r e e a t i ng . A l l t h i s ha s become pos s ib l e
because o f t he f r equen t d i sp l ay o f va r i ous adve r t i s emen t s , such a s
p ro t e s t s aga in s t t he gene t i c mod i f i c a t i on o f f oods , t he g rowing p rob l em
o f obes i t y , e t c .
3 . Quick exper i ence
Cons ide r an example : One pe r son i s work ing i n t he s a l e s o f au tomob i l e s
wh i l e t he o the r one i s work ing i n t he s a l e s o f beve rages . A t t he end o f
t he mon th , t he pe r son who i s work ing fo r t he s a l e s o f au tomob i l e s may
s e l l 2 o r 3 un i t s , i f he i s f o r t una t e . On t he o the r hand , t he o the r pe r son
s e l l s a l a rge number o f p roduc t s eve ry day . De f in i t e l y , t he pe r son
s e l l i ng beve rages w i l l ge t more expe r i enced i n l e s s t ime work ing i n
FMCG than any o the r s ec to r , no ma t t e r whe the r i n s a l e s , ma rke t i ng ,
ope ra t i ons , a ccoun t i ng , e t c . I n t he end , one w i l l l and up l e a rn ing more
and ga in ing a f i rm g ra sp o f ba s i c bus ine s s sk i l l s .
4 . A wide range o f exper i ence
One can have a w ide r ange o f cho i ce s i f one de s i r e s a c a r ee r pa th i n
FMCG sec to r . The " f a s t mov ing" pa r t o f FMCGs r equ i r e s peop l e who
a r e f l ex ib l e . I n t e r0depa r tmen t t r ans f e r s a r e ve ry common . One w i l l ge t
t o l e a rn a l o t , even i f one en t e r s t h i s s ec to r f o r a sho r t du ra t i on .
Page | 9
5 . An indus try tha t thr ive s on innovat ion
FMCG sec to r g ive s t he oppo r tun i t y t o do c r ea t i ve work . The re i s a
cons t an t r equ i r emen t o f i nnova t i on i n p roduc t i on , adve r t i s i ng ,
packag ing and b r and ing . FMCG o f f e r s an oppo r tun i t y t o exp re s s ones
c r ea t i v i t y t h rough deve lop ing new idea s fo r p roduc t s , a s b r ands
compe t e head t o head on t he she l f .
6 . Nat ionwide oppor tun i t i e s , bo th urban and rura l
FMCG sec to r o f f e r s oppo r tun i t i e s t h rough i t s connec t i on t o t he p r ima ry
s ec to r i n ru r a l and u rban a r ea s . The s ec to r i s pa r t i cu l a r l y a t t r a c t i ve fo r
t hose i n t e r e s t ed i n work ing i n d i f f e r en t pa r t s o f t he coun t ry , a s i t ha s a
na t i onwide ba se , un l i ke many o the r s ec to r s con f ined t o pa r t i cu l a r
l oca t i ons .
7 . Of f shore oppor tun i t i e s
The In t e rna t i ona l o f f i c e s o f mos t FMCG mul t i na t i ona l s r egu l a r l y
r e c ru i t s t a f f f r om ou r coun t ry , e i t he r f o r sho r t p ro j ec t s o r f o r l onge r
s t i n t s .
Ind ian Consumer C las s
I nd i a ha s a popu l a t i on o f ove r 1 b i l l i on and 4 c l ima t i c zones .
Seve ra l r e l i g ious and pe r sona l be l i e f s , 15 o f f i c i a l l anguages , d i f f e r en t
soc i a l cu s toms and food hab i t s cha rac t e r i s e Ind i an consumer c l a s s .
Bes ide s , I nd i a i s a l so d i f f e r en t i n cu l t u r e i f compa red w i th o the r As i an
coun t r i e s . The re fo re , I nd i a ha s h igh d i s t i nc t i venes s i n demand and t he
compan i e s i n Ind i a c an ge t l o t o f ma rke t oppo r tun i t i e s f o r va r i ous
c l a s se s o f consumer s . Consumer goods marke t e r s ’ expe r i ence t ha t
dea l i ng w i th Ind i a i s l i ke dea l i ng w i th many sma l l ma rke t s a t t he s ame
t ime .
Page | 10
Ind i an consumer goods marke t i s expec t ed t o r e ach $400 b i l l i on by
2010 . I nd i a ha s t he younges t popu l a t i on amongs t t he ma jo r coun t r i e s .
The re a r e a l o t o f young peop l e i n Ind i a i n d i f f e r en t i ncome ca t ego r i e s .
Consumer goods marke t e r s a r e o f t en f aced w i th a d i l emma r ega rd ing
t he cho i ce o f app rop r i a t e ma rke t s egmen t .
I n Ind i a t hey do no t have t o f a ce t h i s d i l emma l a rge ly because r ap id
u rban i za t i on , i nc r ea se i n demand , p r e sence o f l a rge number o f young
popu l a t i on , any number o f oppo r tun i t i e s i s ava i l ab l e . The bo t t om l i ne i s
t ha t I nd i an marke t i s chang ing r ap id ly and i s showing unp receden t ed
consumer bus ine s s oppo r tun i t y .
As t he r e s t r i c t i ons on fo r e ign i nves tmen t s we re r e l axed i n 1991 , Mul t i -
Na t i ona l Compan i e s have been en t e r i ng Ind i a s i nce t hen .
Recent Deve lopments in Fas t Mov ing Consumer Goods (FMCG)
Sec tor
FMCG sec to r i s no doub t r eg i s t e r i ng an up t r end i n g rowth . Acco rd ing
t o CNBC, FMCG sec to r g rowth s t o ry w i l l con t i nue because o f t he
pos i t i ve budge t . Neve r the l e s s , t he r e a r e some ba r r i e r s t o t he g rowth o f
t he s ec to r . I nd i r ec t t axe s cons t i t u t e no l e s s t han 35% o f t he t o t a l co s t
o f consumer p roduc t s - t he h ighes t i n As i a . Las t yea r , F inance Min i s t e r
p roposed t o i n t roduce an i n t eg ra t ed Goods and Se rv i ce Tax by Apr i l
2010 .Th i s i s an excep t i ona l l y good move because t he g rowth o f
consumpt ion , p roduc t i on , and emp loymen t i s d i r e c t l y p ropo r t i ona t e t o
r educ t i on i n i nd i r ec t t axe s .
Page | 11
Budge t 2008 -2009 for FMCG Sec tor
The i ncome t ax p ropos i t i ons have an i nd i r ec t impac t on FMCG sec to r .
More d i sposab l e i ncome in t he hands o f consumer s w i l l enab l e t hem to
g r adua t e t o h igh end ca t ego ry p roduc t s . Ove ra l l FMCG p roduc t
consumpt ion i s expec t ed t o i nc r ea se i n u rban a s we l l a s r u r a l a r ea s .
P roposed i nc r ea se o f t he co rpus o f r u r a l i n f r a s t ruc tu r e deve lopmen t
fund t o Rs .140bn w i l l bene f i t t o r u r a l deve lopmen t wh ich u l t ima t e ly
i nc r ea se p roduc t pene t r a t i on i n ru r a l a r ea s . Reduc t i on o f Exc i s e du ty
f rom 16% to 14% wi l l bene f i t s e c to r a s a who le
Du ty impose on non - f i l t e r C iga re t t e s i s pos i t i ve fo r ITC a s i t ha s f i l t e r
c i ga r e t t e s .
Reduc t i on i n CST f rom 3% to 2% i s pos i t i ve fo r a l l f ood p roce s s ing
compan i e s .
Exc lu s ion o f t e a & co f f ee f rom exc i s e du ty w i l l no t on ly bene f i t
consumer s bu t a l so t o t he compan i e s l i ke ITC , HUL, Ta t a Tea , Ta t a
Cof f ee , Nes t l e , e t c .
Corpora te Soc ia l Respons ib i l i t y
FMCG compan i e s have now s t a r t ed t ak ing Corpo ra t e Soc i a l
Respons ib i l i t y s e r i ous ly . Fo r i n s t ance , t o encoun t e r domes t i c v io l ence ,
Ponds ha s t i ed up w i th t he Un i t ed Na t i ons Deve lopmen t Fund (UNDF)
fo r Women . Su r f Exce l i s f und ing t he educa t i on o f ch i l d r en . Mos t
b r ands l i nk t hemse lve s w i th t he soc i a l c ause s , t he r eby l i nk ing
consumer s w i th t he b r ands and ga in ing goodwi l l i n t he ma rke t .
Page | 12
FMCG ON BUYING SPREE
To a t t a i n a max imum g rowth , many FMCG compan i e s have f i xed
va r i ous ma jo r buy ou t dea l s i n bo th domes t i c a s we l l a s i n t e rna t i ona l
ma rke t . As an example , Ta t a Tea , t he l a rge s t t e a manufac tu r i ng
company i n Ind i a and t he s econd l a rge s t t e a company i n t he wor ld and
i t s p romote r Ta t a Sons had j o in t l y a cqu i r ed a 30% s t ake i n Ene rgy
b r ands Inc (Ene rgy Brands was founded i n 1996 and i s a subs id i a ry o f
Coca -Co la . ) f o r Rs . 3148 c ro re i n Augus t 2006 . Th i s a cqu i s i t i on was
t he t h i rd l a rge s t g loba l a cqu i s i t i on a f t e r V ideocon and Ta t a S t ee l by an
Ind i an company .
A l so i n t he yea r 2006 , Ta t a Cof f ee L td . Acqu i r ed E igh t O ' C lock co f f ee
company (EOC) , USA f rom Gryphon Inves to r s wor th Rs 1015 c ro re .
I n ano the r example , Mar i co L td . - a l e ad ing Ind i an g roup i n Consumer
P roduc t s and Se rv i ce s , a cqu i r ed H indus t an Un i l eve r L td ' s b r and N iha r
fo r Rs 227 c ro r e i n 2006 . I n t he s ame yea r Mar i co had acqu i r ed two
Egyp t i an co lo r and ha i r c a r e b r and by t he name o f Ha i rmode and
f i ancée .
I n domes t i c ma rke t Godre j Beve rages & foods L td . (GBFL) ha s
a cqu i r ed Nu t r i ne , a con fec t i ona ry b r and . Emami ’ s a cqu i s i t i on o f Zandu
i s a l so a no t ab l e one .
These acqu i s i t i ons have p l ayed a ma jo r r o l e t o push t he g rowth i n t he
s ec to r . A l so t he FMCG ma jo r s h iked t he p r i c e s and t ha t move p roved t o
be good fo r t hem. Ano the r f a c to r t ha t i s d r i v ing t he g rowth up i s
i nc r ea se i n adve r t i s i ng budge t s , and i nves t i ng heav i l y beh ind b r ands .
Page | 13
In e s sence , t he ma jo r f a c to r s t ha t have p rope l l ed t he g rowth o f FMCG
Sec to r a r e :
Majo r a cqu i s i t i ons
Pr i c ing power
Ef fec t i ve ma rke t i ng and adve r t i s i ng s t r a t egy .
Ma jo r FMCG compan i e s a r e now p l ann ing t o en t e r new ca t ego r i e s w i th
f r e sh marke t i ng ob j ec t i ve s and a r e a l so gea r i ng up fo r more acqu i s i t i on
i n domes t i c and i n t e rna t i ona l ma rke t s t ha t w i l l c e r t a i n ly g ive a spu r t o
t he g rowth i n FMCG sec to r .
FMCG REPORT AT THE ONSET OF 2008
We be l i eve t ha t i n a s cena r io o f a buoyan t e conomy and mu l t i p l e
g rowth t r i gge r s be ing i n p l ace , t he FMCG sec to r shou ld su s t a in robus t
g rowth momen tum. We expec t new p roduc t deve lopmen t s , be t t e r hea l t h
and happ i e r t a s t e buds i n t he FMCG sec to r .
Momen tum to su s t a in : Wi th Ind i a r i s i ng , t he ou t l ook o f I nd i ans i s
chang ing t oo . They a r e w i l l i ng t o expe r imen t and t r y ou t new p roduc t s .
Cap tu r i ng i n s igh t s i n to t he i r needs and syn the s i z ing t he se i n to
s t r a t eg i e s and f i na l p roduc t f o rma t s p r e sen t s a new oppor tun i t y fo r
FMCG p l aye r s . Up g rada t i on f rom unb randed t o b r anded goods
(packaged g roce ry , househo ld c l e an ing p roduc t s ) , demand o f emerg ing
ca t ego r i e s ( b r eak fa s t c e r ea l s , ha i r co lou r s ) and hea l t h and hyg i ene
p roduc t s ( chyavanp ra sh ) wou ld be t he g rowth d r i ve r s .
Go ing ru r a l : As pe r Asschom, FMCG wi l l be w i tne s s ing more t han 50%
o f i t s g rowth i n t he ru r a l and s emi -u rban s egmen t s by 2010 . Cur r en t l y ,
nea r l y 34% o f t he o f f t ake o f FMCG compan i e s come f rom ru ra l a r ea s .
As s een l i ke l a s t yea r , even i n 2008 , t he ru r a l a r ea s wou ld p rov ide a
huge po t en t i a l .
Page | 14
Compan ie s l i ke HUL, ITC and Co lga t e have a l r e ady e s t ab l i shed good
d i s t r i bu t i on ne tworks i n t he se r eg ions . O the r compan i e s wou ld s t a r t
c a t e r i ng t o t he se r eg ions i n nea r f u tu r e .
Hea l t h and we l l ne s s : Wi th t he g rowth p rospec t s o f t he e conomy and
s ec to r i n p l ace , t hough mos t o f t he c a t ego r i e s w i l l con t i nue t he i r
g rowth , p roce s sed foods and t he Pe r sona l Ca re s egmen t i s l i ke ly be t he
f a s t e s t g rowing s egmen t s .
Foods : Food fo rms t he l a rge s t componen t o f t he t o t a l consumpt ion
expend i t u r e i n Ind i a a ccoun t i ng fo r a s much a s 51%. Th i s i s h ighes t
compa red t o 9 .7% fo r an ave rage Amer i can pe r son and 15% fo r bo th
J apanese and Br i t i sh . Though w i th r i s i ng i ncome , t he sha re wou ld go
down , bu t wou ld i nc r ea se i n abso lu t e t e rms . Fu r the r , t he compan i e s a r e
w iden ing t he i r hea l t h food po r t fo l i o t o t a rge t t he r i ch , hea l t h consc ious
u rbans . Dabur , HUL and ITC have made i nves tmen t s i n t h i s s egmen t .
Va lue g rowth : A long w i th vo lume g rowth we expec t t he va lue g rowth t o
be s t rong t oo . The compan i e s wou ld t ake s e l ec t i ve h ike s i n p r i c e t o
mee t t he i n f l a t i ona ry p r e s su re . A l so t he consumer s wou ld upg rade f rom
mass b r ands t o p r emium b rands , wh ich wou ld be a key d r i ve r i n t he
va lue g rowth .
Re t a i l f o rma t s : I nd i a i s w i tne s s ing a r e t a i l i ng r evo lu t i on i n r e cen t
t imes . Whi l e some r e t a i l cha in s a r e o f l a rge r e t a i l f o rma t s enab l i ng
huge vo lumes , some a r e focused on a f fo rdab i l i t y and t he r eby squeez ing
t he ma rg in s . On ly 4% re t a i l ou t l e t s a r e i n t he o rgan i s ed s ec to r , t he r eby
r educ ing t he r e ach . Wi th FDI expec t ed t o be a l l owed , t he sha re f rom
the r e t a i l f o rma t s by t he FMCG p l aye r s i s expec t ed t o i nc r ea se .
Page | 15
Cut - t h roa t compe t i t i on : FMCG compan i e s con t i nue t o f a ce i n t ense
compe t i t i on . P l aye r s f rom uno rgan i zed and o rgan i zed s ec to r s con t i nue
t o g r ab each o the r ’ s ma rke t sha r e s . Low b rand awarenes s enab l e s l oca l
p l aye r s t o ma rke t t he i r spu r ious l ook -a l i ke b r ands . A l so w i th en t ry o f
ex i s t i ng p l aye r s i n new segmen t s l i ke ITC’s en t ry i n pe r sona l c a r e
p roduc t s , Dabu r ’ s p l ans t o ven tu re i n to hea l t h beve rages wou ld add t o
t he a l r e ady agg re s s ive env i ronmen t r e su l t i ng i n h igh p r e s su re on
marg in s .
Commodi ty p r i c e s - a key r i sk : A wor sen ing o f t he commod i ty p r i c e
env i ronmen t i s a key r i sk . I n t he l a s t two yea r s , mos t o f t he compan i e s
had f aced p r e s su re on i t s i npu t p r i c e s . C rude , pa lm o i l , whea t and
packag ing cos t s we re on a r i s e . Though mos t o f t he compan i e s had
t aken j ud i c ious p r i c e i nc r ea se s , howeve r , a su s t a ined i n f l a t i ona ry
env i ronmen t cou ld hu r t g rowth o r ma rg in s o r bo th .
Go ing fo rwa rd :
Wi th t he e conomy on a h igh g rowth f l i gh t , r obus t consumer i sm , g r ea t e r
r u r a l pene t r a t i on and r ap id ly g rowing o rgan i zed r e t a i l , we r ema in
bu l l i sh ove r t he g rowth t r a c t i on i n t he FMCG space . Whi l e ru r a l
r eg ions wou ld d r i ve consumpt ion due t o h ighe r pene t r a t i on , o rgan i s ed
r e t a i l i ng i n u rban marke t s wou ld he lp i nc r ea se va lue g rowth l ed by
demand o f p r emium p roduc t s . The sh i f t f r om uno rgan i zed t o o rgan i zed
and f rom unb randed t o b r anded w i l l add fu r t he r impe tus t o g rowth i n
t h i s s egmen t . I nd i a ' s immense popu l a t i on o f one b i l l i on -p lu s peop l e
o f f e r s t r emendous marke t po t en t i a l . Bu t i t s many l anguages , s i z e and
poo r i n f r a s t ruc tu r e c an make i t a d i f f i cu l t p l a ce t o ope ra t e . The
compan i e s w i l l have t o a l i gn i t s s t r a t eg i e s a s pe r t he chang ing
env i ronmen t , a t t i t ude s and p r e f e r ences o f t he cus tomer s t o be
succe s s fu l .
Page | 16
RURAL INDIA:
Highe r pene t r a t i on , pe r c ap i t a consumpt ion , i nc r ea s ing popu l a t i on ba se ,
and r i s i ng househo ld i ncome con t i nued t o d r i ve t he g rowth i n t he
FMCG sec to r i n FY08 . The FMCG sec to r g r ew by 12% YoY in 2007 .
Rura l r eg ions , whe re nea r l y 70% o f Ind i a ' s popu l a t i on r e s ide s ,
a ccoun t ed fo r 34% o f t he o f f t ake fo r FMCG p roduc t s . S ince u rban
r eg ions a r e a l r e ady ma tu red , t he ru r a l r eg ion i s expec t ed t o be t he key
g rowth d r i ve r . I n u rban a r ea s , i n t roduc t i on o f newer , conven i ence and
h ighe r end p roduc t s p rope l l ed t he g rowth . Howeve r , conce rns w i th
r e spec t t o t he i nc r ea s ing compe t i t i ve env i ronmen t , i npu t cos t p r e s su re s
and i n f r a s t ruc tu r e bo t t l enecks con t i nued t o wor ry .
I ndus t ry Wish L i s t
The VAT on p roce s sed foods shou ld be r educed f rom ex i s t i ng h igh
l eve l s . The pe r i shab l e foods shou ld a t t r a c t VAT o f 0% whe rea s non -
pe r i shab l e s shou ld a t t r a c t VAT o f 4%.
Exc i s e du ty shou ld be r educed , wh i l e c en t r a l exc i s e shou ld be
exempted . Taxes shou ld be conve rged i n s t ead o f cha rg ing mu l t i p l e
t axe s .
I n f r a s t ruc tu r e s t a t u s shou ld be acco rded t o ag r i -p roce s s ing i ndus t ry .
Tax b r eaks and i ncen t i ve s shou ld be g iven t o t he food p roce s s ing
i ndus t ry a s i t e s t ab l i she s a v i t a l l i nkage and syne rgy be tween t he two
p i l l a r s o f t he e conomy- indus t ry and ag r i cu l t u r e . Fu r the r , e s t ab l i shmen t
o f co ld cha in and o the r mode rn i zed t e chno logy fo r up g r ada t i on o f
s t o r age hand l i ng and t r anspo r t a t i on shou ld be g r an t ed i n f r a s t ruc tu r e
s t a t u s and t he t ax bene f i t t o spu r i t s g rowth .
Page | 17
Confedera t ion o f Ind ian Indus tr i e s
The exc i s e du ty d i f f e r ence be tween ' b r anded ' and ' unb randed ' f ood
p roduc t s ex i s t i ng a t p r e sen t shou ld be r emoved t o encou rage consumer s
t o move f rom unhyg i en i c unb randed foods t o hyg i en i ca l l y packaged
p roce s sed foods .
Th rus t on be t t e r packag ing shou ld be made . Impor t du ty on packag ing
mach ine ry shou ld be n i l . I ncen t i ve s , whe reve r nece s sa ry , shou ld be
g iven t o t he i npu t s i de l i ke c ap i t a l goods , i n f r a s t ruc tu r e deve lopmen t ,
new t echno logy , e t c f o r t he domes t i c packag ing i ndus t ry . A l so t he t axe s
shou ld be r a t i ona l i z ed . These i n i t i a t i ve s wou ld he lp t o r educe t he
was t ages and r a i s e t he qua l i t y o f expo r t ab l e food p roduc t s .
Budge t over the years
Budge t 2005 -06
Inc r ea se i n cus toms du ty o f r e f i ned pa lm o i l t o 75%
Exc i se du ty on da i ry mach ine ry h ived o f f f r om 16%.
Imp lemen ta t i on o f VAT ac ros s a l l s t a t e s
Conces s iona l r a t e o f 5% cus tom du ty on t a e and co f f ee mach ine ry
Exc i se du ty on p r epa ra t i ons o f mea t , pou l t ry and f i sh ha lved t o
8%
Exc i se du ty on food g r ade hexane (u sed i n t he ed ib l e o i l i ndus t ry )
ha lved t o 16%
Budge t 2006 -07
Page | 18
Exc i se du ty on Condensed mi lk abo l i shed (16% ea r l i e r ) .
Exc i se du ty on Pec t i ne s and Pec t a t e s , u sed a s a ge l l i ng agen t i n
J ams and J e l l i e s abo l i shed (16% ea r l i e r ) .
Exc i se du ty on unb randed ed ib l e p r epa ra t i ons o f o i l i nc r ea sed
f rom n i l t o 8%.
Exc i se on b i s cu i t s manufac tu r ed w i thou t a i d o f power w i l l now
a t t r a c t a du ty o f 8% (n i l e a r l i e r ) .
Exc i se du ty on i c e - c r eams exempted
Exc i se on r eady t o e a t packaged food r educed f rom 16% to 8%
Exc i se on i n s t an t f ood mixes exempted
Exc i se on soaps manufac tu r ed w i thou t power w i l l now a t t r a c t 16%
du ty
Exc i se du ty on p roce s sed mea t , f i sh and pou l t ry p roduc t s r educed
f rom 8% to n i l .
Exc i se du ty on yea s t exempted
Budge t 2007 -08
Fa rm sec to r ha s been g iven t he t op p r i o r i t y . Agr i cu l t u r e
i nves tmen t s t o go up to 2% o f GDP.
Duty on ed ib l e o i l ha s been r educed .
Cus toms du ty on food p roce s s ing mach ine ry and t he i r pa r t s i s
be ing r educed f rom 7 .5% to 5%. Exc i s e du ty ha s been fu l l y
exempted on b i s cu i t s o f pe r k i l og ram r e t a i l s a l e p r i c e equ iva l en t
o f Rs .50 pe r kg o r l e s s .
Exc i se du ty on food mixes , i nc lud ing i n s t an t f ood mixes , ha s been
r educed f rom 16%/ o r 8% to N i l .
Free s amp le s and d i sp l ays a r e exempt fo rm the pu rv i ew o f FBT .
Ven tu re c ap i t a l i nves t i ng i n da i ry i ndus t ry w i l l ge t a pa s s t h rough
s t a t u s .
Be t t e r r u r a l i n f r a s t ruc tu r e deve lopmen t t o be an a r ea o f f ocus .
Budge t 2008 -09
Page | 19
Reduc t i on i n exc i s e du ty f rom 16% to n i l on t e a and co f f ee mixes .
Cus toms du ty on bac to fuges ha s been r educed f rom 7 .5% to N i l .
Cus toms du ty on f eed add i t i ve s /p r e -mixes ha s been r educed f rom
30% to 20%.
Cus toms du ty i s be ing r educed on v i t amin p r emixes and mine ra l
m ix tu r e s f rom 30% to 20% and on phospho r i c a c id f rom 7 .5% to
5% to r educe cos t o f manufac tu r e o f da i ry and pou l t ry f e eds
Exc i se du ty on pack ing pape r ha s been r educed f rom 12% to 8%.
Exc i se du ty on pan masa l a , no t con t a in ing t obacco , w i th be t e l nu t
con t en t no t more t han 15%, ha s been r educed f rom 16% to 8%.
Exc i se du ty on i nk fo r wr i t i ng i n s t rumen t s such a s wh i t e boa rd
marke r s and t he l i ke i s be ing r educed f rom 16% to 8%.
Mentho l i s f u l l y exempted f rom exc i s e du ty .
Rs .40 c ro r e i n 2008 -09 i s p rov ided fo r Spec i a l Pu rpose Tea Fund
fo r r e -p l an t a t i on & r e juvena t i on and s im i l a r suppo r t t o c a rdamom,
rubbe r & co f f ee i s a l so g iven . C rop i n su rance s cheme fo r t e a ,
r ubbe r , t obacco , ch i l l i , g i nge r , t u rmer i c , peppe r and ca rdamom i s
t o be i n t roduced .
Budge t 2009-10
Page | 20
Emphas i s i s on ag r i cu l t u r e , r u r a l g rowth , r u r a l i n f r a s t ruc tu r e i s l i ke ly
t o i nc r ea se . I ncome in t he hands o f r u r a l peop l e and t he r eby l e ad t o
i nc r ea se i n consumpt ion .
Agr i cu l t u r e c r ed i t f l ow a l l oca t i on i n FY10 o f Rs . 3 , 25 ,000 c ro re
t o boos t ag r i cu l t u r e and t he r eby acce l e r a t e ru r a l demand .
In t e r e s t subven t i on s cheme on sho r t t e rm loan t o be con t i nued and
add i t i ona l subven t i on o f 1% to be g iven t o t hose f a rmer s who
r epay sho r t t e rm c rop l oan on t ime t o Encou rage f a rmer s t o r epay
l oan on t ime t o s ave i n t e r e s t and t he r eby s t imu la t e consumpt ion
Al loca t i on unde r NREGS inc rea sed by 144% to Rs . 39 ,100 c ro re
and r ea l wage o f Rs . 100 /day p rov ided unde r NREGA to i nc r ea se
emp loymen t i n ru r a l a r ea s and t he r eby boos t r u r a l consumpt ion
Abol i t i on o f FBT – pos i t i ve fo r a l l FMCG compan i e s
Pe r sona l I ncome Tax s l abs r a i s ed by Rs . 10 ,000 fo r ma l e &
f ema le and Rs . 15 ,000 fo r s en io r c i t i z ens , t h i s w i l l r e su l t i n
s av ings and t he r eby encou rage consumpt ion .
A l l FMCG compan i e s a r e l i ke ly t o bene f i t f r om th i s a s a l l compan i e s
have s t a r t ed focus ing on ru r a l I nd i a fo r d r i v ing vo lume g rowth .
No i nc r ea se i n exc i s e du ty on c iga r e t t e s i s a pos i t i ve move fo r ITC
HUL, Ta t a Tea , ITC
Key Pos i t i ve s
Rura l pene t r a t i on l eve l s a r e i nc r ea s ing : Acco rd ing t o e s t ima t e s , on ly
abou t 11% to 13% o f t he t o t a l f ood p roduc t i on i s consumed i n
p roce s sed fo rm . Th i s speaks fo r i t s e l f , h i gh l i gh t i ng t he s cope fo r
g rowth . The p l anned deve lopmen t o f r oads , po r t s , r a i lways and a i rpo r t s ,
i s i nc r ea s ing FMCG pene t r a t i on i n t he ru r a l a r ea s .
Newer produc t s : As g rowth ha s shown s igns o f s l a cken ing compan i e s
a r e i nc r ea s ing ly focus ing on key p roduc t s and b r ands , co s t e f f i c i enc i e s
Page | 21
and ru r a l ma rke t s . Th i s i s a s i gn o f ma rke t soph i s t i c a t i on , bo th f rom
the manufac tu r e r ' s po in t o f v i ew a s we l l a s t he consumer ' s po in t o f
v i ew . Wi th r i s i ng consumer i sm and chang ing l i f e s t y l e t he demand fo r
va lue added p roduc t s i s i nc r ea s ing .
Cost advantage : Owing t o Ind i a ' s co s t advan t age , many MNC
compan i e s have s t a r t ed u s ing t he i r I nd i an ope ra t i ons a s t he i r
manufac tu r i ng ba se . A l t e rna t i ve ly , some Ind i an compan i e s have t e s t ed
fo r e ign sho re s l i ke Bang l adesh , S r i Lanka and t he Midd l e Eas t among
o the r .
VAT: The p roposed i n t roduc t i on o f VAT a t t he s t a r t o f FY06 i s a l ong
t e rm pos i t i ve fo r t he FMCG sec to r . Th i s had been a l ong pend ing
demand o f t he FMCG sec to r . Pos t t h i s ; t he t ax amb igu i t y w i l l ge t
r educed , bene f i t i ng t he s ec to r .
Reta i l ing : FMCG compan i e s have pa r t ne r ed w i th mode rn r e t a i l i ng
s t o r e s and a s t h i s f o rma t i s t he fu tu r e . Growth w i l l be f a s t e r because
mode rn i s a t i on o f t he r e t a i l s e c to r w i l l be r e f l e c t ed i n r ap id g rowth i n
s a l e s o f supe rmarke t s , depa r tmen t s t o r e s and hype rmarke t s , because o f
t he g rowing p r e f e r ence o f t he a f f l uen t and uppe r m idd l e c l a s se s fo r
shopp ing a t t he se t ypes o f r e t a i l s t o r e s , g iven t he conven i ences t hey
o f f e r such a s shopp ing amb ience , va r i e t y and a s i ng l e -po in t sou rce fo r
pu rchase s .
Key Negat ive s
Page | 22
Compet i t i on : New en t r an t s i n t he s ec to r have he igh t ened compe t i t i on
i n key s egmen t s l i ke soaps and de t e rgen t s , pu t t i ng p r e s su re on
p ro f i t ab i l i t y
Higher input cos t s : The compan i e s w i tne s sed r i s e i n t he i npu t p r i c e s
du r ing t he yea r . H ighe r c rude , whea t , pa lm o i l p r i c e s amongs t o the r s
p r e s su r i z ed t he ma rg in s . Though t he compan i e s t ook e f f ec t i ve p r i c e
h ike o f t he f i na l p roduc t s , a f u r t he r h ike wou ld l e ad t o l o s s o f ma rke t
sha r e .
In fras t ruc ture : The i n f r a s t ruc tu r e fo r f r e e t r anspo r t o f goods i s no t
adequa t e i n t he coun t ry . A l so , t he f a l l i n ag r i cu l t u r a l ou tpu t con t i nues
t o c a s t on FMCG sec to r ' s p ro spec t s i n t he sho r t t e rm .
Spur ious goods : A l a rge pa r t o f t he b r anded marke t con t i nues t o be
t h r ea t ened by spu r ious goods and i l l ega l f o r e ign impor t s . I n t imes o f
weakened consumer demand such menaces con t i nue t o n igh tmare s t o
l a rge compan i e s .
Page | 23
KEY INFORMATION WHY FMCG IS ASKING SLUMP?
Whethe r i t i s a bu l l o r bea r ma rke t , r o t i , k apda and makaan con t i nue t o
r ema in t he ba s i c nece s s i t i e s o f l i f e . Whi l e makaan i s f a c ing some
t roub l e amids t t he cu r r en t s l owdown , and shopp ing fo r kapda i s no t
l i ke ly t o be a s s t r ong a s be fo re , i t i s t he ro t i componen t t ha t s t i l l
domina t e s t he consumer ’ s ba ske t .
Th i s t r end i s be ing r ep l i c a t ed i n t he f i nanc i a l ma rke t a s we l l . Hav ing
ex i t ed o the r s ec to r s l i ke r e a l t y , i n f r a s t ruc tu r e and cap i t a l goods ,
i nves to r s a r e now tu rn ing t he i r a t t en t i on t o FMCG. Th i s i s r e f l e c t ed by
t he g r adua l i nc r ea se i n i nves to r s ’ i n t e r e s t i n compan i e s t ha t f ocus on
food and o the r anc i l l a ry consumab le s r equ i r ed by househo lds . Apa r t
f r om r e t a i l i nve s to r s , even p r i va t e equ i t y i nves to r s a r e f l ock ing t o
c l i nch dea l s w i th compan i e s i n t he FMCG sec to r .
So , wha t c an be t he r e a sons beh ind t h i s sh i f t i n f ocus i n f avou r o f
FMCG compan i e s? H i s to r i c a l l y , FMCG compan i e s have ru l ed t he roos t
du r ing pe r i ods o f s l ump in t he ma rke t .
The re a r e s eve ra l f a c to r s wh ich h in t a t a r e su rgence i n i nves to r s ’
i n t e r e s t i n FMCG compan i e s . Th i s s ec to r ha s been t he be s t pe r fo rmer i n
Page | 24
va r ious qua r t e r s l i ke t he qua r t e r ended Sep t embe r ’08 . Mos t compan i e s
i n t he s ec to r have been ab l e t o wa rd o f f t he e f f ec t s o f t he s l owdown
caused due t o va r i ous f a c to r s l i ke cos t i n f l a t i on , c r ed i t c runch and
h ighe r i n t e r e s t co s t s . And t he marke t a l r e ady s eems t o be
acknowledg ing t h i s f a c t . Fo r i n s t ance , Nes t l e ha s a h ighe r m-cap t han
compan i e s l i ke Ta t a Moto r s , H inda l co and Gra s im .
Howeve r , t he FMCG sec to r i s no t ab so lu t e ly i n su l a t ed f rom mac ro -
economic f ac to r s t ha t a r e a f f ec t i ng o the r s ec to r s . A l ook a t t he
h i s t o r i c a l r evenues and p ro f i t f i gu re s o f 14 l e ad ing FMCG compan i e s
on a t r a i l i ng fou r -qua r t e r ba s i s i nd i ca t e s t ha t t he p i c tu r e ’ s no t t oo ro sy
fo r t h i s s ec to r . Whi l e t o t a l r evenues have g rown s t e ad i l y ove r t he pa s t
t h r ee yea r s , agg rega t e ope ra t i ng p ro f i t ma rg in (OPM) , t ha t had su rged
du r ing ’06 , ha s d ropped s t e ad i l y eve r s i nce .
The f a l l ha s been more p ronounced s i nce t he pa s t two qua r t e r s .
Howeve r , t he good t h ing abou t t he FMCG sec to r i s t ha t i t doe s no t
w i tne s s ex t r emes . The r ange o f t he r i s e and f a l l i n OPM in t h i s s ec to r
ha s been be tween 17% and 19 .5%, o r 250 ba s i s po in t s . Th i s i s qu i t e a
na r row r ange compa red t o i n t e r e s t r a t e - s ens i t i ve and cyc l i c a l s ec to r s ,
wh i ch a r e showing vo l a t i l e movemen t s i n pe r fo rmance .
Ano the r pos i t i ve t r end i s t ha t wh i l e mos t compan i e s i n o the r s ec to r s a r e
she lv ing t he i r a cqu i s i t i on p l ans o r go ing s l ow on expans ion , FMCG i s
one o f t he ve ry f ew sec to r s wh ich i s s ee ing i nc r ea sed M&A ac t i v i t y i n
r e cen t t imes . Emami ’ s buyou t o f Zandu Pha rma and Dabur Ind i a ’ s
a cqu i s i t i on o f Fem Ca re Pha rma a r e no t ab l e example s o f t h i s t r end .
A l so , Mar i co and Godre j Consumer P roduc t s a r e expand ing t he i r
bus ine s s i n coun t r i e s l i ke Wes t As i a , Sou th Af r i c a and Egyp t . Mos t
domes t i c compan i e s a r e l aunch ing homegrown b rands i n o the r emerg ing
marke t s .
Moreove r , I nd i a ’ s r u r a l ma rke t i s unde r -pene t r a t ed , wh ich ho ld s
immense g rowth po t en t i a l f o r t he FMCG sec to r . Mos t compan i e s have
Page | 25
dev i sed s t r a t eg i e s i nvo lv ing d i s t i nc t packag ing , d i f f e r en t i a l p r i c i ng and
l oca l adve r t i s i ng t o t ap t he se ma rke t s . The emergence o f s t r ong
r eg iona l b r ands , wh ich a r e g iv ing t ough compe t i t i on t o mu l t i na t i ona l
b r ands , a l so h igh l i gh t s t he po t en t i a l g rowth i n t he se ma rke t s .
Whi l e f e a r s o f a r e ce s s ion have r e su l t ed i n hazy g rowth p ro j ec t i ons fo r
compan i e s i n mos t o the r s ec to r s , t he FMCG segmen t p rov ide s t he much -
needed p r ed i c t ab i l i t y t o t he ma rke t . The economic p rob l ems a f f l i c t i ng
o the r s ec to r s a r e no t l i ke ly t o adve r se ly a f f ec t g rowth i n ag r i cu l t u r e ,
f ood and a l l i ed bus ine s se s . Moreove r , t he e f f ec t o f t he s l owdown i s no t
l i ke ly t o be a s bad i n t he c a se o f FMCG compan i e s , a s f o r o the r
cyc l i c a l and cap i t a l - i n t ens ive s ec to r s .
Wi th a f a i r l y s t ab l e pe r fo rmance , p r ed i c t ab l e g rowth , r e l a t i ve ly
r e ce s s ion -p roo f bus ine s s and g rowing i nves to r i n t e r e s t , i t may no t be
su rp r i s i ng i f compan i e s f rom th i s s ec to r once aga in su rge t o
p rominence . The i r r i s e , l i ke i n t he pa s t , may he ra ld t he nex t bu l l r un .
Page | 26
INTRODUCTION
EMAMI
About the Company:
Emami Ltd, the flagship company of the Rs 2000 crore Emami Group, is a leading player in
the personal and healthcare consumer products industry in India. A jewel in the crown of the
conglomerate, the company is a coveted Rs 700 crore business entity engaged in manufacture
and marketing of health, beauty and personal care products that are based entirely on
ayurvedic formulation.
Established by Mr. R S Agarwal and Mr. R S Goenka in 1974, Emami Limited has over 25
brands under its portfolio. The company’s financials show it has repeatedly outperformed the
industry standards. Emami Ltd has maintained a CAGR of 25% over the last three years
compared to the industry average of 16-17%
Understanding the human needs and fulfilling them by dint of technical research is a positive
feature of Emami. This is being made possible by Himani Ayurveda Science Foundation
(HASF) that generates the very best of ayurvedic formulations. The world class quality
control methods and processes maintained by HASF ensure optimum utility of each
ingredient. The foundation is completely engaged in constant innovation and pharmaceutical
enhancements.
Boroplus brand is the market leader in the antiseptic cream segment; the Navratna Oil is also
in the pole position in the cool oil segment. Fair and Handsome is the pioneer in the fairness
cream for men segment.
Boroplus has been selected as among the top 100 brands by the Brand Equity of The
Economic Times. In 2006 and 2007, Navratna has been ranked the 6th Most Energized Indian
Brand by the DY&R Brand Asset Valuator. Brand extensions have helped Emami
consolidate its position in the market and also cater to varied consumer needs.
Emami has recently entered the glycerine soap category with Emami Pure Skin and
petroleum jelly category with Emami Vasocare.
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Emami has successfully established its brands through strong celebrity endorsements.
Besides Amitabh Bachan and Shah Rukh, other celebrity endorsers of Emami’s brand include
weekly medical check-ups and treatment by qualified doctors
preventive health awareness programmes using audio-visuals besides running a
small savings scheme for women and the youth.
Training programmes in health, midwifery are also being conducted by the
organisation.
All programmes are implemented through a full-time trained social worker, under the
guidance of four trustees (all GSK management staff) who periodically visit the
project and provide their time, professional skills and expertise towards its activities.
Through constant interaction, the full-time social worker has built an excellent rapport
with the villagers and the local and district governmental functionaries. As a result of
continuous follow-up by the Trust, a major drinking water supply scheme has been
implemented last year in one of the drought-prone villages by the local government
authorities.
The Trust has been recently able to get the State Public Department's approval of
establishing a Sub-Primary Health Centre in this village. This centre, costing about
Rs. 45 lakhs (approx. £ 65407), would be established by the district government
authorities as a result of the Trust's periodic follow-up for the last four years.
SSSS,a Trust Working For Disadvantaged Slum Children in Mumbai
Shishukalyan Snehi Swayamsevak Sanstha (SSSS) -- meaning ''a voluntary
organisation for Child Welfare'', is a charitable trust promoted by Glaxo India
employees in 1979 for the development of financially disadvantaged children -
deprived of opportunities such as basic education, healthcare and recreation. The
SSSS operates in the slums of Worli Koliwada, a fisher folk community, located near
the company's head office in Mumbai. The SSSS runs a Medical Care Centre which
provides comprehensive health check-up and treatment.
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Nutritional Supplements Scheme for children at a preprimary education centre and an
Educational Sponsorship Scheme for needy girl students of a local school. The
programmes are implemented by a full-time trained social worker, under the guidance
of a Managing Committee which has representatives of GSK and leading voluntary
organizations in Mumbai.
Glaxo AIDS helpline As a unique and innovative initiative for counselling and
dissemination of information on HIV/AIDS to the lay public in Mumbai, the company
launched a 24 hours phone-in helpline in October 2000. Highly trained and
experienced team of counsellors answer thousands of callers from 10 a.m. to 9 p.m.
Thereafter, the callers can obtain basic information on issues related to HIV/AIDS
through a comprehensive Interactive Voice Response that is operational from 9 p.m.
to 10 a.m., available in two local languages besides English. The helpline focuses on
various aspects related to general awareness, prevention, treatment and care, psycho-
social support for HIV positive people and their families.
The helpline provides immediate, complete and factual information to the general
public. It is aimed at addressing various existing myths, misconceptions and
prejudices related to issues on sexual and HIV/AIDS in an atmosphere of anonymity
and confidentiality. The highly trained staff provide counselling, further referrals if
needed.As on March 31, 2003, around 25,000 phone calls have been answered by
the Glaxo AIDS helpline, adjudged as one of the best professionally managed
helplines by several leading bodies like the Tata Institute of Social Sciences.
Supporting mentally challenged children
Providing infrastructure to local skills
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EMAMI
Strengths:
Diversified business and product portfolio. Brand ambassadors: Besides Amitabh and Shah Rukh, other celebrity endorsers of
Emami’s brand include Madhuri Dixit, Kareena Kapoor, Govinda, Sourav Ganguly, Chiranjeevi, Surya and Upendra among others.
Himani Ayurveda Science Foundation that helps Emami in R&D. Continuous Innovation and market research Timely introduction of new products. The Policy of partner and progress presents a strong image of the company to its
stakeholders and customers. Fair dealings.
Weakness:
Small Product portfolio.
Low Brand Awareness
Opportunities:
Expansion by introduction of new products.
Innovation in existing product lines and Diversification.
Introduction of new schemes like the Self Employment Scheme.
Threats:
Competition by existing and new firms.
Government regulations
Slowdown in the FMCG sector or the economy on the whole.
Rise in Price of raw materials.
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COLGATE-PALMOLIVE
Strengths:
Strong financial performance Focus on innovation and new product launches Colgate business planning initiative
Weakness:
Product recalls Highly leveraged
Opportunities:
Emerging markets growth Deploying advance technologies Growing Hispanic population in the US Specialty pet nutrition growth
Threats:
Competitive landscape from other CPGs Private label growth Increasing commodity prices Falling consumer confidence in the US
GILLETTE
Page | 71
Strengths:
• First mover advantage and 97% Brand Awareness
• 48% market share and increase in Sales.
• Established international manufacturing, wholesalers, retailers and agents
• Has 90% of the Indonesian premium priced segment market
• Consistently profitable for the last 5 years
• Increase in the number of individuals with a disposable income
• 7% GDP growth for past 20 years under Replita plan
• Company management supports geographic expansion, R&D, advertising and capital
spending as drivers for growth
Weaknesses:
• Inability to meet the demand in the upcoming year, until new capacity.
• Suboptimal product mix leading to product cannibalization- too much diversification
• Four times higher price than competitors - some of the target customers cannot afford
Opportunities:
• Reduction of competitors due to bankruptcies of retailers due to low-price gouging war
• Increased demand for higher end, higher margin products
• Percentage of population earning >$10,000/year increasing rapidly
• 40% of the higher income group shop in supermarkets
• 60% of shavers are currently shaving with knives rather than competitor products- room for
new customer acquisition
• Room for additional revenue through the potential to sell more shaving product - 4% men
use shave lotion and 58% shave dry
• Small kiosks and mom & pop shops requesting product from wholesalers
Threats:
The major threat is that it cannot cater to the demands of the common man, thereby
having less sales and inability for the survival in the future.
Another major threat is from the competitors.
Not a good growth rate, hence it might not be able to cope up with its competitors.
GLAXOSMITHKLINE CONSUMER
Page | 72
Strengths:
The group operates primarily in 117 countries
Products are sold in over 140 countries.
Recorded revenues of £22,716 million
Weakness:
Employs huge number of employees(103000)
Limited variety of different segments of products
Less of company know-how to people
Oppourtunities:
Expansion of business and advertisements
New variety of products
Better management of human resource
Threats:
Competition from competitors
Launching of new products in market pose a danger
EMAMI
Page | 73
Shared Values:
The values of the company are strong which has lead to its growth over the time.
“Making people healthy and beautiful, naturally” is its core value. The company aims at
contributing whole heartedly towards the environment and society integrating all the
stakeholders into the Emami family.
Its other values are:
To make Emami synonymous with natural beauty and health in the consumers mind
and to effectively manage talents by building a learning organization.
To drive growth through quality and innovation in products and services and to
uphold the principles of corporate governance.
Commitment and loyalty to institutional values and principles
Customer Orientation
Social Responsibility
Environmental Safety
Strategy
Emami Limited is one of the fastest growing ayurveda-focused, health, beauty and personal
care product companies in India today. Through the efforts of a team of committed and
competent personnel, the company strives for continual improvement in their quality
performances.
Emami is planning to take on Johnson and Johnson in the baby products arena with a two-
pronged strategy which hinges on working out a right pricing formula on the one hand and
marketing products based on ayurveda on the other.
Starting with an entry in the southern markets, Emami, which has under its belt, brands like
Navratna, Boroplus and Zandu, is planning to add to its portfolio of three baby products that
it has now launched — soap, oil and talc, while creating price-points which the company
hopes will expand the market. A national roll-out is planned by September.
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The company is also planning to expand the product-base with creams, lotions and shampoo
with medicinal products like gripe-water coming in the next phase.
Emami is planning to beat the slowdown in the economy with its winter care products from
which it is targeting a Rs. 200 crore turnover, these products are expected to contribute 30 per
cent of the company’s turnover. The company planned an investment of between Rs. 60 crore
and Rs. 80 crore on advertising and brand promotion.
The company plans to reach an additional 15 lakh households, through door-to-door activities
and promotions. Emami has recently entered niche categories, petroleum jelly and glycerin
soap. It is also looking at strengthening its foothold in the over-the-counter (OTC) segment
with the launch of a cough syrup.
Structure:
The structure is very formal with Board of directors at the top of the hierarchy followed by
the other managers and executives. The decisions relating to company’s growth and various
strategies are taken by the Top level managers after consulting the Board of Directors. It
follows the conventional top down hierarchy with Board of Directors on the top followed by
the Chief Officers like CEO, CFO, COO and so on. These Chief Officers are followed by
Head Managers like Marketing Manager, H.R Manager and so on, under whom branch
managers perform their tasks.
Board of Director's:
Founders:
Mr R S Agarwal, Executive Chairman, is a Chartered Accountant, Company Secretary and
LLB. He is an eminent industrialist with experience in strategic planning, corporate affairs
and finance.
Mr R S Goenka, Director, is an M Com and LLB with expertise in taxation, strategic
planning, corporate affairs and finance.
Mr S K Goenka, Managing Director
Mr Viren J Shah, Director
Mr K N Memani, Director
Mr K K Khemka, Independent Director
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Mr S N Jalan - Independent Director
Mr S K Todi - Independent Director
Mr Vaidya S Chaturvedi, Independent Director
Mr Mohan Goenka, Wholetime Director
Mr Aditya V Agarwal, Wholetime Director
Management Team:
Mr N Venkat, CEO and ED
Mr N H Bhansali, CFO and President
Mr Shyam Sutaria, CEO – IMD
Mr Saroj Chakraborty, CEO - Foods Division
Mr R K Surana, President - Operations and Commercial
Mr Krishna Mohan, President – Sales
System
Emami is investing in its future by further building integrity into its information systems. It
has implemented SAP. With the implementation, the following benefits are in the process of
being accrued:
Standardized Work Processes
Emami is a global company, offering a diverse portfolio of products to markets in more than
58 countries. With the SAP implementation, the Company will be able to manage their entire
global supply chain more efficiently, enabling them to make the best possible business
decisions ranging from capacity planning to production scheduling. This is also helping them
to reduce the amount of time and effort it takes to fulfill customer requests and transactions.
Having a robust, online transactional system with a single data base the company can analyze
and evaluate their global inventory.
Improved Timeliness
Operational efficiency to respond quickly to fast changing market realities is a strength built
in their IT department.
Strengthen Relationships
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Companywide access to accurate information about customers, production and distribution
will form the backbone of the customer care concept-ultimately integrating disparate touch
points, raising the quality of customer interactions, and focusing business processes across
the enterprise around customer needs. Business process will streamline and automation across
all locations.
Accuracy of Information
This new system will serve as a repository of information and allow the Company to build
accurate customer profiles based on the products we sell and the services we offer. The
business information system enables them to gather, store, analyze, and provide easy access
to the most up-to-date information available—all updated in real-time. It also helps in
Enhanced management control and online user-friendly management reporting.
Staff
At Emami exciting, challenging and satisfying career is promised, derived from professional
and personal progress, sincerity and dignity. They attempt to recruit a varied group of highly
qualified and dedicated people, and offer them opportunities to bring out their finest. A career
at Emami lets a person to work with most competent professionals on some of the power
brands in the personal and healthcare industry. The Company believes that talented
professionals are the most valuable resources for significant growth.
Working at Emami means to learn and grow continuously. They look out for highest ethical
principles apart from technical skill. The company believes their achievement depends
wholly on the creativity, performance and success of our associates at all levels. Challenge,
innovation, teamwork and knowledge are of high priority in the organization
Style:
The company has a unique style of working. It comprises of various attributes that needs to
be developed and followed in the day to day working of the Organization. A few of them are
listed below:
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Commitment & Loyalty to institutional values and principles
A strong sense of ownership and commitment towards the organization and the business as a
whole is the basic premise of all actions. The human dignity and worth of an individual is
acknowledged and maintained at all times.
Integrity
This is cherished above all within the organization and whatever said, done, and the way they
do it, will emphasize integrity and dependability. The Company practices integrity in its real
sense in all personal and business actions
Attention to detail
Utmost importance is given to attention for details in all the activities. It is the diligence
which provides them with the competitive edge and also ensures quality in all their activities.
Teamwork & Team-oriented Environment
Teamwork is the cornerstone of business that helps deliver value to the customers. They work
together across titles, jobs and organization structure to share knowledge and expertise for the
growth of the individual and the organization. An environment which would foster teamwork,
cooperation and an urge to utilize knowledge and information is made available.
Simple living, High thinking
As an organization it will imbibe the principles of leanness and agility of a small organization
and discourage extravagant expenses in all their dealings and strive towards becoming an
organization worth emulating.
Skill:
The skill required differs from job to job. The company recruits employees with high
technical and conceptual skills. Various steps are taken to ensure that the best of the talent is
acquired and retained. Management skills, Leadership skills, Decision making and problem
solving ability are a few of the skills required in the company. Moreover Emami believes in
recruiting employees who love to undertake challenging tasks, complicated situations and
ready to face anything that comes their way.
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COLGATE-PALMOLIVE
Strategy:
(1) Getting closer to consumers, the profession and our customers;
(2) Driving innovation throughout all areas of our business;
(3) Increasing effectiveness and efficiency everywhere
(4) Strengthening leadership worldwide.
Alignment of the company goals and strategies with those of the company retail customers is
another critical component of the company business strategy. One new initiative rolling out
globally fosters the joint development of commercial plans that align both the customer's and
Colgate's strategic priorities and business goals.
Colgate has developed global commercial selling principles that apply to the company
relationships with all customers, regardless of their size or location. These principles provide
specific guidelines on how to achieve business goals while maintaining Colgate's
commitment to its values and to upholding the highest ethical standards in its business
dealings.
Another global initiative, Colgate Business Planning (CBP), a fully integrated commercial
planning and execution discipline, from the budget process through to the store-shelf, is
accelerating profitable growth by contributing to higher market shares, net sales and margin
growth
Underlying the company success is a strong focus on innovation throughout all areas of the
company business from new product development to the supply chain to all business
functions and processes. The number of marketing professionals dedicated full time to new
product development has increased by more than 50% in the past of the company years.
Additionally, we have reorganized the research and development function into dedicated
teams focused on specific elements of the innovation process. These include conducting early
research, seeking external innovation opportunities, developing products that combine
consumer needs with technology, and global implementation support for quality execution.
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Structure:
The structure is very formal with Board of directors at the top of the hierarchy followed by
the other managers and executives. It follows the conventional top down hierarchy with
Board of Directors on the top followed by the Chief Officers like CEO, CFO, COO and so
on. These Chief Officers are followed by Head Managers like Marketing Manager, H.R
Manager and so on, under whom branch managers perform their tasks.
Board of Directors :
Ian Cook -Chairman, President and Chief Executive Officer
John Cahill -Former Chairman and CEO, The Pepsi Bottling Group, Inc.
David Johnson -Chairman Emeritus of Campbell Soup Company
Richard Kogan -Former President and Chief Executive Officer of Schering-Plough
Corporation, 1996-2003
Delano Lewis -Senior Fellow, New Mexico State University, since 2006
J. Pedro Reinhard -Former Executive Vice President and Chief Financial Officer of
The Dow Chemical Company
Management Team:
Ian.M.Cook-Chairman And CEO
Michael J. Tangney -Chief Operating Officer
Stephen C. Patrick-Chief Financial Officer
Andrew D. Hendry-Senior Vice President,
Systems:
Strengthening relationship among employees, suppliers and retailers
Create a “Design Win” calculator and more efficient process for accepting orders
Define the “sales process” model? Identify and communicate expectations to all sales
personnel
Style:
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Colgate works with the core style of strengthening Leadership worldwide. It includes
essential values such as inspiring leadership in everyone, acting courageously, providing a
strategic perspective, building a collaborative environment and delivering outstanding results.
It also has increased visibility of leadership through establishing regular staff meetings and
implementing leadership development program for directors and managers
Staff:
It has over 36000 dedicated employees who help the company in achieving its goals. The
employees have their goals aligned with that of the company resulting in increased efficiency.
It is ensured that employees are competent and dedicated along with being responsible.
Skills:
The company looks for talented professionals who have their objectives in line with their
objectives. Employees with critical reasoning and good communication along with integrity
are the ones most preferred.
Shared Values:
The Company’s mission is to consistently deliver strong business results and superior returns
to stakeholders by providing consumers with the best of their products to healthier and more
enjoyable lives and aims to become the best among the consumer products by understanding
consumers and consumers’ expectations better and by continually innovating and improving
their products, services and processes.
Colgate-Palmolive’s business operations have always been guided by three core values which
includes caring, global teamwork and continuous improvement.
GILLETTE
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Strategy:
Create and implement improved sales process and sales skill/tool improvement
program
Work with the sales team to create and communicate a stronger value proposition for
selling products; Use CEO to help communicate it.
Increase the focus on Global Account Manager role including role clarity and
training.
Implement CRM (customer requirements management) tool to increase sales team
effectiveness
Structure:
Redefine role of Global Account Manager (GAM)
Identify compensation structure for GAM
Define and communicate the career paths for each sales job function
Change organization structure so that FAE become part of separate team structure
Systems:
Create a “Design Win” calculator and more efficient process for accepting orders
Define the “sales process” model? Identify and communicate expectations to all sales
personnel
Develop clearer employee policies in areas such as auto and travel expenses
(especially for Europe)
Develop the needed infrastructure (comp, benefits, payroll, etc.) for Asia sales
Make gross margin bonus an element of the 2004 commission plan
Style:
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Increased visibility of leadership through establishing regular staff meetings Implement
leadership development program for directors and managers
Staff:
Hire Customer GAM
Hire FAE in Europe
Skills:
Validate the needed GAM skills and test for those among existing team
Increase the team’s skills and willingness to use the new CRM tool & processes
Increase sales management
Train sales staff in the “sales process” model
Increase technical knowledge of products and technologies
Improve sales team’s skills in building customer relationships
Shared Values:
Instill the value that each AM and GAM is an independent business person who can
demonstrate their value to the organization and manager their own business
GLAXOSMITHKLINE CONSUMER
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Structure:
It follows a hierarchical structure headed by the board of directors followed by the chief officers and the functional heads.
1. Redefine role of Global Account Manager (GAM)
2. Identify compensation structure for GAM
3. Define and communicate the career paths for each sales job function
4. Change organization structure so that FAE become part of separate team structure
Chairperson- SJScarff Managing Director- ZAhmed Directors - A Dayal, R Subramanian, K Kashyap, Dwarakanath, P Murari, P K Gupta
Staff:
1.Hire Customer GAM
2.Hire FAE in Europe
Systems:
1.Create a “Design Win” calculator and more efficient process for accepting orders
2.Define the “sales process” model? Identify and communicate expectations to all sales personnel
3.Develop clearer employee policies in areas such as auto and travel expenses (especially for Europe)
4.Develop the needed infrastructure (comp, benefits, payroll, etc.) for Asia sales
5.Make gross margin bonus an element of the 2004 commission plan
Style:
Increased visibility of leadership through establishing regular staff meetings Implement leadership development program for directors and managers
Strategy:
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1.Create and implement improved sales process and sales skill/tool improvement program
2. Grow a diversified global business
2. Deliver more products of value
3. Simplify GSKCH’s operating model
Skills:
1.Validate the needed GAM skills and test for those among existing team
2.Increase the team’s skills and willingness to use the new CRM tool & processes
3.Increase sales management
4.Train sales staff in the “sales process” model
5.Increase technical knowledge of products and technologies
6.Improve sales team’s skills in building customer relationships
Shared Values:
Instill the value that each AM and GAM is an independent business person who can demonstrate their value to the organization and manager their own business
In the Indian FMCG sector, rural India accounts for more than 40% of the country’s
consumption. It is our understanding that as prosperity percolates across the lower levels of
India’s income pyramid, the FMCG industry will outperform its earlier annual growth
average. As the Indian economy is reporting highest ever growth, there are a number of
pockets of optimism:
• Urban demand: We feel that a 10% annual growth will continue to drive FMCG sector
growth.
• Rural demand: A huge proportion of India’s population lives in rural villages; the per capita
consumption in these pockets is among the lowest. In our opinion, we have reached the
tipping point and annual demand is now soaring.
• Infrastructural development: We feel that planned infrastructure development – roads, ports,
railways and airports – will accelerate FMCG growth.
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• Low manufacturing base : We foresee that India’s low-cost manufacturing base will enable
it to address the growing FMCG demand in Bangladesh, Sri Lanka, Middle East, Pakistan
and similar countries; besides, non-resident Indians in the UK and the USA represent a
prospective market.
• Brand consciousness: We perceive increasing brand consciousness as consumers gradually
move away from loose and unbranded alternatives.
• Favourable tax structure: The introduction of VAT will reduce longstanding tax
ambiguities; Companies in tax exemption zones will benefit.
The fringe benefit tax rationalization on brand ambassadors, celebrity endorsement as well as
tours and travels will strengthen the FMCG sector.
• Modern retail formats: We see modern retail stores accelerating FMCG off take and leading to a greater proportion of the growth of branded and value-added products.
COMPANY:
Colgate-Palmolive:
Focus on core business will give company a steady income stream. The company has high
brand recognition and its products are used in almost every house of the country. The
company is facing heavy competition in most of its product lines. Colgate has focused solely
on its core strength—oral dental care products. Through its marketing efforts, the company
has retained the top position in product categories such as toothpastes and toothbrushes. The
company’s profits have increased resulting in increase of its share value. This has resulted in
increased shareholder wealth which has had a positive impact on the company’s reputation
and growth. Colgate’s continuous interaction with the people through its various initiatives
has helped the company in increasing trust and revenues. Colgate is doing well in the market
and will continue to do so only if the company is able to face the stiff competition from its
rival firms.
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Gillette India:
Strong brand value, and various products catering to all income groups are the key points for
the companies’ growth. The increasing needs of men in relation to grooming themselves and
the look good idea have helped boost the sales of its products. The company’s timely
introduction of products has given it a first mover’s advantage and faces less or no
competition in the industry. Some of the company’s good products are priced high, which
makes them inaccessible to the low and middle income groups of the society. However its
brand value and years of experience in the industry will help them overcome all possible