mm ppt

Marketing scenario of consumer goods in India after the incorporation of WTO

Presented byAbhinav Madra Akanksha Malhotra Akash

INDIAN CONSUMER MARKETPresent Indian consumer is much more intelligent and has more purchasing power than before, which has made India an attractive destination for foreign companies, and this was helped by the economic reforms & Indias inclusion in WTO in 1990s after which the number of sectors open to foreign participants has expanded steadily, and Indias working-class population has increased and is likely to continue to grow for the next two decades at least

From tradition Kirana shop Kirana

TO.

Mall culture

INDIAN TRADE REFORMSy y y y y y

Economic liberalization in India started in 1991 The reforms brought changes in three broad areas known as liberalization, privatization & globalization Liberalization did away with regulatory hurdles & did away with licensing requirements Privatization reduced the role of state & public sector in business Globalization made it easier for MNC to operate in india Competition increased tremendously post liberalization

y

y y y

Indian being a part of WTO had to bring in certain changes, which went well with the reforms. And resulted in Import duty reduction. Competition in the Market Increased foreign investment As a result of the economic reforms India became one of the fastest growing economy in the world & became and attractive destination for MNC

WTO GENESIS

The General Agreement on Trade and Tariff (GATT) came into existence in 1947 It sought substantial reduction in tariff and other barriers to trade and to eliminate discriminatory treatment in international commerce. India signatory to GATT 1947 along with twenty two other countries Eight rounds of negotiations had taken place during five decades of its existence

WTOy

WTO Came into existence on 1-1-1995 with the conclusion of Uruguay Round Multilateral Trade Negotiations at Marrakesh on 15th April 1994, to Ii is a organization that intends to supervise and liberalize international trade The GATT still exists as the WTO's umbrella treaty for trade in goods

y

y

FUNCTIONSy y y y y

y

Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies Assisting developing countries in trade policy issues, through technical assistance and training programms Cooperating with other international organizations

STRUCTUREy

WTO has 153 members, accounting for over 97% of world trade 30 negotiating members (Observers) Decisions are made by the consensus of entire members.

y y

WTO founder members (1 January 1995) WTO subsequent members

Organizational Structure

PRINCIPLES1.

Non-Discrimination1. 2. Most favoured Nation(MFN) National Treatment policy policy. gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize. a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade

2.

Reciprocity x

3.

Binding and enforceable commitments x

1.

Transparency x x x publish trade regulations respond to requests for information by other members notify changes in trade policies to the WTO

2.

Safety valves -

In specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction articles allowing for the use of trade measures to attain noneconomic objectives articles aimed at ensuring "fair competition provisions permitting intervention in trade for economic reasons

TRADE AGREEMENTSThe WTO oversees about 60 different agreements which have the status of international legal texts. some important agreements are o Agreement on Agriculture o General Agreement on trade in Services o General Agreement on Tariffs & Trade (GATT) o Agreement on Trade-Related aspects on Intellectual Property Rights

BENEFITSThere are many over-riding reasons why were better off with the system than without it. Here are 10 of them 1. The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. Provides more choices of products & qualities

6. Trade raises income 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government

CRITICISMy y

WTO is accused of widening the sociological gap between rich and poor it claims to be fixing. According to Martin Khor, WTO bais in the following way Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing) The increase in non-tariff barriers such as anti-dumping measures allowed against developing countries

Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products).

Dr Raoul Marc Jennar argues that a consultative parliamentary assembly would be ineffective for the following reasonsIt does not resolve the problem of "informal meetings" whereby industrialized countries negotiate the most important decisions It does not reduce the de facto inequality which exists between countries with regards to an effective and efficient participation to all activities within all WTO bodies It does not rectify the multiple violations of the general principof les law which affect the dispute settlement mechanism

Indias commitment to WTO.y

y y y y y

India is committed to phased liberalization of trade and investment and progressive integration of its domestic economy with the world economy Commitments related to industrial design and layout design of integrated circuits Copyrights and related rights India has committed to WTO to reduce tariff on non-agricultural goods Trade Related Intellectual Property Rights Trade Related Investment Measures

After effects of WTOy

y y

y y y y

Economic reforms led to an overall increase in the income levels in the country pushing up the demand for FMCG. Increased activity and investments by MNCs in India Categories within categories created in products (such as feminine hygiene products, mens toiletries, processed foods, etc.) ,earlier not explored. Price war among players for greater share of the Indian fmcg market Fierce competition led to consolidation in the country. Increase in product offerings. Many local and regional players emerged as tough competitors.

CONSUMABLE MARKET IN INDIA

Introduction to FMCGy

y y y y y

Consumable goods referred to as Fast Moving Consumer Goods (FMCG) are the products having a quick turnover and a short shelf life. Characteristics of FMCGs: Sector touches all aspects of human life, from looks to hygiene to palate. Products account for a significant part of the consumer's budget. Major investment in brand building and promotion. Little time spent on purchase decision. Brand switching induced by heavy advertisement, recommendation of the retailer or word of mouth

Categories of FMCGCategory Household care Products Fabric wash(laundry soaps and synthetic detergents); household cleaners(dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish) Health beverages, soft drinks, staples/cereals, bakery products(biscuits, breads, cakes), snack food, chocolates, ice cream, tea, coffee, soft drinks, processed fruits, vegetables, dairy products, bottled water, branded flour, branded rice, sugar, juices etc. Oral care, hair care, skin care, personal wash(soaps), cosmetics and toiletries, deodorants, perfumes, feminine hygiene.

Food and beverages

Personal care

Indian FMCG sector Important

contributor to the countrys GDP. 4th largest sector in the economy and responsible for 5 percent of the total factory employment in India. Well-established distribution networks and intense competition between the organized and unorganized segments. Strong and competitive MNC presence across the entire value chain. The middle class and the rural segments, the most promising market for FMCG.

y

y y

According to the study conducted by AC Nielsen, 62 of the top 100 brands in India owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Top 10 companies in Indian FMCG sector:1) 2) 3) 4) 5) 6) 7) 8) 9) 10) Hindustan unilever limited ITC(indian tobacco company) Nestle india GCMMF(amul) Dabur india Asian paints Cadbury india Britannia industries Procter and gamble hygiene and health care Marico industries

Characteristics of Indian FMCG sector pre - liberalisationy

y

y y

Elaborate licenses, regulations and the accompanying red tape( License Raj )required to set up business between 1947 and 1990. Companies like ITC, HLL, Colgate, Cadbury and Nestle, a dominant force in the FMCG sector able to charge a premium for their products due to less competition. Most FMCG categories unrepresented by any large player and largely dominated by unorganized players. Limited investments due to low purchasing power of the consumer and the governments favoring of the smallscale sector.

y

y y y y

Hindustan Lever Limited (HLL) the only MNC company that stuck around and had its manufacturing base in India. Complex policies on account of over-regulated business environment. Low penetration in rural sector. Low innovation in marketing. The consumers had limited choices.

Changesy y y

y

No more a monopoly market of Thumps Up or Amul chocolates. Half of the monopoly brands have either sold off their brands to MNCs or have vanished completely. Coca-Cola Co. bought the local maker of a popular brand of soda, Thumps Up, and used its entrenched distribution system to build Coke's dominance. The Indian company of Ramesh Chauhan having the largest market share with Thumbs Up gave up to the global player(Coke).

One of the biggest changes to hit the FMCG industry was the sachet bug. In the last 3 years, detergent companies, shampoo companies, hair oil companies, biscuit companies, chocolate companies etc.have introduced products in smaller package sizes, at lower price points. This is the single big innovation to reach new users and expand market share for value added products in urban India, and for general FMCG products like detergents, soaps and oral care in rural India.

Quantitative restrictions removaly y y y y y

QR removal in 2000 and 2001. Became easier for MNCs to import those products in India which could not be freely imported. Increased competition. Companies able to import inputs at lower rates and take advantage of cheap establishment costs. Consumers have more choice. India has successively brought down the weighted average tariff to 28 per cent in 2001 from as high as 56 per cent in 1990.

Indian brands resilient to changeA

swing of launches by HLL, ITC, Godrej etc. Innovations like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by GCMMF and Godrej Pillsbury. Amul has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia ranks in the top 100 FMCG brands, dominates the biscuits category. Asian Paints enjoys a formidable presence in the Indian sub-continent. Cadbury India is the market leader in the chocolate confectionery market with a 70% market share.

Focus on Urban middle classCompany Lever Investment In 2005, introduced high end priced perfect radiance and lakme matt effect products to capture premium market share

P&G

In 2007, launched 4 new skin care products and promoted them through online and print mediums In 2002, Marico opened Kaya skin care centres offering range of skin care treatments

Marico

HUL

In 2007, extended its Dove soap brand into a range of hair care products for the premium-end market

MTV

In 2003, MTV offered a range of unisex eau de parfums, after shaves and deodorants

Nestle

In 2008, expanded its portfolio in dairy products( probiotic and low fat dahi, milkshake and fruit yogurt), prepared foods (maggi healthy soups, rice noodles) and beverages(nescafe mild)

Kellogg

In 2008, positioned its Special K cereal as a health management alternative for urban women

FMCG sector over the yearssector Major brands 1970s and 80s New brands1990s onwards Indian brands Global brands

soaps

Lifebuoy, Cinthol, Liril, Lux, Pears, Rexona, Mysore Sandal, Neem, Margo Fair & Lovely, Ponds, Johnson & Johnson Surf, nirma, wheel Maggi, kissan, parle, britannia Nescafe, red label, campa, thums up

Nirma beauty soap

Palmolive, dettol, dove

Cream and lotions detergents Processed foods beverages

Dabur, himalaya Fena, Lakhani MTR, aashirwad, haldiram, bikaner Tata tea, bisleri, tajmahal

Oriflame, Avon, Biotique, Amway,Garnier Ariel, Tide, Henkel Heinz, pillsbury Pepsi, coke, sprite, 7 up

Unorganised and organised FMCG playersIncome rises

Living standard improves

FMCG competitive environment Consumers More choices available Purchasing power increases Demand shift from basic products to more premium lifestyle products Willing to pay premium prices for some lifestyle choice FMCG players Increase growth via price hike Keep pulse on new customer insights and product developments to cater to changing needs Focus on health and personal care product categories Penetrate rural areas Invest into creative promotions

Shift of focus to the rural sectory y

Rural areas make up more than 50% (153 million) of Indias total households India's two largest companies, ITC and HLL, have already set shops for their rural customers.Company ITC foods Godrej consumer products GCMFL (gujarat co-operative milk marketing federation ltd. Parle agro 2008 promotion spending increase Increased by 120% Increased by 30% Increased by 20% Increased budget by 50%

source: financial express

Product Promotion Strategies in Rural Areas

Combination of media and personalised marketing

Companies rely less on outdoor advertising and more on radio or TV and one-to-one contact programmes in rural areas.

and & Social women initiatives

Hindustan Unilever's whitening brand Fair and Lovely marketing program provides rural micro credit and basics of entrepreneurships and informs villagers about the company's product through contests, paper chart presentations, live product demonstrations and usage basics.

y

y y

Chennai-based CavinKare Products organizes live demonstrations in remote areas where villagers get a free tinge of hair dye free of cost. Brooke Bond Lipton India markets its rural brands through magic shows and skits. Reckitt and Colemen uses NGOs in rural areas to educate customers about product benefits.

Current scenario of Indian FMCG sectorIts not only the rich who are spending more. It's the great Indian middle class thats thrown caution to the winds and is on a spending juggernaut. Companies are doling out lower priced products. Attractive marketing schemes to hook more buyers. Rapid urbanization, increased literacy and rising per capita income the key growth drivers for the sector.

CONSUMER DURABLE INDUSTRY IN INDIA

Durable Goody

In economics, a durable good or a hard good is a good that does not quickly wear out, or more specifically, one that yields services or utility over time rather than being completely used up when used once eg refrigerators, cars, DVD players etc.

Indias Consumer MarketIndias consumer market is riding the crest of the countrys economic boom. Driven by a young population with access to disposable incomes and easy finance options, the consumer market has been throwing up staggering figures. India ranks fifth in the world, on purchase power parity terms.

Structure of the Indian Consumer Market

POLICY AND INITIATIVESy

Foreign investment up to 100 per cent is possible in the Indian consumer electronics industry to set up units exclusively for exports. It is now possible to import duty-free all components and raw materials, manufacture products and export it. EHTP (Electronic Hardware Technology Park) is an initiative to provide benefits to companies that are replacing certain imports with local manufacturing. EHTP benefits include export credits, no duties on imported components or capital equipment, business tax incentives, and an expedited import-export process.

y

y

Intellectual Property Rightsy

Several amendments to the Copyright Act, creation of a new Trademark Act, a new Designs Act and amendments to the Patents Act show Indias continued effort to protect IPR. In the current WTO regime, India is a party to the Trade Related Aspects of the Intellectual Properties (TRIPs) Agreement and has accordingly, amended most of its IPR Acts and Rules to conform to the said Agreement. The agreement on TRIPs takes care of the intellectual property rights by enforcing the patent rights, copy rights and related rights, and the protection of industrial designs, trade marks, geographical indications, layout designs of integrated circuits and undisclosed information. The consumer electronics and durables sector is expected to continue to benefit from supportive policies and become globally competitive.

y

y

y

CHALLENGESy

Heavy taxation in the country is one of the challenges for the players. At its present structure the total tax incidence in India even now stands at around 25-30%, whereas the corresponding tariffs in other Asian countries are between 7 and 17%. Foraying into rural markets has a considerable cost component attached to it. Poor infrastructure is another reason that seems to have held back the industry. Regular power supply is imperative for any consumer electronics product.

y

y

Opportunitiesy

The rising rate of growth of GDP, rising purchasing power of people with higher propensity to consume with preference for sophisticated brands would provide constant impetus to growth of white goods industry segment. Penetration of consumer durables would be deeper in rural India if banks and financial institutions come out with liberal incentive schemes. The other factor for surging demand for consumer goods is the phenomenal growth of media in India. The flurry of television channels and the rising penetration of cinemas will continue to spread awareness of products in the remotest of markets. Reduction in import duties may significantly lower prices of products such as microwave ovens, whose market size is quite small in India. Otherwise, local manufacturing will continue to stay competitive.

y

y

y

Key Growth Drivers

Sector Real Estate Capital Goods FMCG IT Life science Banking Oil & Gas Auto Consumer Durables Metal

P/E 67.3 46.6 28.8 26.9 21.4 20.9 19.7 19.5 18.1 13.8

P/E

White Goods Refrigerators Washing Machines Air Conditioners Audio Equipment

Brown Goods Mixers Grinders Microwave oven Irons Electric Fans Cooking Range Chimneys

Consumer Electronics Mobile Phones Televisions MP3 Players DVD Players

Market Positioning & Branding Addressing key customer requirements that act as demand drivers by proactive marketing & establishing strong brand association.

Product Technology Providing Technology that benefit the customer through low power consumption, low service requirement, low cost of operation.

Distribution & Service Network From saturated urban regions to low penetration rural areas distribution networks & brand recognition will continue to play significant roles.

Attractive Locations With raw materials forming a significant chunk of costs, production facilities located near ports to import cheaper raw materials could provide an advantage.

The Indian consumer durables segment can be segregated into consumer electronics (TVs, VCD players and audio systems etc.) and consumer appliances (also known as white goods) like refrigerators, washing machines, air conditioners (A/Cs), microwave ovens, vacuum cleaners and dishwashers. Most of the segments in this sector are characterized by intense competition, emergence of new companies (especially MNCs) and introduction of state-of-the-art models, price discounts and exchange schemes.

Growth of Consumer Electronics Production in India

One of the critical factors those influences durable demand is the government spending on infrastructure, especially the rural electrification programme. y The digital revolution is shaking up the consumer durables industry like Xbox video game console, Compaq and HP sell MP3 music players, Apples iMac and developing a range of capabilities - electronic hardware, software and entertainment content.y

Growth Scenarioy

Rising disposable income and declining prices of durables have resulted in increased volumes. An increase in disposable income is aided by an increase in the number of both double-income and nuclear families. Some high-growth categories include mobile phones, TVs and music systems.

Sales trend and future projection of consumer electronics

segment

Source: Intelligence Unit,The Economist

COMPETITION OVERVIEW1. Samsung India y Samsung India commenced its operations in India in December 1995, today enjoys a sales turnover of over US$ 1 billion in just a decade of operations in the country. y The Samsung manufacturing complex housing manufacturing facilities for Colour Televisions, Colour Monitors, Refrigerators and Washing Machines

2.WhirlpoolWhirlpool is the most recognized brand in home appliances in India and holds a market share of over 25%. y In the year ending in March '06, the annual turnover of the company for its Indian enterprise was Rs.1,375 crores. y According to IMRB surveys Whirlpool enjoys the status of the single largest refrigerator and second largest washing machine brand in India.y

3. LG Indiay

It's global leading products include residential air conditioners, DVD players, Mobile handsets, home theatre systems and optical storage systems.

4. GodrejGodrej India was established in 1897. It is one of the largest privately-held diversified industrial corporations in India. y The combined Sales during the Fiscal Year ended March 31, 2006, amounted to about Rs. 58,000 million (US$ 1,270 million). y The Company has a network of 38 Company-owned Retail Stores, more than 2,200 Wholesale Dealers, and more than 18,000 Retail Outlets.y

Market share of major players in refrigerator market

Market Share of the Major players in Washing Machine segment

4. Toshiba India Electronic giant Toshiba Corporation and was incorporated in India on September 2001. 5. Sony India Sony Corporation, Japan, established its India operations in November 1994. In India, Sony has its distribution network comprising of over 7000 channel partners, 215 Sony World and Sony Exclusive outlets and 21 direct branch locations. 6. Sharp India Ltd Sharp India ltd was incorporated in 1985 as Kalyani Telecommunications and Electronics Pvt Ltd. The company manufacture The company was accredited with the ISO-9001 certification in the month of February, 2001. s consumer electronic goods such as TVs,VCRs,VCPs and audio products.The company was accredited with the ISO-9001 certification in the month of February, 2001. 7. Hitachi India Some of HILs product range includes Semiconductors and Display Components. It also supports the sale of Plasma TVs, LCD TVs, LCD Projectors, Smart Boards and DVD Camcorders.

Market share of colour TV market

Finance for consumer durables hits rough patch

Marketing is not an event, but a process . . . It has a beginning, a middle, but never an end. You improve it, perfect it, change it, even pause it. But you never stop it completely.

Thank You