2011StrategistStrategy and Consulting Club, MDIGurgaonMurugappanpg10murugappan_o@mandevian.com[FMCG-SECTOR REPORT]This document present the latest updates in Indian FMCG sector
STRATEGIST-Strategy and Consulting Club .MDI Gurgaon FMCGIndustry newsDemand for most FMCG products remains stagnant during 2010The double-digit sales growth in the consumer product may not be purely on account of growingdemand, as widely perceived; It’s price increase and popularity of premium products that are driving thevalue growth.Data from Indias largest household research firm IMRB that tracks consumption trends in severalsectors reflects that while demand in most categories remained stagnant in 2010, sales growth wasmainly on account of price hikes and the launch of premium products by most companies, which bring inhigher revenues to marketer.Inflation – A major concernInflationary pressures are high. The input costs are rising and affecting the margin heavily. Companiesare managing it by reduction in size of some of the products.FMCG cos make packaging changes to cut costSome of the countrys largest consumer products companies such as Hindustan Unilever and ParleProducts too are doing the same by reducing the package. Now, reducing package has two elements:the content of the pack and the material used for making the pack.While most consumer goods companies have periodically reduced the weight of packets to deal withincreasing input costs, packaging firms are working on developing newer, cheaper packaging materialsto control costs. The measures include tweaking the size and thickness of packages as well as replacingcostly material with lower-cost alternatives.Tetra Pak India, which has a 90% share in packaged fruits and juices segment, introduced smaller, 60-65ml and 100-110 ml pack offerings, for brands such as Parle Agros Frooti.
STRATEGIST-Strategy and Consulting Club .MDI GurgaonCompany newsNew productsDabur to expand oral care range, ropes in Bipasha for MeswakDabur India has roped in Bollywoods sultry beauty Bipasha Basu as the ambassador for its toothpastebrand Meswak, while it looks to expand oral care portfolio by introducing new brands andproducts. Currently, Bipasha is also endorsing Daburs Real Activ juice.Besides the new marketing initiatives, the company is also preparing to introduce new brands andproducts to strengthen its oral care portfolio which currently has Dabur Red, Babool, Promise andMeswak in the toothpaste segment and Lal Dant Manjan in the tooth powder segment.HUL launches Bru World Café HUL launched Bru World Café taking head on coffee retail chains like Café Coffee Day and Barista. Well,the timing can be no perfect than this. Just on the heels on US coffee retail chain Starbucks planning tosetup cafes in India and an another US coffee/food retail major Dunkin Donuts waiting to enter thecountry, HUL has just inched up faster to open the coffee retail units.Britannia forays into breakfast mixes marketFMCG major Britannia Industries entered the Rs 500-crore branded breakfast space dominated byplayers like MTR Foods, Kellogg India, PepsiCo and Marico. The company has launched Britannia HealthyStart, a range of ready-to-cook breakfast mixes consisting of upmas, pohas, porridges and oats. Thecompany said the breakfast range is fortified with multi-grains, vegetables, pulses and nuts and takesonly 5 minutes to cook. It is priced between Rs 33 and Rs 45 for 150-170 gm packets.DealsCargill to buy Maricos Sweekar brand for Rs 60 cr Commodity wholesaler and branded edible oil company Cargill India announced that it has inked anagreement with Mumbai-based consumer goodmaker Marico to acquire the latters refined sunfloweroil brand Sweekar for about Rs 60 crore, which will make it the second-largest player in the nationalsunflower oil market.Amrutanjan acquires soft drink brandC hennai based Amrutanjan Health Care Ltd. has planned to acquire soft-drink and fruit beveragebusiness of Siva Soft Drink Private Ltd. This acquisition will also hand popular brand currently owned bySivas Soft Drink, Fruitnik. Fruitnik is a pulp-based flavored fruit drink. This brand was launched in 1958and is popular brand in southern India.
STRATEGIST-Strategy and Consulting Club .MDI GurgaonJyothy Lab acquires 14.9% stake in Henkel India for Rs 60.73crJyothy Lab acquires 14.9% stake in Henkel India for Rs 60.73cr. The company said the acquisition is partof its strategy to strengthen its "brand portfolio both in the urban and rural India"P&G, Henkel & Colgate keen on Unilevers SanexUnilevers forced sale of the Sanex deodorant business is drawing bids and interest from rivals includingProcter & Gamble, Henkel AG and Colgate-Palmolive, people briefed on the discussions said.The maker of Dove soap, which gained Sanex when it bought Sara Lees international toiletries businessin December for 1.21 billion euros ($1.69 billion), is in advanced talks to sell the brand for as much as $1billionBudget ImpactReduction of surcharge from 7.5 to 5% is positive for the industry, says Adi GodrejAdi Godrej, Chairman , Godrej Consumer Products gives his take on the positive aspects of Union Budget2011 . "I think the most important thing is that he has clearly given a signal of GST coming throughsoon...that is a major development which is very welcome as it will help us solve a lot of macroeconomicissues, including inflation, fiscal deficit and help GDP growth."For the sector, another good development is reduction in surcharge from 7.5 percent to 5 percent. Soas the surcharge comes down, even with the base MAT rate being hiked from 18 to 18.5 percent, it (theeffective rate) remains unchanged."P&G cuts sanitary napkins, baby diapers prices by up to 15 pc FMCG giant Procter & Gamble (P&G), which sells sanitary napkins under the brand Whisper anddiapers under Pampers today said it is reducing the price of its sanitary napkins and baby diapers by upto 15 per cent as a result of the excise duty cut announced during the recent Union Budget.InvestmentsNestle to invest Rs 1,500 cr in the next two-three yearsBetting big on the domestic market, Nestle India today said it would invest close to Rs 1,500 crore overthe next two-three year period as part of its expansion plans, a top company official said here today.Elaborating on the investments proposed he said the company has embarked on a Rs 360 croreinvestment plan for their new factory at Nanjangud in Karnataka. The company would also invest Rs 200crore by this year-end for manufacturing chocolates in Punjab. For its noodle and confectionerybusiness, the company is setting up two manufacturing facilities one each in Goa and in HimachalPradesh at an investment of Rs 1,200 crore
STRATEGIST-Strategy and Consulting Club .MDI GurgaonContract farming and IT systems - A case studyMarico’s mobile based-application generates additional revenues of Rs 4 crore for farmersFor Saffola, one of the premium brands of Marico, Kardi seeds are a critical raw material. Marico hencestarted a contract farming initiative to enrol farmers to produce Kardi seeds as a crop. Under thisinitiative, Marico provides the know-how and the basic support to start the farming process.Over the last two years, the acreage increased to 80,000 acres. The total farmers enrolled in theprogram have increased to 31,000 across 2,000 villages and 10 states. Since the initiative is growing insize, it called for tools and techniques to gather information and sharpen the decision making process.At Marico, Field Agri Representatives (FAR) are the backbone of the contract farming operations. FARare the field forces who sell the idea of contract farming and enrol farmers into the program. Given thenature of their work, Marico designed a solution that could be easily loaded on a cell phone.An easy-to-use J2ME application was built in-house to track and record information on a low-cost Nokiahandset (which could also transmit photos). The FAR record photographs of soil conditions and cropgrowth and also of critical operations such as application of pesticides with geo-tagging. Thisinformation is then relayed to the analysts in the corporate office. Using GPS on the phone, theefficiency of the FAR (including his route and the time spent at each location) can be also tracked in realtime by the management team. This does away with the need for physical audits. Unique identificationof the FAR by the IMEI number of his mobile, ensures the required security and confidentiality.The resultsThe coupling of the mobile application and the central application ensures real-time information in anotherwise difficult geography. The real-time flow of information also ensures that the right informationis available at the right time and place to accelerate decision making. Innovative use of geo-taggingallows managers to check the efficiency of the field force and also track the progress of the crop at thecontract farming sites.Post deployment of the mobile application, productivity has increased by 30 percent from 1.78 to 2.33quintals per acre. Damage to crops has reduced by 50 percent—from 31 percent to 17 percent of sowingacreage. This has increased satisfaction among stakeholders (especially farmers) in the value chain—thereby increasing Marico’s equity. The company says it has been able to gain additional 2,000 MT ofseeds from the same acreage. This has resulted in additional income of Rs 4 crore for the farmers.Formation of a central farmer database helps to accelerate the settlement of dues and also provides thenecessary information to the farmers in terms of weather forecasts, pesticide information, etc.By using tools and technologies, the need to recruit additional support staff has been reduced. Thus,despite a growth of 30 percent in operations, the support staff has remained the same.