FMCG industry financial overview based on EIC (Top-Down) approach. Also, survey based on Consumer buying behavior in covid-19 pandemic condition is present in the ppt.
1. Shree Chanakya Education Society’s
Indira Institute of Management, Pune
Summer Internship Project
MBA Semester III (Batch 2019-21)
Name of the Student : Koustubh Kulkarni
Division : Finance
Roll No. : 35
Specialization : Finance
Title : Analysis on Indian FMCG sector
Name of the Organization: KRG Strategy Consultants Pvt Ltd
Name of the Internal Guide : Dr Smita Pachare
Name of the External Guide : CMA Kailash Gandhi
2. Introduction and Rationale of Study
Introduction:
Fast-moving consumer goods (FMCG), also called consumer packaged goods (CPG), refer
to products that are highly in-demand, sold quickly, and affordable. Such items are
considered “fast-moving” as they are quick to leave the shelves of a store or
supermarket because consumers use them on a regular basis.
Significance of the Study:
FMCG sector is India’s fourth largest sector with household and personal care accounting
for 50 per cent of FMCG sales in India. Growing awareness, easier access and changing
lifestyles have been the key growth drivers for the sector. FMCG is anticipated to witness
substantial growth and in turn it will be highly beneficial for Indian economy. Its current
growth rate is 8-10% per annum which makes it lucrative sector for investments and
business opportunities.
3. Industry/Sector Profile
Examples include non-durable household
goods such as packaged foods, beverages,
toiletries, over-the-counter drugs and other
consumables.
Fast-moving consumer goods (FMCG) are
products that are sold quickly and at a
relatively low cost.
Surge in trend of online shopping, R&D for
the new brands & products, and expansion
of FMCG network in rural areas of the
developing countries are expected to open
new avenues for the FMCG market players
in the future.
The personal care segment is anticipated to
witness substantial growth owing to the rise
in disposable income of consumers, thus
enabling them to spend considerable
amount on luxury personal care products.
Fig. 1: FMCG Industry Overview
Particulars Global Market Indian Market
Market Size
(in ₹ crore)
6,72,24,180
(FY17)
4,40,709.1
(FY18)
Population 7.59B 1.37B
CAGR
(2016-2025)
5.4% 23.15%
Source: IBEF, AlliedMarketResearch
4. Industry/Sector Profile – (Import-Export)
India
USA:
CG imports=2,719,825.86
CG exports=21,996,617.5
Europe:
CG imports=6,490,961.19
CG exports=25,698,285.0
Middle east & N Africa:
CG imports= 9,988,562.6
CG exports=27,330,760.1
Australia:
CG imports=363,651.68
CG exports=2,053,793.74
Russia:
CG imports=271,366.57
CG exports=775,048.56
North America:
CG imports=2,788,913.64
CG exports=23,069,802.0
China:
CG imports=8,457,582.70
CG exports=1,181,354.71
Source: World bank – Consumer goods 2016
All figures in US$ Thousands
South Asia:
CG imports=1,599,933.20
CG exports=7,405,655.74
World:
CG imports= 39,891,234.60
CG exports=117,502,011.28
5. Industry/Sector Profile (contd..)
Fig. 2: GDP [Source: RBI, World Bank (as of 2018)]
1. FMCG comes under Industry sector
of Indian Economy, which comprises
of 23.10%
2. FMCG is fourth largest sector of India
and has market size of around 4.4
lakh crores as of FY18. (Source: IBEF)
Industr
y,
23.10%
Agri &
Allied,
15.40%
Service
s,
61.50%
GDP
Fig. 3: Top 5 FMCG Companies in India (FY18)
Rank As per higher
consumption rate
As per revenue Providing every
household with the
exact product India
wants
1 Hindustan Unilever
Limited
Hindustan Unilever
Limited
Hindustan Unilever
Limited
2 ITC Ltd Patanjali Ayurved Colgate-Palmolive
3 Dabur India Ltd ITC Ltd ITC Ltd
4 Britannia Industries Ltd Nestle India Nestle India
5 Godrej Group Godrej Group Parle Agro
Fig. 4: Top 5 FMCG Companies in India (FY18)
Rank According to the
brand value and
revenue earnings
By revenue and
Income
Providing different
products for the use
of customer
1 Hindustan Unilever
Limited
ITC Ltd Hindustan Unilever
Limited
2 Colgate-Palmolive Hindustan Unilever
Limited
ITC Ltd
3 ITC Ltd Britannia Industries
Ltd
AMUL
4 Nestle India Nestle India Dabur India Ltd
5 Parle Agro Dabur India Ltd Britannia Industries Ltd
Source: IBEF, Annual Reports of Companies
6. FMCG- Regulatory Framework
Policies Regulation:
1. Ministry: Ministry of Commerce and Industry
(GoI)
2. Government’s introduction of Relaxation of
license rules and approval of 100% foreign
direct investment (FDI) in single-brand retail
stores and 51% in the multi-brands stores are
some of the investing opportunities for global
companies to establish their base in India.
3. Regulatory frameworks like Exercise duty,
National Food Security Act, and Telecom
Regulatory Authority of India (TRAI)
advertising regulations are some of the main
changes in policies and regulations directly
affecting the Indian FMCG industry.
Government Initiatives:
1. In the past few years, there are increasing
number of initiatives like farm loan waivers,
Direct Benefit Transfer (DBT) and
development of infrastructure in rural areas.
2. Under the Union budget 2019-2020, the focus
has been shifting towards education,
agriculture, healthcare, infrastructure, tax
rebate and MSMEs.
3. These initiatives are projected to have an
impact by increasing the minimum wages of
common people, especially in rural areas.
Thus, any increment in income will be directly
proportional to demand in FMCG products.
Taxation:
1. With the implementation of Goods and
Services Tax in FY18 (July 1, 2018), GST council
has reduced the tax rates down to 5% on most
of the processed food items, increasing the
consumption of food products. Other personal
care products have also seen a reduction in
GST to 18% against the previous 23-24%.
2. GST is expected to transform logistics in the
FMCG sector into a modern and efficient
model as all major corporations are
remodeling their operations into larger
logistics and warehousing.
Other:
The minimum capitalization for foreign FMCG
companies to invest in India is US$100 million.
7. Company Overview
Dabur Ltd
Mission & Vision
"Dedicated to the health & well being
of every household“
Major Customers
People who prefer organic and
ayurvedic products. Dabur has high
penetration in both rural as well as
Urban market.
Financial Performance
Net worth (in ₹ crore): 6605.75
PAT (in ₹ crore): 1447.93
Market cap (in ₹ crore): 86700.45
(Source: Company annual reports FY20)
Britannia Industries Ltd
Mission & Vision
To dominate the food and beverage
market in India with a distinctive range
of “Tasty Yet Healthy” Britannia brands
Major Customers
Britannia is a famous for its biscuit
products also it is a largest brand in the
organized bread market.
Financial Performance
Net worth (in ₹ crore): 4402.83
PAT (in ₹ crore): 1484.30
Market cap (in ₹ crore): 91061.20
(Source: Company annual reports FY20)
Proctor & Gamble Hygiene and
Health Care Ltd
Mission & Vision
“Be, and be recognized as, the best
consumer products and services
company in the world”.
Major Customers
Famous for fabric care and personal
care products like Gillette, Head n
Shoulders etc.
Financial Performance
Net worth (in ₹ crore): 909.06
PAT (in ₹ crore): 419.13
Market cap (in ₹ crore): 33988.66
(Source: Company annual reports June 19)
Godrej Consumer Products Ltd
Mission & Vision
There are many ways to do business.
We choose the Goodness Way.
Major Customers
Soaps, face wash and Mosquito
repellents.
Financial Performance
Net worth (in ₹ crore): 7898.36
PAT (in ₹ crore): 1179.89
Market cap (in ₹ crore): 71643.93
(Source: Company annual reports FY20)
8. Company Overview - Products
Personal
Care
Home
Care
Health
Care &
OTC
Foods &
Beverages
Dabur Britannia
Personal
Care
Home
Care
Health
Care &
OTC
Foods &
Beverages
P&G
9. Review of Literature
Literature Review:
1. Dr. R Jayanthi (2017). Fast Moving Consumer Goods (FMCG) Sector in India: A study.
This study gives brief overview about FMCG sector in India. It also considers impact of GST on FMCG
back then.
2. Dr. Pramod H. Patil (2016). An overview of Indian FMCG sector.
This study consist of overview on FMCG sector and analysis such as PEST and SWOT on FMCG sector in
India.
3. Rosy Dhingra, Kapil Dev, Madhuri Gupta (2018). Performance analysis of FMCG sector in
India.
This study underlines importance of discriminatory power of Financial ratios.
4. Shivam Sakshi, Peto Karoly (2018). Overview Of Indian Fast Moving Consumer Goods
Sector, Focus On Rural India.
This study focuses on growth and distribution of FMCG in rural India.
5. Pallavi Patil (2015). Current trends in FMCG sector in Indian market context.
The study aims to find corporate strategy and opportunities in FMCG sector India.
11. Objectives and Scope of the Project
Objectives:
• Assist with data and document-intensive financial analysis, economic and statistical analysis, due diligence,
valuation analysis and present overview of the Indian FMCG industry.
• Performing Indian FMCG industry research.
• Understanding of business, economic and industry risk of FMCG in India.
• Analyse financial statements to identify trends and anomalies in financial data of FMCG companies in India.
• To analyse COVID-19 impact on FMCG industry in India.
Scope of Project:
1) Research: Effective Research Techniques & Data collection and interpretation of data
2) Economic analysis: Macro’s effects on micro & Micro’s effects on macro
3) Sectoral Analysis: Info about sector & Opportunity and risk analysis
4) Company Analysis: Analyse a company & Analyse current business trends
5) Financial Statements: Understanding FS & Analysing trends from FS
6) Data Analytics: Du Pont analysis for companies & Competitive advantage
7) Valuation: Understanding of DCF valuation and its applications
12. Research Methodology
Rational of the study:
To study the FMCG sector in India because of its tremendous growth over last decade. And, to study its resilience in
the times of covid-19 pandemic.
Significance of Problem:
FMCG sector is known for its recession-proof nature. So, in the testing times of covid-19 pandemic it would be
important to know in depth analysis of FMCG sector in India for future predictions.
Research Objective:
-The main objective of the research is to provide brief overview of FMCG sector in India and critically analyse it.
Also, to analyse financial statements of companies in this sector and covid-19 pandemic impact on them.
-To assess the discriminatory power of most significant ratios.
-To examine and make a comparative analysis of performance of selected FMCG companies.
13. Research Methodology (contd..)
Research Design:
Research design used for study is exploratory research. And, comparative analysis.
Data Sources:
The study is based on secondary data from web portals, company’s annual reports, journals, news articles and
thesis. A Survey was conducted for buying behaviour of customers of FMCG products in covid-19 pandemic.
Data Collection Instrument:
Online-Web, Survey
Sampling Design:
• Sampling Size: 4
• Sampling Method: Convenience Sampling
• Sampling Unit: FMCG company in India
Outline of Analysis:
The objective of this study is to analyse and to provide brief overview of FMCG sector by conducting exploratory
research using online-web tool.
14. Data Analysis
Companies
MCAP (in ₹
crores) P/B P/E EPS ROE% ROCE EV/EBITDA
Dabur 78331.75 17.12 66.93 6.62 31.50% 34.88% 47.36
Britannia 90902.38 20.48 53.56 58.35 31.85% 36.72% 31.15
P&G 34651.84 31.88 81.60 130.82 49.79% 71.48% 56.62
Godrej Consumer 67800.02 13.22 57.46 11.54 36.69% 32.15% 43.89
Valuation Indicators (Peer Comparison) Source: Moneycontrol
16.50%
15.70%
13.40%
10%
7.30%
6.50%
5.30%
Q2F Y 19 Q3F Y 19 Q4F Y 19 Q1F Y 20 Q2F Y 20 Q3F Y 20 Q4F Y 20
FMCG GROWTH
Future Scenario:
1) According to Nielsen,
Post covid-19, only two types of customers will exist:
a) Consumers insulated from income loss
b) Consumers with curtailed disposable income due to
unemployment, furloughing, etc.
2) Hence the growth estimates for FY20 slashed to 5-6%
as FMCG’s growth is declining from last 7 quarters
Source: Bloomberg Quint Data
15. Data Analysis - Discounted Cash Flow Analysis
Dabur Ltd
Year 1 Year 2 Year 3 Year 4 Terminal Year
Free Cash Flow 712.63 748.26 785.67 824.96 833.21
Discount Rate 15% 15% 15% 15% 15%
DCF 619.68 565.79 516.59 471.67 414.25
Godrej
Year 1 Year 2 Year 3 Year 4 Terminal Year
Free Cash Flow 725.37 761.64 799.72 839.71 848.11
Discount Rate 15% 15% 15% 15% 15%
DCF 630.76 575.91 525.83 480.10 421.66
Britannia
Year 1 Year 2 Year 3 Year 4 Terminal Year
Free Cash Flow 646.18 678.48 712.41 748.03 755.51
Discount Rate 15% 15% 15% 15% 15%
DCF 561.89 513.02 468.42 427.68 375.62
P&G
Year 1 Year 2 Year 3 Year 4 Terminal Year
Free Cash Flow 375.12 393.88 413.57 434.25 438.59
Discount Rate 15% 15% 15% 15% 15%
DCF 326.19 297.83 271.93 248.28 218.06
17. Data Analysis – Covid-19 impact on shopping behavior
212
406
795
911
428212
406
795
911
428
212
406
795
911
428
212
406
795
911
428
MUCH LESS SOMEWHAT
LESS
NEUTRAL SOMEWHAT
MORE
MUCH MORE
Count of Stock up
Count of Making online
purchases
Count of Experienced product
shortages at stores
Count of Compromise with the
Brand
1. It is clearly visible that stocking up of
products is increased and people are
buying in large quantities to avoid
products going out of stock.
2. People are choosing online stores for
their purchases because they want to
abide by all lockdown rules and options
like contact less delivery are attracting lot
of customers towards online purchases.
3. High amount of people experienced
their favourite product shortages at stores.
As, the people were stocking up in large
quantities. They saw scarcity of products in
stores.
4. Many people compromised with their
favourite brand because of scarcity of
products. They chose similar type of
products over their brand.
Total Responses: 2752
18. Findings
• Growth of FMCG is somehow halted due to economic slowdown and now followed by
covid-19 pandemic.
• FMCG sector is known as a recession-proof sector and it will withstand covid-19
pandemic but growth will be further reduced as people won’t prefer premium FMCG
products which are key growth drivers in FMCG.
• Due to free market, Indian FMCG companies struggling for profits and due to high
amount of existence of unorganized FMCG companies, FMCG industry in India has
become Red Ocean.
• GST helped FMCG industries by bringing constant indirect tax throughout India.
• Indian Ayurveda products are famous in and outside India.
• Growing digitization is helping FMCG industry to grow. E.g.: e-commerce
• Rural India’s population is 12.2% of total population of world. So, this segment should
not be overlooked by investors.
• The India of 2030 will have 37 crores Generation Z consumers, with changed priorities
when it comes to purchasing goods.
• India does have a wide distribution network of retail shops, around 1.30Cr shops for
135Cr population.
19. Conclusion & Suggestions
1. Conclusion:
- FMCG industry in India does have very high potential. Because this industry is highly
related with population.
- Profit margins are low in FMCG products.
- Competition between FMCG companies in India is very high as it is a free market and
existence of large foreign companies makes it more competitive.
2. Suggestions:
- FMCG should be considered as separate industry and separate regulations should be
framed as it does have capacity to grow beyond its current limits.
- Indian FMCG companies should focus on under-developed/developing economies to set
up Indian FMCG company bases because they are the next ones to boom FMCG Global
industry.
