Market Research report on FMCG for the year 2013. Project - BIM Trichy (2013-15)

1. MARKET RESEARCH- FMCG (INDIA)
Vivek.M
Sahana Priyadharshini
Sharmi.K

2. Contents
MARKET RESEARCH- FMCG (INDIA).......................................................................................................................................1
Contents................................................................................................................................................................................2
INDUSTRY OVERVIEW:...........................................................................................................................................................3
MARKET SEGMENTS:.........................................................................................................................................................3
..........................................................................................................................................................................................3
HOUSEHOLD CARE:............................................................................................................................................................4
PERSONAL CARE:...............................................................................................................................................................4
FOOD AND BEVERAGES:....................................................................................................................................................4
TOP COMPANIES IN INDIA:................................................................................................................................................4
PLAYER PROFILES:..............................................................................................................................................................5
KEY FINANCIALS:................................................................................................................................................................6
MARKET SIZE AND SHARE BASED ON VALUE:....................................................................................................................6
SUPPLY AND DEMAND:......................................................................................................................................................6
SUPPLY:.............................................................................................................................................................................6
DEMAND:..........................................................................................................................................................................7
ASSUMPTIONS:..................................................................................................................................................................8
KEY GROWTH DRIVERS:.....................................................................................................................................................8
CHALLENGES AND OPPORTUNITIES:..................................................................................................................................9
RECENT TRENDS:.............................................................................................................................................................10
REGULATORY FRAMEWORK:...........................................................................................................................................11
THREAT FOR NEW ENTRANTS:.........................................................................................................................................12
RIVALRY AMONG EXISTING COMPETITORS:....................................................................................................................12
BARGAINING POWER OF BUYERS:...................................................................................................................................13
BARGAINING POWER OF SUPPLIERS:..............................................................................................................................13
THREAT OF SUBSTITUTE PRODUCTS:...............................................................................................................................13

3. INDUSTRY OVERVIEW:
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this
category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the
list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and
household accessories and extends to certain electronic goods. These items are meant for daily or frequent
consumption and have a high return.
The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1
billion. It has a strong MNC presence and also has a well-established distribution network, heavy competition between
the organized and the unorganized segments with low operational cost. Availability of key raw materials, cheaper labor
costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble
from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in most
product categories like jams, toothpaste, skin care, hair wash etc. in India is low indicating the untapped market
potential.
Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to
makers of branded products to convert consumers to branded products. Growth is also likely to come from consumer
'upgrading' in the matured product categories. The market is estimated to grow to US$ 100 billion by 2025, according to
market research firm Nielsen. In the last decade the FMCG sector has grown at an average of 11% a year; in the last five
years, annual growth accelerated to 17%. The FMCG Industry is characterized by a well-established distribution network,
low penetration levels, low operating cost, lower per capita consumption and intense competition between the
organized and unorganized segments.
FMCGs are slowly and gradually positioning and deeply penetrating in the fast growing rural market. The FMCG
sector in India continues on a strong growth path with both Urban and Rural India contributing to its growth. Rural India
contributes one third of FMCG sales in India.
MARKET SEGMENTS:
The market segments based on market share of each sector and their contribution to total FMCG market is given below

4. HOUSEHOLD CARE:
The detergents segment is growing at an annual growth rate of 10 to 11 per cent during the past five years. The
local and unorganized players account for a major share of the total volume of the detergent market. The preference is
given to detergents in urban area compared to bars. Household care segment is featured by intense competition and
high level of penetration. With rapid urbanization, emergence of small pack size and sachets, the demand for the
household care products is booming. In washing powder segment, HUL is the leader with 38 per cent of market share.
Other major players are Nirma, Henkel and Proctor & Gamble.
PERSONAL CARE:
Personal care segment includes personal wash products, hair care products, oral care products, cosmetics etc.
The Indian skin care and cosmetics market is valued at $274 million and is dominated by HUL, Colgate Palmolive, Gillette
India and Godrej. The coconut oil market accounts for 72 per cent share in the hair oil market whereas the remaining 28
per cent consists of perfume-based oils such as light oil and amla. The hair care market can be segmented into hair oils,
shampoos, hair colorants & conditioners, and hair gels. In the branded coconut hair oil market, Marico (with Parachute)
and Dabur are the leading players. Sachet makes up to 40 per cent of the total shampoo sale. Again the market is
dominated by HUL with around 47 per cent market share; P&G occupies second position with market share of around 23
per cent and the remaining market share is held by local players like CavinKare and Dabur.
In personal wash segment, HUL, Nirma and Godrej together constitute 88 per cent of the total market share.
HUL is the leader with market share of 53 per cent; Godrej occupies second position with market share of ~10 per cent.
The skin care market is at a primary stage in India. With the change in life styles, increase in disposable incomes,
greater product choice and availability, people are becoming more alert about personal grooming. The major players in
this segment are Hindustan Unilever with a market share of 54 per cent, followed by CavinKare with a market share of
12 per cent and Godrej with a market share of 3 per cent. The oral care market can be segmented into toothpaste - 60
per cent; toothpowder -23 per cent; toothbrushes - 17 per cent. This segment is dominated by Colgate-Palmolive with
market share of 49 per cent, while HUL occupies second position with market share of 30 per cent. In toothpowders
market, Colgate and Dabur are the major players.
FOOD AND BEVERAGES:
This segment comprises of the food processing industry, health beverage industry, bread and biscuits,
chocolates & confectionery, Mineral Water and ice creams. The three largest consumed categories of packaged foods
are packed tea, biscuits and soft drinks. Indian hot beverage market is a tea dominant market. The major share of tea
market is dominated by unorganized players. Leading branded tea players are HUL and Tata Tea. Major players in food
segment are HUL, ITC, Godrej, Nestle and Amul.
TOP COMPANIES IN INDIA:
The top companies in India pertaining to FMCG sector based on their market capitalization are as follows:
• ITC
• HUL
• Nestle India
• Godrej Consumers Prod Ltd
• Dabur India Ltd

5. PLAYER PROFILES:
Key Mid-cap FMCG players other than Bajaj Corp Ltd and Marico are,
• Dabur India Ltd.
• Emami Ltd
• ITC Limited
• Procter and Gamble
• Jyothi Laboratories
The Product lines of the players with respect to Health Care and Personal Care and the companies are chosen such that
their market capitalization doesn’t exceed Rs. 40,000 crores to comply with Midcap FMCG.
Company Product Lines Products
Dabur India Ltd
Hair Care
Dabur Amla
Vatika- Coconut hair oil
Vatika- Lemon and Henna Shampoo
Vatika- Black/Oliver and Almond Shampoo
Almond Hair Oil
Oral Care Dabur Red/Babool
Skin Care Gulabari/Fem/U-veda
Digestives Pudin Hara/Hajmola
Emami Ltd
Cooling Oil Navaratna Oil
Healthcare and
Wellness
Chyawanaprash
Zandu- Kesari Jeevan
Skincare Boroplus/Fair and Handsome/Vasocare
Agro Tech Limited Edible Oils Sundrop
Procter and Gamble
Fabric Care Ariel/Tide
Hair Care Pantene/Head and Shoulders
Jyothi Laboratories Fabric Care Ujala/Henko/Mr.White/Chek
Personal Care Margo/Fa/Neem
Marico Hair Care
Parachute & Nihar coconut oil
Hair & Care/Livon/Set Wet
Mediker shampoo
Personal Care Manjal soap/Zatak deodorant
Edible Oils Saffola
Bajaj Corp Ltd Hair Care
Bajaj Almond drops/Brahmi Amla/Kailash
Parbat/Shikakai/Jasmine hair oil
Personal Care No Marks cream/face wash/soap

6. KEY FINANCIALS:
Companies/Metrics
Dabur
India Ltd.
Emami
Ltd.
Agro Tech
Ltd.
Procter &
Gamble
Jyothi
Laboratories
Marico
Bajaj Corp
Ltd.
Revenues(‘13) (in Cr) 4,410.45 1,699.10 791.79 1,787.13 1,125.54 3,636.50 651.94
Profit Before Tax (in
Cr)
953 368.68 60.44 286 44.04 541.99 209.56
Profit After Tax (in Cr) 763 314.74 41.64 203 44.04 429.09 167.38
Earnings Per Share (in
Rs)
4.4 20.8 17.09 62.6 2.73 6.65 11.35
Book value (in Rs) 12.2 51.37 100.37 248.09 41.47 30.89 32.80
Operating margin (%) 18.3 21.31 8.14 14.85 12.16 15.32 28.49
Net Worth (in Cr) 1,594.78 777.47 244.61 805.32 724.03 1,991.43 483.81
ROCE (%) 46.14 34.2 24.72 35.53 8.87 20.36 43.33
MARKET SIZE AND SHARE BASED ON VALUE:
Hair Oil
Market Size - 7798 Cr
Company Revenue (in Cr) Market Share
Dabur India Ltd 4383.9 56%
Emami Ltd 441.65 6%
Marico 757.3 10%
Bajaj Corp Ltd 604 8%
Skin Care
Market Size - 5000 Cr
Company Revenue (in Cr) Market Share
Dabur India Ltd 42 1%
Emami Ltd 223 4%
Marico 336 7%
Bajaj Corp Ltd 342 7%
Jyothi Laboratories 96 2%
SUPPLY AND DEMAND:
SUPPLY:
The production of product types and the availability of goods to the domestic market in 2012-2013 are given in the table
below.
Product Type Production 2012-13 Domestic

7. tonnes
Market(Prod-X+I)
(Tonnes)
Soaps 805,060.30 802,854.20
Detergents 1,394,128.70 1,388,148.10
Hair Oil 106,479.40 106,479.40
Hair Shampoos 98,659.30 98,659.30
**Prod- Production, X- Exports, I – Imports
These product types are taken as these fit the consumer goods category. This volume was the supply to the market in
2012-2013 as per the data from Centre for Monitoring Indian Economy.
DEMAND:
Demand of the market can be assumed to Market Potential from the prospective consumer’s point of view. The
demand or the market potential under monthly usage terms is in table below.
Segment
Product
Type
Household Type SKU(ml) Price(Rs.) Population Households
Value in Rs.
Millions/month
Hair Care
Hair Oil High/Middle/Lower 175 50 1,242,497,000 310,624,250 15,531,212,500
Hair
Shampoo
High/Middle/Lower 250 69 1,242,497,000 310,624,250 21,433,073,250
Skin Care
Soaps Middle 75 35 900,746,000 225,186,500 7,881,527,500
Soaps Higher 75 75 900,746,000 225,186,500 16,888,987,500
Fabric
Care
Detergents High/Middle 1000 90 741,800,000 185,450,000 16,690,500,000
Soaps Middle/Lower 91 5 900,746,000 225,186,500 1,125,932,500

8. Soaps Lower 91 2 500,697,000 125,174,250 250,348,500
Two SKUs are taken as a sample to find the absolute market potential in terms of number of households.
ASSUMPTIONS:
• Every household uses one unit of the SKU per month
• Every household has 4 members on average
• 75ml/175ml/200ml are the SKUs assumed
• Feasible price in the price range has been taken
As it is evident, there is a huge untapped potential in the market. With the growth drivers influencing the consumer
behavior much more, penetration would be more. From the table above, Hair Oil market alone has the potential of Rs.
15.5 billion for one SKU per annum and the total market for hair oil stands at Rs.45 billion. Thus, with all the other
variants, the 100 ml, sachets, the market would go beyond 45 billion dollars i.e. 9000 crores of rupees.
KEY GROWTH DRIVERS:
The following key growth drivers have been identified in FMCG sector:
1. Impact of Foreign investments
2. Rural consumption
3. Urban consumption
1. Impact of foreign investments
Despite the slowdown in consumer demand and uncertain economic conditions, the FDI inflows into India exceed
$18.28 billion in 2012-13, according to RBI data. Much of the inflows are directed towards FMCG sector, with major
contributors being PepsiCo, Coca-Cola and P&G, in an attempt to take over HUL in India. Most of the efforts are planned
at expansion and penetration deeper into the market. Thus, FDI inflows are a key growth driver for FMCG sector.
2. Rural Consumption
For the last two quarters, no significant growth in rural consumption has occurred despite a good monsoon. Although
the growth from rural markets was as high as 22% in 2013, the growth in 2014 is expected to remain sluggish. Major
reasons that can be attributed for reduction in rural consumption are drop in wage growth and fall in government
spending on rural infrastructure. Added efforts like introducing smaller SKUs will be needed by FMCG companies in
order to sustain their growth in rural markets.
3. Urban consumption
Urban markets contribute to nearly 66% of consumption of FMCG in India. Increase in urban population and income
growth will be the growth drivers in long term. However, currently growth in urban markets has dropped from 8% to 2%,
pulling down the confidence of investors.

9. CHALLENGES AND OPPORTUNITIES:
The Challenges and the opportunities are illustrated in the SWOT analysis table below
Strengths
• Low operational costs
• Presence of established distribution
networks in both urban and rural
areas
• Presence of well-known brands in
FMCG sector
• Favorable governmental Policy: Indian
Government has passed the policies
aimed at attaining international
competitiveness through lifting of the
quantitative restrictions, reducing
excise duties, 100 per cent export
oriented units can be set up by
government approval and use of
foreign brand names etc.
• Foreign Direct Investment (FDI):
Automatic investment approval up to
100 crores.
•
Opportunities
• Untapped rural market, changing life style
• Rising income levels, i.e. increase in purchasing
power of consumers
• Large domestic market with more population of
median age 25
• High consumer goods spending
• India is the largest milk producer in the world, yet
only around 15 per cent of the milk is processed.
The organized liquid milk business is in its infancy
and also has large long-term growth potential.
Even investment opportunities exist in value-
added products like desserts, puddings etc.
• Only about 10-12 per cent of output is processed
and consumed in packaged form, thus
highlighting the huge potential.
• Lower price and smaller packs are also likely to
drive potential up trading for major FMCG.
Threats:
•
domestic br
•
•
upon monso
Weaknesses
• Lower scope of investing in
technology and achieving economies
of scale, especially in small sectors
• Low exports levels
Threats
Removal of import restrictions resulting in replacing of
domestic brands
• Tax and regulatory structure
• Rural demand is cyclical in nature and also depends
upon monsoon.
• Excise and Customs duty affecting the prices of the
goods.
FMC
G

10. RECENT TRENDS:
• FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita
consumption for almost all the products in the country, FMCG companies have immense possibilities for growth.
And if the companies are able to change the mind-set of the consumers, i.e. if they are able to take the
consumers to branded products and offer new generation products, they would be able to generate higher
growth in the near future.
• It is expected that the rural income will rise in future, boosting purchasing power in the countryside. However,
the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban
population, along with increase in income levels and the availability of new categories, would help the urban
areas maintain their position in terms of consumption.
• At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the
remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such
as personal care, fabric care, and hot beverages.
• The Accenture report goes on to state that rural incomes have been growing at more than 7% over the past few
years, helping to account for almost 40% of India’s total consumption of goods and services.
• In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will
keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods,
bakery, and dairy are long-term growth categories in both rural and urban areas.
The FMCG sector is softening due to the general consumer price inflation and restricted spending by the consumers on
discretionary products. Some of the major products the companies plan to unveil are,
Company New product Launches
Marico
Saffola Oats
Parachute Advanced Body Lotion
Godrej
Godrej expert rich crème hair color
HIT Anti Roach gel
Dabur
OxyLife Men Creme Bleach
New fruit juice: Real SUPAFruits
HUL
TONI&GUY Launch in India
Dove Elixir
Surf Excel Liquid Detergent
Further the FMCG industry continues to witness major several Mergers and acquisitions. The major player in the Indian
FMCG market, with leading Household and Personal Care Products, Godrej Consumer products Ltd (GCPL) made a series
of acquisitions across various geographies.
The FMCG major has successfully completed the acquisition of 60% stake in CosmeticaNacional, a leading hair colorant
and Cosmetics Company in Chile, through its subsidiary Godrej Netherlands B.V and 51% stake in Darling Group
operations in Kenya through its subsidiary Godrej East Africa Holdings Ltd.

11. REGULATORY FRAMEWORK:
FMCG as an industry per se has countable regulators, countable statutory bodies and countable legislations. They are,
• Central Board of Excise Duty and Customs is an apex organization that deals with indirect taxes and direct taxes
in India. FMCG industry is heavily affected by the tax regulations such that when government hikes the excise for
FMCG, it affects industry player’s margin. Lastly Government raised 12% excise for FMCG.
• Competition Commission of India is the body that ensures the interests of the consumers are met and the
effective of market according to the competition act of 2006. The relevance of CCI to FMCG is, FMCG is the
sector where there is cut throat competition and price wars. The Competition Commission has the power to A.)
Creation of barriers for the new players. B.)Driving existing competitors out of the market C.)Foreclosure of
competition D.)Accrual of benefits for the customers.
• National Consumer Disputes Redressal Commission is a social legislation where consumers can register their
complaints on the company and to obtain cheap redressal for their grievances. Consumer Protection Act of 1986
stands as the base for this commission to function. Issues relating to MRP, Expiry Date are addressed here.
National Accreditation Board of Testing and Calibration is the autonomous body under Department of Science
and technology that tests the products of the brands and confirms the authenticity of the product.
• Food Safety and Standards Authority of India is the statutory body that lays down science based standards for
articles of food processing, distribution, sale and import of food. This regulator is very important to FMCG
industry as it is this body that dictates the norms for packaging and labeling for food related products. In
Cadbury Diary Milk worm case, this is the body that took the action of questioning the Cadburys.
NCDRC/
NABL
FSSA
CBEC
CCI
FMCG

12. PORTER’S FIVE FORCE MODEL:
THREAT FOR NEW ENTRANTS:
Each different consumer segment under FMCG industry in India is already replete with well established brands such as
Ariel, Tide, Olay, Parachute etc. This makes the establishment of any new brand for any new entrant challenging. Also
any new entrant would face stiff competition from existing FMCG majors because even if the new entries come with
differentiated products, it could be easily replicated by existing players who are already well established.
RIVALRY AMONG EXISTING COMPETITORS:
The FMCG Industry as such is highly fragmented because of the various consumer segments to which it caters to. Adding
to this, there are many private label brands which already compete with the established and well-known brands which
makes the going difficult for any existing player in the industry as well.
RIVALRY AMONG EXISTING
COMPETITORS
1. Highly fragmented
market with several
players
2. Private label brands
sold at low cost by
retailers
THREAT FOR NEW ENTRANTS
1. Well established brands
2. The highly integrated and
complex distribution systems
BARGAINING POWER OF
SUPPLIERS
1. Prices ->
International
Commodity price
2. Long term
relationship with
suppliers can be
used to negotiate
price
BARGAINING POWER
OF BUYERS
1. High
competition
2. Brand loyalty
of consumers
3. Very low
switching
costs
THREAT OF SUBSTITUTE PRODUCTS
1. Availability of close substitutes
2. Price plays a key differentiating
factor
3. Inelastic demand

13. BARGAINING POWER OF BUYERS:
The consumers have high bargaining power because of the fact that there are several well established brands available
in the market for every consumer segment to which they can switch to. Also the cost of switching to different and new
products is also not so high.
BARGAINING POWER OF SUPPLIERS:
Price of Raw materials fluctuate and depend largely on the international commodity price movements. In such situations
long term relationship with the suppliers can be used to negotiate prices.
THREAT OF SUBSTITUTE PRODUCTS:
The FMCG industry faces stiff competition in terms of substitute products because of the availability of close substitute
from various brands under each product category. Consumer goods such as break, milk are inelastic to changes in price
and hence have inelastic demand.