A REPORT

ON

COMPETITIVE
STRATEGIES IN FMCG
SECTOR

BY

NIKHIL MITTAL
09BS0001429
SECTION D
GROUP 7
IBS GURGAON
[1]
 AUTHORIZATION
The Report is submitted as partial fulfillment of the requirement of
MBA Program of ICFAI Business School, GURGAON. This report is
to be submitted to:

Prof. Vibha Arora

Faculty [IBS, GURGAON]

[2]
 ACKNOWLEDGEMENT

With immense pleasure, I would like to present this project report on

Competitive Strategies in FMCG Sector. As a student of ICFAI
BUSINESS SCHOOL, GURGAON would like to express my sincere
thanks too all those who helped me during my project.

My sincere and deepest thanks to Prof. Vibha Arora, Faculty Member,

ICFAI BUSINESS SCHOOL, GURGAON for having spared his
valuable time with me and for all the guidance given in executing the
project as per requirements.

Last but not least, I would like to record my deepest sense of gratitude to
my friends for their support and constant encouragement.

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 TABLE OF CONTENTS

 Authorization…………………………………… [2]
 Acknowledgement…………………………….... [3]
 About FMCG Sector………………………….… [5]
 Competitive Strategies………………………….. [7]
 Research Methodology……………………….… [9]
 Data Analysis……...………………………….... [10]
 Conclusion. ………………………………….… [16]
 Reference…………………………………….… [18]
 Annexure…………………………………….… [19]

About FMCG Sector

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Meaning

Products which have a quick turnover, and relatively low cost are known as Fast Moving
Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples
of FMCG generally include a wide range of frequently purchased consumer products such as
toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as
other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG
may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks,
tissue paper, and chocolate bars.

Facts about Indian FMCG Sector

India’s FMCG sector is the fourth largest sector in the economy and creates employment for
more than three million people in downstream activities. Its principal constituents are Household
Care, Personal Care and Food & Beverages. The total FMCG market is in excess of Rs. 85,000
Crores. It is currently growing at double digit growth rate and is expected to maintain a high
growth rate. 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.

Major Players
The major players in Indian FMCG Sector are as follow:
• Hindustan Unilever Limited
• Nestle India Limited
• Procter & Gamble (P & G)
• Dabur India Limited
• Nirma
• Colgate-Palmolive
• Britannia

Challenges
The main challenges faced by FMCG sector are as follow:

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 i. Lower scope of investing in technology and achieving economies of scale, especially
in small sectors: The major challenge faced by this sector is the low scope of investing
in technology and achieving economies of scale because this sector deals in low price
products and implementing new technology requires huge investment.
ii. Low export levels: Another challenge faced by this sector is the low export levels. The
products produced are mainly consumed in the domestic market, but for growth and
expansion, it is important to tap global market also.
iii. Competition from unorganized sector: Another challenge is the competition from
unorganized sector. Indian FMCG market has been divided into organized and
unorganized sector. The unorganized sector is crowded by large number of local players,
competing on margins and covers about half the Indian market. This presents
tremendous opportunity for organized sector to convert consumers to branded products.

Opportunities

The various opportunities available for FMCG sector are as follow:

i. Untapped rural market: The major opportunity available for FMCG sector is to capture
the untapped rural market. 70% of Indian population lives in villages and accounts for
50% of total FMCG market. So, it is necessary for FMCG companies to capture this
growing rural market.
ii. Rising income levels, i.e. increase in purchasing power of consumers: With the
growth in the economy the income of the consumers is increasing which ultimately
increases their purchasing power. So companies must try to take advantage of this by
providing good products to the consumers.
iii. Export potential: Another opportunity for this sector is to tap the foreign market. Cheap
labor and quality products and services in India provide cost advantage to these
companies and also government offered zero import duty on capital goods and raw
material for export oriented units. So the companies must try to capture global market for
further growth.
Competitive Strategies

Meaning

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A strategy that strongly positions a company against its competitors and gives that company the
strongest possible strategic advantage. The purpose of its competitive strategy is to build a
sustainable competitive advantage over the organization’s rivals. It defines the fundamental
decisions that guide the organization’s marketing, financial management and operating
strategies.

A competitive strategy answers the following questions.

 How do we define our business today and how will we define it tomorrow?

 In what industries or markets will we compete?  The intensity of competition in

an industry determines its profit potential and competitive attractiveness.

 How will we respond to the competitive forces in these industries or markets

(from suppliers, rivals, new entrants, substitute products, customers)?

 What will be our fundamental approach to attaining competitive advantage (low

price, differentiation, niche)?

 What size or market position do we plan to achieve?

 What will be our focus and method for growth (sales or profit margins, internally
or by acquisition)?

The key to strategy formulation lies in understanding and overcoming the system barriers that
obstruct the attainment of organizational goals. An effective strategy recognizes these barriers
and develops decisions and choices that circumvent them.

Porter’s 5 Competitor Forces

Porter's five forces" is a framework for the industry analysis and business strategy development
developed by Michael E. Porter. Three of Porter's five forces refer to competition from external
sources. The remainder is internal threats. It is useful to use Porter's five forces in conjunction
with SWOT analysis.

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The five forces are as follow:

I. The threat of substitute products: The existence of products outside of the realm of the
common product boundaries increases the propensity of customers to switch to
alternatives:

II. The threat of new entrants: Profitable markets that yield high returns will draw firms.
This results in many new entrants, which eventually will decrease profitability. Unless
the entry of new firms can be blocked by incumbents, the profit rate will fall towards a
competitive level.

III. The intensity of competitive rivalry: For most industries, the intensity of competitive
rivalry is the major determinant of the competitiveness of the industry. How will
competition react to a certain behavior by another firm? Competitive rivalry is likely to
be based on dimensions such as price, quality, and innovation. Technological advances
protect companies from competition. This applies to products and services. Companies
that are successful with introducing new technology, are able to charge higher prices and
achieve higher profits, until competitors imitate them. Examples of recent technology
advantage in have been mp3 players and mobile telephones.

IV. The bargaining power of customers: The bargaining power of customers is also
described as the market of outputs: the ability of customers to put the firm under pressure,
which also affects the customer's sensitivity to price changes.

V. The bargaining power of suppliers: The bargaining power of suppliers is also described
as the market of inputs. Suppliers of raw materials, components, labor, and services (such
as expertise) to the firm can be a source of power over the firm, when there are few
substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high
prices for unique resources.

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 Research Methodology

Objective of the Study

 To know about the strategies used by different companies in FMCG sector.

 To study the competition between major players like HUL, Nestle, P & G, etc. in the
market.

 To know about their market share.

 To know the future growth prospects.

Methodology

For studying the competitive strategies of different companies in the FMCG sector, we have used
different research tools like interviews, questionnaire and secondary data from various resources.
For this we have taken the interviews of different retailers and consumers along with
questionnaires to collect the primary data. Also along with primary data, we have used secondary
data to know the exact strategies followed by the companies.

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 Data Analysis

For the comparative study of FMCG sector, we have divided this sector into three parts. These
are as follow:

I. Food & Beverages

II. Personal Care

III. Household Utilities

We shall study about these sectors one by one and try to analyze the strategies followed by
companies to capture more market share and also try to find out the reasons which are affecting
their sales.

Food & Beverages

In this sector, we have taken items like soups, sauces, biscuits, soft drinks, chocolates, etc. These
are described as follow:

Soups: According to the survey done on retailers, there is more sale of Maggi soups inspite of its
high price as compared to Knorr soups. But according to the retailers, the margin of profit is
more in Knorr soups. So they try to put extra efforts to increase its sales. According to consumer
survey, Maggi soup is preferred by them. The consumer preference of soups is shown in the form
of pie chart as follow:

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 Consumer Preference

Knorr
soups
Maggi
Soup

As per pie chart, both soups almost covered half the market, but Maggi soups are more preferred
by consumers because of its quality and taste as compared to Knorr soups.

Sauces: In sauces, there is competition between mainly two brands- Kissan and Maggi. But
according to our survey, retailers prefer to Kissan Sauce because it gives more margin to them as
compared to Maggi. But consumers prefer Maggi sauce more as compared to Kissan because of
its quality and taste. Its preference chart is shown as follow:

Consumer Preference

Kissan
Sauce
Maggi
Sauce

Biscuits: In biscuits market, the two main competitors are Parle and Britannia. According to
retailers, the sale of Parle biscuits is more as compared to Britannia. But the margin of profit is
almost same in both companies. But according to the consumer survey, they prefer to buy
Britannia biscuits. The reason for this is the taste and quality given by the company and also the
advertisement has some impact on its sale. Its preference chart is as follows:

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 Consumer Preference

Parle
Biscuits
Britannia
Biscuits

Chocolates: In chocolate market also there are two major competitors- Cadbury and Nestle. But
Cadbury has more market share and consumer preference as compared to Nestle. According to
our survey, retailers told that Cadbury has more sales and consumers also prefer to buy Cadbury
because of its brand name along with its taste and quality. Its consumer preference chart is as
follow:

Consumer Preference

Cadbury
Nestle

Soft Drinks: In beverage market, the main competitors are Coke and Pepsi. According to the
retailers, Coke has more sales as compared to Pepsi. And according to the consumer survey,
consumers also have first preference for Coke. They give it priority on the basis of its taste,
quality and brand image. Its preference chart is as follow:

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 Consumer Preference

Coke
Pepsi

Personal Care

In this sector, we have covered items like toothpastes, hair oil, soaps and shampoos. These are
discussed as follow:

Toothpastes: In toothpaste market, the main leader is Colgate. Its main competitors are Close-up
and Pepsodent. But according to the retailers, Colgate has more sales as compared to Close-up
and Pepsodent. According to the consumer survey also, consumers prefer Colgate over other
brands because of its quality and brand image it has maintained in the minds of consumers. Its
preference chart is as follow:

Consumer Preference
16
14
12
10 Consumer
8 Preference
6
4
2
0
Colgate Pepsodent Close-up

The market share of Colgate is 51.9% as compared to its nearest competitor HUL having market share of
only 23.1%. To capture more market share, there was the classic toothpaste war between Colgate
and Pepsodent, where repositioning against each other is happening all the time.
First it was Pepsodent’s claim that they fight germs twice as long as Colgate. This was against

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Colgate’s long-cherished positioning statement of a germ and cavity fighter culminating in the
Colgate “ring of confidence”. Colgate found that they were losing the strong brand loyalty that it
traditionally enjoyed with nearly 50 per cent market share.

Therefore, they hit out with a counter claim that Colgate fights germs two-and-a-half times
longer to dilute the positive perception that Pepsodent was building so assiduously with the
consumers. The Dhishum, dishum campaign of Pepsodent very effectively created a positive note
and dug further into Colgate’s “germ fighter” domain.

Colgate’s “Talk to me” campaign is by far the most effective counter salvo they have fired that
tugs at the heart strings of its prime target audience — teenagers and young adults. It is,
however, yet to be seen who is winning and who is holding out. It would be unwise to dismiss
that Pepsodent’s strategy has put Colgate on the defensive and thereby, repositioning it.

Hair Oil: According to retailers survey, they prefer to keep Dabur hair oil because it gives more
margin to them. But according to consumer survey, they prefer to buy Parachute oil as compared
to Dabur and Navratna. It is because of its band image and quality that it provides to its
consumers. Dabur also has its own market share but Marico is the market leader in hair oil sector
with 56% market share. The preference chart of hair oil is as follow:

Consumer Preference
18
16
14
12
Consumer
10 Preference
8
6
4
2
0
Parachute Dabur Navratna

Soaps: According to retailers survey, there is more sale of Lux and Dove in the market. Also
according to the consumer survey, they prefer to buy Dove and Lux because of their quality. It

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shows that there is stiff competition prevailing among HUL and P & G. its preference chart is as
follow:

Consumer Preference
9
8
7
6
5 Consumer Preference
4
3
2
1
0
Lux Cinthol Dove Dettol Pears

Shampoos: In shampoo market, the main competitors are HUL and P & G. Their brands are
Sunsilk, Clinic Plus, Pantene and Head & Shoulders. According to the retailers, there is more
demand of Pantene and Head & Shoulders as compared to Sunsilk and Clinic Plus. But
according to the consumer survey, consumers prefer more Head & Shoulders and Garnier. The
reason for this is the quality and brand image of the product. Its preference chart is as follow:

Consumer Preference
10
9
8
7
6
5
4
3 Consumer
2 Preference
1
0
ilk ne rs us ni
er
uns n te lde c Pl r
S Pa ou in
i Ga
Sh Cl
&
ad
He

Household Utilities

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In this sector we have covered only one item that is, detergents because it is an important
household product used in our day to day life. It is discussed as follow:

Detergents: In detergents also there are mainly two competitors- Surf and Tide. Retailers told
that both Surf and Tide have almost equal sales and the margin given by companies is also
almost same. According to consumer survey also, they prefer to buy Surf and Tide because of
their brand image and quality. Tide has more sales because of its low price as compared to Surf.
So Tide gives direct competition to Surf in the sales. Its preference chart is as follow:

Consumer Preference
10
9
8
7
6 Consumer
5 Preference
4
3
2
1
0
Nirma Ariel Surf Tide Wheel

Conclusion

After collecting and analysis of primary and secondary data, we can conclude about the various
strategies followed by companies to increase their sales and market share. Here we will conclude
about FMCG sector by dividing it into three categories- food 7 beverages, personal care and
household utilities.

Food & Beverages:

In soups and sauces, Nestle is leading in the sales and consumer preference. Britannia is
preferred by consumers and in chocolates, Cadbury is the market leader. In beverages market,
Coke and Pepsi are the major players. But according to our survey, consumers prefer Coke over
Pepsi. From data, we conclude that the sales and preference of foods and beverages mainly
depends on its quality and taste and a little bit on brand name. but advertising and price has no

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such effect on its sales. So the companies ust have to focus more on the quality and taste of their
products.

Personal Care:

In this sector, we have covered four items- toothpastes, hair oil, soaps and shampoos. In
toothpaste market, Colgate-Palmolive is the market leader and its main competitor is HUL with
products such as Pepsodent and Close-up. In hair oil sector, consumers prefer to buy Parachute
oil of Marico Ltd. as compared to Dabur hair oil. In soap sector, the main competitors are HUL,s
Lux, Dettol and Dove. According to our survey, consumers mostly prefer Dove, Lux and Dettol
showing their likings towards these soaps. In shampoo sector, the two major competitors are
HUL and P & G with their brands Sunsilk, Clinic Plus, Pantene and Head ‘n’ Shoulders.
Consumers mainly like to buy the shampoos of HUL and P & G because of their brand image.
From the data, we can conclude that the personal care products are mainly dependent on their
quality and brand image. As the consumer are more concerned about their personal care, so they
don’t compromise on the quality of the product. So companies must try to focus on the quality
of their products for further growth and expansion.

Household Utilities:

In this sector, we have covered only one item i.e. detergents. In this sector also, HUL is the
market leader with Surf as its brand. It is facing stiff competition from Tide and Ariel. In this
sector, quality and price play important role in the preference of consumers. So companies must
have to make strategies in such a way that these could cover more and more market share on the
basis of quality and price of their products.

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 References

 www.hul.com

 www.nestleindia.com

 www.parle.com

 www.britannia.com

 www.pg-india.com

 Marketing Management by Philip Kotler

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