Fast Moving Consumer Goods

By: Anjali Jhavar 16th Jan, 2008

SYNOPSIS
Meaning Industry Overview Rural India Portars Model Industry Segments Evolution Category trends Changing strategies in FMCG Sector FMCG 2013 Concluded transaction Opportunity for Aarayaa

FMCG Meaning
Packaged Consumer Goods - other than groceries and pulses - which people buy at regular intervals for frequent consumptions are classified as FMCG (Fast Moving Consumer Goods).

CHARACTERISTICS
These products cater to necessities & comforts & meet the demands of the entire cross section of population Many of these products are perishable Accounts for a significant part of the consumers budget. Price & income elasticity of demand varies across products and consumers Brand loyalties or recommendations of reliable retailer / dealer drive purchase decision Brand switching is often induced by heavy advertisement, recommendations of the retailers or neighbors / friends
Increase in Disposable Income Organised Retail Distribution Network & Depth Buying Pattern Shift Favorable Indian Economy & Demographics

Growth Drivers

Industry Overview
Industry size about US$25 bn of which the rural segment is about US$5bn The Industry has been growing at a CAGR of 4% for the last three years Food & Personal care are the largest segments Low share of many categories such as home care, baby care & OTC Demand backed by growing consumption & higher disposables The growth in the sector is led by both higher urban & rural sector FMCG Industry Size (USD bn)
25 25 20 15 10 5 0 CY 2006 CY 2007 Total Rural CY 2008
Per sonal car e, 22%

FMCG Growth

Category wise share of FMCG segments

other s, 5% Hair car e, 8% OTC pr oducts, 4% Baby car e, 2% Household, 4% Food pr oducts, 43%

20 15

5
Fabr ic car e, 12%

Contd.
Fourth largest sector in Indian economy. Key component for Indias GDP as it accounts for 5% of the total factory employment in the country
FMCG industry is poised to clock a 16% growth in sales during 2008-09 FICCI According to ASSOCHAM the total market size of FMCG products is expected to grow at a CAGR of 12% over the next 5 years around Rs.990bn by 2010 and about Rs.1293bn by 2012.

FMCGs sustained growth possible due to continuous & steady improvement in consumer incomes

Rural India Growth Engine

PENETRATION LEVELS
Category Hair oil Toilet soap Toothpaste Shampoo Skin cream Detergent Bars Washing powder Mosquito Repellants Packaged fruit juice Health supplement Rural 67% 91% 42% 37% 18% 87% 84% 18% 2% .02% Urban 80% 98% 77% 57% 32% 91% 90% 59% 6% 1% Total 71% 93% 53% 43% 22% 89% 86% 30% 1% 1%
S e m iU rb a n , 2 1 % R u ra l , 5 7 %

Over 70% of the total households in India reside in the rural areas. The penetration level of FMCG products in rural households is much lower than urban households. A rise in per capita consumption by rural households with improvement in incomes and rising urbanization boost FMCG demand.

S ale s bre ak up 2007-08

U rb a n , 2 2 %

Some Facts

Porters Model
Supply Demand Barriers to Entry Bargaining Power of Suppliers Bargaining Power of Customers Competition
Abundant supply in metros. Distribution networks are being beefed up to penetrate the rural areas. HLL expects the FMCG market to triple in market size by FY10, which highlights the potential. Huge investments in promoting brands, setting up distribution networks and intense competition, but the sector is not capital intensive. Some of the companies are integrated backwards, which reduces the supplier's clout. Manufacturing is largely outsourced. In case of branded products, there is little that the consumer can influence, but intense competition within the FMCG companies results in value for money deals for consumers (e.g. buy one, get one free concept). Competition is faced from both domestic, MNCs and also from cheaper imports, which are increasingly visible in urban markets. Price wars are a common phenomenon.

Industry Segments
FMCG alternatively called as CPG (Consumer packaged goods) can be broadly categorized into four segment.
hair care, skin care, personal wash (soaps), cosmetics, toiletries, deodorants, perfume, paper products (tissues, diapers, sanitary), oral care, shoe care health beverages, soft drinks, staples / cereals, bakery products, snack food, ready to eat segment, confectioneries, ice creams, tea, coffee, processed fruit / vegetables / meat, dairy products, bottled water, juices fabric wash, household cleaners (dish / utensil cleaners, floor cleaners, toilet cleaners, air freshners, insecticides & mosquito repellants, metal polish & furniture polish) beer, IMFL, cigarettes, bidi

Personal care

Food & Bevg.

Household care

Spirits & Tobacco

Personal Care Category Hair Care

Industry Growth
35% 30% 25% 20% 1 5% 1 0% 5% 0% 2004 2005 2006 2007 2008 7% 20% 1 4% 25% 30%

Product Shampoo

Major Companies

Key brands

Leader

HUL, Dabur, Marico, Cavincare,Sunsilk, Clinic plus, Vatika, Mediker, HUL 48% P&G, Cavincare, Garnier,Chik, Head & Shoulders, Pantene, Nyle, Marico 90% Himalaya Garnier fructis, Himalaya Marico, Dabur, Emami, ShalimarParashute, Hair n Care, Shanti Amla, Chemicals, Bajaj, Dey Chemical Nihar, Dabur Amla, Vatika, Navratna, Shalimar, Bajaj Almonds, Keo Karpin Marico 56%

Hair oil

Hair dye

Godrej, Cavincare, HygieneGodrej Kali Mehandi, Kesh Kala, Nupur, Godrej 35% Research Institute, Henna ExportIndica, Vasmol, Black rose kali mehandi, Corporation, Emami, Loreal, Mr. Black, Loreal

Personal Care Category Personal Wash

Industry Grow th 15% 13% 10% 5% 0% 2004 2005 2006 2007 2008 4% 5% 8% 9%

Product Soaps Economy Soaps premium

Major Companies HUL, Godrej, Nirma,

Key brands Lifeboy, Godrej No: 1, Breez,

Leader HUL 18%

HUL, Godrej, Nirma, P&G, Cholayil,Lux, Dove, Liril, Pears, Cinthol, Evita, Fair HUL 54% ITC, Glow, Neema Rose, Camay, Medimix, Vivel, Fiama de Wills

Personal Care Category Oral Care

Toothpaste Industry growth
16% 14% 12% 10% 8% 6% 4% 2% 0% 2004 2005 2006 2007 2008 3% 5% 9% 13% 15%

Product
Tooth paste

Major Companies

Key brands

Leader

HUL, Colgate India Pamolive,Pesodent, Close-up Colgate, Dabur Colgate 49% Dabur, Anchor red, Babool, Meswak, Promise, Anchor Colgate India Pamolive, Dabur, Colgate Toothpowder, Dabur Lal Dant Colgate 45% Manjan, Colgate 34%

Tooth powder Toothbrush

HUL, Colgate India Pamolive,Pesodent, Colgate, Binacca, Oral-B, Dabur, Oral-B, P&G P&G

Personal Care Category Skin Care

The skin care market is valued above $200 million in India. Growth Drivers: Safe and effective procedures, advancement in medical technology, increase in awareness

Product Fairness Cream

Major Companies HUL, Godrej, Emami, Revlon

Key brands Cavincare,Fair & Lovely, Fair Glow, Fairever, Natural Fair, Fair & Handsome, Fair Glow

Leader HUL

Normal Cream

HUL, Emami, Lotus, Shehnaz,Lakme, Ponds, Aviance, Vaseline, HUL Vico, Himalaya, Loreal Ayush, Boroplus, Emami cold cream, Lotus, Shehnaz, Vico, Himalaya, Loreal

Household Care Category

Category Laundry Soap

Major Companies Nirma, Hindustan Unilever Nirma, Hindustan Unilever, Henkel

Key brands Nirma, Rin, Wheel

Leaders HUL

Fabric Wash

Nirma Super, Surf Excel, Wheel, Henko, Pril

HUL

Food Category
Category Product Major Companies Key brands Leaders

Beverages

soft drinks

Pepsi, Cola, Parle Agro

Pepsi, Limca, Mirinda, Cocacola, Thumsup, Maza

Pepsi

fruit juices

Parle Agro, Dabur, Cavinkare

Frooti, Appy fizz, Real juice Parle Maa Parle, Brritania, Sunfeast Priyagold Dairy Milk, Alpenlebe, Buttercap Cadbury Parle

Biscuits & Confectionery

Biscuits

Parle, Britania, ITC Priyagold

Confectionery

Cadbury, Nestle, Prefetti Lotte, Parle, Parle Agro

Ready to Eat

Nestle, Kellogs India Pvt Ltd

Maggi, Cornflakes

Nestle

Evolution
LACKLUSTER STAGE 1950 to 1970 Low purchasing power Few players in market Low investment in sector Govts emphasis on small scale sector HLL and other companys urbane focus RURAL SENSITIZATION STAGE 1970 to 1990 Entry of MNCs Cavinkare brought Sachet bug & changed the rules of the game. Nirma enters and changes the focus to Value for Money Attention shifted to getting to rural consumer first LIBERALIZATION BOOM & STABILIZATION STAGE 1991 to 2000 Both urbans standard of living & rural purchasing power improved Post liberalisation attracted many MNCs to invest in India This period brought higher number domestic & imported products choices. Value for money & value added offers considered to be above all

Contd.
DROP STAGE 2000 to 2005 Market grew more crowded, the new brands entered into categories which were virtually the bastions of HULs, Colgate and P&G This made veterans difficult to hold on their market share Industrial slowdown & crises in agriculture sector forced consumer to cut back on spending BOOM REVISTED STAGE 2005 onwards FMCG got new lease of life 2005 onwards Increased disposable income Organised retail boom Increased rural penetration CURRENT SCENARIO Global recession & economic downturn Rising input cost along with high Inflation rate Players adopted multiple strategies like: FMCG players hike prices to save the bottom line focusing rural penetration Shifting from higher SKUs to lower SKUs Cost cutting strategies Looking for mergers & Acquisition Restructuring to leverage synergies

FMCG Category Trends

Under penetrated Growth Categories

Growth Categories: shaving cream, skin/fairness cream, shampoos, skin care & cosmetics, tooth powder, hair colour, skin care, anti-aging solution, deodorants and mens products. Most of these categories are under penetrated and there is a huge scope for growth. The growth categories will grow more than 20% during 2008-2009,

Penetrated Growth Categories

Mainstream categories with high penetration levels such as washing detergents, soaps and hair oils have shown strong underlying volume growth, despite sharp inflation led price increases in FY08. This is partly related to the growth in organized retail (3-5% of turnover for most FMCG players) that gives more visibility to national brands with strong brand equity.

Health Food Categories

FMCG majors are widening their health food portfolio to cash in on the rich, urban, health conscious Indian. Sugar free Chywanprash, organic spices and multi grain pastas and biscuits are few examples. Urban India is high on health and FMCG majors are cashing in on the opportunity. Processed foods particularly juices that are based on the health platform would see stronger growth.

FMCG - 2013
2003
181 mn Household

2013
231 mn Household

Concluded Transaction - 2008

Dr. Oetker India Pvt. Ltd acquired Fun Foods Pvt Ltd and VRB Foods

USD 23 mn USD 25 mn

KS Oils acquired an edible oil refinery from Ambo Agro Products

Dabur India Limited acquired Fem Care Pharma Ltd

USD 52 mn 50% Stake USD 50 mn 51% Stake

Godrej Consumer Products Ltd acquired Godrej SCA Hygiene Ltd

Emami Ltd acquired Zandu Pharmaceutical Works Ltd

Tyson Foods Inc acquired Godrej Foods Ltd

Crowlas Ltd, Trewellard Ltd and Lesma Ltd, the Cyprus based investment co. have acquired 50% stake in Sanghvi Foods Pvt Ltd

USD 17 mn

Cavinkare acquired the Maa Fruits, fruit-drink manufacturer

USD 8 mn

Opportunity for Aarayaa

Kerala-based Eastern Condiments (P) Ltd
the largest integrated spices and condiments processor in the country revenues to the tune of Rs 200 crore for the fiscal 2007-08 The company will also offer products in the ready-to-eat and ready-to-cook space

Hygiene Research Institute

maker of well-known Super Vasmol-branded hair dye, is planning to raise close to Rs 500 crore currently commands a 23 per cent market share of the hairdye and colours industry

Cavinkare
Entered into hair products through Indica 7 now looking to expand it. Target rapid growth in food segment. total turnover of Rs 560 crore and for 2008-09

Others: Ghadi Detergent, Ujala, Vicco, Himalaya, Bikanerwala, Haldirams, Balaji,

THANK YOU