29 March 2014

Indian FMCG industry

What is Industry analysis ?
  Structured study to provide a good understanding of an industry
  involves reviewing the economic, political and market factors that influence the way the industry develops
  Focuses on issues like : overview of industry, trends, growth drivers, swot analysis, regulations, major players
  Supports strategy formulation, know the industry attractiveness, create differential advantage
  FMCG - consumables (other than groceries/pulses) people buy at regular intervals
  toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and extends to certain electronic goods
  The size of the Indian FMCG industry is estimated at
    around  Rs. 250000 crores representing nearly 2.5% of the country’s GDP
  In the last decade the FMCG sector has grown at an average of 11% a year;  grown at approximately 17%
                CAGR in the last 5 years
  The industry is volume driven and is characterized by low margins. The products are branded and backed by skilled marketing, heavy advertising, slick packaging and strong distribution networks. Also, raw material prices play an important role in determining the pricing of the final product
  The urban market
    accounts  for a major
                chunk of revenues
  However, high inflation, muted salary hikes, and slowing economic growth have slowed down the industry growth rate since late 2012
  Combined sales of companies including Hindustan Unilever , Dabur, GodrejConsumers, Emami, Marico, GSK Consumer, Nestle India, ITC and Colgate India grew 13% during the quarter ended June ‘13, down from 15% a year earlier and 22% in June quarter 2011
  Growth will come from rural dwellers that are expected to see a rise in disposable incomes due to the direct cash transfer scheme, while urban consumers will continue to be affected by the macroeconomic environment. 

Product innovation
Indian FMCG companies are consolidating their existing business portfolios
Focus on rural market
Companies are now focusing on the rural market segment which is growing at a rapid pace and contributes about 33 per cent to the total FMCG market
Expanding distribution networks
Companies are now focused on improving their distribution networks to expand their reach in rural India
Rising importance of smaller-sized packs
Companies are increasingly introducing smaller stock keeping units at reduced prices. This helps them to sustain margins, maintain volumes from price-conscious customers and expand their consumer base
Focus on enhancing presence in Africa
FMCG companies entering Africa as it helps to be close to consumption markets within Africa
Such foreign investments are encouraged by local governments, as they offer incentives to enter the markets
Reducing carbon footprint and eco-friendly products
FMCG players in India are increasingly focusing on reducing their carbon footprint by creating eco-friendly products. They generate the required energy from renewable sources and earn CER credits for the same
Consumers are becoming more brand conscious and prefer lifestyle and premium range products given their increasing disposable income

Growth Drivers:
          Rise of rural consumers
          Increasing per capita income of urban and rural population
          Growing popularity of organised retail
          Government’s pro-industry policies
          Education and urbanization
          Greater awareness of products, brands
          Changing Profile and mind set of consumer
          Led to new product launches
Changing mind set of consumer
        shift towards quality products, rather than just the cheaper ones
       Growth will come from the fringes—categories that are not among the mainstays—such as oats, conditioners, liquid fabric conditioners, and liquid soaps and face wash 
       Focus on health and wellness is going to fuel the demand for health based food products  viz. Britannia launched Nutrichoice biscuits, Danone launching probiotic yogurt, Dabur introduced a juice with fiber and HUL introduced Soya and multigrain atta, iodized salt, energy drinks
 Sales of olive oil, for instance, exceed that of Saffola, a premium cooking oil from Marico, at grocery retail chain Big Bazaar.
Oats, which didn't exist as a category until three years ago, are now a Rs.200 crore market. 
Need for Innovation
India’s FMCG market is mature, competitive, and crowded with local and global brands. In this market, innovation is critical for:        
       Remaining competitive
       Generating new avenues for sales and profits
       Driving growth by entering new categories through relevant innovation
       Increasing market share and moving towards market dominance positions in:   
                Brand share
                Overall FMCG market share
                Category share
       Growing product and category penetration
       Creating products that match consumers’ evolving tastes, preferences and needs
       Reaching new customers
       Growing the share of wallet from current customers
       Launching new products and keeping the product portfolio fresh
       Leveraging new distribution channels to boost revenue and penetration (e g. social media, multi-channel, omnichannel)

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