Innovation in FMCG

February 2013
What do the Asian and Indian FMCG markets look like?
p2
/Defining
p7
p3
innovation/TheFMCG imperative
p8
How does FMCG innovation differ between China and India? /Concluding comments
The Indian FMCG sector

The innovation imperative
p4
What do the Asian and Indian FMCG markets look like?
Rising incomes, escalating demand, new products: FMCG perspectives in Asia, including India
Asias FMCG market
India
s
FMC
Selected FMCG trends in Asia*
Soaps and cleansers: Market

demand growth (% change pa)
Asia and Australasia
China
Hong Kong
India
Japan
Food, beverages, tobacco: Market
demand growth (% change pa)
Asia and Australasia
China
Hong Kong
India
Japan
G
marke
t
Selected
FMCG
Trends
in India
Defining innovation
Different innovation types exist to serve different objectives: Breakthrough and radical extend
beyond the incremental
Incremental innovation
Small changes in existing products and services or changes to the business model
Typically 5 to 25% improvements in cost, performa speed, value, price)
Characterised as better, faster, cheaper products above average revenue growth
Breakthrough innovation
Significant change to either the technologies or service
Based on entirely new components of technology o to organise and use existing components
Typically greater than 25% improvement in cost, p

Significant new competitive advantages that drive growth
Radical innovation
Substantial changes to both technology and busin
New value to customer, new players in the value n for making and delivering the product or service
New basis of competition in existing markets (e.
cost basis)
Source: PwCs Innovation practice Or, creates entirely new markets that provide cus Or, creates very high revenue growth rates
Source: PwCs Innovation practice
The FMCG innovation imperative
Innovation is more than just launching new products

Innovation is a wide concept which aside from creating, launching and marketing new products also includes improving
shopping processes, providing consumers
a range of tools to purchase products as also ensuring that the entire organisation is focused on the singular goal of
improving the customers overall

consumers become more global in
desires, as they travel abroad
products, their appetite to
market will only increase. To
companies need to focus on R&D and innovation as a means
to grow the business. At the
are shrinking, companies across
. As
to
their
FMCG
(e g.,
durables and electronics) are launching new products, the pressure to market new products, quickly, is Innovation is a
survival tactic.
Most FMCG CEOs believe that long-term demand and

growth are significant in markets like India, Brazil, Russia,
Source: PwCs Innovation practice
etc. In addition, the opportunity for FMCG products is large

given that per capita consumption in India is lower than in most markets. The opportunity in terms of incremental penetration
and consumption is present. Most FMCG brands
are rushing to design, create, test and launch new products to capture the attention of Indian consumers.
Indian
and
PwC
Health and wellness: A lifestyle change impacting the FMCG sector

FMCG brands focused on R&D and innovation as a means of
growth have a culture that promotes using
create either the next generation of products
new product categories.

Not that creating the next big thing
surveyConsumerbyGoods Technology and Sopheon Corporation,
obstacles to the successful development and launch of new
easy. According to a
consumer products can be found in the

innovation process. While most companies
the survey had little difficulty
than 20% of those ideas resulted in
highly innovative. The remainder were
extensions or promotional ideas and
packaging
One area that we see global and local

health and wellness. Health and wellness
consumer preferences and shopping habits and
listening. Leading global and Indian
have embraced this trend and are focused
emerging brands in health and wellness
a
and
According to theWindsPwCofchange:-FICCIthewellnessreport
consumer, nutrition foods, beverages and supplements
INR 145 billion to 150 billion market
of 10 to 12%.
India, growing at a CAGR
Product propositions in the FMCG food and beverage category: Good for you, healthier for
you
Health
and
wellne
ss
brand
s are
based
on
sever
al
produ
ct
Source:
PwC
propositions:
Source: PwC-FICCI report Winds of change: the wellness
consumer
Positively impact the consumers overall health

Made with natural ingredients, no artificial preservatives
Contain less sugar, cholesterol, zero transfats, etc.
Dairy-based and contain cultures with health benefits
Baked instead of being deep-fried
Infused with vitamins and nutrients
Help minimise or reduce cholesterol
analysis
While there are several products targeted to urban Indian consumers, the sweet spot lies in
serving the 700 million-strong group of consumers in rural India.
D
Opportunities abound in Indias FMCG growth rates and low
penetration categories, such as home care and rural consumers will
have the same purchase drivers:
Personal care: It makes me feel skin cream to have soft skin,
etc
Home care: Its
given the high annual
Invest resources in devising a USP that is

innovative and radically different.
across categories. For some
Different DNA
care products, urban and
Dont approach
under-served
consumers in
the same way you

would approach target
wear this lipstick, I

buy consumers:
their needs vary!
important to keep my home clean, I like to have a
clean home since I am

house-proud,
That said, while FMCG marketers see
importance of strengthening
Offer under-served consumers a product
their presence in urban areas, many New structuresturning to rural markets for
the next wave of growth. FMCG

aspects in mind when serving rural
and
new products
What are the right products that

How can the products be better marketed using the right
communication platforms (e. g. self
etc. in order to tailor the key
Create strong distribution
networks and skills to
quickly (e.g.
Which channels are the best to move

deliver to the last
agricultural formats, online, m- mile.
which is new and transformational.
to keep the following
Determine the best way to source, create,

procure, partner with and deliver the product
to under-served consumers.
to this target group?
groups, plays, skits, etc.),
Enter into partnerships that help you reach your
Our thought leadershipDNAmodel reportforinclusive

market, such as those with farmers, self-help
services: Drivingindicatesthatprofitabilityinordertobuildmodel
groups, microfinance, NGOs, etc.
for a profitable business, banks have
become more inclusive in their
approach towards consumers using the DNA model. We feel that this perspective is also valuable and applicable to Indias
FMCG industry as
consumer goods companies step up their efforts to serve this group of
large and under-served consumers.
Source: PwCs DNA model for inclusive finan

profitability, PwC analysis
6
PwC
How does FMCG innovation differ
China vs India: In which market are FMCG brands more innovative?

Innovation in China is occurring bothChineseconsumersthe haveB2Badoptedasthe wellinternetas asretail thechannel earlierB2C sphere. Most Chinese companies believe that
thaninnovationtheir isglobalcriticalpeersto the following:
The ability to compete in overseas markChinesets consumers shop online more frequen The longevity and continued growth ofChinesethecompanyshoppers are ahead of
the curve wh
devices and social media
Remaining competitive and surviving market forces
Related to producing innovative products is how to best retail them to consumers. PwCs research of online shoppers globally suggests
consumers are willing to use the online channel as a means to research and buy from. This is a valuable insight that companies serving
this market need to keep in mind, as
that
Chinese
look in not
only the products they offerDemystifyingbutthe how
PwCs
online shopper: 10 myths of multichannel retailing, a survey of

interviews across 11 countries, reveals the following:
Demographically, Chinas online consumers are
the
youngest and
most employed (i.e Chinese consumers are young and relatively

Note: Respondents who say they are shopping daily, wee affluent
a month. Sample: Global: 11,067 online shoppers, China
as compared to online shoppers in developed markets who
are aging and have shrinking purchasing power)
*Source: PwCs Demystifying the online shopper: 10 myths of multichannel retailing

Sample: Global: 11,067 online shoppers, China: 900 online shoppers
7
Concluding comments
Perspectives in FMCG innovation
FMCG CEOs challenges: Acquiring companies and stretch goals will only get my organisation so far
How do I get my team to think about the next big game-changing Should I set up an R&D lab/innovation cell? How much funding Do I need
to reshape the organisational culture so that we Are my priorities for innovation and development clear?
What kind of time to markets are reasonable for a large Do I need to convince the board of how imperative it is to
What are the current pain points in time to market and how do I reduce these?
Source: PwC analysis
Did you know that FMCG brand extensions
Source: Nielsen
I
n
d
i
a
s
F
M
C
G
m
a
r
k
e
t
i
s
m
a
t
u
re, competitive, and crowded

with local and global brands.
In this market, innovation is
critical for:
Market Remaining competitive
1Generating new avenues for sales

and profits
2Driving
growth by entering new

categories
through
relevant
innovation
3Increasing
market share and

moving
towards
market
dominance positions in:
-- Brand share
O
v
e
r
a
ll
F
M
C
G
t
e
g
o
r
y
m
a
r
k
e
t
s
h
a
r
e
C
a
s
h
a
r
e
Growin
g
product
and
categor
y
penetra
tion
Consumer
Creating products that match
consumers evolving tastes, preferences and needs
1Reaching new customers

2Growing the share of wallet
Product
Launching new products and keeping
the product portfolio fresh
Channel Leveraging new
distribution
channels to boost
revenue and
penetration (e g.
social media,
multichannel,
omnichannel)
Source: PwC analysis
PwC
from
current customers
About PwC
PwC* helps organisations and individuals create the value theyre looking for. Were a n countries with more than 180,000 people who are committed to delivering quality in assura services.
PwC India refers to the network of PwC firms in India, having offices in: Ahmedabad, Bang NCR, Hyderabad, Kolkata, Mumbai and Pune. For more information about PwC Indias service visit
www.pwc.in.
*PwC refers to PwC India and may sometimes refer to the PwC network. Each member firm is entity. Please see www.pwc.com/structure for further details.
You can connect with us on:
facebook.com/PwCIndia
twitter.com/PwC_IN
linkedin.com/company/pwc-india
youtube.com/pwc
www.pwc.in
2013 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers Private Limited (a limited liability company in India),
which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a sep
MS 455 - February 2013 IT-T&l.indd
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February 2013

What do the Asian and Indian FMCG markets look like?

The Indian FMCG sector

What do the Asian and Indian FMCG markets look like?

Asias FMCG market

Selected FMCG trends in Asia*

Soaps and cleansers: Market

Typically greater than 25% improvement in cost, p

New basis of competition in existing markets (e.

Source: PwCs Innovation practice

The FMCG innovation imperative

Innovation is more than just launching new products

improving the customers overall

Most FMCG CEOs believe that long-term demand and

Source: PwCs Innovation practice

etc. In addition, the opportunity for FMCG products is large

Health and wellness: A lifestyle change impacting the FMCG sector

new product categories.

consumer products can be found in the

One area that we see global and local

India, growing at a CAGR

Source: PwC-FICCI report Winds of change: the wellness

Positively impact the consumers overall health

given the high annual

Invest resources in devising a USP that is

across categories. For some

care products, urban and

the same way you

wear this lipstick, I

their needs vary!

important to keep my home clean, I like to have a

clean home since I am

the next wave of growth. FMCG

What are the right products that

Which channels are the best to move

which is new and transformational.

to keep the following

Determine the best way to source, create,

groups, plays, skits, etc.),

Enter into partnerships that help you reach your

Our thought leadershipDNAmodel reportforinclusive

large and under-served consumers.

Source: PwCs DNA model for inclusive finan

How does FMCG innovation differ

China vs India: In which market are FMCG brands more innovative?

Remaining competitive and surviving market forces

this market need to keep in mind, as

only the products they offerDemystifyingbutthe how

online shopper: 10 myths of multichannel retailing, a survey of

Demographically, Chinas online consumers are

most employed (i.e Chinese consumers are young and relatively

a month. Sample: Global: 11,067 online shoppers, China

as compared to online shoppers in developed markets who

are aging and have shrinking purchasing power)

*Source: PwCs Demystifying the online shopper: 10 myths of multichannel retailing

Did you know that FMCG brand extensions

re, competitive, and crowded

Market Remaining competitive