Report on

FMCG-Industry Analysis

Strategic Management
MB2305

Submitted By-
Anand Aggarwal
(180701003)
Niresh Solanki
(180701013)
Parijat Thanki
(180701006)
Utkarsh Pandey
(180701026)
Vishal Nandwana
(180701032)

TAPMI School of Business

Jaipur
 ACKNOWLEDGEMENT

I Anand Aggarwal along with my whole group would like to acknowledge our
professors Prof. Nilanjan Chattopadhyay and Dr. Samar Sarabhai for guiding us
in making this report work. We would also like to acknowledge our fellow classmates
who helped us in completing this report.
 CONTENTS

INTRODUCTION OF THE INDUSTRY

FMCG TRENDS IN INDIA
KEY SEGMENTS OF FMCG
MAIN CHARATERISTICS OF FMCG
NATURE OF THE INDUSTRY
TOP 5 COMPANIES IN FMCG INDUSTRY
SWOT ANALYSIS OF TOP 5 COMPANIES
GROWTH RATE OF THE INDUSTRY
MARKETING MIX OF THE INDUSTRY
MAJOR EVENTS OCCURRED IN LAST QUARTER
FACTORS AFFECTING FMCG INDUSTRY
UPSTREAM/DOWNSTREAM UNDER FMCG INDUSTRY
CONCLUSION
REFERENCES
 INTRODUCTION OF THE INDUSTRY

Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian
economy with Household and Personal Care accounting for 50 per cent of FMCG sales
in India. Growing awareness, easier access and changing lifestyles have been the key
growth drivers for the sector. The urban segment (accounts for a revenue share of
around 55 per cent) is the largest contributor to the overall revenue generated by the
FMCG sector in India However, in the last few years, the FMCG market has grown at
a faster pace in rural India compared with urban India. Semi-urban and rural segments
are growing at a rapid pace and FMCG products account for 50 per cent of total rural
spending.

FMCG is the fourth largest sector in the Indian economy. It contributes 16.83% in
total GDP.

The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840
billion in 2017, with modern trade expected to grow at 20 per cent - 25 per cent per
annum, which is likely to boost revenues of FMCG companies. Revenues of FMCG
sector reached Rs 3.4 lakh crore (US$ 52.75 billion) in FY18 and are estimated to
reach US$ 103.7 billion in 2020. The sector witnessed growth of 16.5 per cent in value
terms between July-September 2018; supported by moderate inflation, increase in
private consumption and rural income

Urban market accounts for major chunk of revenues:

Accounting for a revenue share of around 55 per cent, urban segment is the largest
contributor to the overall revenue generated by the FMCG sector in India. Rural
segment is growing at a rapid pace and accounted for a revenue share of 45 per cent
in the overall revenues recorded by FMCG sector in India.

The government has allowed 100 per cent Foreign Direct Investment (FDI) in food
processing and single-brand retail and 51 per cent in multi-brand retail. This would
bolster employment and supply chains, and also provide high visibility for FMCG brands
in organised retail markets, bolstering consumer spending and encouraging more
product launches. The sector witnessed healthy FDI inflows of US$ 14.42 billion,
during April 2000 to December 2018. Some of the recent developments in the FMCG
sector are as follows:

● In FY2019, ITC made more than 60 launches in the Fast Moving Consumer Goods
(FMCG) segment in India.

● In February 2019 India’s leading FMCG Contract Manufacturer (HFL) Hindustan

Foods Limited received investment of US$ 22 million from Convergent
Finance LLP.

● Patanjali will spend US$743.72 million in various food parks in Maharashtra,

Madhya Pradesh, Assam, Andhra Pradesh and Uttar Pradesh.

● Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in

FY19 for capacity expansion and is also planning to make acquisitions in the
domestic market.

● In May 2018, RP-Sanjiv Goenka Group created an Rs 1 billion (US$ 14.92

million) venture capital fund to invest in FMCG start-ups.

● In August 2018, Fonterra announced a joint venture with Future Consumer

Ltd which will produce a range of consumer and foodservice dairy products.

Some of the major initiatives taken by the government to promote the FMCG sector
in India are as follows:

● The minimum capitalisation for foreign FMCG companies to invest in India is

US$100 million.

● The Government of India has approved 100 percent Foreign Direct

Investment (FDI) in the cash and carry segment and in single-brand retail
along with 51 per cent FDI in multi-brand retail.

● The Government of India has drafted a new Consumer Protection Bill with
special emphasis on setting up an extensive mechanism to ensure simple,
speedy, accessible, affordable and timely delivery of justice to consumers.
 ● The Goods and Services Tax (GST) is beneficial for the FMCG industry as many
of the FMCG products such as Soap, Toothpaste and Hair oil now come under
18 percent tax bracket against the previous 23-24 per cent rate.

● The GST is expected to transform logistics in the FMCG sector into a

modern and efficient model as all major corporations are remodelling their
operations into larger logistics and warehousing.

FMCG TRENDS IN INDIA

Products must Upgrading in some Demand for new Entry of new

offer value for categories. Eg: categories. Eg: brands/ brand line
money. Skincare Men’s Grooming extension.

Rising
income
Driving Desire to
Greater
purchases experiment
awareness
with brands.
of products

FMCG growth is a
Increasing function of.. Evolving
consumer Consumer
Demand Lifestyles

Availability New
Growth of
of online
modern product
channel to launches
trade
shop
 KEY SEGMENTS OF FMCG

HOUSEHOLD PERSONAL FOOD AND BEV.

•Fabric Wash •Oral care •Health beverages

(laundry soaps and
synthetic detergents)

•Household cleaners •Hair care •Soft drinks

(dish/utensil cleaners, floor
cleaners, toilet cleaners, air
fresheners, insecticides
and mosquito repellents,
metal polish and furniture
polish)

•Skin care •Staples/cereals

•Personal wash (soaps) •Bakery products

(biscuits, bread, cakes)

•Cosmetics •Snack food

•Toiletries •Chocolates

•Perfumes •Ice cream

•Deodorants •Tea & Coffee

•Feminine hygiene •Processed fruits &

vegetables

•Dairy products

•Bottled water

•Branded flour

•Branded rice

•Juices
 MAIN CHARACTERISTICS OF FMCG

From the consumer’s perspective:

❏ Frequent purchase- The goods and the items under FMCG industry are
frequently purchased by the customers because of their frequent use in the day
to day activities. So these goods have usually high demand.

❏ Low involvement (little or no effort to choose the item)- Since these items are
so widely available with large number of sellers thus consumers have to make
a very little effort to search for the products of their desire. With the increase
of internet these goods are very conveniently delivered to the customer at their
doorstep.

❏ Low price- The prices of the goods are generally kept low my many brands
because of the availability of large number of substitutes of such products. Thus
in fear of losing the customers and to remain in competition firms generally
adopt competitive pricing strategy.

From the marketers' angle:

❏ High volumes- The FMCG industry goods are so hugely demanded that the
retailers generally keep high stocks of such items with them. These goods are
consumed on day to day basis thus they require high volumes to be kept by
retailers.

❏ Low contribution margins- The items involve less contribution margins for the
retailer but due to their high demand the items are sold in bulk which benefits
the retailer and compensates for the small contribution margin to the retailer.

❏ Extensive distribution networks- The products are flowed through a very

extensive distribution network because of their very high demand.
 NATURE OF THE INDUSTRY

FMCG is a non-cyclical industry by nature. Such industries do well during

economic downturns, as they have essential goods that consumer needs. This industry
has sticky demand.

The stocks of companies that produce these goods and services are also called
defensive stocks because they are "defended" against the effects of economic
downturn.

For example, household non-durable goods such as toothpaste, soap, shampoo, and
dish detergent may not seem like essentials, but they can't really be sacrificed. Most
people don't feel they can wait until next year to lather up with soap in the shower.

Investing in non-cyclical is a good way for investors to avoid losses when highly cyclical
companies are suffering. A utility is one example of non-cyclical company. People will
always need power and heat for themselves and their families. By providing a service
that is consistently used, utility companies grow conservatively and do not fluctuate
dramatically. Even though they provide safety, they are not going to skyrocket when
the economy experiences growth.
 TOP 5 COMPANIES UNDER FMCG

On the basis of Market Popularity

1. Hindustan Unilever limited
2. Colgate - Palmolive
3. ITC limited
4. Nestle
5. Parle agro
6. Britannia
7. Marico Limited

On the basis of Market Share of FY 2017-18

Company Billion (USD) Market Share

ITC 5.75 10.90%

HUL 4.84 9.18%

NESTLE 1.6 3.03%

BRITANNIA 1.31 2.48%

MARICO LIMITED 0.72 1.36%

COLGATE PALMOLIVE 0.59 1.12%

PROCTER AND GAMBLE 0.35 0.66%

On the basis of Q3 of FY 2018-2019

Company Quarterly sales (in In billions($)
crore) (Rs.)

ITC 11136.55 1.59

HUL 9357 1.34

NESTLE 2878.83 0.41

BRITANNIA 2685.37 0.38

MARICO LIMITED 1499.81 0.21

COLGATE PALMOLIVE 1091.63 0.16

 SWOT ANALYSIS OF TOP 5 COMPANIES

SWOT OF HUL

STRENGTHS

1- Brand visibility-From soap to mineral water, HUL is shaping the life of 1.3 billion
people daily. Being in consumer goods market with its 20 consumer categories such
as soap, tea, detergents, shampoo etc. & each having large assortments, helped
HUL in occupying the large shelf space of Grocery /departmental stores which itself
explains the acceptance of their products in the market.

2- Market leader in consumer goods-According to study conducted every 2 out

of three Indian consumers use HUL products. HUL used selective targeting strategy
to emerge as a market leader in the Indian market.

3- Innovative FMCG Company-HUL both Mumbai and Bangalore research facilities

were brought together in Bangalore at the single site. Employees in this facility
continuously working & developing innovations in products & manufacturing
processes which is helping the HUL to set it as front-runner in the consumer goods
market.

4- Extensive and integrated distribution strategy- HUL has a very diverse and
strong distribution system set up which ensures that products are accessible at most
of the locations for the most of the customers.

5- High brand awareness-By signing popular celebrities for the advertisements of

their products HUL has created positive word of mouth over the ages which helped
them in social acceptance of their products intelligently targeted & meant for
different income groups.
6- Stretched product line-It offers product categories namely oral care, personal
care, household surface, fabric care and pet nutrition etc. having deep assortments
across the product categories.

WEAKNESS

1- Decreasing market share-Competitors focusing on a particular product & eating

up HUL’s share, like Ghadi & Nirma detergent eating up HUL’s wheel detergent
market share.

2- Large number of brands-Sometimes having broad brand portfolio can lead to

confused positioning. Price positioning in some categories allows for low price
competition like AMUL captured Kwality’s market share.

OPPORTUNITIES

1- Expanding market-By penetrating more in the rural markets through its project
Shakti AMMA and transition of unorganized business to organized one will lead to
further expansion of the consumer goods market.

2- Awareness in usage rate in consumer goods-People getting more aware and

conscious about the usage may be through advertising /word of mouth /doctor
prescription ,is resulting in increase in usage rate of the these products.

3- Increasing income levels-Due to stable political scenario, improved literacy rate

& controlled inflation, disposable income of the people is increasing thereby resulting
into improvement in demand & changing their lifestyle.
THREATS

1- Buyers power-With highly diversified consumer goods market where there are
lots of brands claiming different sorts of benefits, it’s very difficult for consumers to
stick to a particular brand & hence results into brand switching where consumer got
power to select a brand based on several factors like availability, price and
preference.

2- Competition in the market-With increasing number of local & national players

it’s becoming very hard for the companies to differentiate themselves from others.
There is also threat from counterfeit products destroying its brand image in the
market.
 SWOT OF ITC

STRENGTHS

1- Strong brands in various businesses-ITC is a strong house of brands with

most of its products leading the segments in which they operate. ITC owns some of
the most popular cigarette brands like gold flake and Classic. It also owns Sunfeast,
which is amongst the top selling biscuits in India.

2- Effective social business initiatives-ITC has developed a triple-bottom-line

strategy through which concentrates on developing the nation’s economic, social and
environmental capital. ITC has brought in initiatives like E-Choupal, Choupal
Pradarshan Khet (CPK) which benefits the people at the grass root level, i.e.
farmers.

WEAKNESS

1- High revenues from the tobacco industry-ITC has been continuously making
efforts to divert the FMCG business from over dependence on tobacco products and
have been successful in doing so to an extent. But, tobacco products remain to be
the major source of the revenue contributing more than 60% of the total revenue
from FMCG businesses.

2- Tobacco affects the image-ITC has made a lot of efforts to improve its
corporate image but the fact that ITC has many tobacco products in its portfolio
impacts its corporate image.

3- Increase in the tax affects the revenue-Due to the increase in taxation on

tobacco products, the prices increases and hence revenues get affected.
OPPORTUNITIES

1- Strategic acquisitions-ITC should continue making the strategic acquisition like

they have done in the past by acquiring Savlon from Johnson & Johnson and B
Natural from Balan natural Foods. Keeping in mind that the product fits into the
existing distribution network, ITC can look to increase its portfolio of products and
expand its Non-Tobacco FMCG business and thereby strengthening the base of
revenue.

2- Growth in purchasing power and improving lifestyle-ITC should tap on the

increasing purchasing power and improving the lifestyle of customers in India. This
could help in increasing revenue for all its businesses.

3- Tap opportunities created in the rural market-The growing rural market in

India and other emerging nations create huge opportunities to improve the bottom-
line of the company.

THREATS

1- Increasing awareness in health-There has been an increase in the health

consciousness which has resulted in the decrease in demand for tobacco products in
India. Also, anti-smoking campaigns throughout the country affect the sales of
cigarettes.

2- Strict regulations in tobacco industry-The Tobacco and Cigarette Industry in

India continue to be targeted by strict government regulations and taxation system.
This possesses a threat to the highly profitable Cigarette business of ITC.
 SWOT OF NESTLE

STRENGTH

1. Unmatched research and development capability- Nestle has done the

R and D investment at huge level. In 2015 Nestle spend 1.6 billion USD which
gave them revenue of 89 billion USD while their competitors did very less R and
D.

2. Strong geographic presence, with one of the best geographically

diversified revenue sources- Nestle reaches the 189 countries which almost
covers whole of the world.

3. Unrivalled product and brand portfolio-Nestlé’s product portfolio is wider

than any of its rivals in the industry. Wide product portfolio allows Nestlé to
better satisfy various consumers’ needs and target wider consumer segment.

WEAKNESS

1. Criticism over high water usage, selling contaminated food, anti-

unionism, forced child labour and using other unethical practices- Nestle
has previously received a lot of criticism in the past about the contaminated
foods being sold. This results in the damaged brand reputation and loss of trust
for the brand in the mind of the consumers.

2. Contaminated food recalls-Even with strict quality control measures the

company often has to recall its products in various markets due to some form of
contamination. In 2014, Nestlé recalled and destroyed 37,000 tons of
contaminated Maggi noodles in India. This resulted in hundreds of millions in lost
sales and damaged brand reputation.
THREATS

1. Poor quality water and its scarcity-Beverages, make over 25% of the
total Nestlé’s sales and water is used in all of their production. Bottled water
products alone generate 8% of the total company’s revenue. In the future it is
expected that water crisis will occur and company has to face huge difficulties.

2. Increased competition in the beverage and food industries-According

to Nestlé, competitive rivalry is one of the key threats affecting the company.
The beverage and food industries are highly competitive and consist of numerous
small, large and multinational companies. Food and beverage markets are
growing very slowly and with so many new start-ups, Nestlé will find it hard to
compete in the future.

OPPORTUNITIES

1. Clear and accurate labelling indicating of any harmful products-

According to the study done by Deloitte, consumers are more likely to buy
products that are clearly and accurately labelled. Nestlé, which has a history of
providing misleading nutritional information on its labels should improve its
practices and clearly label the products and include all the necessary information
in addition to nutritional values.

2. Transparency in material sourcing-Consumers are becoming more and

more conscious of where the food came from and how it was grown or made.
Many young consumers are placing sustainability as an important decision
making factor when buying their food. Nestlé could start sourcing all of its
materials from sustainably grown plantations and farms.
 SWOT OF COLGATE

STRENGTH

1- Brand recall and visibility-Colgate being the household name it is, has high
brand recall & visibility. Excellent advertising and brand visibility of products with a
strong customer loyalty for brands had helped the brand to compete with other
players, thereby emerging as one of the topmost brands in the FMCG market.

2- Product line-Colgate offers product categories namely oral care, personal care,
household surface, fabric care and pet nutrition having deep assortments across the
product categories. In FMCG, the more in depth your product line the more chances
of success increases because the cost of logistics drops further.

3- Efficient supply chain-With extensive distribution network in rural & urban

markets, Colgate ensures that it reaches a wide customer make, thereby making the
product available. Product availability is the major concern in this highly competitive
market as brand switching is very easy.

WEAKNESS

1- Saturated market-With large number of local & national players fighting in

personal & oral care segment, the market has become saturated & there is little
scope for growth while all companies are eating each others market share.

2- Cost control-Majority of its properties have been on rent basis resulting into high
cost of operations due to which its profits are decreasing. Due to high cost of
operations, Colgate products are also priced higher than the rivals.
3- Limited brands under different categorized-Colgate have limited brands
under a particular product category and they have limited offerings under different
segments unlike their competitors like P&G, HUL etc.

OPPORTUNITIES

1- Expanding the product line-By following product line stretching & product line
filling strategies they can increase their sales, create offerings and give value for
different segments.

2- Usage rate-People need to be made aware about the optimum usage rate for
these products so that the market utilizes the product as forecasted by the company.
This can happen only through advertising /word of mouth /doctor prescription. Many
a time’s companies forecast wrong because they assume a higher usage rate in the
market.

3- Strengthening through mergers and acquisitions-It’s one of the smart

strategies followed by global companies to sustain and expand in the overseas
market. However Colgate is yet to capitalize the market by use of such strategies.

THREATS

1- Low margins-As the competition rises, the margins for companies are dropping
and companies find that they have to give more and more discount to sustain in the
same channel.

2- Ethical issues-The “Ethical Consumer Research Association” once recommended

that its readers should not buy Colgate because of its use of animal testing. In the
digital age, information like this will affect the brand Colgate
3- Price of raw material- Increasing price of raw material will result in further
increase in the price of Colgate. Over a period of time, justifying the high price
compared to competition will become difficult in a saturated market. Further
increase in price will result in decrease in sales & brand switching by consumers.

4- Competition in the market-With increasing number of local & national players

it’s becoming very hard for the companies to differentiate themselves from others.
There is also threat from counterfeit products destroying its brand image in the
market.
 GROWTH RATE OF INDUSTRY

EVOLUTION OF FMCG IN INDIA:

● FMCG is the 4th largest sector in the Indian economy.

● Household and Personal Care is the leading segment, accounting for 50 per
cent of the overall market. Hair care (23 per cent) and Food and Beverages (19
per cent) comes next in terms of market share.

● Growing awareness, easier access and changing lifestyles have been the key
growth drivers for the sector.

● The number of online users in India is likely to cross 850 million by 2025.

● Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$
672 billion in 2016, with modern trade expected to grow at 20 per cent - 25
per cent per annum, which is likely to boost revenues of FMCG companies.

THREE MAIN SEGMENTS OF FMCG

Food and Beverages:

It accounts for 19 per cent of the sector. This segment includes health beverages,
staples/cereals, bakery products, snacks, chocolates, ice cream, tea/coffee/soft drinks,
processed fruits and vegetables, dairy products, and branded flour.

Healthcare:

It accounts for 31 per cent of the sector. This segment includes OTC products and
ethical.

Household and Personal Care:

It accounts for 50 per cent of the sector. This segment includes oral care, hair care,
skin care, cosmetics/deodorants, perfumes, feminine hygiene and paper products,
Fabric wash, household cleaners.
STRONG GROWTH IN INDIAN FMCG SECTOR

● The FMCG sector in India generated revenues worth US$ 49 billion in 2016.

● By 2020, the revenues of the sector are forecasted to reach US$ 104 billion

● In the long run, with the system becoming more transparent and easily compliable,
demonetisation is expected to benefit organised players in the FMCG industry.

● The growth in sales of major FMCG companies like Dabur, HUL, Marico, in the
June-September 2017 quarter, is signalling the revival of consumer demand in
India.

● Direct selling sector in India is expected to reach Rs 159.3 billion (US$ 2.5 billion)
by 2021, if provided with a conducive environment through reforms and regulation.

GROWTH DRIVERS FOR INDIA’S FMCG SECTOR

Shift to Organise Market:

Organised sector growth is expected to grow as the share of unorganised market in

the FMCG sector fall with increased level of brand consciousness.

Growth in modern retail will augment the growth of organised FMCG sector.

Increase in Penetration:

Low penetration levels of branded products in categories like instant foods indicating
a scope for volume growth.

Investment in this sector attracts investors as the FMCG products have demand
throughout the year.

Easy Access:

Availability of products has become way easier as internet and different channels of
sales has made the accessibility of desired product to customers more convenient at
required time and place.

Online grocery stores and online retail stores like Grofers, Flipkart, Amazon making
the FMCG product s more readily available.
 Rural Consumption:

Rural consumption has increased, led by a combination of increasing incomes and

higher aspiration levels, there is an increased demand for branded products in rural
India.

Huge untapped rural market.

Godrej is launching One Rural programme to generate more revenues from rural
areas.

Rural India accounts for 40 per cent of the total FMCG market, as of May 2017.

HIGHER INCOMES AND GROWTH IN URBAN AND RURAL MARKETS

● Incomes have risen at a brisk pace in India and will continue rising given the
country’s strong economic growth prospects. According to IMF, nominal per
capita income is estimated to grow at a CAGR of 4.94 percent during 2010-19.

● An important consequence of rising incomes is growing appetite for premium

products, primarily in the urban segment.
 ● As the proportion of ‘working age population’ in total population increases, per
capita income and GDP are expected to surge.

FDI INFLOWS RISE OVER THE YEARS

● 100 percent FDI is allowed in food processing and single-brand retail and 51
per cent in multi-brand retail.

● This would bolster employment and supply chains, and also provide high
visibility for FMCG brands in organised retail markets, bolstering consumer
spending and encouraging more product launches

● The sector witnessed healthy FDI inflows of US$ 12,604.77 million during April
2000 to September 2017.

● Within FMCG, food processing was the largest recipient; its share was 63.49
per cent

● US based dairy giant - Schreiber Dynamix Dairies, opened its 1st fully-
automated infant nutrition plant, at Baramati, Maharashtra, with an investment
of US$ 37.18 million.
● Britannia has signed an MOU with a Greek baker – Chipita, to produce bakery
items. The venture is worth an investment of US$ 11 million, in which Britannia
will be looking after functions like logistics costs, supply-chain and distribution
network

● The Hershey Co plans to invest US$ 50 million over the next five years in India,
its fastest growing core market outside of US. The company is also planning
to make India an export hub for Hershey products.

● The bottling arm of Coca-Cola India, Hindustan Coca-Cola Beverages (HCCB) is

planning to increase its retail reach by one million new outlets and is targeting
a revenue of US$ 2.5 billion by 2020.
 MARKETING MIX OF THE INDUSTRY

The product, place, promotion and pricing represents the primary elements of the
company's market offer. All activities and programmes, which FMCG marketers design
and perform to deliver value to the FMCG consumers and to win their loyalty, relate
to one element or the other components. So, in the FMCG sector, the marketing mix
can be seen as a combination of the product, the price, the distribution network, and
the promotional methods.

PRODUCT

A product represents the heart of an FMCG company and acts as a need-satisfying

entity to an FMCG consumer. FMCG sector consists of several products, with significant
categories being food, beverages, personal and home care products. FMCG products
are repeatedly the same within these categories, which leads to intense competition
among retailers. Unilever has categorized its products into two leading brands;
personal and home care products and food and beverages. Laundry detergents,
deodorants, dishwasher, ice cream, syrups, cooking oil, margarine, and Soya-based
drinks are Unilever products and fall into the two primary categories. Nestle has four
distinct strategic business units (beverages, milk and milk products, prepared foods
and cooking aides, and chocolates) which are used to manage different food products.
India, Nestle launched Nestea to attract and retain consumers. Nestlé's chocolate
segment is a star. Milky bar, Nestle Kit Kat, and Polo are Nestlé’s popular chocolate
brands. Aplino, the recently introduced chocolate brands, targets the gifting segment.

PRICE

Prices of FMCG products are not particular. The prices keep on changing and are
different for different products. Nestlé's pricing depends on the market of its products.
Nescafe and Maggi are of good quality; thus, nestle prices Nescafe and Maggi with
higher profits margins (Morschett, Schramm-Klein, & Zentes, 2015). Packaging and
consumption-based pricing are Nestlé's strength of pricing. Consumers often make
their choices based on their consumption. Thus, Nestle offers competitive pricing for
products like Alpino and Polo this is because of tough competition from different
companies. Unilever’s pricing strategy takes into account the competitor’s strategies.
Competitive pricing forms the base of deciding the price for any Unilever’s products.

PLACE

Distribution is an essential function of FMCG products. There are several types of

distribution arrangements. The conventional strategy of Nestle follows two
strategies;

(a) manufacturing- bulk buyers-consumers &

(b) manufacturing carrying and forwarding agents distributor-retailers-consumers.

Nonetheless, Nestle distribution channel is strong and has superior marketing and
sales networks that supplement the distribution channel. Unilever plies its services
across 100 countries. The company uses a global scale to ensure the delivery of
sustainable and profitable growth. Besides, Unilever rolls out innovations across all
markets at a faster rate.

PROMOTION

The policy in FMCG sector is to maintain communication simple and profit-oriented. In

order to craft an increased demand in the market by relating with both lifestyle and
behaviour. FMCG companies adopted different advertising and promotional techniques
& also use corporate social responsibilities as a marketing tool to gain emotional
advantages in the consumers mind. Unilever promotes its product through
advertisement by either print media or electronic media. On the other hand, Unilever
offers promotional schemes, for example, premium packs and sales. Such promotional
schemes are meant to attract additional customers.
CASE : PROMOTION STRATEGY BY HUL

This strategy was used at village to village basis

In the process of promoting “vim” in rural areas. Keeping into mind the dynamics of
rural consumer and distribution infrastructure, the marketer had adopted a different
promotion strategy to promote the vim in rural areas.

The formal media used to communicate the product was T.V, radio

Cinema, print proportionately depending upon their reach and their influence on rural
masses.

The informal promotion strategy was formulated. The steps involved to promote the
product in rural areas.

The first step was the usage of audio- visual publicity vans. This publicity vans were
covered by beautiful banners, this banners were embossed with the product photos,
the base or tagline of the product and colourful picture that can attract the rural
consumer. The audible material used were a tunes of current filmy songs, which were
composed with new lyrics, this lyrics gave the special features about the vim. This
step was used as an introduction of the product vim in rural markets.

The second step in the promotion strategy was to do Door-to-door marketing. This
step was very well designed. To do Door- to- door marketing the marketer employed
the young local youths who can communicate with rural people in the local language.
This youth carried along with them flip charts as a substitute medium to T.V.

This flipchart contained a story. The story used in the flip chart was about two female
named “Kamala” and “bimla”. Explaining that kamala used vim and bimla used other
proxy product. Kamala showed bimla the benefit of using vim in compare to other
proxy product and explaining the features of the product.

The Door-to-door marketing step was complementary to other step that involved the
participation of the rural housewives, which contained games. This games were
strategically designed so as to position the product and the price of the product in the
minds of consumer.
The games used were:

o Spotting the right price.

o Match the pairs.
o Turn the wheel.

This games were used to entice the people and pull them to “mohalla” the small place
between the houses so as to do mass marketing as much as possible. This all was
done as process of mass marketing.

The fourth step in promotion was Retail contact

In this step the marketers gave scratch coupons to the consumers who came to
purchased vim with incentive packages (i.e. packages one for two)

The prizes distributed to whom so ever won was 12months soaps. Prizes were
distributed on the spot so to create better perception of the company and product in
the mind of the consumer. The same was made applicable for the retailers on the bulk
purchase. This retailers were also given special discount on their bulk purchase.

The final step was that all the people were invited to the central location. This central
location was usually a place where all the village people assembled so that becomes
easy to communicate at large to the masses. The activity undertaken at the central
location was cleaning up the sweet makers vessels, which was the toughest to do.

It was communicated as

“Saf kare mitaheewale ki kadai”

This exercise of promoting the product was one of the best as when it was proved in
front of the consumer as vim cleaned “the mitaheewale ki kadai” without living any
greasiness. The advantages of the Vim were also shown to them.

The advantages of vim were that it relieved from the hardship of scrubbing the vessel,
which was done with ease with the help of “vim”. The other advantage was that it
would certainly save their lot of time, which can be utilized effectively for some other
work. This created a clear perception about the product.
This process was used again and again in capturing different markets.

The other promotion strategy to promote the product

Roadshows comprising attractively designed floats will traverse the length and breadth
of the country during the time span of the offer.

The carnival, which will cover hundreds of small towns and villages apart from the
metros and is part of a massive rural promo initiative that HLL plans to unleash.

The company even had to promote the product in Haats & Melas of different villages.

To promote the vim HLL planned to distribute gold as prize

IN a bid to promote vim one of its leading dish wash soap, Vim Gold Bar, HLL had
launched a below-the-line advertisement.

This medium proposes to bring Vim to the rural households via direct interaction
between customer and producer.

This promotional blitzkrieg across the country includes giving away gold worth Rs 5
crore.

The offer gives; customers stand a chance to win gold in different denominations by
just scratching a card received on every purchase of a Vim bar.

Each scratch card carries an 8-digit number. Every Sunday, one such number will be
announced on Sony Entertainment TV between 8-9 p.m. and this number will be valid
for the entire period of the offer.

If the number on the scratch card of the consumer matches with the number
announced on TV, they would be eligible for a 400 gm. gold bar - the weight of the
Vim bar in gold.

In case of fewer digits matching, the consumer stands to win 100 gm., 10 gm., or 1
gm. of

Gold or Rs 100 off on purchase of HLL products from the retailer

Communication
Vim Bar has always created an impact in the market with its path-breaking
communication. The communication has been designed to powerfully communicate
the tough stain removal properties of the Vim Bar. HLL created a new consumer lingo
for the tough stain problem with the campaign baseline of Vim being the “Khar Khar
ka moh tod jawab”.

HLL had to completely change its communication when it entered into rural it had to
completely changed its communication from the previous one that was that after
cleaning the vessel with bar you can see your face(apka chehra Bhi dekhega saf) to
(khar khar ka moh tod jawab) just because the rural consumers used aluminium
vessels to cook their food. It won’t create sense to appeal them to buy that product
that did not suit their living.
MAGGI:

1872 - The original company came into existence in Switzerland.

1947 - Maggi merged with nestle.

1982 - Nestle introduced Maggi brand in India.

Marketing Mix (Maggi)

Product Price Place Promotion

1. MAGGI 1. MAGGI IS MOTHER GODOWN SALES PROMOTION:

VEGETABLE USING MARKET
↓ 1. DRY SAMPLING-
ATTA PENETRATION
NOODLES IN MARKETING PROMOTERS WERE
CARRIAGE & FORWARDING
MAGGI ALWAYS DISTRIBUTING
AGENT
NOODLES. THE MAGGI NOODLES
↓ PACKET.

2. MULTIGRAIN 2. NESTLE DISTRIBUTOR SUPER 2.WET SAMPLING- ALSO

NOODLES HOPES TO GET STOCKIST COOKED MAGGI TO THE
(TARGETING HIGHER SALES CONSUMERS.
HEALTH VOLUME IN ↓ ↓
CONSCIOUS TURN WILL 3. ORGANIZING
PEOPLE) RETAILER RE-DISTRIBUTOR
LOWER THE CONTESTS TO
COSTS. ↓ ↓ ENGAGE CUSTOMERS.
FOLLOWED BY WINNING
END CUSTOMER ← RETAILER GREAT GIFTS.
3. DAL ATTA 3. WITH THIS
NOODLES
THEY HAVE 4. SPONSORING MANY
(TARGETING
PENETRATED SHOWS LIKE
HEALTH
THE MARKET MASTERCHEF, MAGGI QUIZ
CONSCIOUS
AND HAVE 80% COMPETITIONS. AND ALSO
PEOPLE)
MARKET SHARE ORGANIZING MANY
IN THE INNOVATIVE CAMPAIGNS
PRESENT THAT HELPED IN
SCENARIO. IMPROVING PUBLIC
4. 2 MINUTE RELATIONS
NOODLES 4.ALSO
(FOR PACKAGING
CONVENIEN AND
CE SAVVYs) CONSUMPTION
BASED PRICING.
CONCLUSION OF MARKETING MIX
From FMCG’s perspective, the four Ps have been significant, in some instances, at
least for marketers of FMCG product. The FMCG sector represents the world of pure
marketing. The sector is the best training ground for learning various forms of
marketing disciplines and processes. Advertising is FMCG’s widely employed marketing
tactic. In addition, marketing mix with its four Ps still serves as an international
marketing approach. Different marketing mix elements impact the sales and brand
awareness with differing levels of intensity. The studies made by the three FMCG
companies found similarities and concluded that advertising strategy occupies the
focal point to achieving brand effectiveness and awareness.
 MAJOR EVENTS OCCURRED IN LAST QUARTER/YEAR

1. India’s largest fast-moving consumer goods company, Hindustan Unilever

(HUL) on Monday announced a merger with GlaxoSmithKline Consumer Healthcare
Ltd (GSK CH India). As part of this steaming hot deal, health drinks including Boost,
Horlicks and Maltova — the mainstays of GSK CH — will now move to the HUL stable.
The transaction is an all equity merger with 4.39 shares of HUL being allotted for every
share in GSK CH India. The deal values the total business at ₹31,700crore.

Target name Acquirer name Merger/Acquisition Year

GlaxoSmithKline HUL Acquisition 2018

Consumer Healthcare
(GSKCH India)

Bombay shaving Colgate Acquisition (14% 2018

company Palmolive stake)

Brillare science, Emami Acquisition (26%) 2018, 2019

creme 21

Beardo Marico Acquisition (45%) 2018

2. Colgate-Palmolive Asia Pacific, a subsidiary of the global consumer behemoth, made

its debut in the Indian consumer brand space with an investment in men’s grooming
firm Bombay Shaving Company.
The primary investment is pegged at about Rs. 18 crore ($2.6 million), with the Hong
Kong arm of the global consumer company leading the round and picking up a 14%
stake in Bombay Shaving Company.
3. Emami Ltd has acquired German personal care brand Creme 21 which is large in
the Middle-East, according to a company release. While the company did not share
the deal value, Emami said the brand has been acquired at less than 1.5 times of its
sales of Euro 8 million.
The company said this international acquisition is in line with the company’s strategy
for pursuing growth through inorganic route. The acquisition is being funded from
internal accruals. Creme 21 is present in skin and body care products such as creams
and lotions, shower gels, sun care range and men’s portfolio.
4. FMCG major Marico has acquired about 45 per cent stake in men's grooming
brand Beardo, the company said in a statement. While, the company has not
disclosed the amount, sources close to the deal said that it was around Rs 50-60
crore.
 FACTORS AFFECTING FMCG INDUSTRY

ECONOMIC
Slowdown in global economic scenario affects almost every industry across the world.
Increase/decrease in unemployment or changing the purchase power of consumer
affects the industry as well. Decrease in disposable income leads to consumers not
opting to buy expensive products or services. This further pressurizes the RMCG
companies to reduce the prices for the products and services.
Organizations functioning in FMCG industry have to review this economic ride and
have to respond accordingly.

POLITICAL
Political factors have a greater influence on the organization and industry and it is the
duty of the organizations to comply with it. It is necessary for the organizations to
comply with the legislations implemented non-conformance of which may lead to
serious implications on the organization. The government has implemented certain
restriction in the import policies. However tax exemptions in sales and excise duty are
provided for the small scale industries. This will allow the SMEs to invest more and will
increase the number of new entrants. Transportation and infrastructure facilities are
improving not only in urban but also in the rural area which will help in distribution
network.

TECHNOLOGICAL
Advancement in technology boost the production with enhancement in quality of
products and services rendered to the customers. Organizations began to adopt e-
business to improve brand communication and market. Technological advancement
makes the supply chain and transactions along the chain simple. Organizations
reduced costs with effective IT technologies and increased the rate of information
transactions. Technology is playing a key and huge part in the FMCG sector by
developing the new packaging, increasing productivity and longer shelf life of food
products.
Better, stronger, more effective and faster are the key elements that all manufacturers
in this sector push for, as it drives sales. The advancement enhances the sales by
enabling the manufacturer to produce better products with attractive packaging and
better communication. With advancement in communication technology and rising
social media network it enables the organizations to communicate better to the
customers by improved marketing campaigns.

INTERNATIONAL TRADE
The economic crisis and slowdown had greatly affected the sales FMCG goods across
the world. However emerging economies like India, China and Brazil are not greatly
affected and manage to do well to recover quickly. A common trend that was followed
across the world during economic slowdown was trading down. Because, customers
became more cautious looking for less expensive brands, special offers and discounts.
This added tremendous pressure on the market prices due to severe competition and
down trading. However emerging economies like India, China and Brazil saw
development in hypermarkets helping the growth of FMCG markets in these countries.
UPSTREAM INDUSTRY/ DOWNSTREAM INDUSTRY UNDER FMCG

UPSTREAM
Upstream industry are those industrial firms that generally process the raw materials
into an intermediary product which is then further converted into finished product by
the downstream industry.

DOWNSTREAM
Downstream industry are those industrial firms that process the output of other firms
into a different finished product. These industries generally experience higher profits
margins than the upstream industries.

Upstream Product Downstream

Agricultural Farmers Aashirwad Aata by ITC Hotels & Restaurants

Dairy Farmers EveryDay Milk Powder by Hotels & Restaurants

Nestle

Dairy Farmers Toned Milk by Nestle Manufacturing of Nestle

Dips and Chocolates

Chemical Industry Bisleri by Parle Manufacturing of Parle

Frooti & Appy Fizz

Chemical Industry Tata Salt Hotels & Restaurants

 CONCLUSION

As mentioned above the FMCG sector contributes to almost 17% of the total GDP of
India therefore the government is taking various measures to ensure the sustainable
development of this industry which are as follows:

● Number of mega food parks ready increased from 2 between 2008-14 to

13 between 2014- 18.
● Preservation and processing capacity increased from 308,000 during 2008-14
to 1.41 million during 2014-18.
● The number of food labs increased from 31 during 2008-14 to 42 during 2014-
18.

Rural consumption has increased, led by a combination of increasing incomes and

higher aspiration levels; there is an increased demand for branded products in rural
India. The rural FMCG market in India is expected to grow to US$ 220 billion by
2025 from US$ 23.6 billion in FY18. In FY18, FMCG’s rural segment contributed an
estimated 10 percent of the total income and it is forecasted to contribute 15-16 per
cent in FY 19. FMCG sector is forecasted to grow at 12-13 per cent between
September–December 2018.

On the other hand, with the share of unorganised market in the FMCG sector falling,
the organised sector growth is expected to rise with increased level of brand
consciousness, also augmented by the growth in modern retail.
Another major factor propelling the demand for food services in India is the growing
youth population, primarily in the country’s urban regions. India has a large base of
young consumers who form the majority of the workforce and, due to time
constraints, barely get time for cooking.
Online portals are expected to play a key role for companies trying to enter the
hinterlands. The Internet has contributed in a big way, facilitating a cheaper and
more convenient means to increase a company’s reach. It is estimated that 40 per
cent of all FMCG consumption in India will be online by 2020. The online FMCG
market is forecasted to reach US$ 45 billion in 2020 from US$ 20 billion in 2017.

It is estimated that India will gain US$ 15 billion a year by implementing the Goods
and Services Tax. GST and demonetisation are expected to drive demand, both in the
rural and urban areas, and economic growth in a structured manner in the long term
and improve performance of companies within the sector.
 REFERENCES

● IBEF Report on FMCG Industry in India 2019

● Media Reports, Press Information Bureau (PIB), Union Budget 2018-19,

Firstpost

● The Innovation Imperative by PWC

● Major events that took place in current time:

I. Marico-Beardo:
https://www.thehindubusinessline.com/companies/marico-acquires-45-stake-
in-mens-grooming-brand-beardo-for-rs-50-cr/article9590675.ece

II. Colgate-Palmolive & Bombay shaving company :

https://economictimes.indiatimes.com/industry/cons-products/fmcg/colgate-
palmolive-buys-14-stake-in-bombay-shaving-
company/articleshow/65509170.cms?from=mdr

III. HUL- GSK

https://www.thehindubusinessline.com/companies/hul-buys-gsk-consumer-in-
mega-deal/article25656899.ece

IV. Emami-Creme21
https://economictimes.indiatimes.com/industry/cons-products/fmcg/emami-
acquires-german-personal-care-brand-creme-
21/articleshow/67688715.cms?utm_source=contentofinterest&utm_medium=
text&utm_campaign=cppst

● http://www.managementparadise.com/forums/marketing-management-rm-
im/201285-promotional-strategy-hul.html
● https://www.ijser.org/researchpaper/Marketing-Mix-in-FMCGs-leading-
Companies--Four-Ps-Analysis.pdf
● https://www.slideshare.net/IBEFIndia/fmcg-sector-report-january-2018
● http://www.ibef.org.