2.

0 FMCG INDUSTRY

FAST MOVING CONSUMER GOODS (FMCG)

FMCG are products that have a quick shelf turnover, at relatively low cost and
don't require a lot of thought, time and financial investment to purchase. The
margin of profit on every individual FMCG product is less. However the huge
number of goods sold is what makes the difference. Hence profit in FMCG
goods always translates to number of goods sold. Fast Moving Consumer Goods
is a classification that refers to a wide range of frequently purchased consumer
products including: toiletries, soaps, cosmetics, teeth cleaning products, shaving
products, detergents, and other non-durables such as glassware, bulbs, batteries,
paper products and plastic goods, such as buckets.

Fast Moving’ is in opposition to consumer durables such as kitchen appliances

that are generally replaced in less than a year. The category may include
consumer electronics and packaged food products and drinks . The term
Consumer Packaged Goods (CPG) is used interchangeably with Fast Moving
Consumer Goods (FMCG). Three of the largest and best known examples of
Fast Moving Consumer Goods companies are NESTLÉ, UNILEVER AND
PROCTER & GAMBLE. Examples of FMCGs are soft drinks, tissue paper, and
chocolate bars. Some examples of FMCG brands are Coca-Cola, Kleenex and
Pepsi . The FMCG sector represents consumer goods required for daily or
frequent use. The main segments of this sector are personal care (oral care, hair
care, soaps, cosmetics, and toiletries), household care (fabric wash and
household cleaners), branded and packaged food, beverages (health beverages,
soft drinks, staples, cereals, dairy products, chocolates, bakery products) and
tobacco.

The Indian FMCG sector is an important contributor to the country's GDP. It is

the fourth largest sector in the economy and is responsible for 5% of the total
eefactory employment in India. This industry has witnessed strong growth in the
past decade. This has been due to liberalization, urbanization, increase in the
disposable incomes and affluent lifestyle. Furthermore, the boom has also been
catalyzed by the reduction in excise duties, de-reservation from the small-scale
sector and the concerted efforts of personal care companies to attract the
burgeoning affluent segment in the middle-class through product and packaging
innovations.

2.1 STRIKING FEATURES OF FMCG INDUSTRY

 Critical operating rules in Indian FMCG sector

 Heavy launch costs on new products on launch advertisements, free samples

and product promotions.

 Majority of the product classes require very low investment in fixed assets

 Existence of contract manufacturing

 Marketing assumes a significant place in the brand building Process

 Extensive distribution networks and logistics are key to achieving a high.

 level of penetration in both the urban and rural markets.

 Factors like low entry barriers in terms of low capital investment, fiscal
incentives from government and low brand.

 Awareness in rural areas have led to the mushrooming of the unorganized

sector.
2.2 INDIAN COMPETITIVENESS & COMPARISON WITH
THE WORLD MARKETS

The following factors make India a competitive player in FMCG sector:

Availability of raw materials - Because of the diverse agro-climatic conditions

in India, there is a large raw material base suitable for food processing
industries. India is the largest producer of livestock, milk, sugarcane, coconut,
spices and cashew and is the second largest producer of rice, wheat and fruits
&vegetables. India also produces caustic soda and soda ash, which are required
for the production of soaps and detergents. The availability of these raw
materials gives India the locational advantage.

Labor cost comparison - Low cost labor gives India a competitive advantage.
India's labor cost is amongst the lowest in the world, after China & Indonesia.
Low labor costs give the advantage of low cost of production. Many MNC's
have established their plants in India to outsource for domestic and export
markets.

Presence across value chain - Indian companies have their presence across the
value chain of FMCG sector, right from the supply of raw materials to packaged
goods in the food-processing sector. This brings for India a higher cost
competitive advantage.

For example, Amul supplies milk as well as dairy products like cheese, butter,
etc. Likewise RSPL provides Namaste India milk & milk products.
With the forthcoming Budget, FMCG companies have some expectations from
the Finance Minister (FM), which could revive the consumer sentiments helping
the sector to perform well going ahead. However, before going through this
year’s wish list, let’s take look at the FMCG- specific announcements made in
last
year‘s (2017-2018) budget.

Following are some of the key Budget announcements made for FY17 with
respect to the FMCG sector:

 Revenue expenditure kept under check, estimated at 6% in FY18 versus

12.8% in FY17.

 Excise duty on filter cigarettes has been hiked by 6%. Duty on pan masala
up from 6% to 9%, and on unmanufactured tobacco from 4.2% to 8.3
 Excise on beedis has increased—fourfold for machine-made ones from Rs21
per thousand pieces to Rs78 per thousand and by one-third for handmade
ones to Rs28 per thousand pieces.

 Reduction in income tax by 5% for individuals with income of 2.5 -5 lakhs

will help in save 12500 annually. This will give more disposable income in
the hands of people which will increase non-food expense. This tax cut will
cost government somewhere around 15000 crores. We can expect that some
of this will go to consumption and some for saving.

 MGNREGA Allocation- Government this time made highest ever allocation

to MGNREGA of 48000 crores. This will increase the income of the rural
people which will again increase their spending power.

 Increase in allocation to rural economy by 24%– With the aim to double the
farmer’s income by next five years’ government allocated 1.87 lakh crore to
boost the agriculture sector.

 Increase in sanitation expenditure in rural areas – Sanitation coverage has

increased from 42% to 60%. This will increase the demand for personal care
products and sanitary ware.

 Integration of fruits and vegetables with agro-processing units – This will

help farmers get a better price for their products.

 Setting up of Dairy Processing Fund of 8000 crores– According to analysts,

this fund will increase the farmer’s income by 50000 crores.
 Also, food segment in FMCG account for 19%, second highest after personal
care products. A push to dairy products will directly lead to increase in
production of food products.

 Safe drinking water to 28000 arsenic and fluoride affected habitants. This
will be a welcome step for beverages company.

 Increase emphasis on Skill development in rural India– Emphasis on skill

development and entrepreneurship will increase the employment in rural
India which will increase the disposable income

 Currently, FMCG sector derives 40% of its revenues from rural sector and
rural sector spends 50% of its expenditure on consumption. Also, growth in
revenues in rural markets is higher paced than the growth of revenues in
urban markets.

 Excise on Tabacco products– Government announced an increase in the

excise duty on filter cigarettes by 6%. Duty on Pan Masala is up by 3% and
on unmanufactured tobacco by 4.1%. Excise on machine made beedis have
increased from 21 per thousand to 78 per thousand, that is almost 300%.

 This will negatively affect the revenues of companies like ITC, Godfrey
Philip, VST etc.

 Reduction in tax rate for MSMEs by 5%- Government reduced the tax rate
for MSMEs from 30% to 25%. Close to 90% of companies belong to this
category. This will increase the profits of MSMEs and will encourage them
to scale up their production.
 CONCLUSION– Overall Positive! the government made a good move by
focusing on the rural economy as this segment has more growth in the
context of FMCG sector. FMCG companies should devise strategies to
market their products in the rural economy and the companies which already
are leaders in the rural market will be able to take the share of growth.

2.3 SALES PROMOTION STRATEGIES

There are three types of sales promotion strategies: Push, Pull, or a combination
of the two.

A push strategy involves convincing trade intermediary channel members to

"push" the product through the distribution channels to the ultimate consumer
via promotions and personal selling efforts. The company promotes the product
through a reseller who in turn promotes it to yet another reseller or the final
consumer. Trade-promotion objectives are to persuade retailers or wholesalers
to carry a brand and give the brand a shelf space. Several push strategies are:
allowances, buy-back guarantees, free trials, contests, specialty advertising
items, discounts, displays, and premiums. space, promote a brand in advertising,
and/or push a brand to final consumers.
A pull strategy attempts to get consumers to "pull" the product from the
manufacturer through the marketing channel. The company focuses its
marketing communications efforts on consumers in the hope that it stimulates
interest and demand for the product at the end-user level. This strategy is often
employed if distributors are reluctant to carry a product because it gets as many
consumers as possible to go to retail outlets and request the product, thus
pulling it through the channel. Consumer- promotion objectives are to entice
consumers to try a new product, lure customers away from competitor’s
products, get consumers to "load up" on a mature product, hold & reward loyal
customers, and build consumer relationships. Typical tactics employed in pull
strategy are: samples, coupons, cash refunds and rebates, premiums, advertising
specialties, loyalty programs/patronage rewards, contests, sweepstakes, games,
and point-of-purchase (POP) displays.

2.4 HOW TO START A SALES PROMOTION

Step 1: Sales promotions begin with a product that you would like to promote
and offer to your customers or clients. That’s especially true of one-time
marketing concepts, such as you might use to start or expand your business or to
boost your short-term revenues. Your ideal promotional offer should be
something that offers value to your customers, and is very relevant to your
business. It should also be very pertinent to your competitive edge. Sometimes,
the easiest promotional offer is a discount, but there are usually more creative
ideas that you can come up with through brainstorming with your peers or
business associates. What does your "competitive edge" consist of? It's basically
something that sets you apart from your competition.
Step 2: How can your promotion outshine your competitive edge? Other
common promotions can include bonus products and/or services. Such
promotional tools will not only bring in additional business, but it will give your
customers a chance to “sample” your other products or services that you have
made available to them.

Step 3: Once you have your promotional offer set in motion, you must begin to
promote your sales promotion! This is where many businesses fall short in their
advertising and marketing efforts. This failure happens in two ways: First, they
don’t promote their promotion to their existing or potential customers; or they
communicate the wrong marketing message. When it comes to business
marketing, the first thought is usually advertising; but advertising adds expense.
Between the cost of buying advertising media and the cost of the promotion
itself, you may find that your returns don’t justify the expense. In addition,
advertising for a promotion tends to attract price-sensitive shoppers who may
not return.

Step 4: There are definitely smarter and cheaper ways to begin promoting your
sales promotion. If you own a store, you can do an in-store promotion--place in-
store signs at appropriate places like at the entry, near relevant sale products and
at the checkout counters. Have your employees mention the promotion to all the
customers that come in. A great way to advertise with little to no money is to
have your employee’s wear buttons, tags or stickers that promote the product
you are trying to sell. Another way is to place promotional flyers in the bags at
check-out counters.

Step 5: Another great way to promote your business is through the Internet. If
your company has a website, highlight your promotions on your website's main
page. Go as far as to create a web page about your promotion, and then create a
link that you can place on other websites. Collect email addresses from your
customers and send them your promotional offers. Other than a few moments of
your time, this is a great way to advertise without spending a cent.

Step 6: Another cost-effective way to advertise and promote your business is to

have your employees mention the promotion to incoming callers throughout the
sales day. Also, change your voicemail message to reflect the sales promotion.
If you have to place your customers on hold for any reason, have your on-hold
message speak about the current promotion within your business. And finally,
have your employees call your existing customers to inform them of your
current and upcoming promotions.

Step 7: Another very good marketing tool is to send out a press release
promoting the promotion. Postcards can be a cost-effective way to get the word
out to your existing or potential customers, for little to no money. If you have
developed business relationships with your competitors, see if you can do a
joint promotion. It can be very cost effective and promote unity within the
business community. The there is always the "standard" type of promoting your
business, and that is through your local newspaper and penny saver.

Step 8: If you are the "hands-on" type, get involved within your local
community. If you haven't already, join your local Chamber of Commerce. Find
out what's going on within your local community. Are there any trade shows or
fairs coming up? See if you can't sponsor a booth by advertising your business.
There are many networking breakfasts and luncheons within the local business
community that can help promote and market your business, plus find out who
your competition is, especially if you are a new start up business. This, too, can
be a very cost-effective way to advertise.
Step 9: Don't be afraid to be very creative with your campaign! Come up with a
catchy slogan. Don't be concerned if it sounds irritating or a little "off the wall."
Remember that it is the "squeaky wheel" that always gets the grease! Have fun
with it! Make it interesting! Build your existing or potential customers' curiosity
up so much that they have to come in and see what all the ruckus is about! Offer
free samples to the first 100 customers who enter the store. The possibilities are
endless!

Step 10: Finally, plan ahead. Advertise during the seasons where sales are
normally slow. Find out why this part of the season is slow. Are folks on
vacation? Are the parents getting their kids ready to go back to school? Do you
have a product or service that flourishes during the holiday season, or does your
business become stifled? If you sell a product or service that most of your
existing or potential customers would purchase during the holiday season
anyway, it may be wise to structure the majority of your advertising budget
towards your slower seasons of the year. Why waste advertising dollars, even if
it is the holidays, if you know your customers are coming in anyway? Don't do
as your competitors do and spend endless wasted effort and dollars going from
one promotion to another!
TOP FMCG COMPANIES IN INDIA

Patanjali

Hindustan Unilever Ltd.

ITC (Indian Tobacco Company)

Nestlé India

GCMMF (AMUL)

Dabur India

Parle Agro

Cadbury India

Britannia Industries

Procter & Gamble Hygiene and Health Care

Colgate-Palmolive (India)ltd.
 PATANJALI

Patanjali started its operations with Patanjali yogpeeth in Hardiwar,

Uttarakhand. Patanjali yogpeeth is one of the largest yoga institutes in the
country. Swami Ramdevji Maharaj and Acharya Balkrishanaji Maharaj set up
Patanjali Ayurveda Pvt Ltd for treatment, research and development and for the
manufacturing of ayurvedic medicines in Yoga and Ayurveda.
Patanjali Yogpeeth offers treatment and scientific research and has brought a
revolution when it comes healthcare in the country with the combined approach
of Yoga and Ayurveda.
The infrastructural facilities at Patanjali Yogpeeth includes an OPD for free
medical consultation, IPD of thousand beds, laboratory for test investigation of
radiology, cardiology and pathology, a yoga research department, free yoga
classes, high quality ayurvedic medicines manufactured by Divya pharmacy,
facilities of library and reading room along with a cyber café, a huge
auditorium, apartments for senior citizens, a grand museum and a sale outlet of
11,000 square feet for literature related to yoga and Ayurveda.

PRODUCTION

Patanjali Food and Herbal Park at Haridwar is the main production facility
operated by Patanjali Ayurved. The company has a production capacity of 7350
billion (US$4.9 billion) and is in the process of expanding to a capacity of
760,000 crore (equivalent to 7610 billion orUS$8.5 billion in 2017) through its
new production units at several places, including Noida, Nagpur, and Indore.
The company plans to establish further units in India and in Nepal.
In 2016, the Patanjali Food and Herbal Park was given a full-time security cover
of 35 armed Central Industrial Security Force (CISF) commandos. The park will
be the eighth private institute in India to be guarded by CISF paramilitary
forces. Baba Ramdev is himself a "Z" category protected of central paramilitary
forces
Distribution strategy:

With more than 4600 retail outlets across India and distributing its products
through e-commerce sites, supermarkets chains like future group’s big
bazaar,reliance retail outlets and many others, Patanjali is emerging as a fastest
growing FMCG company in India.

Brand equity:

Baba Ramdev himself being the face of the promotions of the Patanjali products
is helping the brand in maintaining high TOMA (top of mind awareness). Also,
the products appeal and benefits are such that it is helping the brand to be a
household name in India offering products for a kitchen to home care.

Competitive analysis:

Being present in different products segments and having 4 different sub-brands

has helped the company in having a high share of wallet of the customers.
Distribution is one of the critical instruments in the success of the FMCG
players in a country like India and Patanjali through its own retail outlets and
partnered channel of distribution has made the products available to its
customers in most of the locations in India.
Customer analysis:

A customer of Patanjali are people from all age groups, as the products offered
by Patanjali are perceived to be healthy and availability in different SKU’s
(stock keeping unit) make it more affordable for the customers.
 HINDUSTAN UNILEVER LIMITED

Hindustan Unilever Limited also called Hindustan Lever Limited (HLL) was
established in 1933 as Lever Brothers India Limited. Hindustan Lever Limited
(HLL) is India's largest Fast Moving Consumer Goods Company, with a
customer base of 2 out of every 3 Indian in the category of Home & Personal
Care Products and Foods & Beverages. The company has combined volumes of
about 4 million tonnes and sales of Rs.10, 000 crores. HLL is also one of the
country's largest exporters; the Government of India has recognized HLL as a
Golden Super Star Trading House.

Type Pub HUL

Headquarters Mumbai , India

Key people
Mr. Sanjiv Mehta, CEO
Industry FMCG

Products Tea, soap, detergents

Employees 41,000

Parent Unilever

Website www.hul.com
Some of HUL brands are:

Kwality Walls Ice Cream

Hamam

Lifebuoy

Rexona

Lux

Liril

Sales promotional tool used by HUL

 Hindustan Unilever (HUL) is partnering over a dozen content creators from

Star Network and Yash Raj Films to Facebook and Google to produce
content across channels where HUL brands can participate, perhaps subtly,
as part of the conversation.

 Recently, the maker of Dove and Rin invited 13 producers including

broadcasters, radio channels, film producers and top-notch digital companies
to its campus to ideate how they can seamlessly weave HUL brands in their
content, messages and shows, instead of just product placement and brand
plugs.
 The Door-to-door marketing step was complementary to other step that
involved the participation of the rural housewives, which contained games.
These 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 :

 Spotting the right price.

 Match the pairs.

 Turn the wheel

These 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.
 ITC LIMITED

ITC was set up in 1910 by the name of 'Imperial Tobacco Company of India
Limited'. The company is now known as Indian Tobacco Company Ltd.

ITC has its presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri- Business, Packaged Foods & Confectionery, Information
Technology, Branded Apparel, Greeting Cards, Safety Matches and other
FMCG products. ITC is a market leader in the businesses of Cigarettes, Hotels,
Paperboards, Packaging and Agri-Exports. It is gaining its market share very
rapidly in the businesses of Packaged Foods & Confectionery, Branded Apparel
and Greeting Cards & Stationery.

 Headquarters : Kolkata , West Bengal, India.

 Key people :Sanjiv Puri, (Chief Executive Officer)
 Revenue : 753,748 crore (US$8.0 billion) (2016). Operating
 income: 715,037crore (US$2.2 billion) (2015).

Manufacturing:

ITC Visits 5 IITs (Chennai, Delhi, Kanpur, Kharagpur, Bombay) and some of
the NITs for its technical functions from various disciplines such as Mechanical,
Electrical and Electronics,
Production Engineering, Chemical and Civil. Marketing and Human Resources.

ITC recruit’s talent from the premier Management Institutes of the country for
Marketing and HR functions. These campuses include the IIMs, ISB, XLRI,
FMS, IIFT, TISS, JBIMS and Symbiosis.

ITC products

 Foods: ITC's major food brands include Kitchens of India; Aashirvaad,

Mint-o, gum-o, B natural, Sunfeast, Candyman, Bingo! and Yippee!.

 Lifestyle apparel: ITC sells its products under the Wills Lifestyle and John
Players brands. Wills Lifestyle was accorded the ‘Superbrand’ status and
John Players was included in the top 10 ‘Most Trusted Apparel Brands 2012’
by The Economic Times.

 Personal care products include perfumes, haircare and skincare categories.

Major brands are Fiama Di Wills, Vivel , Essenza Di Wills, Superia and
Engage.

 Stationery: Brands include Classmate , Paper Kraft and Colour Crew.

 Safety Matches and Agarbattis: Ship, i Kno and Aim brands of safety
matches and the Mangaldeep brand of agarbattis (Incense Sticks ).

 Hotels: ITC's Hotels division (under brands including WelcomHotel) is

India's second largest hotel chain with over 90 hotels throughout India.

 Paperboard: Products such as specialty paper, graphic and other paper are
sold under the ITC brand by the ITC Paperboards and Specialty Papers
Division like Classmate product of ITC well known for their quality.
 Packaging and Printing: ITC's Packaging and Printing division operates
manufacturing facilities at Haridwar and Chennai and services domestic and
export markets.

 Information Technology: ITC operates through its fully owned subsidiary

ITC Infotech India Limited, which is a SEI CMM Level 5 company.

Sales promotional tools used by ITC

ITC’s Personal Care Products Business has announced the expansion of its
product portfolio with the launch of Engage. This new range of deo sprays for
men and women is packed in peculiarly shaped cans and uses ‘silhouettes’ as its
key design component.
 NESTLÉ INDIA LTD

Nestlé's relationship with India started in 1912. It started its trading with India
as The Nestlé Anglo-Swiss Condensed Milk Company (Export) Limited,
importing and selling finished products in the Indian market. Nestlé India is
amongst India's 'Most Respected Companies' and amongst the 'Top Wealth
Creators of India'.
Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. Nestlé India is a
company that provides Indian Consumers products with global standards and is
committed to constant growth and shareholder satisfaction. Nestlé India has also
provided opportunities of growth and employment to about 1 million people
including farmers, suppliers of packaging materials, services and other goods.

Nestlé made its first investment in Moga in 1961. In 1967 Nestlé established its
next factory at Choladi (Tamil Nadu). At present, it has a number of factories in
different parts of India such as:
 Punjab

 Uttaranchal

 Delhi

 Gurgaon

 Kolkata
Careers with Nestlé

Nestlé has an employee base of around 250,000. Nestlé also offers an

opportunity of working overseas. It provides career in various fields such as
Marketing, Administration, Finance or Molecular Biology.
Every year, Nestlé recruits a large number of graduates with strong academic
qualifications, essential language skills and relevant internships or professional
experience.

Nestle products:

 NESCAFÉ

 MAGGI

 MILKYBAR

 KIT KAT

 BAR-ONE

 MILKMAID

 NESTEA
Sales promotional tools used by Nestle :

Chocolates – Nestle has some popular chocolate products, most popular being
Nestle Kitkat, Munch, Milky bar, Eclairs and Polo. The newly introduced
Alpino is targeting the gifting segment in response to various chocolates like
Dairy milk and Bournville by Cadbury.

The chocolates segment of Nestle is a star, where the competition is high and
the expense is high but at the same time the market size is huge as well.

 Promotions for other products too are done smartly. Kitkat focuses on “Take
a break” and has done some good marketing for the same.

 The strength of pricing for Nestle comes from its packaging or consumption
based pricing. For Nescafe as well as Maggi, Nestle offers a lot of sizes and
package options. In supermarkets, you can even find a 16 packet maggi
whereas in small retail shops, you can find 5 rs maggi.

 Maggi 2 Minute Noodles- The flagship product in the Maggi umbrella brand,
this product is available in five flavours that are Tricky Tomato, Chicken,
Masala, Romantic Capsica and Thrillian Curry.
2.5 SWOT Analysis of FMCG Sector

STRENGTHS
 Low operational cost

 Presence of established distribution network in both urban and rural areas

 Presence of well-known brand in FMCG sector

 Favorable government policy

 Indian government has passes the policies aimed at attaining international

competitiveness through lifting of the quantitative restrictions, reducing
excise duties, 100% export oriented units can be set by govt approval and
use of foreign brand name etc.

 Foreign direct investment

Automatic investment approval up to 100% foreign equity and over as corporate
bodies investment is allowed for most of the food processing sector except malt
food, alcoholic beverages and those reserved for small scale industries.

WEAKNESS

 Lower scope of investing in technology and achieving economies of scale,

especially in small sectors.
 Low export level.
OPPORTUNITIES

 Untapped rural market, changing lifestyle

 Rising income level, i.e. increase in purchasing power of consumer

 Large domestic market with more population of median age 25.

 High consumer good spending.

 Lower price and smaller packs are also likely to drive potential upgrading for
major FMCG products.