1. 2011
Strategist
Strategy and Consulting Club, MDI
Gurgaon
Murugappan
pg10murugappan_o@mandevian.com
[FMCG-SECTOR REPORT]
This document present the latest updates in Indian FMCG sector

2. STRATEGIST-Strategy and Consulting Club .MDI Gurgaon
FMCG
Industry news
Demand for most FMCG products remains stagnant during 2010
The double-digit sales growth in the consumer product may not be purely on account of growing
demand, as widely perceived; It’s price increase and popularity of premium products that are driving the
value growth.
Data from India's largest household research firm IMRB that tracks consumption trends in several
sectors reflects that while demand in most categories remained stagnant in 2010, sales growth was
mainly on account of price hikes and the launch of premium products by most companies, which bring in
higher revenues to marketer.
Inflation – A major concern
Inflationary pressures are high. The input costs are rising and affecting the margin heavily. Companies
are managing it by reduction in size of some of the products.
FMCG cos make packaging changes to cut cost
Some of the country's largest consumer products companies such as Hindustan Unilever and Parle
Products too are doing the same by reducing the package. Now, reducing package has two elements:
the content of the pack and the material used for making the pack.
While most consumer goods companies have periodically reduced the weight of packets to deal with
increasing input costs, packaging firms are working on developing newer, cheaper packaging materials
to control costs. The measures include tweaking the size and thickness of packages as well as replacing
costly material with lower-cost alternatives.
Tetra Pak India, which has a 90% share in packaged fruits and juices segment, introduced smaller, 60-65
ml and 100-110 ml pack offerings, for brands such as Parle Agro's Frooti.

3. STRATEGIST-Strategy and Consulting Club .MDI Gurgaon
Company news
New products
Dabur to expand oral care range, ropes in Bipasha for Meswak
Dabur India has roped in Bollywood's sultry beauty Bipasha Basu as the ambassador for its toothpaste
brand Meswak, while it looks to expand oral care portfolio by introducing new brands and
products. Currently, Bipasha is also endorsing Dabur's Real Activ juice.
Besides the new marketing initiatives, the company is also preparing to introduce new brands and
products to strengthen its oral care portfolio which currently has Dabur Red, Babool, Promise and
Meswak in the toothpaste segment and Lal Dant Manjan in the tooth powder segment.
HUL launches Bru World Café
HUL launched Bru World Café taking head on coffee retail chains like Café Coffee Day and Barista. Well,
the timing can be no perfect than this. Just on the heels on US coffee retail chain Starbucks planning to
setup cafes in India and an another US coffee/food retail major Dunkin Donuts waiting to enter the
country, HUL has just inched up faster to open the coffee retail units.
Britannia forays into breakfast mixes market
FMCG major Britannia Industries entered the Rs 500-crore branded breakfast space dominated by
players like MTR Foods, Kellogg India, PepsiCo and Marico. The company has launched Britannia Healthy
Start, a range of ready-to-cook breakfast mixes consisting of upmas, pohas, porridges and oats. The
company said the breakfast range is fortified with multi-grains, vegetables, pulses and nuts and takes
only 5 minutes to cook. It is priced between Rs 33 and Rs 45 for 150-170 gm packets.
Deals
Cargill to buy Marico's Sweekar brand for Rs 60 cr
Commodity wholesaler and branded edible oil company Cargill India announced that it has inked an
agreement with Mumbai-based consumer goodmaker Marico to acquire the latter's refined sunflower
oil brand Sweekar for about Rs 60 crore, which will make it the second-largest player in the national
sunflower oil market.
Amrutanjan acquires soft drink brand
C hennai based Amrutanjan Health Care Ltd. has planned to acquire soft-drink and fruit beverage
business of Siva' Soft Drink Private Ltd. This acquisition will also hand popular brand currently owned by
Siva's Soft Drink, Fruitnik. Fruitnik is a pulp-based flavored fruit drink. This brand was launched in 1958
and is popular brand in southern India.

4. STRATEGIST-Strategy and Consulting Club .MDI Gurgaon
Jyothy Lab acquires 14.9% stake in Henkel India for Rs 60.73cr
Jyothy Lab acquires 14.9% stake in Henkel India for Rs 60.73cr. The company said the acquisition is part
of its strategy to strengthen its "brand portfolio both in the urban and rural India"
P&G, Henkel & Colgate keen on Unilever's Sanex
Unilever's forced sale of the Sanex deodorant business is drawing bids and interest from rivals including
Procter & Gamble, Henkel AG and Colgate-Palmolive, people briefed on the discussions said.
The maker of Dove soap, which gained Sanex when it bought Sara Lee's international toiletries business
in December for 1.21 billion euros ($1.69 billion), is in advanced talks to sell the brand for as much as $1
billion
Budget Impact
Reduction of surcharge from 7.5 to 5% is positive for the industry, says Adi Godrej
Adi Godrej, Chairman , Godrej Consumer Products gives his take on the positive aspects of Union Budget
2011 . "I think the most important thing is that he has clearly given a signal of GST coming through
soon...that is a major development which is very welcome as it will help us solve a lot of macroeconomic
issues, including inflation, fiscal deficit and help GDP growth.
"For the sector, another good development is reduction in surcharge from 7.5 percent to 5 percent. So
as the surcharge comes down, even with the base MAT rate being hiked from 18 to 18.5 percent, it (the
effective rate) remains unchanged."
P&G cuts sanitary napkins, baby diapers prices by up to 15 pc
FMCG giant Procter & Gamble (P&G), which sells sanitary napkins under the brand 'Whisper' and
diapers under 'Pampers' today said it is reducing the price of its sanitary napkins and baby diapers by up
to 15 per cent as a result of the excise duty cut announced during the recent Union Budget.
Investments
Nestle to invest Rs 1,500 cr in the next two-three years
Betting big on the domestic market, Nestle India today said it would invest close to Rs 1,500 crore over
the next two-three year period as part of its expansion plans, a top company official said here today.
Elaborating on the investments proposed he said the company has embarked on a Rs 360 crore
investment plan for their new factory at Nanjangud in Karnataka. The company would also invest Rs 200
crore by this year-end for manufacturing chocolates in Punjab. For its noodle and confectionery
business, the company is setting up two manufacturing facilities one each in Goa and in Himachal
Pradesh at an investment of Rs 1,200 crore

5. STRATEGIST-Strategy and Consulting Club .MDI Gurgaon
Contract farming and IT systems - A case study
Marico’s mobile based-application generates additional revenues of Rs 4 crore for farmers
For Saffola, one of the premium brands of Marico, Kardi seeds are a critical raw material. Marico hence
started a contract farming initiative to enrol farmers to produce Kardi seeds as a crop. Under this
initiative, Marico provides the know-how and the basic support to start the farming process.
Over the last two years, the acreage increased to 80,000 acres. The total farmers enrolled in the
program have increased to 31,000 across 2,000 villages and 10 states. Since the initiative is growing in
size, it called for tools and techniques to gather information and sharpen the decision making process.
At Marico, Field Agri Representatives (FAR) are the backbone of the contract farming operations. FAR
are the field forces who sell the idea of contract farming and enrol farmers into the program. Given the
nature of their work, Marico designed a solution that could be easily loaded on a cell phone.
An easy-to-use J2ME application was built in-house to track and record information on a low-cost Nokia
handset (which could also transmit photos). The FAR record photographs of soil conditions and crop
growth and also of critical operations such as application of pesticides with geo-tagging. This
information is then relayed to the analysts in the corporate office. Using GPS on the phone, the
efficiency of the FAR (including his route and the time spent at each location) can be also tracked in real
time by the management team. This does away with the need for physical audits. Unique identification
of the FAR by the IMEI number of his mobile, ensures the required security and confidentiality.
The results
The coupling of the mobile application and the central application ensures real-time information in an
otherwise difficult geography. The real-time flow of information also ensures that the right information
is available at the right time and place to accelerate decision making. Innovative use of geo-tagging
allows managers to check the efficiency of the field force and also track the progress of the crop at the
contract farming sites.
Post deployment of the mobile application, productivity has increased by 30 percent from 1.78 to 2.33
quintals per acre. Damage to crops has reduced by 50 percent—from 31 percent to 17 percent of sowing
acreage. This has increased satisfaction among stakeholders (especially farmers) in the value chain—
thereby increasing Marico’s equity. The company says it has been able to gain additional 2,000 MT of
seeds from the same acreage. This has resulted in additional income of Rs 4 crore for the farmers.
Formation of a central farmer database helps to accelerate the settlement of dues and also provides the
necessary information to the farmers in terms of weather forecasts, pesticide information, etc.
By using tools and technologies, the need to recruit additional support staff has been reduced. Thus,
despite a growth of 30 percent in operations, the support staff has remained the same.