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FMCG IndustryFMCG products are products that have quick shelf turnover, at relatively low cost and don’t require a lot of thought, time and financial investment to purchaseFMCG Industry mainly deals with production, distribution & marketing of packaged goods to all consumers.
FMCG Industry in IndiaPresentFourth largest sector in the economySize - US$13.1 billionStrong MNC PresenceWell established distribution networkCompetition between organized and unorganized sectorLow Costs of labour and Easy availability of key raw materials.
INTRODUCTIONFMCG Industry:• FMCG products are products that have quick shelf turnover, at relatively low cost and don’t require a lot of thought, time and financial investment to purchase.• FMCG Industry mainly deals with production, distribution & marketing of packaged goods to all consumers
INTRODUCTIONFMCG Industry in India:• Present – Fourth largest sector in the economy – Size - US$13.1 billion – Strong MNC Presence – Well established distribution network – Competition between organized and unorganized sector – Low Costs of labour and Easy availability of key raw materials
INTRODUCTIONFMCG – Major Domestic Players• Domestic Players – Britannia India Ltd (BIL) – Dabur India Ltd – Indian Tobacco Corporation Ltd (ITCL) – Marico – Nirma Limited
INTRODUCTIONFMCG – Major Foreign Players• Foreign Players – Cadbury India Ltd (CIL) – Cargill – Coca Cola – Colgate-Palmolive India – H J Heinz Co – Hindustan Unilever Ltd (HUL) – Nestle India Ltd (NIL) – PepsiCo – Procter & Gamble Hygiene and Health Care Limited
Hindustan Unilever Ltd• HUL touches the lives of two out of every three Indians everyday• Part of the €40 billion Unilever Group. The Group has more than 400 brands spanning 14 categories of home, personal care and food products• Presence in over 100 countries and employs more than 174,000 people worldwide• The Company was incorporated in 1933 but its products have been sold in India since 1888
Hindustan Unilever Ltd• India’s largest FMCG Company• Headquartered in Mumbai• Over 700 million consumers• More than 15,000 employees, including 1,300 managers• More than 200 highly qualified scientists and technologists• Shares listed at BSE (Stock code - 500696) and NSE (Stock code – HINDUNILVR)• Shareholder base of over 3.5 lakh
HUL – The Journey so far… 1931: HUL set up its first subsidiary 1956: HUL offered 10% of its equity to the Indian public 1972: Lipton Acquisition 1984: Brooke Bond Acquisition 1986: Pond’s Acquisition 2000: Modern Foods Acquisition
HUL – Mission MissionUnilevers mission is to add Vitality tolife. We meet everyday needs fornutrition, hygiene, and personal carewith brands that help people feelgood, look good and get more out oflife.
HUL – Geographic Presence• ProductionMore than 35 manufacturing locationsacross India, with major hubs beingAssam, Uttaranchal, HimachalPradesh, Pondicherry and Dadra & NagarHaveli• Marketing – All States in India, Project
HUL – Product Portfolio Revenue Share Ice Creams Soaps and Detergents Other 2% Operations 8% Personal ProductsFoods (Bakery) 1% Beverages Exports Soaps and 4% Detergents Exports 48% Foods (Bakery) Beverages Personal 11% Products Other Operations ( Water etc.) 26% Ice Creams
STRENGTHS Strong parentage and R&D, healthy cash coffers to support innovation Strong position in most of the categories of its presence Unmatched distribution network , a must to cater rural marketsSTRENGTHS Presence across price points to straddle across entire income pyramid Healthy Shareholder Returns in the form of RoE and dividend yield Native Know How
WEAKNESSES 49% of HUVRs sales come from detergents and personal washWEAKNESSES Increase in Ad Spending, which may affect the margins
OPPORTUNITIES OPPORTUNITIES• Change in Rural • Favorable • Consumer India’s source of Demographics expenditure in food income • Increasing sector rose by 13%• Government Focus Consumer • Valued at USD240mn• Futures Market aspirations – packaged foods –• Increase in MSP • Buoyant topline for 5%, 14%(g) FMCG companies • Modern retailing• Massive Election gaining coverage Spending ConsumerGrowing Opportunity sector on aopportunities in Food secularin Rural India growth trend Sector
THREATSLosing market share in Stiff competition from localmost of the categories , as well as MNC playersMatured and Growing THREATS - Rural income is yet dependantReceding pricing power on agriculture and in turn monsoon - Spurious Products
PORTER’S FIVE FORCE MODEL…Threat of New Entrant Supplier Power•Time and Cost of Entry•Specialist Knowledge • Number of•Economies of Scale Suppliers•Cost Advantage •Size of Suppliers•Technology Protection •Your Ability to•Barriers to Entry Change •Cost of Changing Threat of Substitution •Substitute Performance •Cost of Change Buyer Power Competitive Rivalry• Number of Customers • Number of Competitors• Size of Each Order •Quality Differences• Differencebetween •Other Differences Competition •Switching Costs• Price Sensitivity •Customer Loyalty• Ability to Substitute •Costs of Leaving Market• Cost of Changing
THREAT OF NEW ENTRANT• In early 2000, HUL decided to enter Retail Market through direct selling brand (B2C) by the name SANGAM direct• Started in Bombay…with 2 stores, Sangam has vision to grow to 15stores.• With highly competitive retail market, Sangam faced 3 problems: – Specialized knowledge • Space constraints • Cost disadvantage (No disc on competitor’s product) • Time and Cost
COMPETITIVE RIVALRY• Number of Competitors• Quality Differences• Other Differences• Switching Costs• Customer Loyalty
SUPPLIER POWER• Large economies of scale• HUL adopts Backward Integration, therefore – No. of suppliers are less – Size of Suppliers are moderate – Ability to Change is Flexible – Cost of Changing is Low
BUYER POWER• No. of customer’s is moderate• Size of Each Order is in Bulk quantity• Price Sensitivity• Ability to substitute• Cost of changing• Tie-ups with local complementary product manufacturer to get products at cheaper and minimal rates
HUL VALUE CHAIN• Business optimisation through Technology• Integrating suppliers and distributers through SAP• Best marketing talent from top B schools• TPM and product flexibility in Operations• Emotional buying of satisfied customer