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FMCG Aug15
FMCG Aug15
AUGUST2015
FMCG
Executive Summary...3
Advantage India.5
Strategies Adopted..25
Growth Drivers..27
Opportunities....38
Success Stories...42
Useful Information....46
AUGUST2015
FMCG
EXECUTIVE SUMMARY (1/2)
CAGR: 17%
100
18.92
2015
(USD Billion)
CAGR: 18.1%
2025E
103.7
47.3
2015
2020E
(USD Billion)
CAGR: 13.3%
Total consumption
expenditure set to increase
3,600
1,328
2012
2020
(USD Billion)
Source: World Bank, Emami Reports, Dabur Reports, AC Nielsen, McKinsey Global
Institute (MGI) titled The Bird of Gold, Booz & Company, TechSci Research
AUGUST2015
FMCG
EXECUTIVE SUMMARY (2/2)
CAGR: 42.7%
14.5
3.5
2014
2018E
CAGR: 10.8%
267
160
2011
2016
2011
2016
CAGR: 4.3%
631
411
2010
2020
2010
2020
Source: Emami Reports, Dabur Reports, AC Nielsen, McKinsey Global Institute (MGI) titled The Bird of Gold, TechSci Research
Note: Germany population is estimated to reach 81.26 million by 2016
AUGUST2015
FMCG
ADVANTAGE INDIA
AUGUST2015
FMCG
ADVANTAGE INDIA
Growing demand
Growing demand
2015
FMCG
market size:
USD47.3
billion
Attractive opportunities
2020E
FMCG
market size:
USD103.7
billion
Advantage
India
Policy support
Higher investments
AUGUST2015
FMCG
FMCG
THE FMCG MARKET HAS THREE MAIN SEGMENTS
FMCG
Health care
19%*
33%*
48%*
AUGUST2015
FMCG
EVOLUTION OF THE INDIAN FMCG SECTOR
FMCG is the fourth largest sector in the Indian economy
Household and Personal Care is the leading segment, accounting for 48 per cent of the overall market. Health care (33 per
cent) and Food & 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
Retail market in India is estimated to reach USD869 billion by 2015, with organised retail accounting for a 8 per cent share;
this is likely to boost revenues of FMCG companies
9.0
47.3
2015E
2010-15
Market size of chocolates
(USD million)
<100
1,441
2015
<3
22.7
2015
>50
13
2015
2000
Source: Dabur Annual Report, Economic Times, Emami Annual Report, Mckinsey Global Institute, CII, TechSci Research
AUGUST2015
FMCG
STRONG GROWTH IN THE INDIAN FMCG SECTOR
Trends in FMCG revenues over the years
(USD billion)
103.7
CAGR: 13%
17.8
21.3
24.2
2007
2008
2009
30.2
2010
34.8
36.8
2011
2012
44.9
47.3
2013
2015
2020E
AUGUST2015
10
FMCG
FOOD AND PERSONAL CARE MAKE UP TWO-THIRDS OF REVENUES (1/2)
Market break-up by revenue (FY15)
5%
Foods
19%
14%
Health supplements
Digestives
6%
Hair Care
Home Care
Oral Care
23%
6%
9%
Skin Care
AUGUST2015
11
FMCG
FOOD AND PERSONAL CARE MAKE UP TWO-THIRDS OF REVENUES (2/2)
Household and Personal Care products are the largest FMCG segment, constituting around 48 per cent of the total market,
followed by health care products (33 per cent)
Salty snacks was the fastest growing FMCG category in 2013 with a growth rate of 25 per cent
Other categories such as packaged Atta, chocolates, and non-refined oil grew over 20 per cent in 2013, as companies
aggressively focused on increasing their penetration
Sales in biscuits, refined oil, soap, and washing powder (among the top five FMCG product categories) grew 410 per cent
in 2013
Biscuits
20%
10%
Refined Oils
23%
25%
Salty Snacks
10%
Washing Powder
Non-refined Oil
Chocolate
Packaged Atta
0%
Packaged Atta
0.7
15%
4%
Toilet Soap
10%
2013
2012
Chocolate
2.2
29%
30%
Non-refined Oil
Washing Powder
20%
20%
18%
22%
19%
21%
22%
20%
1.4
4.4
2.5
2.9
Salty Snacks
Toilet Soap
Refined Oils
40%
2.7
2.6
Biscuits
AUGUST2015
12
FMCG
THE URBAN MARKET ACCOUNTS FOR A MAJOR CHUNK OF REVENUES
Urban/rural industry break-up (2015)
Urban
40%
USD47.3
billion
60%
Rural
AUGUST2015
13
FMCG
GROWING INCOME TO BOOST THE PREMIUM PRODUCT MARKET
The shift of households from the deprived and aspirers
category having income less than USD1,985.9 per annum
to the seekers and strivers category having income between
USD4,413.1 and USD22,065.3 per annum will change the
outlook for the industry over the coming years
273
26%
50%
25%
12%
2%
2008
AUGUST2015
Deprived
(<1985.9)
32%
40%
35%
15%
1%
6%
2020
3%
29%
17%
7%
2030
Globals
(>22065.3)
14
FMCG
RURAL SEGMENT QUICKLY CATCHING UP (1/3)
In 2014, rural India accounted for more than 50 per cent of
the total FMCG market
631
516
2015F
2020F
AUGUST2015
15
FMCG
RURAL SEGMENT QUICKLY CATCHING UP (2/3)
Rural FMCG market (USD billion)
100
10.4
12.3
12.1
14.8
2009
2010
2011
2012
2013
18.92
2015
20
2018E 2025E
AUGUST2015
16
FMCG
RURAL SEGMENT QUICKLY CATCHING UP (3/3)
70% 68%
64% 63%
59%
54%
52%
47%
47%
Skin Creams
ToothBrush
56%
Salty Snacks
Detergent Cakes/
Bars
59%
Hair Oils
55%
61%
Washing Powders
Urban + Rural
Toothpastes
66%
Toilet Soaps
35%
68%
Biscuits
80%
70%
60%
50%
40%
30%
20%
10%
0%
69%
Shampoos
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
UR Growth (%)
AUGUST2015
17
FMCG
INCREASING SALES OF TOP FMCG COMPANIES
Sales (USD million)
948.5
ITC(Foods)
1,063.6
HUL (F & B)
822.9
Marico*
846.3
916.3
777.5
1,172.9
Dabur
1,295.6
713.4
GCPL
780.2
0
AUGUST2015
200
400
600
FY14
800
1000
1200
1400
FY15
Source: Company Websites
Note: * Data for FY14 & FY13
18
FMCG
MARKET SHARE OF COMPANIES IN A FEW FMCG CATEGORIES
Market leader
Others
Hair oil
33%
17%
Shampoo
47%
23%
Oral care
49%
30%
13%
Skin care
54%
12%
3%
Fruit juice
50%
45%
AUGUST2015
19
FMCG
NOTABLE TRENDS IN FMCG (1/3)
Consolidation
Product innovation
Premiumisation
Indian FMCG companies are consolidating their existing business portfolios which is
leading to divestments, mergers and acquisitions
Several companies have started innovating or customising their existing product portfolios
for new consumer segments
Despite the slowdown, consumers are willing to buy premium goods at higher prices in the
space of convenience, health, and wellness
Consumers are becoming more brand conscious and prefer lifestyle and premium range
products given their increasing disposable income
Product customisation
Brand consciousness
AUGUST2015
20
FMCG
NOTABLE TRENDS IN FMCG (2/3)
Expanding horizons
Backward integration
Expanding distribution
networks
Third-party
manufacturing
A number of companies are exploring the business potential of overseas markets and
several regional markets
Backward integration is becoming the preferred strategy for increasing profit margins,
securing capacity and sources of supply
Companies are now focusing on the rural market segment which is growing at a rapid
pace and contributes about 50 per cent to the total FMCG market
Companies are now focused on improving their distribution networks to expand their reach
in rural India
Reservation of several items for SSI as well as additional tax incentives have made third
party manufacturing a popular route for many big players
AUGUST2015
21
FMCG
NOTABLE TRENDS IN FMCG (3/3)
Rising importance of
smaller-sized packs
Companies are increasingly introducing smaller stock keeping units at reduced prices.
This helps them to sustain margins, maintain volumes from price-conscious customers
and expand their consumer base
Small towns are emerging as significant hiring zones. FMCG companies are hiring field
staff from areas such as Kalpa (Himachal Pradesh), Mangaliya (Madhya Pradesh), Kota
(Rajasthan), and Shirdi (Maharashtra) to sell diverse products
Focus on enhancing
presence in Africa
Reducing carbon
footprint and ecofriendly products
FMCG players in India are increasingly focusing on reducing their carbon footprint by
creating eco-friendly products. They generate the required energy from renewable sources
and earn CER credits for the same
With the rise of retail players, private label has become popular in the FMCG space.
Private Label goods are considered substitutes of premium branded goods
Source: AC Nielsen, TechSci Research
Notes: CER - Certified Emission Reductions; SSI - Small Scale Industry
AUGUST2015
22
FMCG
FMCG
PORTERS FIVE FORCES ANALYSIS
Competitive Rivalry
Substitute Products
Threat of New
Entrants
(Medium)
Bargaining
Power of
Customers
(High)
Competitive
Rivalry
(High)
Substitute
Products
(High)
Bargaining
Power of
Suppliers
(Low)
AUGUST2015
24
FMCG
STRATEGIES ADOPTED
AUGUST2015
FMCG
STRATEGIES ADOPTED
FMCG companies are trying to influence consumers with intelligent deals
Firms like ITC offers combo deals to the consumers. For example, in the case of soaps
and cosmetics; four soap cases are offered at the price of three, selling the range of
deodorants for men and women at a discounted price
The internet enables consumers to make their own research on the kind of products or
Research online
Purchase offline
commodities they want to purchase. One in three FMCG shoppers goes online first and
then to the stores
Almost half of the automobile consumers follow Research Online Purchase Offline
(ROPO) method
Indian consumers have become choosy and are less likely to stay loyal to a brand
Production innovation
Emami is coming up with a new glucose energy drink under Zandu known as Zandu Gluco
Charge
Dabur has launched Indias first drinking yogurt and Real Supafruits under its brand Activ
Customisation
AUGUST2015
26
FMCG
GROWTH DRIVERS
AUGUST2015
FMCG
GROWTH DRIVERS OF INDIAS FMCG SECTOR (1/2)
Government
reforms to
encourage FDI
inflow and market
sentiments
Rising
incomes
driving
purchase
Desire to
experiment
with brands
Evolving
consumer
lifestyle
Greater
awareness of
products,
brands
FMCG
growth
drivers
Increasing
consumer
demand
Availability of
online
channel to
shop
Growing rural
market
Increasing
discretionary
expenditure
AUGUST2015
New product
launches
Growth of
modern trade
FMCG
GROWTH DRIVERS FOR INDIAs FMCG SECTOR (2/2)
Increase in penetration
Easy access
Growth
drivers
Rural consumption
Source: Dabur
AUGUST2015
29
FMCG
HIGHER INCOMES AID GROWTH IN URBAN AND RURAL MARKETS
35.00%
30.00%
2000
25.00%
20.00%
1500
15.00%
1000
10.00%
5.00%
500
0.00%
0
-5.00%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
2019E
Growth Rate
AUGUST2015
30
FMCG
GOVERNMENT INITIATIVES FOR RURAL DEVELOPMENT
Total funds released by govt. for NREGA
(USD billion)
11.9
10.5
AUGUST2015
10.4
8.1
7.8
6.2
4.8
2.7
FY07
2.3
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15E
31
FMCG
FDI INFLOWS RISE OVER THE YEARS
100 per cent FDI is allowed in food processing and singlebrand retail and 51 per cent in multi-brand retail.
Food Processing
6369.82
Paper, Pulp
922.65
Soap, Cosmetics
1050.2
Vegetable Oil
562.59
Tea, Coffee
108.5
Retail Trading
275.38
0
1000
2000
3000
4000
5000
6000
7000
AUGUST2015
32
FMCG
POLICY AND REGULATORY FRAMEWORK (1/2)
Excise duty
Relaxation of license
rules
Statutory Minimum
Price
The rate of GST on services is likely to be 14 per cent and on goods is proposed to be 20
per cent
FMCG sector wants an early rollout of the GoodsandServices tax (GST) so as to reduce
supply chain constraints, improve competitiveness of FMCG companies against
unorganised players
By 2015, organized retail share is projected to double by 14 18 per cent of the total retail
market
Industrial license is not required for almost all food and agro-processing industries, barring
certain items such as beer, potable alcohol and wines, cane sugar, and hydrogenated
animal fats and oils as well as items reserved for exclusive manufacture in the small-scale
sector
In October 2009, the government amended the Sugarcane Control Order, 1966, and
replaced the Statutory Minimum Price (SMP) of sugarcane with Fair and Remunerative
Price (FRP) and the State-Advised Price (SAP)
The government approved 51 per cent FDI in multi-brand retail in 2006, which will boost
the nascent organised retail market in the country
It also allowed 100 per cent FDI in the cash and carry segment and in single-brand retail
AUGUST2015
33
FMCG
POLICY AND REGULATORY FRAMEWORK (2/2)
Telecom Regulatory
Authority of India (TRAI)
advertising regulations
FSB would reduce prices of food grains for Below Poverty Line (BPL) households,
allowing them to spend resources on other goods and services, including FMCG products
This is expected to trigger higher consumption spends, particularly in rural India, which is
an important market for most FMCG companies
FMCG companies, which are top advertisers on television (above 50 per cent share), are
likely to face the twin risks of reduced inventory to advertise, which could be cut by 2530
per cent, and increased prices as broadcasters hike prices
AUGUST2015
34
FMCG
NEW GOODS AND SERVICE TAX (GST) TO SIMPLIFY TAX STRUCTURE
Pricing and profitability
Cash flow
AUGUST2015
35
FMCG
KEY M&A DEALS IN THE INDUSTRY (1/2)
Acquirer name (segment)
Merger/
Acquisition
Diageo PLC
Acquisition
Acquisition
Dabur
Acquisition
Wipro Consumer
Acquisition
Acquisition
Acquisition
Dabur (Food)
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Unilever PLC
Acquisition
Hassad Food Co
Acquisition
AUGUST2015
36
FMCG
KEY M&A DEALS IN THE INDUSTRY (2/2)
Acquirer name (segment)
Merger/
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
AUGUST2015
37
FMCG
OPPORTUNITIES
AUGUST2015
FMCG
GROWTH OPPORTUNITIES IN THE INDIAN FMCG INDUSTRY
Leading players of consumer products have a strong distribution network in rural India;
they also stand to gain from the contribution of technological advances such as internet
and e-commerce to better logistics
Indian consumers are highly adaptable to new and innovative products. For instance there
has been an easy acceptance of mens fairness creams, flavoured yoghurt, and cuppa
mania noodles, gel based facial bleach, drinking yogurt, etc
With the rise in disposable incomes mid- and high-income consumers in urban areas have
shifted their purchase trend from essential to premium products
Indian and multinational FMCG players can leverage India as a strategic sourcing hub for
cost-competitive product development and manufacturing to cater to international markets
Low penetration levels offer room for growth across consumption categories
Majors players are focusing on rural markets to increase their penetration in those areas
Creating strong distribution networks and skills to deliver to the last mile.
Entering into partnerships that help to reach market, such as those with farmers, self-help
groups, microfinance, NGOs, etc
Rural market
Innovative products
Premium products
Sourcing base
Penetration
Align partnership
AUGUST2015
39
FMCG
BIG OPPORTUNITY IN LOWER PENETRATED PRODUCT CATEGORIES
Penetration of many product categories is still low. Even among those where the penetration is higher, per capita
consumption is comparatively low, thereby offering scope for high growth in future
Penetration of products such as hair oil and fairness cream is high in the country, but that of some major products, including
Cold Cream, Face wash and Mens Face wash is just 10 per cent, 9 per cent and 0 per cent, respectively
70%
43%
32%
26%
17%
10%
9%
0%
Hair Oil
Balms
Antiseptic
Cream
Cooling Oil
Cold Cream
Facewash
Men's
Facewash
AUGUST2015
40
FMCG
INCREASING FMCG SHARE IN MODERN RETAIL
Growth of Indias FMCG purchased through modern trade
is surpassing growth of FMCG purchased in general trade
92%
Modern
Traditional
30%
70%
2020E
Source: TCS Report, AC Nielsen, TechSci Research
Note: E- Estimated
AUGUST2015
41
FMCG
SUCCESS STORIES
AUGUST2015
FMCG
EMAMI ONE OF THE FASTEST GROWING FMCG COMPANIES
Sales (USD million)
Salient features
CAGR*: 7.7%
Niche category player and innovator
Key brands are strong market leaders in their respective
categories
Portfolio includes Zandu, one of the strongest Ayurvedic
brands
Over 80 per cent of business comes from wellness categories
During FY11-15, net sales grew at CAGR of 7.7 per cent to
USD367.8 million in FY15 and the profit after tax grew 12.6
per cent to USD80.6 million
A new product to be launched under the Zandu brand known
as Zandu Gluco Charge
Emami has increased focus on OTC products, concentrating
on advertising, distribution, and product launches. These
initiatives are expected to increase revenue contribution to 8
per cent from 6 per cent by FY16
Emami scaled up direct distribution in rural markets at CAGR
of 12 per cent over FY1115 to 640,000 outlets. Rural
contribution is significant at 55 per cent; hence, direct reach
presents opportunity to materially increase throughput per
outlet
AUGUST2015
312.8
310.2
367.8
302.1
273.3
50.2
FY11
58.0
55.2
FY12
FY13
Sales
80.6
66.7
FY14
FY15
PAT
43
FMCG
DABUR RIDING ON STRONG BRAND EQUITY IN INDIA
Sales (USD million)
Salient features
AUGUST2015
FY11
FY12
FY13
Sales
FY14
177.5
1,295.6
151.0
1,172.9
139.9
1,132.4
136.5
1,126.3
124.9
CAGR: 9.7%
894.3
FY15
PAT
44
FMCG
ITC LEADING FOOD AND BEVERAGES COMPANY
Sales (USD million)
Salient features
AUGUST2015
FY11
FY12
Sales (FMCG)
FY13
Sales(Total)
FY14
1,593.9
5,985.9
1,499.3
1,457.4
5,455.0
1,347.4
1,365.9
4,911.0
1,291.1
1,314.4
4,566.0
1,182.8
1,093.4
4,515.0
CAGR: 7.3%
982.5
FY15
PAT
45
FMCG
USEFUL INFORMATION
AUGUST2015
FMCG
INDUSTRY ASSOCIATIONS (1/3)
Indian Dairy Association
Secretary (Establishment)
Indian Dairy Association, Sector-IV, New Delhi 110022
Phone: 91-11-26170781, 26165355, 26179780
Fax: 91 11 26174719
E-mail: ida@nde.vsnl.net.in
Website: www.indairyasso.org
AUGUST2015
47
FMCG
INDUSTRY ASSOCIATIONS (2/3)
Federation of Biscuit Manufacturers of India
PHD House, 4/2, Siri Institutional Area, August Kranti Marg, New
Delhi 110016
Phone: 91-11-26515137; Fax: 91-11-26855450
E-mail: fbmi@rediffmail.com; mallika@phdcci.in
Website: www.biscuitfederation.com
AUGUST2015
48
FMCG
INDUSTRY ASSOCIATIONS (3/3)
The Solvent Extractors' Association of India
142, Jolly Maker Chambers, No 2, 14th Floor, 225, Nariman Point,
Mumbai 400021
Tel: 91-22-22021475, 22822979; Fax: 91-22-22021692
E-mail: solvent@mtnl.net.in
Website: www.seaofindia.com
AUGUST2015
49
FMCG
GLOSSARY
FDI: Foreign Direct Investment
MSP: Minimum Selling Price
AUGUST2015
50
FMCG
EXCHANGE RATES
Exchange rates (Fiscal Year)
2005
43.98
2006
45.18
2007
41.34
2008
43.62
2009
48.42
2010
45.72
2011
46.85
2012
53.46
2013
58.44
2014
61.03
2015(Expected)
61.03
AUGUST2015
51
FMCG
DISCLAIMER
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AUGUST2015
52