Industry Monitor

FMCG

Vol. 1005 May 2010

CONTENTS

INDUSTRY AT A GLANCE ....................................................................................................2

KEY DEVELOPMENTS ..........................................................................................................3
MARKETING .......................................................................................................................3
OPERATIONS ......................................................................................................................4
FINANCE .............................................................................................................................4
MERGERS & ACQUISITIONS............................................................................................5
HUMAN RESOURCES.........................................................................................................6
OTHERS................................................................................................................................6
INDUSTRY STATISTICS .........................................................................................................7
PROUCT FOCUS ......................................................................................................................8
SHAMPOO............................................................................................................................8
Overview ............................................................................................................................8
Market Segmentation ..........................................................................................................8
Global Scenario...................................................................................................................8
Indian Scenario ...................................................................................................................9
Outlook ..............................................................................................................................9
COMPANY SCAN...................................................................................................................10
BRITANNIA INDUSTRIES LTD ......................................................................................10
Introduction......................................................................................................................10
Common Size Comparison ...................................................................................................11
Cost Structure Analysis .....................................................................................................12
Stock Performance............................................................................................................12
Strategies...........................................................................................................................13
Outlook ............................................................................................................................13
STOCK SCAN .........................................................................................................................14
UPCOMING EVENTS ...........................................................................................................16

© Cygnus Business Consulting & Research Pvt. Ltd. 2010 1

Industry Monitor – FMCG May 2010

INDUSTRY AT A GLANCE
MARKETING

¾ Emami: Strong FMCG player to watch out for, India

¾ Nestle to bring more 'Indianised' offers, India
¾ CavinKare gives refreshing changes to Fairever, India
¾ P&G pushes design in brand building, India
¾ Increase in packaging costs puts pressure on FMCG companies, India
¾ Staying cool, playing 'long' will pay off for Nestle, India

OPERATIONS

¾ Wipro Consumer, Godrej chalk out growth plans, India

¾ Dabur may hike product prices by up to 5%, India

FINANCE

¾ Choose FMCG stocks with care: Analysts, India

¾ FMCG cos may see strong profits on volume growth, India
¾ FMCG sales to sag in Jan-Mar, Godrej Cons to defy trend, India
¾ GlaxoSmithkline March qtr net up 15%, India
¾ FMCG firms to gain from surge of rupee, India
¾ Fall in input costs; lower rates help Dabur stay afloat, India

MERGERS & ACQUISITIONS

¾ FMCG cos tie up with barbers, dhabas as unique point of sales, India
¾ Indian FMCG firms eye Africa as next growth vehicle
¾ Emami says to buy Egyptian firm in 3-4 weeks, India
¾ Home-grown FMCG majors eye overseas buyouts for growth, India

HUMAN RESOURCES

¾ B-schools see 40% jump in job offers from FMCG firms, India

OTHERS

¾ Amway targets Rs20bn business in India by 2012, India

¾ Light segment nourishes Rs57.70bn hair oil market

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Industry Monitor – FMCG May 2010

KEY DEVELOPMENTS
MARKETING
Asia-Pacific
India: Emami: Strong FMCG player to watch out for
Emami, a mid-size FMCG company, has seen its stock surging to a record high of Rs645. The company’s
stock price has witnessed a steep re-rating since recommended it in June 2008 and has tripled in the past
one year. Given the rally in its stock, the manufacturer of personal and healthcare products may not be a
screaming buy for new investors as the stock is unlikely to repeat its recent out performance and offers
limited upside. Existing investors can look at accumulating or holding on to it expecting further small
returns.

India: Nestle to bring more 'Indianised' offers

FMCG player Nestle will introduce more products from its global portfolio and will “Indianise” them
besides targeting the rural market to maintain the growth momentum. India is one of the main sources of
growth. At present, India is the 12th largest global market for Nestle but contributes less than 1.5% to the
overall sales of the Swiss FMCG giant. The company had annual sales of over Rs50bn in India and has
been enjoying a growth of around 20% in the last two years.

India: CavinKare gives refreshing changes to Fairever

FMCG major CavinKare has decided to refresh its Fairever. The skin cream brand has been in Indian
market for more than 10 years. The company is also targeting to capture a reasonable market share of
10% in the Indian market. The brand is looking for to reposition itself in the market. The Indian
whitening cream market is of Rs15bn and the company is targeting to capture a good amount of market
share. The whitening cream market is expected to grow at 10% per year with a hike of 4% in volume.

India: P&G pushes design in brand building

After a revamped marketing strategy that saw larger participation in the shopping aisles of shopping
marts, FMCG firms are realigning their brand communication by focusing on designs to win over the
consumer. Cincinnati-based global FMCG giant Procter & Gamble is taking the lead and has embarked
on a redesign campaign to lure consumers with a fresh approach. Re-designed packagings will hit the
stores in June in the US and early 2011 in Europe that will include 25% fewer items, considerably less
packaging material and cost, and more prominently colour-coded packages that delineate product ranges
for different hair needs. Smart firms are focusing on designs to win over consumers.
India: Increase in packaging costs puts pressure on FMCG companies
Increase in packaging costs has put pressure on FMCG companies which are already working with low
margins. Prices of packaging materials such as kraft paper, adhesives for corrugated boxes, aluminium foil
and packaging plastics have increased to 25% in the last three months. This has put pressure on
companies to either increase the price of processed food and some other products or to absorb the cost
which would affect their margins.
India: Staying cool, playing 'long' will pay off for Nestle
Nestle India, a processed food & dairy company, started the year on a disappointing note. Its results for
the first quarter ended March 2010 have been below market expectations, as the company has reported
poor growth in earnings and a modest increase in revenues. Higher raw material costs, along with
increased advertisement spend, have taken a toll on the company’s performance during the quarter. This,
along with absence of any major price increases, has adversely impacted the bottom line. During the
quarter, the company has focused more on achieving volume growth rather than protecting its bottom
line or expanding margins. Thus, while revenues have grown at a modest rate of 17% Y-o-Y, net profit
grew at a mere 2.3%.

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Industry Monitor – FMCG May 2010

OPERATIONS

Asia-Pacific
India: Wipro Consumer, Godrej chalk out growth plans
Encouraged by the fourth quarter results, FMCG majors Wipro Consumer Care and Lighting (WCCL)
and Godrej Consumer Products Ltd (GCPL) are scripting new strategies to sustain growth momentum in
competitive markets. Wipro Consumer Care has kickstarted operations at its new manufacturing facility in
Himachal Pradesh. Core focus is on rural initiatives and enhancing consumer contact points this fiscal.
Godrej Consumer Products, part of the Rs120bn Godrej Group, is chalking out a three-pronged strategy.

India: Dabur may hike product prices by up to 5%

FMCG firm Dabur is further hiking the prices of some of its products between 3-5% to offset the
surging input costs. The price change could vary between 3% and 5%. Food inflation rose to 17.65% for
the week ended April 10th 2010, from 17.22% in the previous week due to higher prices of fruit and
vegetables. The company has already increased prices of its hair oil by about 4-5 % this month. However,
there are no details on which products and by when the price increase would take place.

FINANCE

Asia-Pacific
India: Choose FMCG stocks with care: Analysts
Shares of most fast moving consumer goods (FMCG) companies have performed better than the Sensex
in 2010 so far, but analysts feel it may be time to be choosy about stocks in the sector. Though valuations
have almost caught up with that of the broader market, companies profitability could be under pressure
due to higher input and advertising costs may weigh down performance of some FMCG stocks. The BSE
FMCG index has risen 3.35% in 2010 so far, while the Sensex has gained 1% in the same period. The
biggest drag on the FMCG index has been Hindustan Unilever, which fell 9% in 2010 on fears that price
cuts across products and stubborn raw material prices could impact the companies profit margins.

India: FMCG cos may see strong profits on volume growth

FMCG Companies are expected to log a healthy performance for the March quarter on strong volume
growth coupled with a robust increase in earnings. Godrej Consumer Products (GCPL), Marico, Asian
Paints and ITC are likely to report the strongest growth in earnings. The average of the total estimates of
ETIG and three other brokerages for leading eight fast-moving consumer goods (FMCG) companies
point to a strong 28% increase in net profits during the March quarter, against the corresponding quarter
in the previous year. In view of price cuts affected by companies during the quarter, the growth in
revenues is likely to be volume-driven for the second consecutive quarter. The eight companies are
expected to log a modest growth of 14% in revenues. The net profit margin is likely to increase by 180
bps to 15.8% year-on-year.

India: FMCG sales to sag in Jan-Mar, Godrej Cons to defy trend

Indian mid-cap consumer goods firms are expected to report a modest rise in sales as higher food
inflation hurts buying, but low input costs will help maintain margins in the Jan-March quarter, Britannia
Industries is expected to post a sales growth of 9%, Marico by 10% and Colgate Palmolive by 16%.
India's food price index rose 17.70%, while the fuel index was up 12.71%, government data showed. The
profit growth at these firms is also likely to be slower than in previous quarters but lower raw material
costs could provide a cushion, Marico is expected to maintain margins as input costs have come down
but the price cut by the firm during the just-concluded quarter will hurt.

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Industry Monitor – FMCG May 2010

India: GlaxoSmithkline March qtr net up 15%

Global FMCG firm GlaxoSmithkline Consumer Healthcare net profit rose by 14% to Rs960m for the
quarter ended March 31, 2010, over the same period last year. Total income increased to Rs6720m for the
quarter ended March 31, from Rs5640m in the same period previous fiscal. Shares of the company
reacted positively to the quarterly earnings and surged 1.03% to touch a year-high level of Rs1594.90.

India: FMCG firms to gain from surge of rupee

The strengthening of Indian rupee against the dollar could bring some cheer to fast-moving consumer
goods (FMCG) companies which are challenged by fading benefits of lower raw material costs. Prices of
raw materials like palm oil, copra, LAB (linear alkyl benzene) and HDPE (high-density polyethylene),
which are key ingredients of daily use items like soap, detergent and hair oil, are already showing signs of
firming. While prices of HDPE, which go into product packaging and thus are much in demand in the
entire FMCG sector, rose by around 40% during the period. A rising rupee would negate the impact of
cost increases on imported raw materials like palm oils which are used in making toilet soaps.

India: Fall in input costs; lower rates help Dabur stay afloat
Dabur India, one of the country’s leading mid-sized FMCG companies, registered a robust performance
during its fourth quarter ended March 2010. While the modest revenue growth of 16% was largely in line
with the market expectation, a 30% growth in net profit exceeded the average market estimates. At 20%,
the operating profit margin has risen by 190 bps. The growth in revenues was largely driven by higher
volume and new product launches and healthy growth in the foods and consumer care business segments.
The company has registered strong higher-than-market growth across the key product categories, such as
hair care, skin care, health supplements, digestives and foods.

MERGERS & ACQUISITIONS

Asia-Pacific
India: FMCG cos tie up with barbers, dhabas as unique point of sales
FMCG marketers have found a new league of extraordinary consumers: Kanwariyas in Bihar, barbers of
Meerut, Mumbai’s dabbawallas, devotees at Kumbh Mela, highway dhaba owners and resident welfare
associations. Companies such as Emami, Godrej, Dabur, PepsiCo and Perfetti Van Melle are chasing
these unlikely customer groups to keep demand ticking at a time when prices of grocery items like soaps,
shampoos, hair oils and beverages inch up.

Indian FMCG firms eye Africa as next growth vehicle

Indian consumer firms, faced with rising competition at home, are eyeing the African market whose rising
demand may help boost growth, even as higher valuations may hurt profitability, Godrej Consumer
Products Ltd is among the early movers with recent buys in Nigeria and South Africa, while Marico Ltd,
Dabur India and Emami are other firms following this trend. African countries are now witnessing similar
growth rates in the consumer category as we have seen in India in the past years and there are not enough
organised players in that market.

India: Emami says to buy Egyptian firm in 3-4 weeks

Diversified Emami Group, which makes personal care and consumer care brands under Emami Ltd,
plans to acquire an Egyptian personal care products maker. It’s a personal care company in Egypt whose
manufacturing facilities are to be acquired. Most of Emami's skincare products will be manufactured
there.

India: Home-grown FMCG majors eye overseas buyouts for growth

Even as FMCG major Godrej Consumer Products Ltd (GCPL) is in advanced talks with the Brazillian
hair care company Embelleze, Emami is getting ready to acquire an Egyptian personal care products
company in the next few days. To extend its global foot print, Dabur India also is aggressively scouting

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Industry Monitor – FMCG May 2010

for acquisitions in developing countries in Africa and Asia in healthcare and personal care sectors.
According to industry sources, Godrej Consumer Products will soon clinch a deal with Embelleze, a lead
player in the hair colouring and transforming category in Brazil.

HUMAN RESOURCES

Asia-Pacific
India: B-schools see 40% jump in job offers from FMCG firms
The booming recruitment environment that B-schools experienced in 2007 could be back on the
campuses next year as the fast moving consumer goods (FMCG) sector is planning around 40% increase
in the number of pre-placement offers (PPOs). The Indian FMCG companies, especially those expanding
their portfolio at a rather fast pace, like Godrej India, are bullish about PPOs this year and claim to be
targeting an increase of 40-50% in recruitment.

OTHERS

Asia-Pacific
India: Amway targets Rs20bn business in India by 2012
Consumer and home products direct marketing company Amway India hopes to do business worth
Rs20bnin the country by 2012, adding more products to its portfolio. Amway has done business worth
Rs14bn in 2009 in India, now hopes to take this to Rs17bn this year. Amway India, a wholly-owned
subsidiary of the US-based Amway Corp, has invested about Rs1510m in India, of which Rs260m have
come as foreign direct investment.

Light segment nourishes Rs57.70bn hair oil market

Conversion from unbranded to branded products and growth in the light hair oil category is what is
driving the Rs57.70bn hair oil market. Perfumed oil (Rs29.30bn) and coconut oil (Rs21.10bn) comprise
the two main segments of the hair oil market. Volume growth for the hair oil category is currently pegged
at 12.8% and value growth at 17.7%. However, it is the light hair oil segment within perfumed oil that is
the fastest growing segment recording a value growth of 23.8% and a volume growth of 14.1% in 2009,
Hair oils have primarily been the forte of Indian companies such as Dabur, Emami and Bajaj Corp
(previously Bajaj Sevashram). Even a big MNC such as Hindustan Unilever had to sell its hair oil brand
Nihar to a domestic FMCG company Marico.

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Industry Monitor – FMCG May 2010

INDUSTRY STATISTICS
Major State/District-wise Production of Coffee in India
(In MT)
2009-10@ 2008-09@ 2008-09#

Robusta

Robusta

Robusta
Arabica

Arabica

Arabica
States/Districts

Total

Total

Total
Karnataka
Chikmagalur 40600 35400 76000 38850 32900 71750 29000 28300 57300
Kodagu* 22850 95125 117975 24370 90000 114370 19435 86975 106410
Hassan 16720 11230 27500 18050 10000 28050 12700 7450 20150
Sub Total 80170 141755 221475 81270 132900 214170 61135 122725 183860
Kerala
Wyanad - 50250 50250 10 47500 47510 10 47500 47510
Travancore 775 6650 7425 815 7000 7815 815 7000 7815
Nelliampathies 600 1275 1875 600 1275 1875 600 1275 1875
Sub Total 1375 58175 59550 1425 55775 57200 1425 55775 57200
Tamil Nadu
Pulneys 6900 350 7250 5500 325 5825 5245 325 5570
Nilgiris 1950 3800 5750 1875 3325 5200 1825 3320 5145
Shevroys (Salem) 4000 50 4050 3050 50 3100 3000 40 3040
Anamalais
2000 500 2500 2000 500 2500 2000 500 2500
(Coimbatore)
Sub Total 14850 4700 19550 12425 4200 16625 12070 4185 16225
Non Traditional Areas
AP & Orissa 5500 95 5595 4800 80 4880 4800 70 4870
North East 80 50 130 80 45 125 70 45 115
Sub Total 5580 145 5725 4880 125 5005 4870 115 4985
Grand Total 101525 204775 306300 100000 193000 293000 79500 182800 262300
Note: *: Including Chamarajanagar Dist., #: Post-Monsoon Estimate, @: Post Blossom Estimate.
Source: India stat., Cygnus Research

Major State/District-wise Production of Coffee in India

200 2009-10@ 2008-09@

100
in (000) MT

0
Karnataka Kerala Tamil Nadu Non Traditional
Areas
Note: *: Including Chamarajanagar Dist., @: Post Blossom Estimate. Source: India stat.,
Cygnus Research

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Industry Monitor – FMCG May 2010

PROUCT FOCUS

SHAMPOO
Overview
Shampoo is a hair care product used for the removal of oils, dirt, skin particles,
dandruff, environmental pollutants and other contaminant particles that
gradually build up in hair. The goal is to remove the unwanted build-up
without stripping out so much as to make hair unmanageable. Even though
most modern shampoos include a conditioning component, shampooing is
frequently followed by the use of conditioners which ease combing and styling.

Shampoo cleans by stripping sebum from the hair. Sebum is oil secreted by hair follicles that is readily
absorbed by the strands of hair, and forms a protective layer. Sebum protects the protein structure of hair
from damage, but this protection clomes at a cost. It tends to collect dirt, styling products and scalp
flakes. Surfactants strip the sebum from the hair shafts and thereby remove the dirt attached to it. While
both soaps and shampoos contain surfactants, soap bonds to oils with such affinity that it removes too
much if used on hair. Shampoo uses a different class of surfactants balanced to avoid removing too much
oil from the hair.

Due to the changing consumer behaviour, tastes and fashions, shampoo companies have targeted for all
kinds of segments-premium brands for upper class. The price variations in the shampoo reveal the
positioning of different brands by the players.

Market Segmentation
Shampoo market is segmented on the benefit platforms like:
¾ Cosmetic (shine, health, strength)
Shampoo Market Share 2009-10*
¾ Anti dandruff
¾ Herbal
ITC
Hair Shampoos and Conditioners are 2.1%
Others
targeted at 22.5%
HUL
• Upper middle class 45.4%
• Middle class and House wives
Dabur
• Upper class rural consumers 6.2%
• Teenagers-they are the major segment
P &G
Shampoo awareness in India 23.8%
Urban areas-90%, accounting for 80% of
shampoo sold in the country.
Rural areas-80%, accounting for 20% of
shampoo sold in the country. Note: *9 Months; Source: Nielsen; Cygnus Research

Global Scenario
The shampoo market is characterised by its competitive and aggressive environment. The hygiene sector
and the shampoo market remains with a structurally solid growth despite a bad consolidation and growing
consumer price sensibility. Originally, shampoo had a basic usage but consumers have vastly changed and
evolved its status and image over the past few years. Today, the range of products is more complete, they
offer more and more divisional and the target areas selected more and more specialised. The products are
more sophisticated and valorised by specific ingredients, a frontal approach for the caring aspect and the
creation of a concept.

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Industry Monitor – FMCG May 2010

Indian Scenario
The shampoo market in India has changed significantly since the 1960s when it first became a lifestyle
product in urban homes. The changing dynamics in the industry coupled with comparatively low
penetration rates offer the players in this market the opportunity to grow in both the top and bottom
ends of the market. The hair care market in India is valued at US$200m. It has registered a growth of
3.8% over the previous year.
600 1100
Indian Shampoo Exports Indian Shampoo Imports
2009-10* 2009-10*

800

Rs m
400
Rs m

500

200 200
2006-07 2007-08 2008-09 2009-10* 2006-07 2007-08 2008-09 2009-10*

Note: *(April-Sept.); Source: Ministry of Commerce; Cygnus Research

The hair care market can be segmented into hair oils, shampoos, hair colorants and conditioners, and hair
gels. The shampoo market is valued at Rs4.5 billions and has the penetration level of only 13% in India.
The market is expected to increase due to increased marketing by players, lower duties, and availability of
shampoos in affordable sachets. Sachet makes up to 40% of the total shampoo sale. The Indian shampoo
market is divided in two parts: cosmetic and anti-dandruff. This is primarily a middle class product
because more than 50% of the populations use toilet soaps to wash hair. The penetration level is only
30% in metros. Today HLL has a 63 % market share in the shampoo market. In South India, the
shampoo market is growing at 14% a year.

Outlook
The Rs22bn market for shampoos is losing foam, but smaller players in the market such as Dabur India
and CavinKare have still registered sizzling growth rates. The Rs22bn market for shampoos also includes
Rs6bn of anti-dandruff shampoos. Major FMCG companies have done a good business in the shampoos
segment. Where Dabur earns 31% growth in the shampoos at the same time P&G shows a growth of
35%. FMCG head HUL shows a good turnover in the shampoos segment but at the same time faces a
declining profit as compare to the last year due to the heavy advertising expenses.

The outlook for the shampoo market in India looks quite positive. The increasing rural demand is
favourable factor for the growth of the industry. Rural demand growth is expected to occur mainly with
consumers moving up towards premium products. The recent price cuts and the increasing brand
strengthening strategies by various players have made the availability of different options for the
customers in terms of products.

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Industry Monitor – FMCG May 2010

COMPANY SCAN

BRITANNIA INDUSTRIES LTD

Introduction
Britannia Industries is the market leader in the organised biscuit and bakery products
market in India. The Company was incorporated in 1918 as a public limited company.
Biscuits are the largest segment contributor to the revenues of the company. Popular
brands are Good Day, 50:50 and recent launches are NutriChoice SugarOut, Treat
Fruit Rollz and so on. Other products include bread and cakes. Britannia diversified
into dairy products in 1997 through a joint venture with Fonterra. Dairy products
include processed cheese, dairy whitener, butter, pure, flavoured milk, UHT milk, and yogurt has been
added. The company has production facilities across India with the latest in
Uttaranchal, all ISO 9001-2000 and HACCP certified. Product Line
¾ Tiger
Britannia’s brands are not only strong but also blazing new standards, and that ¾ Good Day
miniscule initial investment has grown by leaps and bounds to millions of rupees ¾ Bourbon
in wealth for Britannia's shareholders. The company's offerings are spread across ¾ 50-50
the spectrum with products ranging from the healthy and economical Tiger ¾ Milk Bikis
biscuits to the more lifestyle-oriented Milkman Cheese. The company at present ¾ Marie Gold
has a 6% share in the growing Rs35bn market.

Company Performance at a Glance

2008-09 2007-08 2006-07 2005-06
Net Sales 31,271.10 25,848.00 21,993.00 17,133.00
PBIDT 2,776.70 2,678.00 1,545.00 2,196.00
OPM (%) 8.88 10.36 7.02 12.82
NPM (%) 5.77 7.39 4.89 8.54
Depreciation 334.60 291.00 253.00 217.00
Interest 117.00 64.00 54.00 21.00
PAT 1,804.00 1,910.00 1,076.00 1,464.00
Source: BSE India; Cygnus Research

Key Ratios at a Glance

Item 2008-09 2007-08 2006-07 2005-06
Debt-Equity Ratio 0.03 0.14 0.01 0.01
Long Term Debt-Equity Ratio 0.03 0.00 0.00 0.00
Current Ratio 1.27 1.56 1.18 1.10
OPM (%) 7.20 8.97 5.85 11.72
NPM (%) 5.75 7.31 4.86 8.48
ROCE (%) 25.29 29.99 19.32 34.97
RONW (%) 22.60 26.07 18.26 27.47
Source: Company; Cygnus Research

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Industry Monitor – FMCG May 2010

Performance Analysis
Performance Analysis of Britannia Industries Ltd.
Quarterly Performance Financial Year Performance
OND 09 OND 08 Var (%) 2008-09 2007-08 Var (%)
Sales 8856.20 8201.40 7.98 31271.10 25848.00 20.98
Other Income 70.40 54.80 28.47 245.30 502.00 (51.14)
PBIDT 422.70 665.30 (36.46) 2776.70 2678.00 3.69
Interest 8.10 30.00 (73.00) 117.00 64.00 82.81
PBDT 414.60 635.30 (34.74) 2659.70 2614.00 1.75
Depreciation 94.90 85.90 10.48 334.60 291.00 14.98
PBT 319.70 549.40 (41.81) 2325.10 2323.00 0.09
TAX 28.70 87.90 (67.35) 521.10 413.00 26.17
PAT 291.00 461.50 (36.94) 1804.00 1910.00 (5.55)
Source: BSE India; Cygnus Research

The net sales of the company have shown an increase of 20.98% during 2008-09 to reach Rs31271.1m
from Rs25848m in 2007-08. The operating profit has increased slightly by 3.69% in 2008-09 at
Rs2776.7m from Rs2678m in 2007-08. The profit after tax has declined by 5.55% during the same period
at Rs1804m from Rs1910m in 2007-08.

During the quarter OND09, the net sales of the company have registered an increase of 7.98% to reach
Rs8856.20m from Rs8201.40m in OND08. The operating profit of the company has declined by 36.46%
at Rs422.70m. Expenditure Common Size Comparison for 2008-09 (% of Sales)
increased 12% YoY to Rs.5803.9mn Britannia Marico Colgate
from Rs.7590.90mn of same period Other Income 0.78 0.53 1.28
of last year. Interest expenses for the
Raw Materials 56.51 49.60 22.34
quarter stood at Rs.8.1m. The PAT
has declined by 36.94% at Rs291m. Staff Expenses 3.07 4.38 7.82
An unprecedented inflation in Advertising & Publicity 6.75 8.82 15.34
commodities has challenged industry Purchase of traded goods 5.21 2.61 19.78
margins. Interest 0.37 1.50 0.06
Depreciation 1.07 0.89 1.30
Common Size Comparison PBT 7.44 8.90 19.50
When the performance of Britannia Tax 1.67 1.50 3.11
is compared to that of its peers PAT 5.77 7.40 16.39
Marico Ltd and Colgate-Palmolive, Source: BSE India; Cygnus Research

32,000
Product Mix 2009 Revenue Performance

Bread
Biscuits &
9.02%
High
Protein C akes 24,000
Food 3.13%
Rs mn

87.13%
Others
0.72%

16,000
2008-09 2007-08 2006-07 2005-06

Source: Company, BSE India; Cygnus Research

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Industry Monitor – FMCG May 2010

the raw material consumption cost is higher (at 56.51% as a percentage of sales) for the year 2008-09. For
Marico Ltd and Colgate-Palmolive, raw material consumption cost is 49.60% and 22.34% respectively.
The advertising and publicity expenses of the company stood at 6.75%, while it is 8.82% and 15.34% for
Marico Ltd and Colgate-Palmolive.

The depreciation charged by the company is also lower (at 1.07%) when compared to its peers’. The
profit before tax stood at 7.44% while it is 8.90% and 19.50% for Marico Ltd and Colgate-Palmolive
respectively. The PAT of the company stood at 5.77% while it is 7.40% & 16.39% for Marico Ltd and
Colgate-Palmolive respectively.

Cost Structure Analysis

The raw materials consumption Cost Structure as Percentage of Net Sales
cost is the major cost of the 2008-09 2007-08 2006-07 2005-06
company, accounted to 56.51% as Raw Material 56.51 57.23 61.43 54.25
a percentage of sales in 2008-09 Staff Expenses 3.07 3.50 3.49 4.27
registered a negative growth. The Advertising & Publicity 6.75 6.96 6.25 6.25
other expenses of the company Purchase of traded goods 9.22 4.18 6.08 9.46
have also declined at 20.36%. The
Other Expenditure 20.36 21.49 19.40 18.55
staff cost has also declined at
Depreciation 1.07 1.13 1.15 1.27
3.07%, advertising cost declined
Interest 0.37 0.25 0.25 0.12
at 6.75%. The purchases of traded
goods have increased at 9.22%. Tax 1.67 1.60 0.49 3.17
The depreciation charged by the Source: BSE India; Cygnus Research
company has declined at 1.07%. The interest paid has increased at 0.37%. The tax paid by the company
has also increased slightly by 1.67%.

Stock Performance
During the 52 week long period under consideration, the Sensex firmed up and ended at 17527.77 points
in March 2010 up by 6124.52 points when compared to April 2009. Sensex gained on good quarterly
results. The company’s stock price, which was at Rs1601.70 at the end of April 2009, has increased to
Rs1599.50 by March 2010. The 52-week high seen in the month of July 2009 was at Rs1861.95 and a 52-
week low was at Rs1567.85 in the month of January 2010. Major part (50.96%) of the company’s stake is
in the hands of promoters and the remaining 49.04% is with public as of December 31, 2009.

165 S ha r e ho ld ing Pa tte r n a s o f De c - 2009

Relative Market performance

130 P ro -
BSE Sensex m ote rs
P ublic
Britannia 49.04% 50.96%

95
Apr '09

May '09

Jun '09

Aug '09

Sep '09

Jan '10
Oct '09

Nov '09

Dec '09

Feb '10

Mar '10
Jul '09

Source: BSE India; Cygnus Research

© Cygnus Business Consulting & Research Pvt. Ltd. 2010 12

Industry Monitor – FMCG May 2010

Strategies

¾ After launching Treat Choco Decker recently, the company is now looking at unveiling new products
in the salted biscuit space.
¾ Betting on the introduction of more choco biscuits, Britannia Industries is looking to grab a 20%
share in the overall chocolate market in India in the next two years.
¾ Britannia Industries is stepping into a larger health and wellness role, its eyes are on the dairy
segment.
¾ During the quarter, the company launched ‘Actimind’, which is a milk-based health drink for
children. It was launched on a pilot basis in Tamil Nadu.
¾ The company is expanding its customer base by launching new products and renovating existing
ones. Britannia brands now have greater availability in rural markets and pervasive presence in
modern trade.

Outlook
Britannia, one of the India’s biggest brands of the country, has a market share of 33%. A more than a
century old Britannia has launched big brands in FMCG Segment. The company is expanding its
customer base by launching new products and renovating existing ones. Britannia brands now have
greater availability in rural markets and pervasive presence in modern trade. Total revenue for the third
quarter stood at Rs.8856.2m from Rs.8201.40m which is 8% increased than that of a year ago period. The
Net sales of the company are expected to grow at CAGR of 13% over 2008A to 2011E.

© Cygnus Business Consulting & Research Pvt. Ltd. 2010 13

Industry Monitor – FMCG May 2010

STOCK SCAN
110 Relative Market Cap Performance
BSE Sensex

BSE FMC G
105
HUL

100

95
16/03/10

17/03/10

18/03/10

19/03/10

22/03/10

23/03/10

25/03/10

26/03/10

29/03/10

30/03/10

31/03/10

1/4/2010

5/4/2010

6/4/2010

7/4/2010

8/4/2010

9/4/2010

12/4/2010

13/04/10

15/04/10
Relative Market Cap performance
120 BSE Sensex
Godrej C onsumer
P&G
110
BSE FMC G

100

90
16/03/10

17/03/10

18/03/10

19/03/10

22/03/10

23/03/10

25/03/10

26/03/10

29/03/10

30/03/10

31/03/10

1/4/2010

5/4/2010

6/4/2010

7/4/2010

8/4/2010

9/4/2010

12/4/2010

13/04/10

15/04/10
Source: BSE India; Cygnus Research

16– 22 Mar, 2010 23–28 Mar, 2010 29 –04 Apr, 2010 05–15 Apr, 2010
SENSEX This week the The auto, infra During this week The increase of annual IIP
sensex rose stocks have built the sensex declined figures and manufacturing
marginally by on their marginally by output has not helped the
0.16% or 27 momentum during 0.11% to 17692 market to give good
points, due to this week; helped points due to the positive boost. The
small gains in the sensex to profit booking madcap, smallcap index
basic goods, increase marginally made by investors and sensex remained
PSU, health care by 1.11% to 17644 in the market. unchanged during the
and metal indices. points. week.
BSE The indices went During this period, During this week, The indices went again by
FMCG down by 17.67 the sector indices the indices moved 0.66 points. The indices
points. The increased by 41.89 down by 46.01 closed at 2833.56 points.
trading started at points. The indices points and closed at
2814.64 points closed at 2841.05 2824.05 points at
and closed at points as BSE the end of the week.
2796.97 points. FMCG index had
outperformed the
broad market.

© Cygnus Business Consulting & Research Pvt. Ltd. 2010 14

Industry Monitor – FMCG May 2010

Godrej Scrip moved down The company’s During this week, The share price
Consumer during this week - share price bounced the price increased registered huge
decreased by 2.45% back by 1.14% to further by Rs1.28% growth by 9.41%.
to Rs268.20 from Rs265.65 from from Rs257.45 to The trade closed at
Rs274.95. Rs262.65. Rs260.75. Rs297.20.
P&G The scrip posted a The stock price During the week, The stock moved
negative growth of increased marginally the scrip showed a down by 8.97%. The
0.67%. The scrip by 0.46%. The huge growth of stock traded at
came down to trading of the stock 21.22%, and closed Rs2203.10 and closed
Rs1894.95 from started at Rs1909.05 at Rs2315.30 due to at Rs2005.45.
Rs1907.70. and closed at good performance
Rs1917.80 of the company.
HUL The scrip traded at The scrip increased The scrip closed at The scrip closed at
Rs226.70 and closed by 4.35%. The price Rs230.70 from Rs225.25 from
at Rs227.70 band for the share Rs239.50 indicating Rs228.45 indicating
indicating a marginal remained in negative growth of negative growth of
growth of 0.44%. between Rs227.70 3.67%. 1.40%.
to Rs237.60.

© Cygnus Business Consulting & Research Pvt. Ltd. 2010 15

Industry Monitor – FMCG May 2010

UPCOMING EVENTS
1. Event International Consumer Goods & Technologies Fair
Date May 11-16, 2010
Venue International Fair Plovdiv, Plovdiv, Bulgaria
Highlights It is the preferred market event, because of its 26 years of history and the new
opportunities it creates. Renowned Bulgarian and foreign companies display the
latest achievements in the textile and fashion, cosmetics and jewellery,
furniture, building materials and equipment, chemistry, household appliances
and equipment, food products and technologies.
Contact Details International Fair Plovdiv
37, Tzar Boris III - Obedinitel, Plovdiv, Bulgaria.
Tel:+(359)-(32)-902000; Fax:+(359)-(32)-902432
2. Event Kitchen & Bath China
Date May 26-29, 2010
Venue Shanghai New International Expo Centre (SNIEC), Shanghai, China.
Highlights Appliances, Cabinets, Countertops, Faucets, Hardware, Tubs & Showers, Sinks,
and Whirlpool will be targeting software products CAD/CAM automation
design and development of interior design kitchens and bathrooms.
Contact Details Worldwide Exhibitions Service Co. Limited, 24/F, Xincheng Mansion, 167
Jiangning Road, Shanghai, China.
Tel:+(86)-(21)-62556060; Fax:+(86)-(21)-62557740
3. Event China International Consumer Goods Fair
Date Jun 08-12, 2010
Venue Ningbo International Conference Exhibition Centre, Ningbo, Zhejiang, China
Highlights It is the largest and most professional international consumer goods fair in
China, which ranks only second to Canton Fair among all the exhibitions
sponsored by Ministry of Commerce.
Contact Details Ministry of Commerce, PRC; 190 Lingqiao Road, Ningbo, China.
Tel:+(86)-(574)-87178078
4. Event Invention & New Product Exposition
Date Jun 16-18, 2010
Venue Monroeville Convention Center, Monroeville, Alabama, USA
Highlights It is a unique trade show that showcases numerous inventions, new products
and innovations that are available to license, market or manufacture. 'The
Invention Show' brings inventors and entrepreneurs together with industry
representatives in one convenient forum.
Contact Details INPEX; 217, Ninth, Pittsburgh, United States of America.
Tel:+(1)-(412)-2881343; Fax:+(1)-(412)-2884546
5. Event IFT Food Expo
Date Jul 17-21, 2010
Venue TBA, Chicago, Illinois, United States of America
Highlights It brings together buyers and sellers from all corners of the food science and
technology world. With more than 1,000 exhibitors and 500 ingredient
companies, the potential for great ideas, professional connections, new
opportunities, and profitable relationships is nearly endless.
Contact Details Organiser: Institute of Food Technologists; 525 W. Van Buren, Chicago, USA
Tel:+(1)-(312)-7828424; Fax:+(1)-(312)-7828348

© Cygnus Business Consulting & Research Pvt. Ltd. 2010 16

Industry Monitor – FMCG May 2010

6. Event China Sourcing Fair: Home Products-Mumbai

Date Sep 08-10, 2010
Venue Bombay Exhibition Centre(BEC) Mumbai, India
Highlights It will showcase the latest and innovative home products in India. The event
will offer best meeting grounds for visitors and exhibitors under single roof.
Contact Details Media Data Systems Pte Ltd; Raffles City Po Box 0203, Raffles, Singapore.
Tel:+(65)-(6547)-2888
7. Event Mumbai’s Computer & IT Products Shopping Festival
Date Oct 21-24, 2010
Venue MMRDA Exhibition Centre , Mumbai, India
Highlights The Mumbai Shopping Festival is a fortnight long kaleidoscope of attractions,
aimed at putting the city on the world tourism map as a preferred destination
for culture tourism.
Contact Details Trade Association of Information Technology - Tait
304 Kilfire House, Opposite Fun Republic, Andheri West, Mumbai, India.
Tel:+(91)-(22)-32950854

© Cygnus Business Consulting & Research Pvt. Ltd. 2010 17