CHAPTER:- 1

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FMCG INDUSTRY

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1.1 Introduction
Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG)
are products that are sold quickly and at relatively low cost. Examples include
non-durable goods such as soft drinks, toiletries, over-the-counter drugs,
processed foods and many other consumables. In contrast, durable goods or
major appliances such as kitchen appliances are generally replaced over a period
of several years.
Many fast moving consumer goods have a short shelf life, either as a result of
high consumer demand or because the product deteriorates rapidly. Some
FMCGs, such as meat, fruits and vegetables, dairy products, and baked goods,
are highly perishable. Other goods, such as alcohol, toiletries, pre-packaged
foods, soft drinks, chocolate, candies, and cleaning products, have high turnover
rates. The sales are sometimes influenced by some holidays and season.
Packaging is critical for FMCGs. The logistics and distribution systems often
require secondary and tertiary packaging to maximize efficiency. The unit pack
or primary package is critical for product protection and shelf life but provides
information and sales incentives to consumers.
Though the profit margin made on FMCG products is relatively small, they are
generally sold in large quantities; thus, the cumulative profit on such products
can be substantial. FMCG is a classic case of low margin and high volume
business.

Market size
India has the potential to become the world's largest middle class consumer
market with an aggregated consumer spend of nearly US$ 13 trillion by 2030,
as per a report by Deloitte titled 'India matters: Winning in growth markets'.
Driven by growing incomes and increasing affordability, the consumer durables
market is projected to expand at a compound annual growth rate (CAGR) of
14.8 per cent, from US$ 7.3 billion in FY12 to US$ 12.5 billion in FY15.
Online retailing, both direct and via marketplaces, will grow threefold to
become a Rs 50,000 crore (US$ 8.26 billion) industry by 2016, driven by a 50-
55 per cent per year growth over the next three years, as per rating agency
Crisil. The growth of internet retail is also expected to boost offline retail stores .

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Government Initiatives
The Government of India has allowed 100 per cent FDI in the electronics
hardware- manufacturing sector via the automatic route. The government has
also allowed 51 per cent FDI in multi-brand retail trading and 100 per cent in
single-brand retail trading in an effort to bring more foreign investment into
India. Hyderabad will soon have a Rs 100 crore (US$ 16.52 million) National
Institute for Footwear Design and Development. The Government of Andhra
Pradesh has allocated the required land at Gachibowli in Cyberabad. Funds for
the centre have already been sanctioned by the Ministry of Commerce. With the
growing demand for skilled labour among Indian industries, the Indian
government aims to train 500 million people by 2022, and is seeking
participation of private players and entrepreneurs for the purpose. Several
corporate, government, and educational organizations are putting in the effort to
train, educate and generate skilled workers.

Road Ahead
India is set to become a key market for wearable technology such as smart
watches and fitness monitors, on the back of consumer interests in these latest
gadgets and growing spending on consumer durables. Respondents from India
were most interested in purchasing fitness monitors (80%), smart watches
(76%) and internet-enabled eyeglasses (74%), as per Accenture's Digital
Consumer Tech Survey 2014. American measurement company Nielsen
projects that rural India's FMCG market will top the US$ 100 billion mark by
2025. Online portals are anticipated to play a significant role for companies
trying to break into these markets. The Internet is also allowing for a cheaper
and more convenient means to increase a company's reach by overcoming
geographical barriers.

Urban trends
With rise in disposable incomes, mid- and high-income consumers in urban
areas have shifted their purchasing trend from essential to premium products. In
response, firms have started enhancing their premium products portfolio. Indian

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and multinational FMCG players are leveraging India as a strategic sourcing
hub for cost-competitive product development and manufacturing to cater to
international markets.

1.2 Top Companies

According to the study conducted by AC Nielsen, 62 of the top 100 brands are
owned by MNCs, and the balance by Indian companies. Fifteen companies own
these 62 brands, and 27 of these are owned by Hindustan Unilever.

The Top Ten India FMCG brands are:

1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestle India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10. Marico Industries

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 1.3 Definition: Fast Moving Consumer Goods (FMCG)

Fast Moving Consumer goods refer to items that are purchased and consumed
frequently by consumers. These are non durable items, which have relatively
low prices. The main product categories that fall under FMCG include:

 Personal and Household care: Personal care includes toiletry items of everyday
use such as toothpaste, soap, shampoo , hair oil, deodorant, perfume, talcum
powder and creams and lotions used for skin care. Household care items include
items required for maintenance of household cleanliness such as floor cleaners,
dish and utensil cleaners, toilet cleaners, air freshners, and mosquito repellents
etc. Washing related items such as detergent, washing powder are also included
in FMCG category.
 Food and Beverages: Easily perishable items such as fruits and vegetables and
meat as well as items with relatively longer shelf life such as confectionery,
chocolates, flour, sugar, cereals, baked items such as biscuits, cakes and cookies
, snacking items, ice creams fall under the food category. Beverages category
includes coffee, tea, fruit juices, health drinks and bottled water are included.

1.4 Importance of FMCG

The stability of an economy depends upon the diversity of its industrial base.
Along with heavy industries, a country also needs enough production of FMCG
products to meet the needs of the people.

FMCG stands for fast moving consumer goods, i.e., the daily items that we need
to use in our everyday life. India has a very strong base for producing FMCG
goods. It has attained self sufficiency in producing all that are needed in
managing daily life. It has shown immense growth potential over the years and
is growing steadily at present. The FMCG industry of India is the fourth largest
industry in the country. The current value of the industry stands at US$13.1
billion. The large base of FMCG industry is now producing wide range of food,
toiletries, soap, body wash, shampoos, cosmetics, toothpastes, shaving products,
detergents, bulbs, batteries as well as electronics products. The FMCG market
of India is expected to grow to emerge as a US$ 33.4 billion industry by 2015.
The middle income group and the rural population are said to be the most
potential market for FMCG products. The fast urbanization is working as the
catalyst for the growth of the industry. The rural market is catching up fast and
most of the products that are available in the big cities have also paved their
ways to rural households.

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 The strong sign of the economy is proving beneficial for the FMCGcompanies
in India and many of them are diversifying their base to cater to the larger
section of consumers. Further, seeing the potential of the Indian market, many
foreign MNCs are also trying to penetrate into Indian market. As a result, the
choices before the consumers have widened.
The current trend of the market shows that big farms are turning into world
players and the small companies catching up fast with them. The study of the
market shows that the following factors have contributed to the growth of
FMCG industry in India.

Large base of consumer – The exploding population of the country has worked
in favor of the growth of the industry. The FMCG companies of India enjoy a
continuously growing consumer base.
Purchasing power – Over the years, the purchasing power of the Indian
population has grown manifold and due to this the demand for FMCG products
has also gone up. This is also encouraging the FMCG companies to introduce
newer products to satisfy the changing taste of consumers.
Competitive market: The Indian FMCG market is extremely competitive.
Even the top companies are finding it difficult to retain their top position in the
market because of fierce competition. New companies are coming up regularly,
forcing the established companies to improve on their current product range.
Media: Television now has reached even the most interior parts of the country
and as a result, commercials are enticing new consumers to try new products
thereby improving the demand for FMCG goods even in the rural areas of India.

This has also widened the scopes for employment in the FMCG industry. Given
below is a list of jobs in India, available in the FMCG industry:

 Sales
 Supply Chain and Distribution
 Finance
 Marketing
 Operations
 Logistics
 Purchasing
 Advertising
 Brand Management
 Human Resources
 Product Development
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 General management

1.5 Five Forces for FMCG Industry analysis:

Rivalry among Competing Firms:

In the FMCG Industry, rivalry among competitors is very fierce. There are
scarce customers because the industry is highly saturated and the competitors
try to snatch their share of market. Market Players use all sorts of tactics and
activities from intensive advertisement campaigns to promotional stuff and
price wars etc. Hence the intensity of rivalry is very high.

Potential Entry of New Competitors:

FMCG Industry does not have any measures which can control the entry of new
firms. The resistance is very low and the structure of the industry is so complex
that new firms can easily enter and also offer tough competition due to cost
effectiveness. Hence potential entry of new firms is highly viable.

Potential Development of Substitute Products:

There are complex and never ending consumer needs and no firm can satisfy all
sorts of needs alone. There are plenty of substitute goods available in the market
that can be re-placed if consumers are not satisfied with one. The wide range of
choices and needs give a sufficient room for new product development that can
replace existing goods. This leads to higher consumer’s expectation.

Bargaining Power of Suppliers:

The bargaining power of suppliers of raw materials and intermediate goods is
not very high. There is ample number of substitute suppliers available and the
raw materials are also readily available and most of the raw materials are

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homogeneous. There is no monopoly situation in the supplier side because the
suppliers are also competing among themselves.

Bargaining Power of Consumers:

Bargaining power of consumers is also very high. This is because in FMCG
industry the switching costs of most of the goods is very low and there is no
threat of buying one product over other. Customers are never reluctant to buy or
try new things off the shelf.

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 1.6 Growth Drivers of India’s FMCG Sector

Rising incomes driving

Government reforms to purchase
encourage FDI inflow and
market sentiments

Desire to experiment
with brands
Greater awareness of
products, brands

FMCG Evolving consumer

Increasing consumer lifestyle
demand growth
drivers

New product
Availability of online launches
grocery stores

Growing rural market

Strong distribution
channel Growth of modern
trade

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Shift to organised market

 Organised sector growth is expected to grow as the share of unorganised

market in the FMCG sector fall with increased level of brand
consciousness
 Growth in modern retail will augment the growth of organised FMCG
sector

Increase in penetration

 Low penetration levels of branded products in categories like instant

foods indicating a scope for volume growth
 Investment in this sector attracts investors as the FMCG products have
demand throughout the year

Easy access

 Availability of products has become way more easier as internet and

different channels of sales has made the accessibility of desired product
to customers more convenient at required time and place
 Online grocery stores and online retail stores like Grofers, Flipkart,
Amazon making the FMCG products more readily available

Rural consumption

 Rural consumption has increased, led by a combination of increasing

incomes and higher aspiration levels, there is an increased demand for
branded products in rural india
 Huge untapped rural market
 Godrej is launching One rural programme
 To generate more revenues from rural areas
 Rural India is estimated to account for 50 percent of the total FMCG
market, in 2016

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CHAPTER:- 2

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Research Design
SYNOPSIS
2.1 TITLE OF THE PROJECT
A comparative analysis ratio of a Hindustan Unilever Ltd (HUL) and Indian
Tobacco Company (ITC) from FMCG sector.

2.2 EXECUTIVE SUMMARY

Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are
products that are sold quickly and at relatively low cost. Examples include non-
durable goods such as soft drinks, toiletries, over-the-counter drugs, processed
foods and many other consumables. In contrast, durable goods or major
appliances such as kitchen appliances are generally replaced over a perio d of
several years.
Many fast moving consumer goods have a short shelf life, either as a result of
high consumer demand or because the product deteriorates rapidly. Some
FMCGs, such as meat, fruits and vegetables, dairy products, and baked goods,
are highly perishable. Other goods, such as alcohol, toiletries, pre-packaged
foods, soft drinks, chocolate, candies, and cleaning products, have high turnover
rates. The sales are sometimes influenced by some holidays and season.
Packaging is critical for FMCGs. The logistics and distribution systems often
require secondary and tertiary packaging to maximize efficiency. The unit pack
or primary package is critical for product protection and shelf life but provides
information and sales incentives to consumers.
Though the profit margin made on FMCG products is relatively small, they are
generally sold in large quantities; thus, the cumulative profit on such products
can be substantial. FMCG is a classic case of low margin and high volume
business.

2.3 OBJECTIVE OF THE STUDY

1. To study the profitability and liquidity trend of the selected FMCG
companies.
2. Comparative analysis of the selected companies based on the given ratios.
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3. To analyze the factors determining the behaviour of profitability and
liquidity.

2.4 STATEMENT OF THE PROBLEM

To make a comparative study of two different companies and know the
profitability and liquidity ratios between them.

2.5 RESEARCH METHODOLOGY

It is the systematic investigation into and study of both companies from FMCG
sector and their ratios in order to establish facts and reach new conclusions.
. Generally the source of data collection is this case are:

 Journals
 Research reports.
 Books.
 Company website.

CHAPTER 1:- INTRODUCTION

This chapter contains the information about the Hindustan Unilever Ltd and
Indian Tobacco company from FMCG sector.
This chapter mainly contains the theoretical background of the study.

CHAPTER 2:- RESEARCH DESIGN

This chapter contains the title of the study, statement of the problems, objectives
of the study, scope of the study, limitations of the study, methodology of the
study, research instruments, definition of the term used and overview of the
chapter schemes of data collected about HUL and ITC from FMCG sector.

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CHAPTER 3:- COMPANY PROFILE
This chapter contains few information about HUL and ITC company. It contains
Inception, Type, Nature, Board of Directors, Organization chart, Business
operations, SWOT Analysis, Product/service profile, Market share,
Competitors, Functional chart, Future prospectus/growth.

CHAPTER 4:- DATA ANALYSIS AND INTERPRETATION

This chapter contains the title of the table, data table, analysis of the table,
inference of the table, graphical representation of the data collected.

CHAPTER 5:- SUMMARY OF FINDINGS AND CONCLUSION

This chapter contains findings, suggestions and conclusions of the study. The
findings are summarized and presented in paragraph form and numbering from.
It also contains the conclusions to justify the objective of the study.

CHAPTER 6:- RECOMMENDATIONS AND SUGGESTIONS

This chapter gives suggestions derived on the basis of finding of the study these
are extended for tentative implementation in operation in day to come.

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CHAPTER:- 3

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Company Profile

Hindustan Unilever Ltd (HUL)

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Hindustan Unilever Ltd Products

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3.1 Introduction
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer
Goods company with a heritage of over 80 years in India. On any given day,
nine out of ten Indian households use our products to feel good, look good and
get more out of life – giving us a unique opportunity to build a brighter future.
HUL works to create a better future every day and helps people feel good, look
good and get more out of life with brands and services that are good for them
and good for others.

With over 35 brands spanning 20 distinct categories such as soaps, detergents,

shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged
foods, ice cream, and water purifiers, the Company is a part of the everyday life
of millions of consumers across India. Its portfolio includes leading household
brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s,
Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke
Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.

The Company has about 18,000 employees and has a net sales of INR 33895
crores (financial year 2016-17). HUL is a subsidiary of Unilever, one of the
world’s leading suppliers of Food, Home Care, Personal Care and Refreshment
products with sales in over 190 countries and an annual sales turnover of €52.7
billion in 2016. Unilever has over 67% shareholding in HUL.

3.2 HUL HISTORY

In the summer of 1888, visitors to the Kolkata harbour noticed crates full of
Sunlight soap bars, embossed with the words "Made in England by Lever
Brothers". With it began an era of marketing branded Fast Moving Consumer
Goods (FMCG).

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Soon after followed Lifebuoy in 1895 and other famous brands like Pears, Lux
and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to
the market in 1937.

In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati

Manufacturing Company, followed by Lever Brothers India Limited (1933) and
United Traders Limited (1935). These three companies merged to form HUL in
November 1956; HUL offered 10% of its equity to the Indian public, being the
first among the foreign subsidiaries to do so. Unilever now holds 67.25% equity
in the company. The rest of the shareholding is distributed among about three
lakh individual shareholders and financial institutions.

The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903, the
company had launched Red Label tea in the country. In 1912, Brooke Bond &
Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984
through an international acquisition. The erstwhile Lipton's links with India
were forged in 1898. Unilever acquired Lipton in 1972, and in 1977 Lipton Tea
(India) Limited was incorporated.

Pond's (India) Limited had been present in India since 1947. It joined the
Unilever fold through an international acquisition of Chesebrough Pond's USA
in 1986.

Since the very early years, HUL has vigorously responded to the stimulus of
economic growth. The growth process has been accompanied by judicious
diversification, always in line with Indian opinions and aspirations.

The liberalisation of the Indian economy, started in 1991, clearly marked an

inflexion in HUL's and the Group's growth curve. Removal of the regulatory
framework allowed the company to explore every single product and
opportunity segment, without any constraints on production capacity.

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Simultaneously, deregulation permitted alliances, acquisitions and mergers. In
one of the most visible and talked about events of India's corporate history, the
erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from
April 1, 1993. In 1996, HUL and yet another Tata company, Lakme Limited,
formed a 50:50 joint venture, Lakme Unilever Limited, to market Lakme's
market-leading cosmetics and other appropriate products of both the companies.
Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its
50% stake in the joint venture to the company.

HUL formed a 50:50 joint venture with the US-based Kimberly Clark
Corporation in 1994, Kimberly-Clark Lever Ltd, which markets Huggies
Diapers and Kotex Sanitary Pads. HUL has also set up a subsidiary in Nepal,
Unilever Nepal Limited (UNL), and its factory represents the largest
manufacturing investment in the Himalayan kingdom. The UNL factory
manufactures HUL's products like Soaps, Detergents and Personal Products
both for the domestic market and exports to India.

The 1990s also witnessed a string of crucial mergers, acquisitions and alliances
on the Foods and Beverages front. In 1992, the erstwhile Brooke Bond acquired
Kothari General Foods, with significant interests in Instant Coffee. In 1993, it
acquired the Kissan business from the UB Group and the Dollops Icecream
business from Cadbury India.

As a measure of backward integration, Tea Estates and Doom Dooma, two

plantation companies of Unilever, were merged with Brooke Bond. Then in
1994, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton
India Limited (BBLIL), enabling greater focus and ensuring synergy in the
traditional Beverages business. 1994 witnessed BBLIL launching the Wall's
range of Frozen Desserts. By the end of the year, the company entered into a
strategic alliance with the Kwality Icecream Group families and in 1995 the
Milkfood 100% Icecream marketing and distribution rights too were acquired.

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Finally, BBLIL merged with HUL, with effect from January 1, 1996. The
internal restructuring culminated in the merger of Pond's (India) Limited (PIL)
with HUL in 1998. The two companies had significant overlaps in Personal
Products, Speciality Chemicals and Exports businesses, besides a common
distribution system since 1993 for Personal Products. The two also had a
common management pool and a technology base. The amalgamation was done
to ensure for the Group, benefits from scale economies both in domestic and
export markets and enable it to fund investments required for aggressively
building new categories.

In January 2000, in a historic step, the government decided to award 74 per cent
equity in Modern Foods to HUL, thereby beginning the divestment of
government equity in public sector undertakings (PSU) to private sector
partners. HUL's entry into Bread is a strategic extension of the company's wheat
business. In 2002, HUL acquired the government's remaining stake in Modern
Foods.

In 2003, HUL acquired the Cooked Shrimp and Pasteurised Crabmeat business
of the Amalgam Group of Companies, a leader in value added Marine Products
exports.

HUL launched a slew of new business initiatives in the early part of 2000’s.
Project Shakti was started in 2001. It is a rural initiative that targets small
villages populated by less than 5000 individuals. It is a unique win-win
initiative that catalyses rural affluence even as it benefits business. Currently,
there are over 45,000 Shakti entrepreneurs covering over 100,000 villages
across 15 states and reaching to over 3 million homes.

In 2002, HUL made its foray into Ayurvedic health & beauty centre category
with the Ayush product range and Ayush Therapy Centres. Hindustan Unilever
Network, Direct to home business was launched in 2003 and this was followed
by the launch of ‘Pureit’ water purifier in 2004.

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In 2007, the Company name was formally changed to Hindustan Unilever
Limited after receiving the approval of share holders during the 74th AGM on
18 May 2007. Brooke Bond and Surf Excel breached the the Rs 1,000 crore
sales mark the same year followed by Wheel which crossed the Rs.2,000 crore
sales milestone in 2008.

On 17th October 2008 , HUL completed 75 years of corporate existence in

India. In January 2010, the HUL head office shifted from the landmark Lever
House, at Backbay Reclamation, Mumbai to the new campus in Andheri (E),
Mumbai.
On 15th November, 2010, the Unilever Sustainable Living Plan was officially
launched in India at New Delhi.
In March, 2012 HUL’s state of the art Learning Centre was inaugurated at the
Hindustan Unilever campus at Andheri, Mumbai.
In April, 2012, the Customer Insight & Innovation Centre (CIIC) was
inaugurated at the Hindustan Unilever campus at Andheri, Mumbai
HUL completed 80 years of corporate existence in India on October 17th, 2013.

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3.3 Board of Director’s

Sr.no Name Designation

1 Mr. Harish Manwani Chairman

2 Mr. Sanjiv Mehta Managing Director & CEO

3 Mr. P B Balaji Executive Director & CFO

4 Mr. Pradeep Banerjee Executive Director

5 Mr. Dev Bajpai Executive Director

6 Mr. Aditya Narayan Independent Director

7 Mr. S Ramadorai Independent Director

8 Mr. O P Bhatt Independent Director

9 Dr. Sanjiv Misra Independent Director

10 Ms. Kalpana Morparia Independent Director

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3.4 HUL Products Profile

HUL Ltd

Home care Personal care Food & Water

Beverages Purifier

Home Care

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Personal Care

Food & Beverages

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Water Purifier

HUL Group of Companies

HUL Group Companies

Unilever India Exports Limited
Subsidiaries India
Unilever Nepal Limited Nepal
Daverashola Estates Private Limited
India
Pond’s Exports Limited India
Levers Associated Trust Limited
India
Levindra Trust Limited India
Hindlever Trust Limited India
Jamnagar Properties Private Limited
India
Brooke Bond Real Estates Private
Limited India
Lakme Lever Private Limited India
Aquagel Chemicals Private Limited
HUL Securitization of Retirement
Trust Benefit Trust
Kimberly Clark Lever Private Limited
Joint Venture

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3.5 SWOT ANALYSIS

STRENGTH
 Largest market share
 Largest exporter of country
 Efficient manpower having 16000 employees over 1300 managers
 Every brand of HUL has its own high brand value

WEAKNESS
 HUL is steadily losing its market share in segments including shops, hair,
oral, skin care as economic growth slows and competition increases.

OPPORTUNITIES
 It can switch to new brands in segments like confectionary, medicines etc
 Divercification

THREATS
 HUL is facing increased compitition with the entry of ITC Ltd
 Also facing compitition from P & G HINDUSTAN UNILIVER
LIMITED

3.6 Vision
To earn the love and respect of India, by making a real difference to every India
The four pillars of our vision set out the long term direction for the company

 We work to create a better future every day.

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  We help people feel good, look good and get more out of life with brands
and services that are good for them and good for others.
 We will inspire people to take small everyday actions that can add up to a
big difference for the world.
 We will develop new ways of doing business with the aim of doubling
the size of our company while reducing our environmental impact.

3.7 Mission or Goal

 Unilever’s mission is to add Vitality to life we meet everyday needs for
nutrition, hygiene, and personal cares with brands that help people feel
good, look good and get more out of life.
 The main aim of the company is to make a billion of Indians feel safe and
secure.

3.8 Purpose & principles

Our corporate purpose states that to succeed requires "the highest standards of
corporate behavior towards everyone we work with, the communities we touch,
and the environment on which we have an impact."

 Always working with integrity

Conducting our operations with integrity and with respect for the many
people, organizations and environments our business touches has always
been at the heart of our corporate responsibility.

 Positive impact
We aim to make a positive impact in many ways: through our brands, our
commercial operations and relationships, through voluntary contributions,
and through the various other ways in which we engage with society.

 Continuous commitment
We're also committed to continuously improving the way we manage our
environmental impacts and are working towards our longer-term goal of
developing a sustainable business.

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 Setting out our aspirations
Our corporate purpose sets out our aspirations in running our business.
It's underpinned by our code of business Principles which describes the
operational standards that everyone at Unilever follows, wherever they
are in the world. The code also supports our approach to governance and
corporate responsibility.

 Working with others

We want to work with suppliers who have values similar to our own and
work to the same standards we do. Our Business partner code, aligned to
our own Code of business principles, comprises ten principles covering
business integrity and responsibilities relating to employees, consumers
and the environment.

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3.9 Financial Performance of HUL
Segment Performance
Segment Revenue (%)-2014 Segment Results (%)-2014
Soaps and Soaps and
Detergents(48.4) Detergents(39.6)
Personal Personal
Products(29.3) Products(47.2)
Beverages(11.8) Beverages(12)

Packaged Packaged
Foods(6.2) Foods(1.6)
Others(4.3) Others(-0.3)

Segment Revenue (%)-2015 Segment Results (%)-2015

Soaps and Soaps and
Detergents(47.1) Detergents(38.0)
Personal Personal
Products(30.2) Products(48.9)
Beverages(12.2) Beverages(11.6)

Packaged Foods(6.6) Packaged

Foods(2.2)
Others(3.9) Others(-0.7)

Segment Revenue (%)-2016 Segment Results (%)-2016

Home Care(33) Home Care(21)

Personal Care(48) Personal Care(65)

Foods(3) Foods(1)

Refreshments(14) Refreshments(13)

Others(2) Others(0)

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Current stock

Current price at BSE 1212

Market capitalization 2,62,333.10
Face value 1.00
EPS(TTM) 21.25
P/E ratio 57.04

Ratio Analysis

Profitability Ratios 2016 2015 2014

PBDIT Margin (%) 19.47 18.91 18.18

PBIT Margin (%) 18.47 17.98 17.25

PBT Margin (%) 18.35 20.08 17.94

Net Profit Margin (%) 12.76 14.00 13.80

Return on Networth / Equity 110.73 115.87 118.04

(%)
Return on Capital Employed 81.16 88.95 88.00
(%)
Return on Assets (%) 28.81 31.65 29.75

Asset Turnover Ratio (%) 225.78 225.94 215.55

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Liquidity Ratios 2016 2015 2014

Current ratio 1.03 1.05 1.03

Quick ratio 0.75 0.76 0.71

Inventory Turnover ratio 12.65 11.84 10.20

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Statement OF Profit & Loss A/C

Statement of Profit & 2014 2015 2016

Loss Account

Gross Sales 32,086 33,856 33,895

Other Income 1,254 1,063 1,118

Interest 17 0 15

Profit Before Taxation 5,523 5,910 6,155

@

Profit After Taxation @ 3,843 4,078 4,247

Earnings Per Share of 19.95 18.87 20.75

RS. 1

Dividend Per Share of 15.00 16.00 17.00

RS. 1

Page | 34
Balance Sheet

Balance Sheet 2014 2015 2016

Fixed Assets 2,937 3,300 4,227

Investments 3,278 2,967 3,779

Net Deferred Tax 196 231 160

Net Assets (Current 2,686 2,811 1,676

and Non-current)

Total 3,725 3,687 6,490

Share Capital 216 216 216

Reserves & Surplus 3,509 3,471 6,271

Loan Funds - - -

Total 3,725 3,687 6,490

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3.10Growth summary of HUL

 HUL prioritized opportunities which build upon the existing assets and
capabilities. It avoided spreading their management thinly. For example:
HUL first made its sales and distribution channel & supply chain
management in manufacturing and selling wheat flour and utilized it into
the selling breads produced by wheat flour.
 HUL is more focused on the innovations Example: In 1995 launched
KISSAN ANNAPURNA staple foods with the message “staple food
including iodized salt”
 Serving Rural population: In 2000 the 32% of the sales were from rural
sector but in 2010 it is more than 50%.
 It follows direct communication from the customers.
 It believes in expanding the portfolio.
 Each category has a different set of supply chain, production and
consumer decision making process issuing associated with it.

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Indian Tobacco Company (ITC)

Page | 37
Indian Tobacco Company Product’s

Page | 38
3.11 Introduction
ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West
Bengal. Its diversified business includes five segments: Fast-Moving Consumer
Goods (FMCG), Hotels, Paperboards & Packaging, Agri Business &
Information Technology.

Established in 1910 as the Imperial Tobacco Company of India Limited, the

company was renamed as the Indian Tobacco Company Limited in 1970 and
further to I.T.C. Limited in 1974. The periods in the name were removed in
September 2001 for the company to be renamed as ITC Ltd.2005-09, by Boston
Consulting Group. The company completed 100 years in 2010 and as of 2012-
13, had an annual turnover of US$8.31 billion and a market capitalization of
US$45 billion. It employs over 25,000 people at more than 60 locations across
India and is part of Forbes 2000 list.
ITC is one of India's foremost multi-business enterprises with a market
capitalisation of US $ 50 billion and a turnover of US $ 8 billion. ITC is rated
among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most
Reputable Companies by Forbes magazine and as 'India's Most Admired
Company' in a survey conducted by Fortune India magazine and Hay Group.
ITC also features as one of world's largest sustainable value creator in the
consumer goods industry in a study by the Boston Consulting Group. ITC has
been listed among India's Most Valuable Companies by Business Today
magazine. The Company is among India's '10 Most Valuable (Company)
Brands', according to a study conducted by Brand Finance and published b y the
Economic Times. ITC also ranks among Asia's 50 best performing companies
compiled by Business Week.

Page | 39
3.12 History of ITC
ITC was incorporated on August 24, 1910 under the name Imperial Tobacco
Company of India Limited. As the Company's ownership progressively
Indianised, the name of the Company was changed from Imperial Tobacco
Company of India Limited to India Tobacco Company Limited in 1970 and then
to I.T.C. Limited in 1974. In recognition of the Company's multi-business
portfolio encompassing a wide range of businesses - Fast Moving Consumer
Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded
Apparel, Education and Stationery Products, Incense Sticks and Safety Matches,
Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and
Information Technology - the full stops in the Company's name were removed
effective September 18, 2001. The Company now stands rechristened 'ITC
Limited, 'where ‘ITC’ is today no longer an acronym or an initialised form.

A Modest Beginning
The Company's beginnings were humble. A leased office on Radha Bazar Lane,
Kolkata, was the centre of the Company's existence. The Company celebrated
its 16th birthday on August 24, 1926, by purchasing the plot of land situated at
37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs
310,000. This decision of the Company was historic in more ways than one. It
was to mark the beginning of a long and eventful journey into India's future.
The Company's headquarter building, 'Virginia House', which came up on that
plot of land two years later, would go on to become one of Kolkata's most
venerated landmarks.

1925: Packaging and Printing: Backward Integration

Though the first six decades of the Company's existence were primarily devoted
to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses,
ITC's Packaging & Printing Business was set up in 1925 as a strategic backward
integration for ITC's Cigarettes business. It is today India's most sophisticated
packaging house.

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1975: Entry into the Hospitality Sector - A 'Welcom' Move
The Seventies witnessed the beginnings of a corporate transformation that
would usher in momentous changes in the life of the Company. In 1975, the
Company launched its Hotels business with the acquisition of a hotel in Chennai
which was rechristened 'ITC-Welcomgroup Hotel Chola' (now renamed My
Fortune, Chennai). The objective of ITC's entry into the hotels business was
rooted in the concept of creating value for the nation. ITC chose the Hotels
business for its potential to earn high levels of foreign exchange, create tourism
infrastructure and generate large scale direct and indirect employment. Since
then ITC's Hotels business has grown to occupy a position of leadership, with
over 100 owned and managed properties spread across India under four brands
namely, ITC Hotels - Luxury Collection, WelcomHotels, Fortune Hotels and
WelcomHeritage.

ITC Hotels recently took its first step toward international expansion with an
upcoming super premium luxury hotel in Colombo, Sri Lanka. In addition, ITC
Hotels also recently tied up with RP Group Hotels & Resorts to manage 5 hotels
in Dubai and India under ITC Hotels' 5-star 'WelcomHotel' brand and the mid-
market to upscale 'Fortune' brand.

1979: Paperboards & Specialty Papers - Development of a Backward Area

In 1979, ITC entered the Paperboards business by promoting ITC
Bhadrachalam Paperboards Limited. Bhadrachalam Paperboards amalgamated
with the Company effective March 13, 2002 and became a Division of the
Company, Bhadrachalam Paperboards Division. In November 2002, this
division merged with the Company's Tribeni Tissues Division to form the
Paperboards & Specialty Papers Division. ITC's paperboards' technology,
productivity, quality and manufacturing processes are comparable to the best in
the world. It has also made an immense contribution to the development of
Sarapaka, an economically backward area in the state of Andhra Pradesh. It is
directly involved in education, environmental protection and community
development. In 2004, ITC acquired the paperboard manufacturing facility of
BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu.
Page | 41
The Kovai Unit allows ITC to improve customer service with reduced lead time
and a wider product range.

1985: Nepal Subsidiary - First Steps beyond National Borders

In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British
joint venture. In August 2002, Surya Tobacco became a subsidiary of ITC
Limited and its name was changed to Surya Nepal Private Limited (Surya
Nepal). In 2004, the company diversified into manufacturing and exports of
garments.

1990: Paperboards & Specialty Papers - Consolidation and Expansion

In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing
company and a major supplier of tissue paper to the cigarette industry. The
merged entity was named the Tribeni Tissues Division (TTD). To harness
strategic and operational synergies, TTD was merged with the Bhadrachalam
Paperboards Division to form the Paperboards & Specialty Papers Division in
November 2002.

1990: Agri Business - Strengthening Farmer Linkages

Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri
Business Division for export of agri-commodities. The Division is today one of
India's largest exporters. ITC's unique and now widely acknowledged e-
Choupal initiative began in 2000 with soya farmers in Madhya Pradesh. Now it
extends to 10 states covering over 4 million farmers. Also, through the 'Choupal
Pradarshan Khet' initiative, the agri services vertical has been focusing on
improving productivity of crops while deepening the relationship with the
farming community.

2002: Education & Stationery Products - Offering the Greenest products

Page | 42
ITC launched line of premium range of notebooks under brand Paperkraft in
2002. To augment its offering and to reach a wider student population, the
Classmate range of notebooks was launched in 2003. Classmate over the years
has grown to become India's largest notebook brand and has also increased its
portfolio to occupy a greater share of the school bag. Years 2007- 2009 saw the
launch of Practical Books, Drawing Books, Geometry Boxes, Pens and Pencils
under the 'Classmate' brand. In 2008, ITC positioned the business as the
Education and Stationery Products Business and launched India's first
environment friendly premium business paper under the 'Paperkraft' Brand.
'Paperkraft' offers a diverse portfolio in the premium executive stationery and
office consumables segment. In 2010, Colour Crew was launched as a new
brand of art stationery.

2000: Lifestyle Retailing - Premium Offerings

ITC also entered the Lifestyle Retailing business with the Wills Sport range of
international quality relaxed wear for men and women in 2000. The Wills
Lifestyle chain of exclusive stores later expanded its range to include Wills
Classic formal wear (2002) and Wills Clublife evening wear (2003). ITC also
initiated a foray into the popular segment with its men's wear brand, John
Players, in 2002. In 2006, Wills Lifestyle became title partner of the country's
most premier fashion event - Wills Lifestyle India Fashion Week - that has
gained recognition from buyers and retailers as the single largest B-2-B
platform for the Fashion Design industry. To mark the occasion, ITC launched a
special 'Wills Signature', taking the event forward to consumers.

2000: Information Technology - Business Friendly Solutions

In 2000, ITC spun off its information technology business into a wholly owned
subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging
opportunities in this area. Today ITC Infotech is one of India's fastest growing
global IT and IT-enabled services companies and has established itself as a key
player in offshore outsourcing, providing outsourced IT solutions and services
to leading global customers across key focus verticals - Banking Financial
Services & Insurance (BFSI), Consumer Packaged Goods (CPG), Retail,

Page | 43
Manufacturing, Engineering Services, Media & Entertainment, Travel,
Hospitality, Life Sciences and Transportation & Logistics.

2001: Branded Packaged Foods - Delighting Millions of Households

ITC's foray into the Foods business is an outstanding example of successfully
blending multiple internal competencies to create a new driver of business
growth. It began in August 2001 with the introduction of 'Kitchens of India'
ready-to-eat Indian gourmet dishes. In 2002, ITC entered the confectionery and
staples segments with the launch of the brands mint-o and Candyman
confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the
introduction of Sunfeast as the Company entered the biscuits segment. ITC
entered the fast growing branded snacks category with Bingo! In 2007. In 2010,
ITC launched Sunfeast Yippee! to enter the Indian instant noodles market. In
just over a decade, the Foods business has grown to a significant size under
seven distinctive brands, with an enviable distribution reach, a rapidly growing
market share and a solid market standing.

2002: Agarbattis & Safety Matches - Supporting the Small and Cottage
Sector
In 2002, ITC's philosophy of contributing to enhancing the competitiveness of
the entire value chain found yet another expression in the Safety Matches
initiative. ITC now markets popular safety matches brands like iKno,
Mangaldeep and Aim.

ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the
manifestation of its partnership with the cottage sector. Mangaldeep is a highly
established national brand and is available across a range of fragrances like
Rose, Jasmine, Bouquet, Sandalwood and 'Fragrance of Temple'.

Page | 44
2005: Personal Care Products - Expert Solutions for Discerning Consumers
ITC entered the Personal Care Business in 2005. In eight years, the Personal
Care portfolio has grown under 'Essenza Di Wills', 'Fiama', 'Vivel' and 'Superia'
brands which have received encouraging consumer response and have been
progressively extended nationally. In May 2013, the business expanded its
product portfolio with the launch of Engage - one of India's first range of
'couple deodorants'

2010: Expanding the Tobacco Portfolio

In 2010, ITC launched its handrolled cigar, Armenteros, in the Indian market.
Armenteros cigars are available exclusively at tobacco selling outlets in select
hotels, fine dining restaurants and exclusive clubs.

Page | 45
3.13 Board of Director’s

Name Designation

Yogesh Chander Deveshwar Chairman & Non-Exe.Director

Rajiv Tandon Executive Director & CFO

Zafir Alam Non Executive Director

Shilabhadra Banerjee Non Executive Director

Suryakant Balkrishna Mainak Non Executive Director

Sahibzada Syed Habib-ur-Rehman Non Executive Director

Nirupama Rao Non Executive Director

Sanjiv Puri Executive Director & CEO

Nakul Anand Executive Director

David Robert Simpson Non Executive Director

Arun Duggal Non Executive Director

Sunil Behari Mathur Non Executive Director

Meera Shankar Non Executive Director

Page | 46
3.14Financial Performance of ITC
Current stock
Current price at BSE 267
Market capitalization 324,462.81
Face value 1.00
EPS(TTM) 8.54
P/E ratio 31.26

Ratio Analysis

Profitability Ratios 2016 2015 2014

PBDIT Margin (%) 43.54 41.13 40.80

PBIT Margin (%) 40.73 38.49 38.09

PBT Margin (%) 40.60 38.34 38.08

Net Profit Margin (%) 26.72 26.31 26.43

Return on Networth / 29.94 31.31 33.51

Equity (%)
Return on Capital 28.18 29.54 31.68
Employed (%)
Return on Assets (%) 19.88 21.73 22.39

Page | 47
Asset Turnover Ratio (%) 74.39 82.60 84.72

Liquidity Ratios 2016 2015 2014

Current ratio 1.65 2.05 1.82

Quick ratio 1.07 1.38 1.18

Inventory Turnover ratio 4.32 4.66 4.52

Page | 48
Balance Sheet of ITC
Capital and Liabilities 2016 2015 2014
Owners' Fund
Equity Share Capital 804.72 801.55 795.32
Share Application Money 0 0 0
Preference Share Capital 0 0 0
Reserves & Surplus 32071.87 29881.73 25414.29
Loan Funds
Deposits 0 0 0
Borrowings made 0 0 0
by the bank
Other Liabilities & 16560 13421.26 12916.23
Provisions
Total 49436.59 44104.54 39125.84
Assests
Cash & Balances with RBI 6563.95 7588.61 3289.37
Money at call and 0 0 0
Short Notice
Investments 12854.24 8405.46 8823.43
Advances 0 0 0
Fixed Assets
Gross Block 22256.11 21392.12 18239.65
Less: Revaluation Reserve 52.41 52.41 52.41
Less: Accumulated 8051.58 7213.63 6226.91
Depreciation
Net Block 14152.12 14126.08 11960.33
Capital Work-in-progress 2500.83 2114.14 2295.73
Other Assets 19958.83 19497.57 16097.49
Miscellaneous Expenses 0 0 0
not written off
Total 49436.59 44104.54 39125.84

Page | 49
Statement OF Profit & Loss A/C

Statement of Profit & 2014 2015 2016

Loss Account

Gross Sales 47068.66 50389.01 51944.57

Other Income 1,107.14 1,613.45 1,828.15

Interest 23.63 78.45 71.93

Profit Before Taxation 12,659.11 13,997.52 14,434.07

@

Profit After Taxation @ 8,785.21 9,607.73 9,328.37

Earnings Per Share of 11.05 11.99 11.59

RS. 1

Page | 50
3.15 Purpose & Principles
ITC's Corporate Governance initiative is based on two core principles. These
are:

 Management must have the executive freedom to drive the enterprise

forward without undue restraints; and this freedom of management
should be exercised within a framework of effective accountability.
 ITC believes that any meaningful policy on Corporate Governance must
provide empowerment to the executive management of the Company, and
simultaneously create a mechanism of checks and balances which ensures
that the decision making powers vested in the executive management is
not only not misused, but is used with care and responsibility to meet
stakeholder aspirations and societal expectations.

3.16 Vision
 Sustain ITC's position as one of India's most valuable corporations
through world class performance, creating growing value for the Indian
economy and the Company's stakeholders.

3.17 Mission
 To enhance the wealth generating capability of the enterprise in a
globalising environment, delivering superior and sustainable stakeholder
value

3.18 Multiple Drivers of Growth

ITC’s aspiration to create enduring value for the nation and its
stakeholders is manifest in its robust portfolio of traditional and Greenfield
businesses encompassing Fast Moving Consumer Goods (FMCG), Hotels,
Paperboards & Specialty Papers, Packaging, Agri-Business, and Information
Technology. This diversified presence in the businesses of tomorrow is powered
by a strategy to pursue multiple drivers of growth based on its proven
competencies, enterprise strengths and strong synergies between its businesses.

Page | 51
The competitiveness of ITC’s diverse businesses rest on the strong foundations
of institutional strengths derived from its deep consumer insights, cutting-edge
Research & Development, differentiated product development capacity, brand-
building capability, world-class manufacturing infrastructure, extensive rural
linkages, efficient trade marketing and distribution network and dedicated
human resources. ITC’s ability to leverage internal synergies residing across its
diverse businesses lends a unique source of competitive advantage to its
products and services.
Within a relatively short span of time, ITC has established vital brands like
Aashirvaad, Sunfeast, Dark Fantasy, Delishus, Bingo!, Yippee!, Candyman,
mint-o, Kitchens of India in the Branded Foods space; Essenza Di Wills, Fiama
Di Wills, Vivel, Vivel Cell Renew, Engage and Superia in the Personal Care
products segment; Classmate and Paperkraft in Education & Stationery
products; Wills Lifestyle and John Players in the Lifestyle Apparel business;
Mangaldeep in Agarbattis and Aim in the Safety Matches segment. This growth
has been rated by a Nielsen Report to be the fastest among the consumer goods
companies operating in India. Today ITC is the country's leading FMCG
marketer, the clear market leader in the Indian Paperboard and Packaging
industry, a globally acknowledged pioneer in farmer empowerment through its
wide-reaching Agri Business, the second largest Hotel Chain in India and a
trailblazer in 'green hoteliering'. This portfolio of rapidly growing businesses
considerably enhances ITC's capacity to generate growing value for the Indian
economy.
ITC's Agri-Business is one of India's largest exporters of agricultural
products. The ITC Group’s contribution to foreign exchange earnings over the
last ten years amounted to nearly US$ 6.0 billion, of which agri exports
constituted 57%. The Company's 'e-Choupal' initiative has enabled Indian
agriculture significantly enhance its competitiveness by empowering Indian
farmers through the power of the Internet. This transformational strategy has
already become the subject matter of a case study at Harvard Business School
apart from receiving widespread global acclaim.
As one of India's most valuable and respected corporations, ITC is widely
perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this
source of inspiration "a commitment beyond the market". In his own words:
"ITC believes that its aspiration to create enduring value for the nation provides
the motive force to sustain growing shareholder value. ITC practices this
Page | 52
philosophy by not only driving each of its businesses towards international
competitiveness but by also consciously contributing to enhancing the
competitiveness of the larger value chain of which it is a part."

Page | 53
3.19 ITC Products Profile

ITC Ltd.

Paperboards,
FMCG Hotels Agribusiness paper and
packaging

It is ITC's strategic intent to secure long-term growth by synergising and

blending the diverse pool of competencies residing in its various businesses to
exploit emerging opportunities in the FMCG sector. The Company's
institutional strength deep understanding of Indian consumer, strong
trademarks, deep and wide distribution network, agri-sourcing skills, packaging
know-how and cuisine expertise continue to be effectively leveraged to rapidly
grow the new FMCG businesses.

ITC has rapidly scaled up presence in its newer FMCG businesses comprising
Branded Packaged Foods, Lifestyle Retailing, Education and Stationery
products, Personal Care products, Safety Matches and Incense Sticks
(Agarbatti), at an impressive pace over the last several years, crossing Rs. 7000
crore mark in 2013.

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3.20 ITC Group of Companies

ITC Group Companies

Subsidiaries ITC Infotech

Surya Nepal Private Limited

Landbase India Limited

King Maker Marketing Inc.

USA Technico Pty Limited

Australia Russell Credit Limited

Wimco Limited Srinivasa Resort

Limited
Fortune Park Hotels Limited
Bay Islands Hotels Limited
Gold Flake Corporation Limited
Joint Venture Maharaja Heritage Resorts Ltd
ITC Essentra Limited

Associate Companies Gujarat Hotels Limited

International Travel House

Page | 55
3.21 SWOT ANALYSIS

STRENGTH
 Brand
 Largest Market players
 Sustainability
 Diversification

WEAKNESS
 The company is still depending up on the Tobacco Revenue.
 Heavy Taxation policy.

OPPORTUNITIES
 E-choupal
 Emerging opportunities in fairness skin care market
 Growth possibilities in the relatively untapped cigar market

THREATS
 Increasing tax in cigarettes
 Health Hazard
 FDI in retail
 Competition

Page | 56
CHAPTER:- 4

Page | 57
Conclusion
Financial Ratio Comparison

Company HUL Ltd ITC limited

Profitability Ratios
2014 2015 2016 2014 2015 2016

PBDIT Margin (%) 18.18 18.91 19.47 40.80 41.13 43.54

PBIT Margin (%) 17.25 17.98 18.47 38.09 38.49 40.73

PBT Margin (%) 17.94 20.08 18.35 38.08 38.34 40.60

Net Profit Margin (%) 13.80 14.00 12.76 26.43 26.31 26.72

Return on Net worth / 118.04 115.87 110.73 33.51 31.31 29.94

Equity (%)

Return on Capital 88.00 88.95 81.16 31.68 29.54 28.18

Employed (%)

Return on Assets (%) 29.75 31.65 28.81 22.39 21.73 19.88

Asset Turnover Ratio 215.55 225.94 225.78 84.72 82.60 74.39

(%)

Liquidity Ratios

Current ratio 1.03 1.05 1.03 1.82 2.05 1.65

Quick ratio 0.71 0.76 0.75 1.18 1.38 1.07

Inventory Turnover 10.20 11.84 12.65 4.52 4.66 4.32

ratio

Page | 58
Overall Strategy comparison
Category HUL ITC
Overview Hindustan Unilever ITC is not a pure-play
(HUL) is the largest FMCG company, since
pure-play FMCG cigarettes is its primary
company in the country business. It is
and has one of the widest diversifying into non-
portfolio of products sold tobacco. FMCG
via a strong distribution segments like foods,
channel. It owns and personal care, paper
markets some of the products, hotels and agri-
most popular brands in business to reduce its
the country across exposure to cigarettes.
various categories,
including soaps,
detergents, shampoos,
tea and face creams.
Performance After stagnating between Despite diversification,
1999 and ’04, the ITC’s reliance on
company is back on the cigarettes is still huge.
growth track. In the past The tobacco business
three years, till 2008 contributes 40% to its
HUL’s net sales have revenues, and accounts
witnessed a CAGR of for over 80% of its
11%, while net profit has profit. This cash-
posted a CAGR of 17%. generating business has
enabled it to take
ambitious, but expensive
bets in new segments and
deliver modest profit
growth.
Overall strategy HUL always believes in ITC is focusing on
customer friendly delivering value at
products with major competitive prices. Its
emphasis on low cost tremendous reach
overall without through extensive
compromising on the distribution chain has
quality of the product. been a competitive
They are leveraging the advantage. Additionally,
capabilities and scale of the company’s e-choupal
the parent company and model for direct
focusing on the value of procurement is well
Page | 59
 execution. The entire known under which ITC
product portfolio is also partners with over
being tweaked to include 100,000 farmers for
premium offerings such spices and wheat
as Pond’s Age Miracle procurement and an even
and dove shampoo in larger number for
skin and hair care. oilseeds. This kind of
rural pedigree is hard to
beat.
Growth drivers The Company has been ITC’s backward
launching new products integration to ensure that
and brand extensions, its products pass
with investments being efficiently from the
made towards brand- farms to consumers has
building and increasing helped it to cut down
its market share. HUL is supply and procurement
also streamlining its costs. ITC’s non-
various business cigarette FMCG business
operations, in line with leverages the large
the ‘One Unilever’ distribution network the
philosophy adopted by company has developed
the Unilever group by selling cigarettes over
worldwide. Introduction the years. A rich product
of premium products and mix, along with ramp-up
addition of new of investments in its new
consumers via market sectors, will be
expansion will be HUL’s instrumental in charting
growth drivers. ITC’s growth path.
Risk Being an MNC operating Increased regulatory
in India, HUL is more clamps on tobacco, along
conservative in its with rising tax burden.
strategies than its Indian So, it has started an
counterparts. Moreover, ambitious diversification
given increasing plan, which has its own
competition, it faces the set of risks. With its
risk of being overtaken foray into the
by domestic players in conventional FMCG
various categories. space, ITC has entered
Prolonged inflation may the high-clutter branded
lead to margin products market. This
contraction, in case HUL will burden its resources
is not able to pass on this in terms of ad spend and
burden to consumers. brand-building. Creating
Page | 60
 The company’s large brand recall and building
size also poses a market share in new
problem, since it does products are ITC’s key
not give HUL the agility challenges. Export ban
to address the rising crop prices pose a
competition it faces from threat for its agri-
national and regional business, taxing its
players margins.

Growth strategy of HUL vs. ITC

Five main competitive strategies are:
 Overall low cost leadership strategy
 Best cost provider's strategy
 Broad differentiation strategy
 Focused low cost strategy
 Focused differentiation strategy
Here competitive strategy varies from sector to sector and company to
company. Thus, it is not easy to predict a single or to find a single strategy for
the whole sector. When we come on to FMCG Sector main strategies lay behind
market strategies, cost, and quality strategies. Here in this report you are going
to get information about such type of strategies of FMCG giants.

Competitive strategies employed by HUL and ITC

HUL & ITC are major companies in FMCG market in India. When we compare
both companies on the basis of their strategies i.e. their competitive strategies in
the present market. When we look at the present segment breakup for both of
the companies then we came to know that their different products vary too
much in the market. Now let us take a comparative analysis of both the
companies under some heads:

Performance:

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After stagnating between 1999 and '04, the company is back on the growth
track. In the past three years, till 2008 HUL's net sales have witnessed a CAGR
of 11%, while net profit has posted a CAGR of 17%. Despite diversification,
ITC's reliance on cigarettes is still huge. The tobacco business contributes 40%
to its revenues, and accounts for over 80% of its profit. This cash-generating
business has enabled it to take ambitious, but expensive bets in new segments
and deliver modest profit growth.

Overall Strategy:
HUL always believes in customer friendly products with major emphasis on
low cost overall without compromising on the quality of the product. They are
leveraging the capabilities and scale of the parent company and focusing on the
value of execution. The entire product portfolio is also being tweaked to include
premium offerings such as Pond's Age Miracle and dove shampoo in skin and
hair care. HUL introduced Project Shakti to penetrate the rural market. ITC is
focusing on delivering value at competitive prices. Its tremendous reach through
extensive distribution chain has been a competitive advantage. Additionally, the
company's e-choupal model for direct. Procurement is well known under which
ITC partners with over 100,000 farmers for spices and wheat procurement and
an even larger number for oilseeds. This kind of rural pedigree is hard to beat.

Growth Drivers:
HUL has been launching new products and brand extensions, with investments
being made towards brand-building and increasing its market share. HUL is also
streamlining its various business operations, in line with the ‘One Unilever'
philosophy adopted by the Unilever group worldwide. Introduction of premium
products and addition of new consumers via market expansion will be HUL's
growth drivers. ITC's backward integration to ensure that its products pass
efficiently from the farms to consumers has helped it to cut down supply and
procurement costs. ITC's non-cigarette FMCG business leverages the large
distribution network the company has developed by selling cigarettes over the
years. A rich product mix, along with ramp-up of investments in its new sectors,
will be instrumental in charting ITC's growth path

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CHAPTER:- 5

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BIBLIOGRAPHY

WEBSITES AND SEARCH ENGINE

https://en.wikipedia.org/wiki/Hindustan_Unilever
https://www.hul.co.in/about/who-we-are/introduction-to-hindustan-unilever/
http://www.moneycontrol.com/india/stockpricequote/personal-
care/hindustanunilever/HU
http://www.itcportal.com/about-itc/profile/history-and-evolution.aspx
http://www.moneycontrol.com/india/stockpricequote/cigarettes/itc/ITC

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