FMCG Sector

2011, BizVantage Confidential 1

India: An Emerging Consumer Market

Indian FMCG sector size poised to reach US$ 47 bn by 2013 and US$ 74 bn by 2018, growing annually at 10-12%
Marketsize US$ Bn 74 43 25
2008 2013E 2018E

Indian rural market currently worth US$ 9 bn is expected to become a US$ 100 bn opportunity by 2025.

By 2025, total consumption is likely to quadruple making India the 5th largest consumer market.

Organized retail is expected to grow by 14-18% by 2015 thereby boosting FMCG growth.
2011, BizVantage Confidential
Source: Economic survey 2009-10, IBEF report

Industry Overview
Indian FMCG industry worth ~ US$ 29 bn roughly constitutes 2.2% of Indias GDP. Within the FMCG sector, Food products is the largest consumption category. Strategic focus on rural marketing, innovations, niche consumer segments, exports, life style products to further the current 10% annual sector growth.

Key Players
Company
HUL Amul India Nestle India ITC ** Britannia Dabur Marico Industries GSK Consumer Cadbury India Colgate Palmolive Procter & Gamble Godrej (GPCL)

Key Categories
Segments 2% 22% 12%

Sales* (US$ Mn)

3921.5 1771.1 1155.4 805.7 759.9 635.9 449.3 447.9 430.1 391.8 388.5 280.5

Personal care, Food products, Household, Baby care, Fabric care Food and beverage products Food and beverage products Personal care, Food products Food products Personal care, Food products, Household Personal care, Household, Food products Food products, Personal care Food products Personal care, Oral care Personal care, Household , Baby care, Fabric care Personal care, Fabric care 2011, BizVantage Confidential

5% 4% 4% 8%

43%

Baby care Food products Household Others

Fabric care Hair care OTC products Personal care

Source: Relevant company websites, IBEF report *Yearly sales as of March 2010, ** FMCG business excluding tobacco

Key Trends: Increasing industry horizons, innovation emergence of life style products and focus on rural consumers
Consolidation
Indian FMCG companies are either increasing their focus on certain segments or are consolidating their existing business portfolios. Eg. Dabur India merged its wholly owned subsidiary Dabur Foods with itself.

Product Innovation

Several companies have taken to innovation by launching or customising their existing product portfolios for new consumer segments. Eg. Emami launched mens fairness cream, Nestle/Amul launched probiotic products by providing active ingredients in regular offerings, GSK launched foodles.

Lifestyle products

Lifestyle and premium range products are the next target product segment among Indian FMCG players. Eg. P&G launched Olay range of products, HUL launched Aviance.

Expanding horizons

Several Indian companies are exploring the business potential of overseas markets and under-penetrated regional markets Eg. Tata Tea acquired 30% stake in Energy Brands Inc (US based specialty water company), Marico is marketing beauty soaps in several African markets

Rural Marketing

Rural markets account for almost 30% of the consumption pie. Companies are devising exclusive marketing strategies gain rural foothold. Eg. ITCs e-choupal initiative, GSK launched Asha (low cost variant of Horlicks), Britannia launched Tiger Iron Zor, Nestle launched Maggi Rasile
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Source: IBEF report, ICMR, D&B Economy outlook, Unitedworld live content engine

Growth drivers, Challenges and Opportunities

Opportunities
Lifestyle & Premium products
Fast evolving lifestyles, rapid urbanization and increasing disposable incomes there exists an opportunity for high-end products.

Growth drivers
Increasing disposable income Growth in organized retail High consumer confidence Well established distribution network Consumer receptiveness to innovation Rapid urbanization and changing lifestyles

Rural Market New growth frontier

With more than 33% of Indian consumer base present in rural markets, it will be a key growth driver for domestic business.

Innovation
Indian consumers being highly receptive to new products demonstrates an opportunity to offer new products targeting specific segments.

Challenges
Diverse consumer preferences Increasing competition Rising logistics, procurement costs Ability to win rural consumers

Geographical Expansion
Fast growing emerging markets as well as culturally compatible markets offer a new dimension to further growth.

2011, BizVantage Confidential

Source: IBEF report, D&B Economy outlook,

The road ahead

Strategic Imperatives
1 2 Foray and win in rural markets Build and expand product portfolio Unleash the power of innovation Enhance customer service Diversify across geographies/categories/products Manage costs across supply chain Deliver on environmental sustainability commitments 3rd Party manufacturing Human resource development

3
4 5 6 7 8 9

2011, BizVantage Confidential

Source: IBEF report, BizVantage analysis