FMCG Sector

Kaushik
Ranjith Kumar
Shyam Sundar
Sai Shyam
Surya Rao

ECONOMIC ANALYSIS
GDP 2014 (increased to 5.7%)
Inflation (WPI decreased 3.74%)
CPI (decreased to 7.8%)
Interest Rates 10% base rate
Economic and political stability
FDI inflow 2% of total FDI of $3.34 billions
Government policies
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INDUSTRY ANALYSIS
Fourth largest sector in Indian economy
Average growth of about 11%
Expected growth in retail growth- $450 billion
CAGR of ~15%
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COMPANY ANALYSIS
Current Ratio
HUL, Godrej< Industry Average(1.32)
ITC, Dabur, Nestle > Industry Average (1.32)
Cash Ratio
ITC, Dabur, Nestle > Industry Average (.73)
Godreg. HUL < Industry Average (.73)
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Asset Management Ratios
A/R turnover ratio
ITC, Dabur> Industry Average
(12.81)
Godreg, HUL, Nestle < Industry
Average
A/P Turnover Ratio
Godrej, HUL > Industry Average
ITC, Nestle, Dabur < Industry
Average
Inventory turnover ratio
ITC > Industry average
Nestle, Dabur, Godrej, HUL
< Industry ratio
Cash conversion cycle
Dabur, HUL, Godrej < Industry
average
ITC >Industry average
Total Asset turnover
ITC, Godrej, Nestle < Industry
average
HUL, Dabur >Industry average
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Leverage ratios
Debt ratio
ITC, Godrej, Dabur <Industry average
HUL, Nestle >Industry average

Debt-equity Ratio
Godrej, Nestle, Dabur < Industry average
HUL, ITC > Industry average

LT Debt
ITC, Godrej, Dabur <Industry average
HUL,Nestle > Industry average
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Profitability Ratios
Gross Margin
Dabur, Nestle <Industry average
HUl, ITC, Godrej > Industry
average

Operating margin
ITC > Industry average
HUL, Godrej, Dabur, Nestle
< Industry average

Net profit
ITC > Industry average
HUL, Godrej, Dabur, Nestle
< Industry average
ROA
Godrej, Nestle <Industry
average
ITC, HUL, Dabur > Industry
average

ROE
HUL > Industry average
ITC, Dabur, Nestle, Godrej <
Industry average

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Nestle
Strengths
Strong brand name to generate
sales
Ability to customize products to
the local market conditions
Strong global operations with
diversified revenue base
Research and development
capabilities
Weaknesses
Increasing instances of product recalls
hampering brand equity
Opportunities
Transition to a nutrition and well-
being' company
Focus on developing and emerging
Economies
Booming out of home eating
market
Threats
Compliance issue resulting in penalty
payments
Macro economic factors
Allegations of unethical business
activities
HUL
STRENGTH
1. HUL is a part of the Unilever group, hence strong
brand equity
2. It has over 15000 employees
3. Reach 6.4 million retail outlets which includes
direct reach to over 1.5 million retail outlets
4. Products with presence in over 20 consumer
categories with over 700 million Indian consumers
using its products
5. As a part of CSR, HUL has initiatives like project
Shakti, plastic recycling, women empowerment etc
WEEKNESS
1. Market share is limited due
to presence of other strong
FMCG brands
2. HUL products has stiff
competition from big domestic
players and international brands
OPPURTUNITIES
1. Tap rural markets and increase penetration in
urban areas
2.Increasing purchasing power of people thereby
increasing demand
THREATS
1. Intense and increasing
competition amongst other
FMCG companies
2.FDI in retail thereby allowing
international brands
3. Competition from unbranded
and local products
GODREJ
STRENGTHS
Some brands in 100 most trusted brands
Presence in more than 60 countries
Over 1,300 full-time employees
Widespread distribution network across
India
Recognized Godrej Research &
Development Centre

WEEKNESS
Limited market share due to stiff
competition in the premium soap market
Rural penetration is limited

OPPORTUNITIES
Tap rural markets and increase
penetration in urban area
Mergers and acquisitions to strengthen
the brand
Increasing purchasing power of people
thereby increasing demand

THREATS
Intense and increasing competition
amongst other FMCG companies
FDI in retail thereby allowing
international brands
Competition from unbranded and local
products

DABUR
STRENGTH
Products present in over 60 c0untries and
distribution through 5000 distributors and 2.8
million outlets
Strong Brand Image and Product
Development Strength
Strong Distribution Network and an
Extensive Supply Chain
It has welfare activities in health care,
education and other socio-economic
activities
WEEKNESS
Fake products sold under the
name of their brands
Image was restricted to
Ayurvedic Company
Association with a particular age
group (35-plus age group)

OPPORTUNITIES
Tap rural markets and increase penetration in
urban areas
Mergers and acquisitions to strengthen the
brand
Increasing purchasing power of people
thereby increasing demand
THREATS
Intense and increasing
competition amongst other
FMCG companies
FDI in retail thereby allowing
international brands
Competition from unbranded and
local products
ITC
STRENGTHS
ITC has a strong and experienced
management
Strong brand presence, excellent products
advertising
Diversified product and services portfolio
which includes FMCG, Hotel chains, paper
& packaging and agri-business
ITC limited employees over 25,000 people
WEEKNESS
ITC is still dependant on its
tobacco revenues and people
have cheaper substitutes and
other brands
Hotel industry has not been able
to create a huge market share
OPPORTUNITIES
Tap rural markets and increase penetration in
urban areas
Mergers and acquisitions to strengthen the
brand
Increasing purchasing power of people
thereby increasing demand
More publicity of hotel chains to increase
market share
THREATS
Strict govt regulations and
policies regarding cigarettes
Intense and increasing
competition amongst other
FMCG companies and hotel
chains
FDI in retail thereby allowing
international brands
Expected Return From The Portfolio











R
p
= 4.622%
p
= .789
p
= .2311 R
m
= 16.6%


07-10-2014 13 TSM