Description
Describing about depth analysis of Indian FMCG industry and indian private banking industry. In the FMCG space HUL, P&G, Dabur and Johnson & Johnson are used for analysis.
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FMCG INDUSTRY OVERVIEW: The fast moving consumer goods (FMCG) industry has grown nearly three times in the past decade. and domestic Indian players such as Dabur, Marico and Godrej have led the growth, while giant Hindustan Unilever has taken the biggest hit. In the last 10 years, the FMCG industry has reached a size of USD 25 billion from USD 9 billion. This has primarily been due to high consumer spending leading to higher sale of premium products as well as companies reaching out successfully to rural India. With a better distribution reach, FMCG companies will garner USD 18 billion from rural India in 2010 versus just USD 5 billion in 2006. Interestingly, the market leader Hindustan Unilever's sales in 2000 were more than the rest of the FMCG players. Today, its sales are less than half of rest of the industry. This dent in the giant's leadership has been brought about by domestic players. Dabur has moved from being an ayurvedic player to a complete consumer player. Similarly, Marico that primarily sold edible oil a decade ago is today the leader in health and wellness with brands like Saffola. But market experts believe that the good run that the industry has seen in the past decade may soon run out of steam as rural growth begins to flatten out and inflation restricts companies from taking any sort of price hikes. In the short term itself, FMCG companies saw a bit of dampening in volumes in the last quarter of financial year 2010. But innovation in categories such as health products, processed foods and personal care is what the experts are betting on for future growth. DOMAIN: PERSONAL CARE: Personal care products are one of the key constituents of the Fast Moving Consumer Goods (FMCG) sector. The sub sectors that come under the personal care sector which is included in this sector analysis are: ? ? ? ? ? Skin care Hair care Oral Care Color cosmetics Perfumes and deodorants
With increase in income levels, penetration of mass media and heightened awareness of personal hygiene, the personal care sector has witnessed strong growth in the recent years. The Indian personal care and cosmetics sector is valued at Rs 5.6 billion and is growing at11.5 %. It is expected that the cosmetics industry will grow at a CAGR of around 17% during 2010-2013.
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MARKET LEADER: HINDUSTAN UNILEVER LIMTED Hindustan Unilever Limited (HUL) is one of the largest fast moving consumer goods company in India. The company, a subsidiary of Unilever, sells Foods and Home and Personal Care brands in about 100 countries worldwide. The company, along with its subsidiaries, is engaged in the production and distribution of soaps and detergents, personal products, beverages, foods, ice creams, exports and others products such as chemicals and agri products. The major brands of the company include Lux, Hamam, lifebuoy, Dove, RIN, Surf, Wheel, Sunlight, Vim, Fair & Lovely, Clinic Plus, Sun Silk, Close-up, Pepsodent, Lakme, Brook Bond and others. MARKET CHALLENGER: PROCTLE & GAMBLE P&G Hygiene and Health Care Limited is one of India's fastest growing Fast Moving Consumer Goods Companies that has in its portfolio P&G's Billion dollar brands such as Vicks & Whisper. With a turnover of Rs. 500+ crores, the Company has carved a reputation for delivering high quality, value-added products to meet the needs of consumers. MARKET FOLLOWER: DABUR Dabur India Limited is the fourth largest FMCG Company in India with Revenues of US$750 Million (Rs 3416 Crore) & Market Capitalization of US$3.5 Billion (over Rs 16,000 Crore). Building on a legacy of quality and experience of over 125 years, Dabur operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care & Foods. MARKET NICHER: JOHNSON & JOHNSON Johnson's Baby is the trusted brand of skin care products for mothers the world over. It owes its strength to the trust of mothers, the long heritage of safe and pure superior quality products. Being specially designed for babies, it has earned the trust the trust of professionals who continue to endorse these products. It s 2009 annual sales was $61.9 billion. The company holds a significant share of the consumer and pharmaceutical markets.
MARKETING STRATEGIES IN PERSONAL CARE SEGMENT: Personal Wash: The market size of personal wash is estimated to be around Rs. 8,300 Cr. The personal wash can be segregated into three segments: Premium, Economy and Popular. The penetration level of soaps is 92 per cent. It is available in 5 million retail stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market share of 53 percent. HUL, which has been losing market share to rivals in the soap segment, has managed to arrest the slide after relaunching various brands under its belt. HUL embarked on a major brand relaunch exercise, under which its soaps like Lifebuoy, Liril, Hamam, Rexona, Breeze and Lux were given new packaging and fragrance. This helped arrest the declining market share. Whereas market follower Dabur India Limited entered into the personal wash segment with the national launch of its new Vatika -
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Honey & Saffron Soap. This launch marks Dabur's entry into the Rs 4700 crore Indian soap market. Soaps segment is amongst the biggest FMCG category in India both in the Urban and the rural market for bathing, amongst these; the beauty and skin care sub-category ranks the largest and comprises almost 50 per cent of the total soap market. J&J on the other hand pays more attention to hygiene and surgical skin care. Its baby care soaps and shampoos occupy a major market share in the niche segment. It products like Neutrogena and Clean and Clear are major products for sensitive skins segment. Skin Care:The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care market is at a primary stage in India. The penetration level of this segment in India is around 20 per cent. With changing life styles, increase in disposable incomes, greater product choice and availability, people are becoming aware about personal grooming. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent. J&J’s product Shower to Shower acts as a major competition especially in certain climates and regions. Hair Care: The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. Marico is the leader in Hair Oil segment with market share of ~ 33 per cent; Dabur occupies second position at ~17 per cent. Shampoo: The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the total shampoo sale. It has low penetration level even in metros. Again the market is dominated by HUL with around ~47 per cent market share; P&G occupies second position with market share of around ~23 per cent. Antidandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to increase due to increased marketing by players and availability of shampoos in affordable sachets. HUL introduced Sunsilk as a premium range shampoo. In the initial times, sunsilk was a cosmetic beauty shampoo but within 10 years of launch of sunsilk, they launched a tonic shampoo for the dandruff which was the first anti-dandruff shampoo in India. Sunsilk was relaunched in 2007 when conditioners, Livon were introduced. In response to Sunsilk, P&G launched Pantene which was targeting the women and the girls. In response to the competitive pressures from HUL and P&G, when they announced the price cuts, Dabur India Ltd decided to cut Vatika shampoo prices by 20 per cent besides launching the brand in one-rupee sachets to gain volumes. Currently there is a price war going on between HUL’s Clinic Plus and P&G’s Rejoice which are the low priced products. Procter & Gamble had slashed the price of Rejoice, its mass-market shampoo brand, by over 20 per cent and now Rejoice is positioned against
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Hindustan Lever's bestselling brand, Clinic Plus. The price of a 100 ml pack of Rejoice has been slashed by 23 per cent to Rs 30 while a 200 ml pack has been marked down by 21 per cent to Rs 59. This is the Counter Offensive Strategy and Position Defense Strategy being adopted by HUL against P&G. Among the baby products Jhonsons shampoo has an over 60% market share and its aggressive marketing strategy has earned it a brand awareness of more than 99%. Oral Care:Competition is tightening between local and global players in the Rs 4500 core branded oral care sector. Even as Hindustan Unilever Ltd (HUL) is drawing up ‘strategic plans’ to drive the performances of its oral care brands, Dabur India Ltd is expanding its ‘manufacturing capacity and distribution network’ to pump up volumes. Incidentally, Dabur launched a new variant of its flagship brand Babool in 2009. They invest in all their brands that woo the customers. HUL then re-launched its brand Pepsodent Germicheck Plus with new formulations. In the mouthwash segment, J&J occupies an undisputed market share of 60% with its premium mouth wash Listerine. P&G stands next here with its products Scope & Plax. Besides the above strategies used by the 4 Market players in the Personal care Segment, strategies followed in other segments are: Detergents:The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care segment is characterized by high degree of competition and high level of penetration. With rapid urbanization, emergence of small pack size and sachets, the demand for the household care products is flourishing. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. In washing powder HUL is the leader with ~38 per cent of market share. Being a pioneer HUL constantly upgraded its product i.e. from launching Rin in 1969 which became a household name synonymous with dazzling white clothes and Surf Excel along with Wheel in order to keep up with the competition. The Indian detergent market has been in lather for some time now. It all started in fiscal 2009, when detergent companies hiked prices too sharply, in response to higher raw material prices. When inputs became cheaper, they held on in the hope of better margins, but local players moved in for the kill with cheaper products. HUL’s unit realization on detergents rose by 30%, but their volumes took a hit. P&G, too, jumped into the fray as part of its effort to grow share in emerging markets with Tide using the Flank Defense Strategy. Thus, fiscal 2010 became the year of corrections. HUL dropped prices on its mass market detergents, and realizations went up by just 2.7% over the previous year, but volumes fell by 3%. Despite price cuts, HUL’s premium detergent brands aided better realizations. The June quarter saw a better performance as HUL’s strategy is showing initial results. Growth Prospect: Large Market
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India has a population of more than 1.150 Billions which is just behind China. According to the estimates, by 2030 India population will be around 1.450 Billion and will surpass China to become the World largest in terms of population. FMCG Industry which is directly related to the population is expected to maintain a robust growth rate.
Spending Pattern An increase is spending pattern has been witnessed in Indian FMCG market. There is an upward trend in urban as well as rural market and also an increase in spending in organized retail sector. An increase in disposable income, of household mainly because of in-crease in nuclear family where both the husband and wife are earning, has leads to growth rate in FMCG goods. Changing Profile and Mind Set of Consumer People are becoming conscious about health and hygienic. There is a change in the mind set of the Consumer and now looking at “Money for Value” rather than “Value for Money”. We have seen willingness in consumers to move to evolved products/ brands, because of changing lifestyles, rising disposable income etc. Consumers are switching from economy to premium product even we have witnessed a sharp increase in the sales of packaged water and water purifier.
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INDIAN PRIVATE BANKING INDUSTRY SECTOR ANALYSIS Banking Industry has cheered investor's confidence once again with the stronger set of returns for the quarter ended June 2010. The expected stronger results, Improved operating metrics and Government infusion of capital in the public sector banks have made investors bid high on the banking Industry. Aggregates of 40 banks have reported 26% jump in the Net Profit at Rs 15068 crore over robust 46% jump in the Net Interest Income (NII) at Rs 38513 crore. With increase in the short term rates and recent policy hikes, many of the bank's in the mid of August have increased the lending (PLR) and deposit rates. Many banks have started mobilizing the deposits at higher rates and also CASA regime. However, we expect margins to sustain as loans get reprised faster than deposits. Thus sustainable margins with upward bias, Healthy credit demand and containment in the slippages and provisions will make Indian banking system stronger going ahead. DESIGNING COMPETITIVE STRATEGIES A market with Competition may typically be occupied by: 1. 2. 3. 4. Market Leader Market Challenger Market Follower Market Nicher
Company Strategies are different for each. In Indian Private banking sector, huge amount of competition exists, with large number of corporate applying for banking license with RBI.
S.No. BANKS Total Income 2009 1 2 3 4 5 6 7 8 9 10 11 12 13 14 City Union Bank Ltd. ING Vysya Bank Ltd. The Federal Bank Ltd. The Jammu & Kashmir Bank Ltd. The Karnataka Bank Ltd. The Karur Vysya Bank Ltd. The Lakshmi Vilas Bank Ltd. The South Indian Bank Ltd. Axis Bank Ltd. HDFC Bank Ltd. ICICI Bank Ltd. Indusind Bank Ltd. Kotak Mahindra Bank Ltd. YES Bank 928 2788 3831 3233 2271 1711 765 1851 13732 19623 38696 2766 3339 2438 2010 1100 2853 4204 3473 2355 2005 1013 2144 15584 19981 33185 3260 3884 2945 Deposits 2009 8207 24889 32198 33004 20333 15101 7361 18092 117374 142812 218348 22110 15644 16169 2010 10285 25865 36058 37237 23731 19272 9075 23012 141300 167404 202017 26710 23886 26799 Investments 2009 2397 10496 12119 10736 8961 4716 1863 6075 46330 58818 103058 8083 9110 7117 2010 3210 10473 13055 13956 9992 6602 2983 7156 55975 58608 120893 10402 12513 10210 Advances 2009 5645 16756 22392 20930 11810 10410 5236 11848 81557 98883 218311 15771 16625 12403 2010 6833 18507 26950 23057 14436 13497 6277 15823 104343 125831 181206 20551 20775 22193 Net Profit 2009 122 189 500 410 267 236 50 195 1815 2245 3758 148 276 304 2010 153 242 465 512 167 336 31 234 2515 2949 4025 350 561 478
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STRUCTURE OF THE PRIVATE BANKING INDUSTRY Private Banks ICICI Bank HDFC Bank, Axis Bank Kotak Mahindra Bank , Indusind bank, South Indian bank, Federal Bank YES Bank
Market leader Market Challenger Market Follower Nicher
MARKET LEADER STRATEGIES In terms of total income, deposits, investments, advances or net profit, ICICI bank seems to be way ahead of all other private sector banks. In terms of the total income earned by the private sector banks, 35% of the total income is generated by ICICI Bank. ICICI Bank is the market leader in Indian private banking sector. Most valuable bank in India in terms of market capitalization and described by the competitors and industry expert in one word –“Aggressive”. ICICI Bank Strategies: 1. Expanding Total Market through Market penpretation Strategy: They have doubled their branch network to over 2,000 branches – the largest branch network among Indian private sector banks. As the result, CASA ratio has increased from 28.7% at March 31, 2009 to 41.7% at March 31, 2010, resulting in a significantly enhanced stable low cost deposit base. 2. They are continuously enhancing their non-branch channels, including internet banking and mobile banking, to give their customers the power to use technology for safe and convenient banking. 3. The ICICI brand has become synonymous with growth and innovation, and is the only Indian brand to feature in the Brandz list of the top 50 global brands. They will build this brand further through a range of initiatives to broaden and deepen their presence across the country and their relationships with our customers. Defend Market Share: 1. Flank Defense: Cross-selling new products and the products of our life and general insurance subsidiaries to their existing customers is a key focus area for the Bank. Crosssell allows them to deepen their relationship with their existing customers and helps them reduce origination costs as well as earn fee income. Core proposition – ‘Hum hain na’ – trust, credibility, total financial solution provider (brought about through its cross selling effort 2. Position Defense: ? Penetrative pricing aimed at achieving large market share. ? Philosophy of profit through volume. ? Price leader in retail banking product ? Aggressive pricing facilitated through low cost of fund acquisition.
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MARKET CHALLENGER AXIS Bank: Axis Bank, formerly UTI Bank, is India’s third largest private-sector bank after the significantly larger ICICI Bank, and HDFC Bank. The bank’s ATM network of 3,171 ATMs is the third largest in the country. It has a wide presence through its 749 branches and extension counters across 454 cities and towns across India. Over the last 12 months, Axis Bank added 141 branches and extension counters and 576 ATMs. It has strengths in both retail and corporate banking. Although the operating environment for the banking industry has become challenging in recent months, Axis Bank is well positioned to benefit from the revival in the economic environment in future. The bank has strong technology and products, an expanding distribution franchise, adequate scale, a strong service culture, and management enterprise. These are the features that should help it stay ahead of large government banks to win market share. Moreover, the management has stood out for its confidence in its business outlook. The bank also has one of the most consistent growth track records. Its net profit has grown above 30% in 32 of the last 34 quarters.The above exceptional performance shown by the Axis Bank over the previous few years, and the level of tough competition it is giving to the market leader in Private Sector Bank ICICI bank makes it a ‘Market Challenger’ in the current segment. Strategies: 1) FRONTAL ATTACK: Attack on competitors through better Performance & Capital Management FINANCIAL AND BUSINESS PERFORMANCE The Bank continued to show robust growth in both business and financial performance indicators during the year 2009-10 in the backdrop of the economic slowdown, by leveraging its basic strengths: the infrastructure created over the years, a well laid-out retail franchise, a large number of corporate relationships and the pre-eminence enjoyed by it in a diverse set of businesses such as infrastructure and capital markets. The strong financial performance reported by the Bank is an assertion of the Bank's strategic focus and adherence to the basics of banking. CAPITAL MANAGEMENT The Bank strives to provide superior returns, while maintaining a solid capital base to support the risks associated with its diversified businesses. Its capital management framework optimizes the use of capital by ensuring its deployment to support business growth in a manner which leads to a high return on equity. The Bank's capital management approach is driven by the objective of maintaining a strong capital base, reflected through a strong Tier I capital adequacy ratio in order to support the execution of its growth plans and business strategies, while meeting the regulatory capital requirements at all times. 2) Encirclement Attack: Attacking the market leader on Retail Banking by superior & innovative financial products
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RETAIL BANKING The Bank aims to increase its market-share in India's expanding financial services industry through continued emphasis on building a strong retail franchise. The Bank remains committed to developing long-term strong relationships with its customers and ensuring that they have access to high-quality service as well as the full suite of financial solutions to help achieve their financial objectives. Growth strategies have focused on building profitable relationships across various customer segments. In order to achieve the objective of becoming more customer-centric, rather than product-centric, the Bank has restructured Retail Banking into two groups namely Mass and Mass Affluent, and Affluent segments. The Mass and Mass Affluent Segment owns, as the name indicates, mass-market customers, while the Affluent Segment owns clientele defined as affluent, comprising customers in the wealth and private banking space. The Bank was also the first to launch a Platinum Chip Debit Card in the country, which is presently offered exclusively to the Priority Banking customer segment. In the prepaid cards market, the Bank has attained a leadership position offering a bouquet of products suited to a variety of needs: Rewards Cards - for disbursement of incentives and commissions, Payroll Cards - for low-value salary payments, Gift Cards - a substitute for cash, gift vouchers and physical gifts, Meal Cards- For disbursement of meal allowances, Annuity Cards -for annuity payments to customers of LIC of India and Remittance Cards – for disbursement of inward remittances. The Bank has continued to retain its leadership position in the infrastructure debt market and syndicated an aggregate amount of Rs. 27,000 crores by way of Rupee and Foreign currency loans during 2009-10. Euromoney Project Finance (Deals of the Year 2009) has conferred several awards in the area of infrastructure financing to the Bank. These include categories such as 'Road Deal of the Year', 'Indian Rail Deal of the Year' and 'Indian PPP Deal of the Year'. 3) Buy pass Strategy : Focus more on Debt Market & Better Technology than Competition Debt Capital Market and Equity Trading The Bank continued to maintain its leadership position in the domestic debt market and has syndicated an aggregate amount of around Rs. 69,077 crores through the private placement of bonds and debentures. Prime database has ranked the Bank as the number 1 arranger for private placement of bonds and debentures till December 2009. Bloomberg has also ranked the Bank as number 1 in India Domestic Bond League Table for the calendar year 2009 and for the quarter ended 31 March 2010. Asia Money has rated the Bank as the Best Domestic Debt House in India for the year 2009.
INFORMATION TECHNOLOGY Technology is one of the key enablers for business and IT has enabled a scalable, robust and function-rich platform to deliver business value for the customers. A strategy of offering increasing functionalities to customers across channels like ATM, net banking, mobile banking
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has been supported by IT by providing a secured and efficient platform. The Bank has consistently remained amongst the top performing banks in terms of value and accuracy of undertaking government transactions. Another major step in this direction is sending password-protected e-statements to registered customers to reduce the use of paper. The statement covers all the accounts of the customer. MARKET FOLLOWER Kotak Mahindra Bank: It is one of the fastest growing bank and among the most admired financial institutions in India. The Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. They have one of the largest and most respected Wealth Management teams in India, providing the widest range of solutions to high net worth individuals, entrepreneurs, business families and employed professionals. The Bank has over 245 branches, a customer base of over 8 lakh and has spread all over India. Strategies: 1. Imitator: It follows the same strategies as ICICI bank with slight difference I terms of pricing & Service levels. Similar to ICICI bank, The Bank has started offering comprehensive business solutions for the business community that includes the Current Account, Trade Services, Cash Management Service and Credit Facilities. Their Wholesale banking products offer business banking solutions for long-term investments and working capital needs, advice on mergers and acquisitions and equipment financing. The fees and interest rate charged for the above services is not the same as ICICI bank. Since it does not have a very large customer base, it cannot compete in terms of pricing. It plans to expand its Branch Banking Business and added 32 branches and 105 ATMs and ended this year with 249 Branches and 492 ATMs. The regulatory changes offering limited free usage of ATMs to customers across all ATMs of banks has helped, the Bank to benefit by higher usage of the network. The Bank is now present in 145 locations across the country. The Bank added over half a million new customers this year. Distinct Services to hold back the current customers: The Bank addresses the entire spectrum of financial needs of Non-Resident Indians. Their tie-up with the Overseas Indian Facilitation Centre (OIFC) as a strategic partner gives them a platform to share their comprehensive range of banking & investment products and services for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs). A holistic proposition on Trade Services coupled with Credit facilities helped the Bank create a profitable segment of customers. The Bank also launched 2 commercial branches aimed at servicing the specific needs of its trade customers.
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MARKET NICHER
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YES Bank: A much differentiated Approach to Banking YES Bank is expanding at a brisk pace, providing customers with a tailored knowledgeable offering and the latest technological platforms to enhance the banking experience. Thus, it has created a niche in an already crowded market. It has a philosophy of sustainability, in keeping with its ethical principles, but is also geared for rapid expansion. Instruments of Growth for YES Bank are: 1) ‡ A focused business strategy. 2) ‡ Entrepreneurial leadership. 3) ‡ Highly rated employees 4) ‡ Best in class processes. 5) ‡ Evolutionary Technology YES BANK is the only Greenfield license awarded by the RBI in the last 15 years. YES BANK has recently become the first Indian Bank to become a signatory to the United Nations Global Compact CRITICAL AREAS IDENTIFIED ON THE TECHNOLOGY FRONT BY YES BANK 1) High level of efficiency through automation of operations 2) Centralized databases and processing for speedy recovery of data 3) Connectivity with customers and external agencies at various touch points. 4) Best systems for integration of front, middle and back offices. 5) Adopting best surveillance and security systems 6) Using real time environment for good disaster recovery process and backup systems A) Corporate & Institutional Banking Customer Segmentation Large Corporate with more than INR 10 billion turnover, Government companies and PSUs, Financial Institutions and Banks, select multinational corporations Typical exposure in the range of INR 300-1000 million
Business Strategy Capitalize on current market conditions to improve penetration in large and reputed business houses to move up the value chain and increase cross-sell Build long term, comprehensive relationships for these marquee corporate
B) Commercial Banking Customer Segmentation Emerging mid-Corporate of India with turnover between INR 1.0 billion and INR 10 billion Typical exposure in the range INR 50-300 million
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Business Strategy Selectively identify emerging sectors & companies for long term institutionalization of relationship capital by leveraging knowledge banking approach Become a privileged growth partner for these large Corporate of tomorrow
C) Business Banking (SME) Customer Segmentation Small and Medium Enterprises (SMEs) with turnover less than INR 1.0 billion (with a focus on the INR 0.5 – 1.0 billion range) Focus on supply chain partners of larger Corporate Typical exposure in the range INR 20-100 million
Business Strategy Focus on liabilities generation and transactional products Service and Technology to be key differentiators for the Bank
D) Retail Banking (Include Small Businesses) Customer Segmentation Small businesses near branch areas Focus on affluent and mass affluent Retail customers Focus in leveraging Corporate relationships for salary accounts
Business Strategy Focus on liabilities generation and transactional products Service and Technology to be key differentiators for the Bank
Highlights of the Achievement: YES BANK won the Financial Insights Innovation Award (FIIA) for the Most Innovative ePayments Solution in Asia for two consecutive years, FY08 and FY09 Consistently ranked among the 10 by Thomson Reuters in the Indian Rupee Bond League Tables Strong expertise in Financial Advisory practice demonstrated by a 135 % y-o-y increase in revenues Awarded the Qimpro Best Prax Compass Award for Innovative Practices in Customer Service Channels Only Bank to receive the Emerging Markets Sustainable Bank of the Year award at the FT/IFC Sustainable Banking Awards
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doc_210976227.docx
Describing about depth analysis of Indian FMCG industry and indian private banking industry. In the FMCG space HUL, P&G, Dabur and Johnson & Johnson are used for analysis.
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FMCG INDUSTRY OVERVIEW: The fast moving consumer goods (FMCG) industry has grown nearly three times in the past decade. and domestic Indian players such as Dabur, Marico and Godrej have led the growth, while giant Hindustan Unilever has taken the biggest hit. In the last 10 years, the FMCG industry has reached a size of USD 25 billion from USD 9 billion. This has primarily been due to high consumer spending leading to higher sale of premium products as well as companies reaching out successfully to rural India. With a better distribution reach, FMCG companies will garner USD 18 billion from rural India in 2010 versus just USD 5 billion in 2006. Interestingly, the market leader Hindustan Unilever's sales in 2000 were more than the rest of the FMCG players. Today, its sales are less than half of rest of the industry. This dent in the giant's leadership has been brought about by domestic players. Dabur has moved from being an ayurvedic player to a complete consumer player. Similarly, Marico that primarily sold edible oil a decade ago is today the leader in health and wellness with brands like Saffola. But market experts believe that the good run that the industry has seen in the past decade may soon run out of steam as rural growth begins to flatten out and inflation restricts companies from taking any sort of price hikes. In the short term itself, FMCG companies saw a bit of dampening in volumes in the last quarter of financial year 2010. But innovation in categories such as health products, processed foods and personal care is what the experts are betting on for future growth. DOMAIN: PERSONAL CARE: Personal care products are one of the key constituents of the Fast Moving Consumer Goods (FMCG) sector. The sub sectors that come under the personal care sector which is included in this sector analysis are: ? ? ? ? ? Skin care Hair care Oral Care Color cosmetics Perfumes and deodorants
With increase in income levels, penetration of mass media and heightened awareness of personal hygiene, the personal care sector has witnessed strong growth in the recent years. The Indian personal care and cosmetics sector is valued at Rs 5.6 billion and is growing at11.5 %. It is expected that the cosmetics industry will grow at a CAGR of around 17% during 2010-2013.
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MARKET LEADER: HINDUSTAN UNILEVER LIMTED Hindustan Unilever Limited (HUL) is one of the largest fast moving consumer goods company in India. The company, a subsidiary of Unilever, sells Foods and Home and Personal Care brands in about 100 countries worldwide. The company, along with its subsidiaries, is engaged in the production and distribution of soaps and detergents, personal products, beverages, foods, ice creams, exports and others products such as chemicals and agri products. The major brands of the company include Lux, Hamam, lifebuoy, Dove, RIN, Surf, Wheel, Sunlight, Vim, Fair & Lovely, Clinic Plus, Sun Silk, Close-up, Pepsodent, Lakme, Brook Bond and others. MARKET CHALLENGER: PROCTLE & GAMBLE P&G Hygiene and Health Care Limited is one of India's fastest growing Fast Moving Consumer Goods Companies that has in its portfolio P&G's Billion dollar brands such as Vicks & Whisper. With a turnover of Rs. 500+ crores, the Company has carved a reputation for delivering high quality, value-added products to meet the needs of consumers. MARKET FOLLOWER: DABUR Dabur India Limited is the fourth largest FMCG Company in India with Revenues of US$750 Million (Rs 3416 Crore) & Market Capitalization of US$3.5 Billion (over Rs 16,000 Crore). Building on a legacy of quality and experience of over 125 years, Dabur operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care & Foods. MARKET NICHER: JOHNSON & JOHNSON Johnson's Baby is the trusted brand of skin care products for mothers the world over. It owes its strength to the trust of mothers, the long heritage of safe and pure superior quality products. Being specially designed for babies, it has earned the trust the trust of professionals who continue to endorse these products. It s 2009 annual sales was $61.9 billion. The company holds a significant share of the consumer and pharmaceutical markets.
MARKETING STRATEGIES IN PERSONAL CARE SEGMENT: Personal Wash: The market size of personal wash is estimated to be around Rs. 8,300 Cr. The personal wash can be segregated into three segments: Premium, Economy and Popular. The penetration level of soaps is 92 per cent. It is available in 5 million retail stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market share of 53 percent. HUL, which has been losing market share to rivals in the soap segment, has managed to arrest the slide after relaunching various brands under its belt. HUL embarked on a major brand relaunch exercise, under which its soaps like Lifebuoy, Liril, Hamam, Rexona, Breeze and Lux were given new packaging and fragrance. This helped arrest the declining market share. Whereas market follower Dabur India Limited entered into the personal wash segment with the national launch of its new Vatika -
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Honey & Saffron Soap. This launch marks Dabur's entry into the Rs 4700 crore Indian soap market. Soaps segment is amongst the biggest FMCG category in India both in the Urban and the rural market for bathing, amongst these; the beauty and skin care sub-category ranks the largest and comprises almost 50 per cent of the total soap market. J&J on the other hand pays more attention to hygiene and surgical skin care. Its baby care soaps and shampoos occupy a major market share in the niche segment. It products like Neutrogena and Clean and Clear are major products for sensitive skins segment. Skin Care:The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care market is at a primary stage in India. The penetration level of this segment in India is around 20 per cent. With changing life styles, increase in disposable incomes, greater product choice and availability, people are becoming aware about personal grooming. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent. J&J’s product Shower to Shower acts as a major competition especially in certain climates and regions. Hair Care: The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. Marico is the leader in Hair Oil segment with market share of ~ 33 per cent; Dabur occupies second position at ~17 per cent. Shampoo: The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the total shampoo sale. It has low penetration level even in metros. Again the market is dominated by HUL with around ~47 per cent market share; P&G occupies second position with market share of around ~23 per cent. Antidandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to increase due to increased marketing by players and availability of shampoos in affordable sachets. HUL introduced Sunsilk as a premium range shampoo. In the initial times, sunsilk was a cosmetic beauty shampoo but within 10 years of launch of sunsilk, they launched a tonic shampoo for the dandruff which was the first anti-dandruff shampoo in India. Sunsilk was relaunched in 2007 when conditioners, Livon were introduced. In response to Sunsilk, P&G launched Pantene which was targeting the women and the girls. In response to the competitive pressures from HUL and P&G, when they announced the price cuts, Dabur India Ltd decided to cut Vatika shampoo prices by 20 per cent besides launching the brand in one-rupee sachets to gain volumes. Currently there is a price war going on between HUL’s Clinic Plus and P&G’s Rejoice which are the low priced products. Procter & Gamble had slashed the price of Rejoice, its mass-market shampoo brand, by over 20 per cent and now Rejoice is positioned against
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Hindustan Lever's bestselling brand, Clinic Plus. The price of a 100 ml pack of Rejoice has been slashed by 23 per cent to Rs 30 while a 200 ml pack has been marked down by 21 per cent to Rs 59. This is the Counter Offensive Strategy and Position Defense Strategy being adopted by HUL against P&G. Among the baby products Jhonsons shampoo has an over 60% market share and its aggressive marketing strategy has earned it a brand awareness of more than 99%. Oral Care:Competition is tightening between local and global players in the Rs 4500 core branded oral care sector. Even as Hindustan Unilever Ltd (HUL) is drawing up ‘strategic plans’ to drive the performances of its oral care brands, Dabur India Ltd is expanding its ‘manufacturing capacity and distribution network’ to pump up volumes. Incidentally, Dabur launched a new variant of its flagship brand Babool in 2009. They invest in all their brands that woo the customers. HUL then re-launched its brand Pepsodent Germicheck Plus with new formulations. In the mouthwash segment, J&J occupies an undisputed market share of 60% with its premium mouth wash Listerine. P&G stands next here with its products Scope & Plax. Besides the above strategies used by the 4 Market players in the Personal care Segment, strategies followed in other segments are: Detergents:The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care segment is characterized by high degree of competition and high level of penetration. With rapid urbanization, emergence of small pack size and sachets, the demand for the household care products is flourishing. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. In washing powder HUL is the leader with ~38 per cent of market share. Being a pioneer HUL constantly upgraded its product i.e. from launching Rin in 1969 which became a household name synonymous with dazzling white clothes and Surf Excel along with Wheel in order to keep up with the competition. The Indian detergent market has been in lather for some time now. It all started in fiscal 2009, when detergent companies hiked prices too sharply, in response to higher raw material prices. When inputs became cheaper, they held on in the hope of better margins, but local players moved in for the kill with cheaper products. HUL’s unit realization on detergents rose by 30%, but their volumes took a hit. P&G, too, jumped into the fray as part of its effort to grow share in emerging markets with Tide using the Flank Defense Strategy. Thus, fiscal 2010 became the year of corrections. HUL dropped prices on its mass market detergents, and realizations went up by just 2.7% over the previous year, but volumes fell by 3%. Despite price cuts, HUL’s premium detergent brands aided better realizations. The June quarter saw a better performance as HUL’s strategy is showing initial results. Growth Prospect: Large Market
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India has a population of more than 1.150 Billions which is just behind China. According to the estimates, by 2030 India population will be around 1.450 Billion and will surpass China to become the World largest in terms of population. FMCG Industry which is directly related to the population is expected to maintain a robust growth rate.
Spending Pattern An increase is spending pattern has been witnessed in Indian FMCG market. There is an upward trend in urban as well as rural market and also an increase in spending in organized retail sector. An increase in disposable income, of household mainly because of in-crease in nuclear family where both the husband and wife are earning, has leads to growth rate in FMCG goods. Changing Profile and Mind Set of Consumer People are becoming conscious about health and hygienic. There is a change in the mind set of the Consumer and now looking at “Money for Value” rather than “Value for Money”. We have seen willingness in consumers to move to evolved products/ brands, because of changing lifestyles, rising disposable income etc. Consumers are switching from economy to premium product even we have witnessed a sharp increase in the sales of packaged water and water purifier.
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INDIAN PRIVATE BANKING INDUSTRY SECTOR ANALYSIS Banking Industry has cheered investor's confidence once again with the stronger set of returns for the quarter ended June 2010. The expected stronger results, Improved operating metrics and Government infusion of capital in the public sector banks have made investors bid high on the banking Industry. Aggregates of 40 banks have reported 26% jump in the Net Profit at Rs 15068 crore over robust 46% jump in the Net Interest Income (NII) at Rs 38513 crore. With increase in the short term rates and recent policy hikes, many of the bank's in the mid of August have increased the lending (PLR) and deposit rates. Many banks have started mobilizing the deposits at higher rates and also CASA regime. However, we expect margins to sustain as loans get reprised faster than deposits. Thus sustainable margins with upward bias, Healthy credit demand and containment in the slippages and provisions will make Indian banking system stronger going ahead. DESIGNING COMPETITIVE STRATEGIES A market with Competition may typically be occupied by: 1. 2. 3. 4. Market Leader Market Challenger Market Follower Market Nicher
Company Strategies are different for each. In Indian Private banking sector, huge amount of competition exists, with large number of corporate applying for banking license with RBI.
S.No. BANKS Total Income 2009 1 2 3 4 5 6 7 8 9 10 11 12 13 14 City Union Bank Ltd. ING Vysya Bank Ltd. The Federal Bank Ltd. The Jammu & Kashmir Bank Ltd. The Karnataka Bank Ltd. The Karur Vysya Bank Ltd. The Lakshmi Vilas Bank Ltd. The South Indian Bank Ltd. Axis Bank Ltd. HDFC Bank Ltd. ICICI Bank Ltd. Indusind Bank Ltd. Kotak Mahindra Bank Ltd. YES Bank 928 2788 3831 3233 2271 1711 765 1851 13732 19623 38696 2766 3339 2438 2010 1100 2853 4204 3473 2355 2005 1013 2144 15584 19981 33185 3260 3884 2945 Deposits 2009 8207 24889 32198 33004 20333 15101 7361 18092 117374 142812 218348 22110 15644 16169 2010 10285 25865 36058 37237 23731 19272 9075 23012 141300 167404 202017 26710 23886 26799 Investments 2009 2397 10496 12119 10736 8961 4716 1863 6075 46330 58818 103058 8083 9110 7117 2010 3210 10473 13055 13956 9992 6602 2983 7156 55975 58608 120893 10402 12513 10210 Advances 2009 5645 16756 22392 20930 11810 10410 5236 11848 81557 98883 218311 15771 16625 12403 2010 6833 18507 26950 23057 14436 13497 6277 15823 104343 125831 181206 20551 20775 22193 Net Profit 2009 122 189 500 410 267 236 50 195 1815 2245 3758 148 276 304 2010 153 242 465 512 167 336 31 234 2515 2949 4025 350 561 478
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STRUCTURE OF THE PRIVATE BANKING INDUSTRY Private Banks ICICI Bank HDFC Bank, Axis Bank Kotak Mahindra Bank , Indusind bank, South Indian bank, Federal Bank YES Bank
Market leader Market Challenger Market Follower Nicher
MARKET LEADER STRATEGIES In terms of total income, deposits, investments, advances or net profit, ICICI bank seems to be way ahead of all other private sector banks. In terms of the total income earned by the private sector banks, 35% of the total income is generated by ICICI Bank. ICICI Bank is the market leader in Indian private banking sector. Most valuable bank in India in terms of market capitalization and described by the competitors and industry expert in one word –“Aggressive”. ICICI Bank Strategies: 1. Expanding Total Market through Market penpretation Strategy: They have doubled their branch network to over 2,000 branches – the largest branch network among Indian private sector banks. As the result, CASA ratio has increased from 28.7% at March 31, 2009 to 41.7% at March 31, 2010, resulting in a significantly enhanced stable low cost deposit base. 2. They are continuously enhancing their non-branch channels, including internet banking and mobile banking, to give their customers the power to use technology for safe and convenient banking. 3. The ICICI brand has become synonymous with growth and innovation, and is the only Indian brand to feature in the Brandz list of the top 50 global brands. They will build this brand further through a range of initiatives to broaden and deepen their presence across the country and their relationships with our customers. Defend Market Share: 1. Flank Defense: Cross-selling new products and the products of our life and general insurance subsidiaries to their existing customers is a key focus area for the Bank. Crosssell allows them to deepen their relationship with their existing customers and helps them reduce origination costs as well as earn fee income. Core proposition – ‘Hum hain na’ – trust, credibility, total financial solution provider (brought about through its cross selling effort 2. Position Defense: ? Penetrative pricing aimed at achieving large market share. ? Philosophy of profit through volume. ? Price leader in retail banking product ? Aggressive pricing facilitated through low cost of fund acquisition.
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MARKET CHALLENGER AXIS Bank: Axis Bank, formerly UTI Bank, is India’s third largest private-sector bank after the significantly larger ICICI Bank, and HDFC Bank. The bank’s ATM network of 3,171 ATMs is the third largest in the country. It has a wide presence through its 749 branches and extension counters across 454 cities and towns across India. Over the last 12 months, Axis Bank added 141 branches and extension counters and 576 ATMs. It has strengths in both retail and corporate banking. Although the operating environment for the banking industry has become challenging in recent months, Axis Bank is well positioned to benefit from the revival in the economic environment in future. The bank has strong technology and products, an expanding distribution franchise, adequate scale, a strong service culture, and management enterprise. These are the features that should help it stay ahead of large government banks to win market share. Moreover, the management has stood out for its confidence in its business outlook. The bank also has one of the most consistent growth track records. Its net profit has grown above 30% in 32 of the last 34 quarters.The above exceptional performance shown by the Axis Bank over the previous few years, and the level of tough competition it is giving to the market leader in Private Sector Bank ICICI bank makes it a ‘Market Challenger’ in the current segment. Strategies: 1) FRONTAL ATTACK: Attack on competitors through better Performance & Capital Management FINANCIAL AND BUSINESS PERFORMANCE The Bank continued to show robust growth in both business and financial performance indicators during the year 2009-10 in the backdrop of the economic slowdown, by leveraging its basic strengths: the infrastructure created over the years, a well laid-out retail franchise, a large number of corporate relationships and the pre-eminence enjoyed by it in a diverse set of businesses such as infrastructure and capital markets. The strong financial performance reported by the Bank is an assertion of the Bank's strategic focus and adherence to the basics of banking. CAPITAL MANAGEMENT The Bank strives to provide superior returns, while maintaining a solid capital base to support the risks associated with its diversified businesses. Its capital management framework optimizes the use of capital by ensuring its deployment to support business growth in a manner which leads to a high return on equity. The Bank's capital management approach is driven by the objective of maintaining a strong capital base, reflected through a strong Tier I capital adequacy ratio in order to support the execution of its growth plans and business strategies, while meeting the regulatory capital requirements at all times. 2) Encirclement Attack: Attacking the market leader on Retail Banking by superior & innovative financial products
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RETAIL BANKING The Bank aims to increase its market-share in India's expanding financial services industry through continued emphasis on building a strong retail franchise. The Bank remains committed to developing long-term strong relationships with its customers and ensuring that they have access to high-quality service as well as the full suite of financial solutions to help achieve their financial objectives. Growth strategies have focused on building profitable relationships across various customer segments. In order to achieve the objective of becoming more customer-centric, rather than product-centric, the Bank has restructured Retail Banking into two groups namely Mass and Mass Affluent, and Affluent segments. The Mass and Mass Affluent Segment owns, as the name indicates, mass-market customers, while the Affluent Segment owns clientele defined as affluent, comprising customers in the wealth and private banking space. The Bank was also the first to launch a Platinum Chip Debit Card in the country, which is presently offered exclusively to the Priority Banking customer segment. In the prepaid cards market, the Bank has attained a leadership position offering a bouquet of products suited to a variety of needs: Rewards Cards - for disbursement of incentives and commissions, Payroll Cards - for low-value salary payments, Gift Cards - a substitute for cash, gift vouchers and physical gifts, Meal Cards- For disbursement of meal allowances, Annuity Cards -for annuity payments to customers of LIC of India and Remittance Cards – for disbursement of inward remittances. The Bank has continued to retain its leadership position in the infrastructure debt market and syndicated an aggregate amount of Rs. 27,000 crores by way of Rupee and Foreign currency loans during 2009-10. Euromoney Project Finance (Deals of the Year 2009) has conferred several awards in the area of infrastructure financing to the Bank. These include categories such as 'Road Deal of the Year', 'Indian Rail Deal of the Year' and 'Indian PPP Deal of the Year'. 3) Buy pass Strategy : Focus more on Debt Market & Better Technology than Competition Debt Capital Market and Equity Trading The Bank continued to maintain its leadership position in the domestic debt market and has syndicated an aggregate amount of around Rs. 69,077 crores through the private placement of bonds and debentures. Prime database has ranked the Bank as the number 1 arranger for private placement of bonds and debentures till December 2009. Bloomberg has also ranked the Bank as number 1 in India Domestic Bond League Table for the calendar year 2009 and for the quarter ended 31 March 2010. Asia Money has rated the Bank as the Best Domestic Debt House in India for the year 2009.
INFORMATION TECHNOLOGY Technology is one of the key enablers for business and IT has enabled a scalable, robust and function-rich platform to deliver business value for the customers. A strategy of offering increasing functionalities to customers across channels like ATM, net banking, mobile banking
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has been supported by IT by providing a secured and efficient platform. The Bank has consistently remained amongst the top performing banks in terms of value and accuracy of undertaking government transactions. Another major step in this direction is sending password-protected e-statements to registered customers to reduce the use of paper. The statement covers all the accounts of the customer. MARKET FOLLOWER Kotak Mahindra Bank: It is one of the fastest growing bank and among the most admired financial institutions in India. The Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. They have one of the largest and most respected Wealth Management teams in India, providing the widest range of solutions to high net worth individuals, entrepreneurs, business families and employed professionals. The Bank has over 245 branches, a customer base of over 8 lakh and has spread all over India. Strategies: 1. Imitator: It follows the same strategies as ICICI bank with slight difference I terms of pricing & Service levels. Similar to ICICI bank, The Bank has started offering comprehensive business solutions for the business community that includes the Current Account, Trade Services, Cash Management Service and Credit Facilities. Their Wholesale banking products offer business banking solutions for long-term investments and working capital needs, advice on mergers and acquisitions and equipment financing. The fees and interest rate charged for the above services is not the same as ICICI bank. Since it does not have a very large customer base, it cannot compete in terms of pricing. It plans to expand its Branch Banking Business and added 32 branches and 105 ATMs and ended this year with 249 Branches and 492 ATMs. The regulatory changes offering limited free usage of ATMs to customers across all ATMs of banks has helped, the Bank to benefit by higher usage of the network. The Bank is now present in 145 locations across the country. The Bank added over half a million new customers this year. Distinct Services to hold back the current customers: The Bank addresses the entire spectrum of financial needs of Non-Resident Indians. Their tie-up with the Overseas Indian Facilitation Centre (OIFC) as a strategic partner gives them a platform to share their comprehensive range of banking & investment products and services for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs). A holistic proposition on Trade Services coupled with Credit facilities helped the Bank create a profitable segment of customers. The Bank also launched 2 commercial branches aimed at servicing the specific needs of its trade customers.
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MARKET NICHER
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YES Bank: A much differentiated Approach to Banking YES Bank is expanding at a brisk pace, providing customers with a tailored knowledgeable offering and the latest technological platforms to enhance the banking experience. Thus, it has created a niche in an already crowded market. It has a philosophy of sustainability, in keeping with its ethical principles, but is also geared for rapid expansion. Instruments of Growth for YES Bank are: 1) ‡ A focused business strategy. 2) ‡ Entrepreneurial leadership. 3) ‡ Highly rated employees 4) ‡ Best in class processes. 5) ‡ Evolutionary Technology YES BANK is the only Greenfield license awarded by the RBI in the last 15 years. YES BANK has recently become the first Indian Bank to become a signatory to the United Nations Global Compact CRITICAL AREAS IDENTIFIED ON THE TECHNOLOGY FRONT BY YES BANK 1) High level of efficiency through automation of operations 2) Centralized databases and processing for speedy recovery of data 3) Connectivity with customers and external agencies at various touch points. 4) Best systems for integration of front, middle and back offices. 5) Adopting best surveillance and security systems 6) Using real time environment for good disaster recovery process and backup systems A) Corporate & Institutional Banking Customer Segmentation Large Corporate with more than INR 10 billion turnover, Government companies and PSUs, Financial Institutions and Banks, select multinational corporations Typical exposure in the range of INR 300-1000 million
Business Strategy Capitalize on current market conditions to improve penetration in large and reputed business houses to move up the value chain and increase cross-sell Build long term, comprehensive relationships for these marquee corporate
B) Commercial Banking Customer Segmentation Emerging mid-Corporate of India with turnover between INR 1.0 billion and INR 10 billion Typical exposure in the range INR 50-300 million
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Business Strategy Selectively identify emerging sectors & companies for long term institutionalization of relationship capital by leveraging knowledge banking approach Become a privileged growth partner for these large Corporate of tomorrow
C) Business Banking (SME) Customer Segmentation Small and Medium Enterprises (SMEs) with turnover less than INR 1.0 billion (with a focus on the INR 0.5 – 1.0 billion range) Focus on supply chain partners of larger Corporate Typical exposure in the range INR 20-100 million
Business Strategy Focus on liabilities generation and transactional products Service and Technology to be key differentiators for the Bank
D) Retail Banking (Include Small Businesses) Customer Segmentation Small businesses near branch areas Focus on affluent and mass affluent Retail customers Focus in leveraging Corporate relationships for salary accounts
Business Strategy Focus on liabilities generation and transactional products Service and Technology to be key differentiators for the Bank
Highlights of the Achievement: YES BANK won the Financial Insights Innovation Award (FIIA) for the Most Innovative ePayments Solution in Asia for two consecutive years, FY08 and FY09 Consistently ranked among the 10 by Thomson Reuters in the Indian Rupee Bond League Tables Strong expertise in Financial Advisory practice demonstrated by a 135 % y-o-y increase in revenues Awarded the Qimpro Best Prax Compass Award for Innovative Practices in Customer Service Channels Only Bank to receive the Emerging Markets Sustainable Bank of the Year award at the FT/IFC Sustainable Banking Awards
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