Description
The FMCG sector in terms of contribution to Indian economy, market structure, price determinants, marketing strategy, growth drivers, scope, law and budget.
Sector Analysis – FMCG
1
Scope of Discussion
• Introduction • Contribution to Indian Economy • Market Structure • Price Determinants • Marketing Strategy • Growth Drivers of Indian Companies
• Growth Scope in India
• Protection Laws • Budget 2011-12 Impacts
3
Introduction
• FMCG ? Quick Turnover and relatively low cost
(soaps , toothbrush, chocolate etc)
• Fourth Largest – US$ 13.1 billion • Burgeoning population + middle class + rural class = huge market • MNCs , Unorganized, Organized , Distribution Competition • Inelastic demand for addictives (constant revenue – ITC )
4
Contribution to Indian Economy
• Directly contributes to the livelihood of 13 million people. • Directly pays out an estimated Rs. 7,000 cr as salary costs • Contribution to the tax exchequer is Rs. 31,000 crores. • Provides opportunities for employment and revenues to a host of other sectors • Total contribution by way of employment salary, taxes and
pay-outs to other sectors is Rs. 82,000 crores
• Low exports ( mostly subcontinent)
5
Companies at glance
1
Major Players
1
Market Structure
• Monopolistically competitive market • Few barriers to entry and exit. • Intense Competition from increasing FMCG companies.
• Competition even from unorganized sector.
• Products are slightly differentiated but close substitutes • Decreasing returns of scale • Some degree of market power for companies.
8
Price Determinants
• Rising prices of raw material due to inflation • Increase in Labor cost. • Price sensitivity of consumers. • Intense competition. • More choices for consumers. • Price War.
9
Pricing
• Strategies used» Efficient procurement » Stocking up on inventory
» Forward covers on inputs.
• Increase in demand comes as a relief. • High Volume growth • Low profitability
10
PRE LIBERALISATION
Low investment as the purchasing power was low
POST LIBERALISATION
Purchasing power of consumers increased
Government had put a lot of emphasis on the development of small scale sector
MNCs started entering in the Indian market, sales went up. Increase in local players added to the competition
Focus shifted from urban to rural areas
Existing companies like HLL were purely focused on the urban area
DEMAND - SUPPLY CURVE
Marketing Strategy
• Huge investment on advertising. • Increased spending on advertisement and promotion: From 8-9% to 12-14%
• Marketing plays significant role in Brand building.
• Marketing mix - T.V, Radio and Newspapers. • Banners, posters, trial packs, events, hoardings. • Internet and e-initiatives are gaining ground.
12
Marketing Strategy…
• An eye on strategies of the competitor. • Ambush Marketing.
• Targeting Rural
market.
• Celebrity Brand
Endorsements.
Overall Strategy
1
Growth Drivers of Indian Companies
• High Availability of Raw materials • Low Labor Cost in India • High Domestic Demand
• High presence across the value chain of FMCG Sector
1
Growth Scope in India
• Untapped Potential in Rural Area • Only about 8-10 % of output is in packaged form • 8 to 10 % growth expected in confectionary products by 2012
• Growth in personal care – due to rise in disposable Income
1
Protection Laws
FDI Policy
• Up to 100 per cent foreign equity allowed for most of the food processing sector.
• 24 % foreign equity permitted in the small-scale sector
1
Protection Laws…
Removal of Quantitative Restrictions and Reservation Policy
• Abolished licenses for almost all food and agro-processing industries. • Quantitative restrictions were removed in 2001. • Budget 2004-05 identified 85 items that were removed from the reserved list.
Central and state initiatives
? Sales tax and power concessions, capital subsidies and other incentives for
setting up a plant in its tax free zones. ? Reduction of Customs duties on plant and equipment,
raw materials and intermediates
18
Budget 2011-12 & Impacts
Change
Readjustment of tax slabs
Impact
Increase in disposable income and demand Increase in disposable income and demand Marginally positive for MAT paying companies Reduce Packaging costs
19
Boost to Agriculture and More Employment opportunities Increase in Minimum Alternative Tax from 18% to 18.5% Decrease in excise duty on corrugated boxes and cartons
Thank You
20
doc_727961823.pptx
The FMCG sector in terms of contribution to Indian economy, market structure, price determinants, marketing strategy, growth drivers, scope, law and budget.
Sector Analysis – FMCG
1
Scope of Discussion
• Introduction • Contribution to Indian Economy • Market Structure • Price Determinants • Marketing Strategy • Growth Drivers of Indian Companies
• Growth Scope in India
• Protection Laws • Budget 2011-12 Impacts
3
Introduction
• FMCG ? Quick Turnover and relatively low cost
(soaps , toothbrush, chocolate etc)
• Fourth Largest – US$ 13.1 billion • Burgeoning population + middle class + rural class = huge market • MNCs , Unorganized, Organized , Distribution Competition • Inelastic demand for addictives (constant revenue – ITC )
4
Contribution to Indian Economy
• Directly contributes to the livelihood of 13 million people. • Directly pays out an estimated Rs. 7,000 cr as salary costs • Contribution to the tax exchequer is Rs. 31,000 crores. • Provides opportunities for employment and revenues to a host of other sectors • Total contribution by way of employment salary, taxes and
pay-outs to other sectors is Rs. 82,000 crores
• Low exports ( mostly subcontinent)
5
Companies at glance
1
Major Players
1
Market Structure
• Monopolistically competitive market • Few barriers to entry and exit. • Intense Competition from increasing FMCG companies.
• Competition even from unorganized sector.
• Products are slightly differentiated but close substitutes • Decreasing returns of scale • Some degree of market power for companies.
8
Price Determinants
• Rising prices of raw material due to inflation • Increase in Labor cost. • Price sensitivity of consumers. • Intense competition. • More choices for consumers. • Price War.
9
Pricing
• Strategies used» Efficient procurement » Stocking up on inventory
» Forward covers on inputs.
• Increase in demand comes as a relief. • High Volume growth • Low profitability
10
PRE LIBERALISATION
Low investment as the purchasing power was low
POST LIBERALISATION
Purchasing power of consumers increased
Government had put a lot of emphasis on the development of small scale sector
MNCs started entering in the Indian market, sales went up. Increase in local players added to the competition
Focus shifted from urban to rural areas
Existing companies like HLL were purely focused on the urban area
DEMAND - SUPPLY CURVE
Marketing Strategy
• Huge investment on advertising. • Increased spending on advertisement and promotion: From 8-9% to 12-14%
• Marketing plays significant role in Brand building.
• Marketing mix - T.V, Radio and Newspapers. • Banners, posters, trial packs, events, hoardings. • Internet and e-initiatives are gaining ground.
12
Marketing Strategy…
• An eye on strategies of the competitor. • Ambush Marketing.
• Targeting Rural
market.
• Celebrity Brand
Endorsements.
Overall Strategy
1
Growth Drivers of Indian Companies
• High Availability of Raw materials • Low Labor Cost in India • High Domestic Demand
• High presence across the value chain of FMCG Sector
1
Growth Scope in India
• Untapped Potential in Rural Area • Only about 8-10 % of output is in packaged form • 8 to 10 % growth expected in confectionary products by 2012
• Growth in personal care – due to rise in disposable Income
1
Protection Laws
FDI Policy
• Up to 100 per cent foreign equity allowed for most of the food processing sector.
• 24 % foreign equity permitted in the small-scale sector
1
Protection Laws…
Removal of Quantitative Restrictions and Reservation Policy
• Abolished licenses for almost all food and agro-processing industries. • Quantitative restrictions were removed in 2001. • Budget 2004-05 identified 85 items that were removed from the reserved list.
Central and state initiatives
? Sales tax and power concessions, capital subsidies and other incentives for
setting up a plant in its tax free zones. ? Reduction of Customs duties on plant and equipment,
raw materials and intermediates
18
Budget 2011-12 & Impacts
Change
Readjustment of tax slabs
Impact
Increase in disposable income and demand Increase in disposable income and demand Marginally positive for MAT paying companies Reduce Packaging costs
19
Boost to Agriculture and More Employment opportunities Increase in Minimum Alternative Tax from 18% to 18.5% Decrease in excise duty on corrugated boxes and cartons
Thank You
20
doc_727961823.pptx