Description
The Indian FMCG sector has shown a good growth inspite of the global economic slowdown. The top 10 FMCG players have shown an average growth ranging from 16-21% in the last 5 years on the back of expansion of distribution network and penetration in the rural markets. There has been a balance of volume and value growth. The Indian FMCG sector has shown a boom and a balanced growth over the years inspite of economic slowdown.
B P W E A L T H
SECTOR REVIEW:
FMCG
Consumption Driven Growth
Table of Content
Background of the study…………………………………...……………………………………… 3
Introduction to Indian Economy…………………………………………………………………. 4
Indian FMCG sector, size, players and growth drivers…….………………………………… 8
Player Analysis— Emami Ltd……………….……………………………………………………. 14
Financial Summary …….………………………………………………………….. 17
Ratio analysis and Cashflow summary .………..……………………………... 18
Player Analysis—Hindustan Unilever . ………………...……………………………………… 19
Financial Summary...……………………………………………………………… 23
Ratio analysis and Cashflow summary ..………..…………………………….. 24
Player Analysis—ITC ……………………………………………………………………………… 25
Financial Summary………………………………………………………………… 30
Ratio analysis and Cash flow summary …..………………………………….. 31
Player Analysis—Tata Global Beverages Ltd………………………………………………… 32
Financial Summary ..……………………………………………………………... 35
Ratio analysis and cash flow summary ……………………………………… 36
Valuation and Outlook………………………………………...………….……………………….. 37
Disclaimer …………………………………………………………………………………………… 38
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 2
Indian FMCG Sector Wednesday, February 1
st
2013
B P W E A L T H
Research Team
[email protected]
022-61596173
2nd Feb , 2011
FMCG Sector Report
Indian Economy Background
The Republic of India is the third largest Asian economy after China and J apan. Among the major emerging markets, India ranks second
in terms of economic growth with the IMF forecasting a GDP growth rate of 6% for CY13. India is the second most populous country in the
world, ~30% of the country’s 1.2bn inhabitants reside in urban areas. India's industrialized economy encompasses diverse manufacturing
sectors (steel production, oil and gas refining, auto, plastics, textiles) while also including traditional village farming, modern agriculture,
and handicrafts. Services, especially information technology, are the major source of economic growth, accounting for more than half of
India's output with less than one third of its labor force.
FMCG Sector : A defensive investment play
The Indian FMCG sector has shown a good growth inspite of the global economic slowdown. The top 10 FMCG players have shown an
average growth ranging from 16-21% in the last 5 years on the back of expansion of distribution network and penetration in the rural mar-
kets. There has been a balance of volume and value growth. The Indian FMCG sector has shown a boom and a balanced growth over the
years inspite of economic slowdown.
A.C Nielson a marketing research firm expects India’s rural markets to grow from USD 12bn in 2011 to estimated USD 100bn by 2025.The
per capita Income of the country is on a high compared to last few years. A majority of the population comprises of people from the age
group of 15-34 years. All these factors will positively contribute to the growth of the sector inspite of the slowdown in the global economy.
Hence the FMCG sector is a safe haven for investors who expect long term returns and balanced growth.
Valuation & Peer comparison
Indian FMCG Sector
B P W E A L T H
Source: Capital Line
Key Financials (FY12) Emami HUL ITC Tata Global
YE March (Rs in mn)
Net Sales 14,535 234,363 265,518 66,312
Sales Growth (YoY) 17 17 18 11
EBITDA 3,551 35,498 91,449 4,405
EBITDA Growth (YoY) 32 49 23 -7
Net Profit 2,551 26,264 61,199 3,561
Net Profit Growth (YoY) 12 26 25 40
Basic EPS Restated 15.8 11.7 7.3 5.4
Key Ratios
EBITDA (%) 22.5 15.7 27.1 11.2
NPM (%) 17.5 11.2 23 5.3
RoE (%) 37.1 86.9 35.1 8.1
RoCE (%) 34.9 86.8 50.6 9.8
Debt / Equity (x) 0.3 0.01 0.01 0.2
Valuation Ratios
P/E (x) 25.5 35.1 31.2 20.9
P/BV (x) 8.6 24.1 9.2 1.5
EV/EBITDA (x) 18.0 22.7 17.4 9.8
Valuation
Peer comparison Snapshot
Company Name CMP FY14E EPS FY14E P/E Multiple
Emami 586 24.5 23.9
HUL 473 17.3 27.3
ITC 307 11.3 27.2
Tata Global Beverages 150 8.1 18.1
Target Price
625
548
334
194
Rating
HOLD
BUY
HOLD
BUY
Upside Potential
6.7%
15.8%
8.8%
29.3%
Source: Company reports
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 4
B P W E A LT H
The Indian Economy
The world economy has been facing the aftermath of recession since last 5 years. The slowdown which started off with the Sub-prime
crisis in USA did not show any effect in India, initially. However today, India too has started feeling the brunt of the worsening Euro crisis
and the sluggish world economy. The major concerns for India remain to be Fiscal Deficit , ever increasing inflation and the inaction on the
part of Government to overcome this grim situation. The stock markets continue to be unfavorable for an investor . The Indian economy is
a mix of primary, secondary and tertiary sector .The Republic of India is the third largest Asian economy after China and J apan. Among
the major emerging markets, India ranks second in terms of economic growth with the IMF forecasting a GDP growth rate of 6 percent for
2013.
What makes Indian Markets attractive ?
? Huge market size comprising of youth and middleclass
? Low labor cost
? Human resources with technical expertise
? Low cost manufacturing bases
? Domestic players giving competition to global companies
? Rising per capita income
? Fastest growing emerging Economy after China
Important Indicators
Source: RBI , Central statistical organization
Particulars FY08 FY09 FY10 FY11 FY12
GDP Growth Rate (%) 9.3 6.7 8.4 8.4 6.5
Export Growth (USD ) 28.9 13.7 -3.5 37.3 23.7
Inflation Rate (WPI) - Average 4.8 8 4.1 9.6 8.8
Index of Industrial Production (Use Based Classification) for
consumer durables
193.8 215.4 252 287.7 295.5
Total FDI Inflow (in million USD) 34,835 41,874 37,745 32,901 41,891
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 5
B P W E A LT H
Source : Database on Indian Economy
GDP Growth Rate (%)
Source: Database on Indian Economy
Inflation rate (%) (FY08 to FY12)
Important Indicators
4.8%
8%
4.1%
9.6%
8.8%
0
2
4
6
8
10
12
FY08 FY09 FY10 FY11 FY12
I
n
f
l
a
t
i
o
n
R
a
t
e
Inflation Rate (WPI) ? Average
9.3%
6.7%
8.4%
8.39%
6.53%
0
1
2
3
4
5
6
7
8
9
10
FY08 FY09 FY10 FY11 FY12
GDP Growth Rate
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 6
B P W E A LT H
Source : Database on Indian Economy
Total FDI Inflows (in Mn USD)
Source: Database on Indian Economy
Product category wise CAGR for IIP in last 5 years
The IIP Index on industrial Production measures the changes in the volume of production. The CAGR for IIP in last
5 years shows the highest CAGR for consumer durables followed by capital goods and consumer goods. The base
year for the index is 2004-05.
34,835
41,874
37,745
32,901
41,891
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
FY08 FY09 FY10 FY11 FY12
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 7
B P W E A LT H
Population of selected countries (in Mn)
India being the second most populous country in the world is a huge consumer market and many countries are eying this as a business
opportunity. The population comprising majorly of youth , is a place for low cost , technical experts. The population of India is amounts for
huge labour supply however it poses many problems to the country too.
The Indian population is considered to be huge consumer base which is expected to reach trillions by 2020.Thus it provides an opportu-
nity for FMCG sector to grow and flourish , as the demand for consumer durables and consumer goods is never ending. The demographic
diversity of the country adds to the usage of products and services catering to different consumer segments and different product catego-
ries.
1,210
308
237
190
1,341
-
200
400
600
800
1,000
1,200
1,400
1,600
India USA Indonesia Brazil China
Source: Database on Indian Economy
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 8
B P W E A LT H
Indian FMCG Market
Fast moving consumer goods are also known as consumer packaged goods .It includes all the com-
modities which consumer buys in regular time intervals. It includes all household goods from soaps,
shampoos, detergent to packaged foodstuff and other household accessories. The Indian FMCG or
the consumer market is expected to grow from USD 997bn to a staggering 3.6 trillion USD by CY20.
Highlights
? Fourth largest sector of the economy.
? Market size of over 33.4 billion USD
? Expected to grow 3.6 times by 2020
? Growth of approximately 17 % from FY 2007-2012
Classification of FMCG sector
1. Household care
2. Personal care
3. Food and Beverages
Drivers of volume growth
? Rise in per capita income and household income
? Highest youth population in the world
? Increasing urbanization
? Increasing literacy
? Huge untapped rural market
? Rise in rural non-agricultural income
? Constant innovation in products through customer feedback
? Investment in this sector attracts investors as the FMCG products have demand throughout the
year.
Few of the top FMCG companies in India are
? Hindustan Unilever
? ITC
? Nestle
? P & G
? Marico
? Emami
? Dabur
? Britannia
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 9
B P W E A LT H
Source: CII FMCG Roadmap 2020—Booz & co Analysis
Source: CII FMCG Roadmap 2020—Booz & co Analysis
Indian FMCG Market share Growth trend
Growth in Market share of FMCG products
Statistics of FMCG sector in India
8%
24%
35%
16%
11%
26%
21%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Oi l s Bi scui ts Frui t Dri nks Ski n care Toothpaste Shampoo Hai r Oi l
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 10
B P W E A LT H
Drivers for growth of FMCG sector
1) Increasing per capita income: Figure indicates states with highest per capita income in INR (2011 census)
2) A very high percent of young population: The figure indicates age composition as a percent of population. The highest percent of
population is between age group Below 5 Years, 5-15, 15-59 and above 60 Years in 2011 and is projected to increase in future. The num-
ber of consumers from India and china will be in trillions by 2d020 as per A.C Nielson report.
Source: Central Statistical Organization
Source: National commission on population
13
11
10
38
34
29
56
59
63
7 7
9
0
10
20
30
40
50
60
70
Bel ow 5Years 5-15 Years 15-59 Years 60 Pl us
Years
1991 2001 2011
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 11
B P W E A LT H
3) Untapped rural population and increasing urban population: The figure indicates that on comparing urban-rural population from
2001 to 2011 , we observe that majority of the population still is rural. There is an absolute increase in the urban population in the last 10
years which is more than increase in rural population. There is immense scope for FMCG companies to have rural penetration.
Urban-rural population classification
Population (in crore ) 2001 2011 Difference
India 102.9 121 18.1
Rural 74.3 83.3 9
Urban 28.6 37.7 9.1
Source : RBI Database
Source : RBI Database
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 12
B P W E A LT H
4) Cheap labour provides cost advantage : The labour cost in India is the least among other developing countries. It is a driver for
FMCG sector growth which involves huge production and requires manpower.
Source : IMF World Economic Outlook 2010 statistics
5) Rate of growth of manufacturing products: The figure below indicates that the rate of growth of manufacturing products in India is
the highest for food and beverages which accounts for a sizeable chunk of FMCG products
Rate of growth (%) of manufacturing products
?6.5 ?0.9
6.8
1.6
1.8
3.6
5.4
5.9
4
8.4
17.4
4.6
?2.7 ?4.8
4.4
?10
?5
0
5
10
15
20
Food products and
beverages
Tobacco products Textiles Wearing apparel Paper and paper
products
G
r
o
w
t
h
r
a
t
e
Manufacturing Products
2009 2010 2011
Source : Economic Survey 2011-12 , India Budget
5,824
2,250
1,889
1,619
1,052
943
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Mal aysi a Chi na Nepal Sri l anka Paki stan Indi a
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 13
B P W E A LT H
These were a few important drivers for growth of FMCG sector. The FMCG sector is considered to be a sector with balanced growth. In-
dia , being a huge consumer market provides ample growth prospects for the FMCG sector.
In order to review this sector , 4 important players of Indian FMCG sector are considered. They are :
? Emami Ltd
? Hindustan Unilever
? ITC
? Tata Global beverages Ltd
All the above stated companies have shown promising growth over the years and are expected show better results in the near future. A
strategic and financial review of each of the above players is done in the report from here on.
Company Background
Emami is a conglomerate from Bengal. It was found by Mr. R.S Agarwal and Mr. R.S Goenka in
1974.Its group umbrella covers wide range of businesses from FMCG, Paper, Writing instruments,
Edible oil and cultivation, Hospitals, art, pharmacy to real estate and retail.
Emami Ltd, the flagship company of the group is engaged in manufacturing and marketing of beauty,
Healthcare and personal care products. The speciality of these products is that they are based en-
tirely on ayurvedic formulation. It is a leading name in beauty and health care consumer products
market in India. Its Brand portfolio comprises of 300 products of Emami, Himani and Zandu. Emami
has a wide network of depos across 32 states in India. Emami products reach 5 lac retail outlets
through 3500 distribution channels across India to overcome the supply chain pressures which is a
major concern for any FMCG company.
Boroplus and navratna Oil are the brands enjoying highest market share for the company. Navratna
oil having 54 % share while boroplus antiseptic cream enjoys 75 % share in the market. Emami was
the first skin care producing company to come out with a fairness cream for men i.e. Fair and Hand-
some. Fair and Handsome, today enjoys a 57% share in the male grooming products market.
The other innovations by Emami are Sona-chandi chyawanprash, Malai kesar cold cream and Vaso-
care Herbal. Emami stretches across 60 countries with subsidiaries in Bangladesh, Egypt, UAE and
U.K., Srilanka and African countries. It has top class manufacturing locations in Kolkata, Guwahati,
Vapi, and Silvasa to name a few. The company is working on enhancing its sales and distribution
network in collaboration with renowned professional advisory services company Ernst and Young.
The project is called ‘Project Navodaya’
Emami bought majority stakes in Zandu, thereby adding ayurveda based health care products to its
portfolio. The merger of Emami and Zandu was a perfect union of businesses with similar synergies .
Brand Portfolio
? Comprises of 300 products (Emami,Zandu and Himani products)
? Boroplus antiseptic cream,Navratna Oil , Zandu Balm , Fair and handsome
? Sona chandi Chavanprash ,Kesari jeevan , Mentho Plus Balm, Fast Relief, Malai Kesar cold
cream and Vasocare petroleum jelly are other prominent brands.
? Zandu Pancharishta, Rhumasyl, Lalima, Sudarshan, Trifala comprise prominent health care
brands
Top Brands
? Navratna Oil (54% share)
? Boroplus Antiseptic cream (75 % share)
? Zandu Balm (43% share)
? Fair and Handsome (57% share)
Innovations
? Sona Chandi Chyawanprash , Malai-Kesar Cold cream , Vasocare (Herbal)
Consumer Healthcare Di vision
? Recorded 34% growth
? It comprises of 3 segments—Generic, OTC and ethical products (Zandu ayurvedic products)
Half year performance highlights (FY13)
? Strong sales growth
? Robust volume growth
? September quarter posted 18% sales growth which is the highest in 4 quarters.
? 16 % volume growth in domestic operations which accounts for 95% of company’s revenue.
Indian FMCG Sector
B P W E A L T H
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 14
Hold
BUY HOLD SELL
>15% -5% to 15% 15% -5% to
15%
15% -5% to
15%
The Indian FMCG sector has shown a good growth inspite of the global economic slowdown. The top 10 FMCG players have shown an average growth ranging from 16-21% in the last 5 years on the back of expansion of distribution network and penetration in the rural markets. There has been a balance of volume and value growth. The Indian FMCG sector has shown a boom and a balanced growth over the years inspite of economic slowdown.
B P W E A L T H
SECTOR REVIEW:
FMCG
Consumption Driven Growth
Table of Content
Background of the study…………………………………...……………………………………… 3
Introduction to Indian Economy…………………………………………………………………. 4
Indian FMCG sector, size, players and growth drivers…….………………………………… 8
Player Analysis— Emami Ltd……………….……………………………………………………. 14
Financial Summary …….………………………………………………………….. 17
Ratio analysis and Cashflow summary .………..……………………………... 18
Player Analysis—Hindustan Unilever . ………………...……………………………………… 19
Financial Summary...……………………………………………………………… 23
Ratio analysis and Cashflow summary ..………..…………………………….. 24
Player Analysis—ITC ……………………………………………………………………………… 25
Financial Summary………………………………………………………………… 30
Ratio analysis and Cash flow summary …..………………………………….. 31
Player Analysis—Tata Global Beverages Ltd………………………………………………… 32
Financial Summary ..……………………………………………………………... 35
Ratio analysis and cash flow summary ……………………………………… 36
Valuation and Outlook………………………………………...………….……………………….. 37
Disclaimer …………………………………………………………………………………………… 38
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 2
Indian FMCG Sector Wednesday, February 1
st
2013
B P W E A L T H
Research Team
[email protected]
022-61596173
2nd Feb , 2011
FMCG Sector Report
Indian Economy Background
The Republic of India is the third largest Asian economy after China and J apan. Among the major emerging markets, India ranks second
in terms of economic growth with the IMF forecasting a GDP growth rate of 6% for CY13. India is the second most populous country in the
world, ~30% of the country’s 1.2bn inhabitants reside in urban areas. India's industrialized economy encompasses diverse manufacturing
sectors (steel production, oil and gas refining, auto, plastics, textiles) while also including traditional village farming, modern agriculture,
and handicrafts. Services, especially information technology, are the major source of economic growth, accounting for more than half of
India's output with less than one third of its labor force.
FMCG Sector : A defensive investment play
The Indian FMCG sector has shown a good growth inspite of the global economic slowdown. The top 10 FMCG players have shown an
average growth ranging from 16-21% in the last 5 years on the back of expansion of distribution network and penetration in the rural mar-
kets. There has been a balance of volume and value growth. The Indian FMCG sector has shown a boom and a balanced growth over the
years inspite of economic slowdown.
A.C Nielson a marketing research firm expects India’s rural markets to grow from USD 12bn in 2011 to estimated USD 100bn by 2025.The
per capita Income of the country is on a high compared to last few years. A majority of the population comprises of people from the age
group of 15-34 years. All these factors will positively contribute to the growth of the sector inspite of the slowdown in the global economy.
Hence the FMCG sector is a safe haven for investors who expect long term returns and balanced growth.
Valuation & Peer comparison
Indian FMCG Sector
B P W E A L T H
Source: Capital Line
Key Financials (FY12) Emami HUL ITC Tata Global
YE March (Rs in mn)
Net Sales 14,535 234,363 265,518 66,312
Sales Growth (YoY) 17 17 18 11
EBITDA 3,551 35,498 91,449 4,405
EBITDA Growth (YoY) 32 49 23 -7
Net Profit 2,551 26,264 61,199 3,561
Net Profit Growth (YoY) 12 26 25 40
Basic EPS Restated 15.8 11.7 7.3 5.4
Key Ratios
EBITDA (%) 22.5 15.7 27.1 11.2
NPM (%) 17.5 11.2 23 5.3
RoE (%) 37.1 86.9 35.1 8.1
RoCE (%) 34.9 86.8 50.6 9.8
Debt / Equity (x) 0.3 0.01 0.01 0.2
Valuation Ratios
P/E (x) 25.5 35.1 31.2 20.9
P/BV (x) 8.6 24.1 9.2 1.5
EV/EBITDA (x) 18.0 22.7 17.4 9.8
Valuation
Peer comparison Snapshot
Company Name CMP FY14E EPS FY14E P/E Multiple
Emami 586 24.5 23.9
HUL 473 17.3 27.3
ITC 307 11.3 27.2
Tata Global Beverages 150 8.1 18.1
Target Price
625
548
334
194
Rating
HOLD
BUY
HOLD
BUY
Upside Potential
6.7%
15.8%
8.8%
29.3%
Source: Company reports
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 4
B P W E A LT H
The Indian Economy
The world economy has been facing the aftermath of recession since last 5 years. The slowdown which started off with the Sub-prime
crisis in USA did not show any effect in India, initially. However today, India too has started feeling the brunt of the worsening Euro crisis
and the sluggish world economy. The major concerns for India remain to be Fiscal Deficit , ever increasing inflation and the inaction on the
part of Government to overcome this grim situation. The stock markets continue to be unfavorable for an investor . The Indian economy is
a mix of primary, secondary and tertiary sector .The Republic of India is the third largest Asian economy after China and J apan. Among
the major emerging markets, India ranks second in terms of economic growth with the IMF forecasting a GDP growth rate of 6 percent for
2013.
What makes Indian Markets attractive ?
? Huge market size comprising of youth and middleclass
? Low labor cost
? Human resources with technical expertise
? Low cost manufacturing bases
? Domestic players giving competition to global companies
? Rising per capita income
? Fastest growing emerging Economy after China
Important Indicators
Source: RBI , Central statistical organization
Particulars FY08 FY09 FY10 FY11 FY12
GDP Growth Rate (%) 9.3 6.7 8.4 8.4 6.5
Export Growth (USD ) 28.9 13.7 -3.5 37.3 23.7
Inflation Rate (WPI) - Average 4.8 8 4.1 9.6 8.8
Index of Industrial Production (Use Based Classification) for
consumer durables
193.8 215.4 252 287.7 295.5
Total FDI Inflow (in million USD) 34,835 41,874 37,745 32,901 41,891
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 5
B P W E A LT H
Source : Database on Indian Economy
GDP Growth Rate (%)
Source: Database on Indian Economy
Inflation rate (%) (FY08 to FY12)
Important Indicators
4.8%
8%
4.1%
9.6%
8.8%
0
2
4
6
8
10
12
FY08 FY09 FY10 FY11 FY12
I
n
f
l
a
t
i
o
n
R
a
t
e
Inflation Rate (WPI) ? Average
9.3%
6.7%
8.4%
8.39%
6.53%
0
1
2
3
4
5
6
7
8
9
10
FY08 FY09 FY10 FY11 FY12
GDP Growth Rate
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 6
B P W E A LT H
Source : Database on Indian Economy
Total FDI Inflows (in Mn USD)
Source: Database on Indian Economy
Product category wise CAGR for IIP in last 5 years
The IIP Index on industrial Production measures the changes in the volume of production. The CAGR for IIP in last
5 years shows the highest CAGR for consumer durables followed by capital goods and consumer goods. The base
year for the index is 2004-05.
34,835
41,874
37,745
32,901
41,891
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
FY08 FY09 FY10 FY11 FY12
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 7
B P W E A LT H
Population of selected countries (in Mn)
India being the second most populous country in the world is a huge consumer market and many countries are eying this as a business
opportunity. The population comprising majorly of youth , is a place for low cost , technical experts. The population of India is amounts for
huge labour supply however it poses many problems to the country too.
The Indian population is considered to be huge consumer base which is expected to reach trillions by 2020.Thus it provides an opportu-
nity for FMCG sector to grow and flourish , as the demand for consumer durables and consumer goods is never ending. The demographic
diversity of the country adds to the usage of products and services catering to different consumer segments and different product catego-
ries.
1,210
308
237
190
1,341
-
200
400
600
800
1,000
1,200
1,400
1,600
India USA Indonesia Brazil China
Source: Database on Indian Economy
FMCG Sector Report
BP Equi t i es Pvt . Li mi t ed (www.bpweal t h.com) 01-02-2013 8
B P W E A LT H
Indian FMCG Market
Fast moving consumer goods are also known as consumer packaged goods .It includes all the com-
modities which consumer buys in regular time intervals. It includes all household goods from soaps,
shampoos, detergent to packaged foodstuff and other household accessories. The Indian FMCG or
the consumer market is expected to grow from USD 997bn to a staggering 3.6 trillion USD by CY20.
Highlights
? Fourth largest sector of the economy.
? Market size of over 33.4 billion USD
? Expected to grow 3.6 times by 2020
? Growth of approximately 17 % from FY 2007-2012
Classification of FMCG sector
1. Household care
2. Personal care
3. Food and Beverages
Drivers of volume growth
? Rise in per capita income and household income
? Highest youth population in the world
? Increasing urbanization
? Increasing literacy
? Huge untapped rural market
? Rise in rural non-agricultural income
? Constant innovation in products through customer feedback
? Investment in this sector attracts investors as the FMCG products have demand throughout the
year.
Few of the top FMCG companies in India are
? Hindustan Unilever
? ITC
? Nestle
? P & G
? Marico
? Emami
? Dabur
? Britannia
FMCG Sector Report
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B P W E A LT H
Source: CII FMCG Roadmap 2020—Booz & co Analysis
Source: CII FMCG Roadmap 2020—Booz & co Analysis
Indian FMCG Market share Growth trend
Growth in Market share of FMCG products
Statistics of FMCG sector in India
8%
24%
35%
16%
11%
26%
21%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Oi l s Bi scui ts Frui t Dri nks Ski n care Toothpaste Shampoo Hai r Oi l
FMCG Sector Report
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B P W E A LT H
Drivers for growth of FMCG sector
1) Increasing per capita income: Figure indicates states with highest per capita income in INR (2011 census)
2) A very high percent of young population: The figure indicates age composition as a percent of population. The highest percent of
population is between age group Below 5 Years, 5-15, 15-59 and above 60 Years in 2011 and is projected to increase in future. The num-
ber of consumers from India and china will be in trillions by 2d020 as per A.C Nielson report.
Source: Central Statistical Organization
Source: National commission on population
13
11
10
38
34
29
56
59
63
7 7
9
0
10
20
30
40
50
60
70
Bel ow 5Years 5-15 Years 15-59 Years 60 Pl us
Years
1991 2001 2011
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B P W E A LT H
3) Untapped rural population and increasing urban population: The figure indicates that on comparing urban-rural population from
2001 to 2011 , we observe that majority of the population still is rural. There is an absolute increase in the urban population in the last 10
years which is more than increase in rural population. There is immense scope for FMCG companies to have rural penetration.
Urban-rural population classification
Population (in crore ) 2001 2011 Difference
India 102.9 121 18.1
Rural 74.3 83.3 9
Urban 28.6 37.7 9.1
Source : RBI Database
Source : RBI Database
FMCG Sector Report
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B P W E A LT H
4) Cheap labour provides cost advantage : The labour cost in India is the least among other developing countries. It is a driver for
FMCG sector growth which involves huge production and requires manpower.
Source : IMF World Economic Outlook 2010 statistics
5) Rate of growth of manufacturing products: The figure below indicates that the rate of growth of manufacturing products in India is
the highest for food and beverages which accounts for a sizeable chunk of FMCG products
Rate of growth (%) of manufacturing products
?6.5 ?0.9
6.8
1.6
1.8
3.6
5.4
5.9
4
8.4
17.4
4.6
?2.7 ?4.8
4.4
?10
?5
0
5
10
15
20
Food products and
beverages
Tobacco products Textiles Wearing apparel Paper and paper
products
G
r
o
w
t
h
r
a
t
e
Manufacturing Products
2009 2010 2011
Source : Economic Survey 2011-12 , India Budget
5,824
2,250
1,889
1,619
1,052
943
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Mal aysi a Chi na Nepal Sri l anka Paki stan Indi a
FMCG Sector Report
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B P W E A LT H
These were a few important drivers for growth of FMCG sector. The FMCG sector is considered to be a sector with balanced growth. In-
dia , being a huge consumer market provides ample growth prospects for the FMCG sector.
In order to review this sector , 4 important players of Indian FMCG sector are considered. They are :
? Emami Ltd
? Hindustan Unilever
? ITC
? Tata Global beverages Ltd
All the above stated companies have shown promising growth over the years and are expected show better results in the near future. A
strategic and financial review of each of the above players is done in the report from here on.
Company Background
Emami is a conglomerate from Bengal. It was found by Mr. R.S Agarwal and Mr. R.S Goenka in
1974.Its group umbrella covers wide range of businesses from FMCG, Paper, Writing instruments,
Edible oil and cultivation, Hospitals, art, pharmacy to real estate and retail.
Emami Ltd, the flagship company of the group is engaged in manufacturing and marketing of beauty,
Healthcare and personal care products. The speciality of these products is that they are based en-
tirely on ayurvedic formulation. It is a leading name in beauty and health care consumer products
market in India. Its Brand portfolio comprises of 300 products of Emami, Himani and Zandu. Emami
has a wide network of depos across 32 states in India. Emami products reach 5 lac retail outlets
through 3500 distribution channels across India to overcome the supply chain pressures which is a
major concern for any FMCG company.
Boroplus and navratna Oil are the brands enjoying highest market share for the company. Navratna
oil having 54 % share while boroplus antiseptic cream enjoys 75 % share in the market. Emami was
the first skin care producing company to come out with a fairness cream for men i.e. Fair and Hand-
some. Fair and Handsome, today enjoys a 57% share in the male grooming products market.
The other innovations by Emami are Sona-chandi chyawanprash, Malai kesar cold cream and Vaso-
care Herbal. Emami stretches across 60 countries with subsidiaries in Bangladesh, Egypt, UAE and
U.K., Srilanka and African countries. It has top class manufacturing locations in Kolkata, Guwahati,
Vapi, and Silvasa to name a few. The company is working on enhancing its sales and distribution
network in collaboration with renowned professional advisory services company Ernst and Young.
The project is called ‘Project Navodaya’
Emami bought majority stakes in Zandu, thereby adding ayurveda based health care products to its
portfolio. The merger of Emami and Zandu was a perfect union of businesses with similar synergies .
Brand Portfolio
? Comprises of 300 products (Emami,Zandu and Himani products)
? Boroplus antiseptic cream,Navratna Oil , Zandu Balm , Fair and handsome
? Sona chandi Chavanprash ,Kesari jeevan , Mentho Plus Balm, Fast Relief, Malai Kesar cold
cream and Vasocare petroleum jelly are other prominent brands.
? Zandu Pancharishta, Rhumasyl, Lalima, Sudarshan, Trifala comprise prominent health care
brands
Top Brands
? Navratna Oil (54% share)
? Boroplus Antiseptic cream (75 % share)
? Zandu Balm (43% share)
? Fair and Handsome (57% share)
Innovations
? Sona Chandi Chyawanprash , Malai-Kesar Cold cream , Vasocare (Herbal)
Consumer Healthcare Di vision
? Recorded 34% growth
? It comprises of 3 segments—Generic, OTC and ethical products (Zandu ayurvedic products)
Half year performance highlights (FY13)
? Strong sales growth
? Robust volume growth
? September quarter posted 18% sales growth which is the highest in 4 quarters.
? 16 % volume growth in domestic operations which accounts for 95% of company’s revenue.
Indian FMCG Sector
B P W E A L T H
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Hold
BUY HOLD SELL
>15% -5% to 15% 15% -5% to
15%
15% -5% to
15%