Post on 19-Mar-2018
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CHAPTER – III
FAST MOVING CONSUMER GOODS – AN OVERVIEW
3.1 INTRODUCTION
FMCGs is the fourth largest sector in India, creating employment opportunities
for more than 3 million people in the country with a market size of over Rs.110,000
crore (around $22 billion) and is estimated to grow to over Rs 185,000 crore (around
$37 billion) by 2014. FMCG Industry is characterized by a well-established distribution
network, low penetration levels, low operating cost, lower per capita consumption and
intense competition between the organized and unorganized segments.76
Organized manufacturing in the Indian FMCG sector started early in the 20th
century. Most of the FMCG companies are multinationals which started mainly as
trading companies. The growth of Indian market as an inevitable result of globalization
encouraged the MNC’s to setup manufacturing facilities in India and this sector began
to flourish in India. It is no longer a seller's market but a buyer's market where the
consumer has a wide range of choice, which encourages FMCG companies to strike it
out for their market share.77
Fast Moving Consumer Goods (FMCG) fulfil the essential and daily household
needs- other than grocery, such as ranging from packaged foodstuff, dairy products,
cooking oil, bread, butter, cereals, beverages like tea and coffee, pharmaceuticals,
confectionery, biscuits, glassware, stationary items, watches, toiletries, detergents,
shampoos, skin care products, cosmetics, toothpaste, dish washing liquid, shaving
76 Kavitha T.C. (2012) “A Comparative Study of Growth, Challenges and
Opportunities in FMCG of Rural Market” 2012 Inter Science Management Review
(IMR).Volume-2 issue 3. Pp. 23-25 77 C.V.Kumar FMCG spearheading portfolio organizer, The ICFAI university press , February
2007,Pp 14-17
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cream, razor, batteries, shoe polish, energy drinks, soft drinks, clothing, furniture and
household accessories to electronic goods like cell phones, laptops, computers, digital
cameras and the like. Those are usually categorized as Fast Moving Consumer
Electronics or FMCEs.
A major portion of the monthly budget of each household is spent on FMCG
products. The introduction of sachets has changed the pattern of buying from traditional
products to branded products. The Fast Moving Consumer Goods sector touches every
aspect of human life and the FMCG producers have realized that there is abundant
opportunity for them to enter into the rural market. Today the shift towards demand for
branded FMCGs in rural areas as a result of socio-economic - politico changes in the
last 5 years has made rural areas more viable markets compared to urban areas for
changes in the life styles of rural people influencing the purchase of branded FMCG
products.
According to the National Council of Applied Economic Research (NCAER), 70
Per cent of Indian populations living in villages make India as the largest potential rural
market in the world. As more than half the FMCGs demand in India, comes from the
rural market. FMCG and its closest companion Retail sector are likely to create most of
the jobs in India in the coming years primarily in areas like marketing, sales,
advertising, supply chain, logistics, human resources, product packaging and
development, finance, operations, general management, supervising and so on.78
78Nagarajan, Dr.J.Khaja Sheriff, “Emerging Challenges and Prospects of FMCG Product
Development in India”. International Journal of Marketing, Finance Service and Management
Research Volume No. 1, January. (2013), Pp. 43-45.
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3.2 FAST MOVING CONSUMER GOODS
Fast Moving Consumer Goods are popularly known as Consumer Packaged
Goods. Which include all consumables (other than grocery/pulses) bought at regular
intervals. The most common in the list are toilet soaps, detergents, shampoos,
toothpaste, shaving products, shoe polish, packaged foodstuff, and household
accessories and certain electronic goods. These items are meant for daily or frequent
consumption and have a high return. The FMCG sector consists of three product
categories such as Household Care, Personal Care and Food and Beverages each with
its own hosts of products that have relatively quick turnover and low costs.
3.2.1 Household Care
The household care products under FMCG include Fabric wash (laundry soaps
and synthetic detergents); Household cleaners (dish/utensil cleaners, floor cleaners,
toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and
furniture polish).
3.2.2 Personal Care
The personal care products under FMCG include Oral care, hair care, skin care,
personal wash (soaps), cosmetics and toiletries, deodorants, perfumes, feminine
hygiene, and paper products.
3.2.3 Foods and Beverages
The Foods and Beverages care products under FMCG include Health beverages,
soft drinks, Staples/cereals, Beverages bakery products (biscuits, bread, cakes), snack
food, chocolates, ice cream, tea, coffee, soft drinks, processed fruits, vegetables, dairy
products, bottled water, branded flour, branded rice, branded sugar and juices and the
like.
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3.3 HISTORICAL GROWTH OF THE FMCG INDUSTRY
The consumer markets in India are constantly evolving. The first phase of
consumer market evolution in the 1980s and the 1990s was characterized by some
major structural changes such as changes in income distribution, increased product
availability (in terms of both quality and quantity), increased competition, increased
media penetration and improved advertising (impacting lifestyle). This raised the levels
of consumer awareness and preference to consume the various products. The late 1990s
witnessed a rush forward in consumer finance products owing to steady financial sector
reforms in the economy and innovative marketing. The consumer markets in India have
entered the second phase of evolution with the turn of the century.
Hindustan Lever Limited (HLL) was probably the only MNC Company that had
its manufacturing base in India. At that time, the focus of the organized players like
HLL was largely cultured. There too, the consumers had limited choice. But, Nirma’s
entry changed the whole Indian FMCG scene. The company focused on the ‘value for
money’ that made FMCG products like detergents very affordable even to the lower
strata of the society. Nirma became a great success story and laid the roadmap for
others to follow.
Further, the government’s relaxation of norms encouraged MNC’s to go for
scale of economy to make FMCG products more affordable. Consequently, today soaps
and detergents have almost 90% penetration in India. Post liberalization saw not only
increased domestic choices, but also of imported products. The lowering of the trade
barriers encouraged MNC’s to invest in India to cater to Indian consumers’ needs.
Further, the FMCG companies such as HLL, Godrej Consumer, Marico,
Henkel, Reckitt Benckiser and Colgate vie with one another to attract and sustain the
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rural consumer first. Each of them has seen a significant expansion in the retail reach in
mid-sized towns and villages. Currently 50% of all HLL sales come from rural India.
One of the biggest changes to boost the FMCG industry was the introduction of
‘sachet’. In the last 3 years, almost all EMCG’s are marketed through, smaller package
sizes at lower price points. This is the biggest innovative leap which increased number
of users and expand market share for value added products in urban India and for
general FMCG products like detergents, soaps and oral care in rural India.
The FMCG industry has tripled its size over the past 10 years chiefly because of
many changes in the Indian economic and industrial landscape, such as reduced levels
of taxation, easier import of materials and technology, reduced barriers to entry of
foreign players, growing organisational maturity of Indian players, growth of media,
and, of course, the growing affluence and appetite for consumption of the Indian
consumer. The industry’s potential to grow further and faster is awesome, given the
low penetration of most categories and rising consumer incomes.79
There is a huge growth potential for all the FMCG companies as the per capita
consumption of almost all products in the country is amongst the lowest in the world.
Again the demand or prospect could be increased further if these companies can change
the consumer's mindset and offer new generation products. Earlier, Indian consumers
were using non-branded apparel, but today, clothes of different brands are available and
the same consumers are willing to pay more for branded quality clothes. It's the quality,
promotion and innovation of products, which can drive many sectors. The growth of
GDP has accelerated the growth of FMCG industry in India over the years. The
79
Sant Sanganeria, “The Indian Consumer Market The Pinnacle Of The Fragrance &
Flavour Industry”, Paper presented at the IFEAT International Conference in
Singapore, 4 - 8 November 2012 ‘Essential Asia’ www.ifeat.org/wp-content/.../India-Consumer-Market-Sanganeria.pdf
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historical growth of the FMCG industry in tune with GDP growth in India is clearly
expressed in the Figure3.1.
Figure3.1 Historical growth of the FMCG Industry
Source: www.ifeat.org/wp-content/.../India-Consumer-Market-Sanganeria.pdf
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3.4 TOP MOST FMCG COMPANIES OPERATING IN INDIA
The following are the top most FMCGs companies operating in India.
3.4.1 Hindustan Unilever Limited (HUL)
Hindustan Unilever Limited (HUL) is an Indian consumer goods company
based in Mumbai, Maharashtra. It is owned by Anglo-Dutch Company Unilever which
owns a 67% controlling share in HUL. The products of which include foods, beverages,
cleaning agents and personal care products.
HUL was established in 1933 as Lever Brothers India Limited and in 1956,
became known as Hindustan Lever Limited, as a result of a merger between Lever
Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. It is
headquartered in Mumbai, India and employs over 16,500 workers, whilst also
indirectly helping to facilitate the employment of over 65,000 people. The company
was renamed in June 2007as “Hindustan Unilever Limited”.
Hindustan Unilever's distribution covers over 2 million retail outlets across
India directly and its products are available in over of 6.3 million outlets in the country.
As per Nielsen market research data, two out of three Indians use HUL products.
Which makes in the market leader in Indian consumer products and markets over 20
consumer categories such as soaps, tea, detergents and shampoos amongst others over
700 million Indian consumers use its products. Eighteen of HUL's brands marked in the
ACNielsen Brand Equity list of 100 Most Trusted Brands according to Annual Survey
(2012) carried out by Brand Equity, a supplement of The Economic Times.
The ‘Most Trusted Brands’ from HUL in the top 100 list (their rankings in
brackets) are among bathing soaps (1-6), among washing materials (7-10), among tooth
care items (11-12) and among health and skin care (13-16)Clinic Plus (4), Lifebuoy
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(10), Fair and Lovely (11), Rin (12), Surf Excel (13), Lux (14), Pepsodent (17), Close-
up (19), Ponds (20), Sunsilk (26), Dove (37), Vim (43), Pears (79), Lakme (81),
Vaseline (86), Wheel (87), Hamam (95) and Rexona (96). The company has a
distribution channel of 6.3 million outlets and owns 35 major Indian brands. The
company launched a multi-brand rural marketing initiative called Khushiyon Ki Doli,
in 2010 in three states of Uttar Pradesh, Andhra Pradesh and Maharashtra has been
extended to Karnataka to cover a total of six States in 2012 which include Maharashtra,
UP, Bihar, West Bengal, Andhra Pradesh and Karnataka. The initiative aims to cover
over Fifty five thousand villages in 2012.
3.4.2 Amul India
Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat,
India. The word Amul is derived from the Sanskrit word Amulya, meaning invaluable.
The co-operative is sometimes referred to as Anand Milk Union Limited. Formed in
1946, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk
Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3 million milk
producers in Gujarat. Amul spurred India's White Revolution, making country the
world's largest producer of milk and milk products. In the process, Amul became the
largest food brand in India and has ventured into markets overseas. Dr.Verghese
Kurien, founder-chairman of the GCMMF for more than 30 years (1973–2006) is the
brain behind the success of Amul.
The GCMMF is the largest food products’ marketing organisation of India. It is
the apex organisation of the dairy cooperatives of Gujarat. Over the last six and a and
half dairy cooperatives in Gujarat have created an economic network that links more
than 3.1 million village milk producers with millions of consumers in India. The
cooperatives collect on an average 9.4 million litres of milk per day from their
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3.4.3 Nestle
Nestle the largest food company in the world in terms of revenue is a Swiss
multinational food and beverage company head quartered in Vevey, Switzerland.
Nestle's products include baby food, bottled water, breakfast cereals, coffee,
confectionery, dairy products, ice cream, pet foods and snacks. About 29 of Nestle's
annual turnover is 1 billion Swiss Francs (about $1.1 billion) by the sale of Nespresso,
Nescafe, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi. Nestle has around
450 factories operating in 86 countries and employs around 328,000 people. It is one of
the main shareholders of L’Oreal, the world's largest cosmetics company.
Nestle was formed in 1905 by the merger of the Anglo-Swiss Milk Company
established in 1866 by brothers George Page and Charles Page and Farine Lactee Henri
Nestle founded in 1866 by Henri Nestle. The company grew significantly during the
First World War and again following the Second World War, expanding its offerings
beyond its early solid milk and infant formula products. The company has made a
number of corporate acquisitions including Crosse and Blackwell in 1950, Findus in
1963, Libby's in 1971, Rowntree Mackintosh in 1988 and Gerber in 2007.
Nestle has a primary listing on the Swiss Exchange and is a constituent of the
Swiss Market Index. It has a secondary listing on Euro. In 2011, Nestle was listed No. 1
in the Fortune Global 500 as the world's most profitable corporation. With a market
capitalization of $233 billion, Nestle ranked No. 9 in the FT Global 500, 2013.
Nestle has 8,000 brands with a wide range of products across a number of
markets, including coffee, bottled water, milkshakes and other beverages, breakfast
cereals, infant foods, performance and healthcare nutrition, seasonings, soups and
sauces, frozen and refrigerated foods and pet food. As of year-end 2010, Nestle held
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29.7% of the shares of L'Oreal, the world's largest company in cosmetics and beauty.
Its brands include Garnier, Maybelline, and Lancome as well as the Body Shop stores.
3.4.4 ITC Limited
ITC is an Indian multinational headquartered in Kolkata, West Bengal. Its
diversified business includes five segments such as FMCGs, Hotels, Paperboards,
Paper and Packaging and Agri Business. In 2012-13, ITC's annual turnover was over
US$ 7 billion and at the end of the same year, its market capitalisation was US$ 45
billion. It employs over 25,000 people at more than 60 locations across India. ITC
claims that it is the only company in the world of comparable dimensions to be carbon
positive, water positive and solid waste recycling positive.
In 2012-13, ITC earned revenue of Rs. 27,136 crores from the business of
Cigarettes (56% of total revenue). ITC Ltd sells 80 Per cent of the cigarettes in the
India where 275 million people use tobacco products. Its major cigarette brands are
W.D. and H.O. Wills, Gold Flake Kings, Gold Flake Premium, Gold Flake Super Star,
Navy Cut, Insignia, India Kings, Classic (Verve, Menthol, Menthol Rush, Regular,
Citric Twist, Mild and Ultra Mild), 555, Benson and Hedges, Silk Cut, Scissors,
Capstan, Berkeley, Bristol, Lucky Strike, Players, Flake and Duke and Royal.
ITC is India's largest seller of branded foods with a sale of over Rs. 4,600 crore
in 2012-13. It is present in 4 categories in Food business such as Staples, Snack Foods,
Ready to Eat Foods and Confectionery. Its major food brands are Kitchens of India;
Aashirvaad, Mint-o, Sunfeast biscuits, Candyman, Bingo chips, Yippee and Sunfeast
Pasta. The various brands of Lifestyle Apparel includes Wills Lifestyle and John
Players brands. Wills Lifestyle was accorded the ‘Super brand’ status and John Players
was included in the top 10 ‘Most Trusted Apparel Brands 2012’ by The Economic
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Times. Further the various brands of personal care includes (Fiama Di Wills, Vivel,
Essenza Di Wills, and Superia). The various brands of Stationery includes Classmate,
PaperKraft and Colour Crew brands launched in 2003 of which Classmate became the
largest notebook brand in India in 2007. ITC's hotels under brands including
WelcomHotel have evolved into being India's second largest hotel chain with over 90
hotels throughout India.
ITC's Agri-Business is one of India's largest exporters of agricultural products.
ITC is one of the India's biggest foreign exchange earners (US $5.4 billion in the last
decade). The Company's 'e-Choupal' initiative is enables Indian agriculture to
significantly enhance its competitiveness by empowering Indian farmers through
Internet. This transformational strategy has created ITC as a huge rural distribution
infrastructure to significantly enhance the Company's marketing reach. As of July 2010,
services through 6500 E-Choupal across 10 states, reach more than 4 million farmers in
about 40,000 villages. Free access to Internet also opens windows of rural India to the
world.
3.4.5 Britannia Industry
Britannia Industry was established in 1892 with an investment of Rs.295.
Initially, biscuits were manufactured in a small house in central Kolkata. Later, the
enterprise was acquired by the Gupta brothers mainly Nalin Chandra Gupta, a
renowned attorney and operated under the name of "V.S. Brothers. In 1918, C.H.
Holmes, an English businessman in Kolkata, was taken on as a partner and the
Britannia Biscuit Company Limited (BBCo) was launched. The Mumbai factory was
set up in 1924 and Peek Freans UK acquired a controlling interest in BBCo. Biscuits
were in big demand during World War II, which gave a boost to the company’s sales.
The company’s name finally was changed to the current "Britannia Industries Limited"
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in 1979. In 1982 the American company Nabisco Brands, Inc. became a major foreign
shareholder.
Britannia is well known for its cheese, cakes, rusks, bread and the popular
Britannia biscuits. Some of its popular branded biscuits are Milk Bikis, Good Day, Pure
Magic, Maska Chaska, Treat and Marie Gold. Britannia is one of India's 100 most
trusted brands listed in the Brand Trust Report. Dairy products contribute close to 10
Per cent of Britannia's revenue. Britannia holds an equity stake in Dynamix Dairy and
outsources the bulk of its dairy products from its associate. Its main competitors are
Nestle India, the National Dairy Development Board (NDDB), and Amul (GCMMF).
The company's factories have an annual capacity of 433,000 tonnes. Tiger, the mass
market brand, realized $150.75 million in sales including exports to countries including
the U.S. and Australia.
3.4.6 Dabur India Ltd
Dabur India Ltd which derived its name from Daktar Burman, is India's largest
Ayurvedic medicine manufacturer. Dabur was founded by Dr SK Burman, a physician
in West Bengal 1884 to produce and dispense Ayurvedic medicines for diseases such as
cholera and malaria. Soon the success of his medicines so wide spread that he came to
be known as the trusted Doctor who came up with effective cures. Dabur India deals is
personal and health care products such as Dabur Lal Dant Manjan, Dabur
Chyawanprash, Dabur Amla, Hajmola, Anmol, Vatika oils and shampoos and Dabur
red toothpaste. Dabur's Ayurvedic Specialties Division has over 260 medicines for
treating a range of ailments and body conditions from common cold to chronic
paralysis. Dabur International, a fully owned subsidiary of Dabur India formerly held
shares in the UAE based Weikfield International.
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Dabur was recognized as the 45th most trusted brand in India by The Brand
Trust Report, India study 2011. Dabur India Limited has marked its presence with
significant achievements and today commands a market leadership status which
includes the following:
1. Leading consumer goods Company in India with a turnover of Rs. 5,283 Crores
(FY12)
2. Two major strategic business units (SBU) - Consumer Care Business and
International Business Division (IBD)
3. Two Subsidiary Group companies - Dabur International and NewU and several
step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt),
Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African
Consumer Care (Nigeria), Naturelle LLC (Ras Al Khaimah-UAE), Weikfield
International (UAE) and Jaquline Inc. (USA)
4. Seventeen ultra-modern manufacturing units spread around the globe
5. Products marketed in over 60 countries
6. Wide and deep market penetration with 50 agents, more than 5000 distributors
and over 3.4 million retail outlets all over India
7. Strategic positioning of Honey as food product, leading to market leadership
(over 75%) in branded honey market
8. Leader in herbal digestives with 90% market share
9. More than 300 products sold through prescriptions as well as over the counter.
Consumer Care Business addresses consumer needs across the FMCG spectrum
through four distinct business portfolios of Personal Care, Health Care, Home
Care and Foods Master brands:
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1. Dabur - Ayurvedic healthcare products
2. Vatika - Premium hair care
3. Hajmola - Tasty digestives
4. Real - Fruit juices and beverages
5. Fem - Fairness bleaches and skin care products
International Business Division (IBD) caters to the health and personal care
needs of customers of international markets across Nepal, Bangladesh, the Middle East,
North and West Africa, EU and the US with its brands Dabur and Vatika. It contributes
to about 30% of total sales.
3.4.7 Cadbury India
Cadbury, officially Cadbury Enterprises Private Limited is a British
confectionery company owned by Mondelez International. Cadbury was established in
Birmingham by John Cadbury in 1824, who sold tea, coffee and drinking chocolate.
Cadbury developed the business with his brother Benjamin, followed by his sons
Richard and George. George developed the Bournville estate, a model village designed
to give the company's workers good living conditions. Having come into India in 1948
by importing chocolates, Cadbury, now has manufacturing units across India. Cadbury
is headquartered in Uxbridge, London, and operates in more than fifty countries
worldwide. Its popular brands include Dairy Milk, Celebrations, Eclairs, Perk and 5-
Star apart from the popular milk drink Bournvita.
The company is best known for its confectionery products including the Dairy
Milk chocolate which was introduced in 1905, with a higher proportion of milk as its
ingredient. By 1914, it became the company's bestselling product. Crème Eggs which
are available for sale in the United Kingdom are the bestselling confectionary product
in the country.
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Cadbury India had a position of 29% in sale at Rs 2,652 crore for the year ended
December 2010. In 2010, Cadbury spent Rs. 511 crores on selling and distribution and
it is about 38% higher than the previous year. The company is aggressively reaching
out to more consumers. In 2011 alone, it increased its direct reach by 25%. Cadbury
India's sales grew 40%, thanks to the successful launch of world's largest selling cookie
Oreo as well as double digit growth of most existing Cadbury brands.
3.4.8 Colgate-Palmolive Company
The Colgate-Palmolive Company is an American multinational consumer
products company engaged in the production, distribution and provision of household,
health care and personal products, such as soaps, detergents, and oral hygiene products
(including toothpaste and toothbrushes). The company's corporate offices are in New
York City.
In 1806, William Colgate, an English soap and candle maker, opened up a
starch, soap and candle factory on Dutch Street in New York City under the name of
William Colgate and Company. In 1833, he suffered a severe heart attack, which forced
him to his business. But after a couple of years on recovery he resumed his business. In
the 1840s, the firm began selling individual cakes of soap in uniform weights. In 1857,
on his death the company was reorganized as ‘Colgate and Company’ under the
management of Samuel Colgate, his son, who though reluctant to continue the business
was forced to continue as it would be the right thing to do. In 1872, Colgate introduced
Cashmere Bouquet, a perfumed soap. In 1873, the firm introduced its first toothpaste,
aromatic toothpaste sold in jars. His company sold the first toothpaste in a tube, Colgate
Ribbon Dental Cream (invented by the dentist Washington Sheffield), in 1896. In the
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same year Colgate hired Martin Ittner under whose direction founded one of the first
applied research laboratories. By 1908 they initiated mass selling of toothpaste in tubes.
In 2006, Colgate-Palmolive announced the intended acquisition of Tom's of
Maine, a leading maker of natural toothpaste, for US $100 million. Today, Colgate has
numerous subsidiary organizations across 200 countries, but it is publically listed in
only two, the United States and India. On October 25, 2012, the company announced it
that is will reference more than 2,310 workers, or 6 Per cent of its workforce, by the
end of 2016 in a push to make the consumer products company more efficient.
Colgate now markets a broadly diversified mix of products in the United States
and other countries. Major product areas include household and personal care products,
food products, health care and industrial supplies and sports and leisure time
equipment. Colgate has been ranked as Most Trusted Brand by Brand Equity’s Annual
Survey. Colgate was voted the Most Trusted Brand of the year.
Colgate Palmolive India today posted a net profit at Rs 109.52 crore for the
second quarter ended September 30, 2013. Net sales of the company, however, rose to
Rs. 895.69 crore for the same period. Colgate-Palmolive is present in the segments of
oral care, personal care, home care and professional oral care.
3.4.9 Procter and Gamble
The Procter and Gamble Company, better known as P and G, is an American
multinational consumer goods company headquartered in downtown Cincinnati, Ohio,
United States. Its products include pet foods, cleaning agents, and personal care
products. Prior to the sale of Pringles to the Kellogg Company, its product line included
foods and beverages. Some of its popular health care products are Vicks inhaler, Vicks
Formula 44 cough syrup, Vicks cough drops, Vicks Vapo Rub and Vicks Action 500+.
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On October 31, 1837, Procter and Gamble came into being. In 1858–1859, sales
reached $1 million. By this point, approximately 80 employees worked for that
company. During the American Civil War, the company won contracts to supply soap
and candles. In addition to the increased profit during the war, the military contracts
introduced soldiers from all over the country to Procter and Gamble's products. In the
1880s, Procter and Gamble began to market a new product, an inexpensive soap that
floats in water. The company called the soap Ivory. The company moved into other
countries, both in terms of manufacturing and product sales, with its 1930 acquisition
of the Thomas Hedley Co., based in Newcastle upon Tyne, England it became an
international corporation.
Procter and Gamble has dramatically expanded throughout its history, but its
headquarters still remains in Cincinnati. In January 2005 P and G announced an
acquisition of Gillette, forming the largest consumer goods company and purchasing
Unilever to the second place. The added brands include Gillette razors, Duracell,
Braun, and Oral-B to their stable. The acquisition was approved by the European Union
and the Federal Trade Commission, with conditions to a spinoff of certain overlapping
brands.
In 2012, P and G earned $83.68 billion in sales. Fortune magazine awarded P
and G a top spot on its list of ‘Global Top Companies for Leaders’, and ranked the
company fifteenth of the ‘World's Most Admired Companies’ list.
P and G India is committed to sustainable growth in India, and is currently
invested in the country through its five plants and over nine contract manufacturing
sites, as well as through 26,000 jobs it creates directly and indirectly. The sustainability
efforts focus on environmental protection as well as social responsibility to help
develop the communities. P and G operates under three entities in India - two listed
73
entities “Procter and Gamble Hygiene and Health Care Limited” and ‘Gillette India
Limited’, as well as one 100% subsidiary of the parent company in the U.S. called
‘Procter and Gamble Home Products’.
Healthcare business at 414 crores posted a growth of 9% in 2010 across Vicks
Vapo Rub, Vicks Cough Drops, Vicks Action 500 and Vicks Inhaler thereby
consolidating the market leadership in its respective categories. Feminine Hygiene
business recorded yet another year of high growth with sales at 623 crores translating to
a growth of over 17%. Whisper has increased its market share with growth across all
major brand forms. Whisper Choice reached its all-time high share overtaking
competition to become the largest mid-tier brand form.
3.4.10 Godrej Group
The Godrej Group, an Indian multinational headquartered in Mumbai,
Maharashtra, is managed and largely owned by the Godrej family. It was founded by
Ardeshir Godrej and Pirojsha Godrej in 1897 and operates in sectors as diverse as real
estate, consumer products, industrial engineering, appliances, furniture, security and
agricultural products. Subsidiaries and affiliated companies include Godrej Industries
and its subsidiaries, Godrej Consumer Products, Godrej Agrovet, and Godrej
Properties, as well as the private holding company Godrej and Boyce
Traditionally, Vikhroli, a suburb to the Northeast of Mumbai has been Godrej's
manufacturing base but increasingly the group has moved significant production
facilities away from Mumbai. The Godrej group also owns vast land in Vikhroli
occupying 3500 acres (14 km2) of land which makes the Godrej group the biggest
private land owner in Mumbai.
The Animal Feed business recorded a growth of 33% in revenues and 30% in
profitability. The strong performance in sales revenue and profitability was on account
74
of increased volumes, innovative products backed by R and D efforts and efficiency in
buying. Godrej Properties Limited (GPL) launched 13 new projects and phases across
the country. While volumes in the real estate sector have declined for the second
consecutive year, GPL has delivered 58% growth in booking volume and 78% growth
in booking value driven by successful new launches in Gurgaon, Bangalore, Kolkata,
Pune, Ahmadabad and Mumbai. The highlight of the year was the successful launch of
Godrej Summit in Gurgaon where GPL sold 695 apartments aggregating to 1 million
sq. ft. of saleable area in 1 day. Godrej Consumer Products Limited (GCPL) reported
Income from operations of Rs.6, 407 crore and Net Profit of Rs. 796 crore as against
Rs.4, 866 crore of Income from Operations and Net Profit of Rs.727 crore for the year
2013.
3.4.11 Marico Industries
Marico Industries is a leading Indian company that manufactures and exports
consumer products to different SAARC countries, Egypt, Middle East and the US.80
The Company was incorporated on 13th October 1988, under the name of Marico
Foods Ltd. The Company is engaged in manufacture and marketing of branded
personal care products, edible oils, fabric care products and processed foods. The
Company's products are sold under the brand names Parachute, Saffola, Sweekar,
Marico's Hair and Care, Revive and Sil. The company has 3 divisions the Consumer
Products Group (CPG), The International Business Group and Kaya Skin Clinic.
During 2009–10, the company generated a turnover of Rs.26.6 billion (USD 600
Million), in respect of its food, hair care and skin care related products. Marico's own
manufacturing facilities are located at Goa, Kanjikode, Jalgaon, Pondicherry,
80
Selvakumar M Dr.., Maria Jansi Rani, Jegatheesan K., “FMCGs: A Bright Future in
India, Facts for you, February 2013. PP. 10-13
75
Dehradun, Baddi, Paonta Sahib and Daman. In Bangladesh, Marico operates through
Marico Bangladesh Limited, a wholly owned subsidiary. Its Manufacturing facility is
located at Shirirchala, near Gazipur.
Marico's brands and their extensions occupy leadership positions with significant
market shares in a number of health and beauty areas. In addition to being a producer of
consumer products the organisation also operates Kaya Skin Clinic of which as of
2010, 81 exist in India, 13 in UAE and 2 in Bangladesh. Marico recently acquired the
aesthetics business, of the Singapore based Derma Rx Asia Pacific Pt Ltd. (Derma Rx),
under the Kaya portfolio.
Marico decided to try to sell products in that market after liberalisation, but found
that Arab customers did not like the scent of coconut, wanted a less sticky hair product,
and needed a product to counteract the high level of chlorination in their water. When
Marico reformulated its product, its market share in the Arab Mideast grew from 2% in
2002 to more than 20% by 2008. The company in recent years has been known for its
foreign acquisitions in countries such as South Africa, Egypt and Singapore. Marico
Ltd has reported 27.36% increase in net profit at Rs 157.72 crore for the first quarter
ended June 30, 2013.
3.4.12 GlaxoSmithKline
Glaxo SmithKline (GSK) is a British multinational pharmaceutical, biologics,
vaccines and consumer healthcare company headquartered in Brentford, London. It is
the world's fourth-largest pharmaceutical company. The company was established in
2000 by the merger of Glaxo Wellcome plc and SmithKline Beecham plc. GSK has a
portfolio of products for major disease areas such as asthma, cancer, virus control,
infections, mental health, diabetes and digestive conditions. It also has a large
consumer healthcare division that produces oral healthcare and nutritional products,
76
drinks and over-the-counter medicines, including Sensodyne, Boost and Horlicks. The
company has a primary listing on the London Stock Exchange and is a constituent of
the FTSE 100 Index.
GSK produces and sells a wide range of prescription-only and over-the-counter
products, including drinks and toothpastes. According to its website, it manufactures
and distributes over four billion packets of products to over 150 countries every year,
and nearly 900 million doses of its vaccines were distributed to 170 countries in 2012.
Its top-selling prescription drugs include the anti-depressant Paxil, which by 2012 had
attracted $11.6 billion in sales, the diabetes drug Avandia at $10.4 billion, the anti-
depressant Wellbutrin at $5.9 billion, the asthma drugs Advair, Flovent and Ventolin,
and an H2 antagonist, Zantac. It also sells several drinks, including Horlicks, a malted
milk drink and Boost, a chocolate-flavoured drink and formerly sold Lucozade,
marketed as an energy drink and Ribena, a fruit drink.
In June 2010 the company acquired Laboratories Phoenix, an Argentine
pharmaceutical company and focuses on the development, marketing and sale of
branded generic products, for a cash consideration of approximately $253m. In
December that year GSK announced its acquisition of the UK-based sports nutrition
company Maxi nutrition for £162 million (US$256 million). In March 2012 the
company announced that it planned to invest around £500 million in manufacturing
facilities in Ulverston, northern England, designating it as the site for a previously
announced biotech plant. GSK made a US$2.6 billion (£1.6 billion) offer for the United
States-based biopharmaceutical company Human Genome Sciences in April 2012. In
2013 the company said it would seek marketing approval for the world's first malaria
vaccine in 2014, after trial data showed the vaccine had significant effects in cutting
cases of the disease in African children.
77
3.5 FMCG SECTOR - INDIAN SCENARIO
The FMCG Sector in India has witnessed a range of recent developments
largely because of tax deduction on various items, rise in the penetration levels and per
capita consumption. But these exists a strict competition between the organized and
unorganized sectors of consumer durables. India offers an abundance of raw materials,
low-priced labor costs, and also has a presence across the entire value chain.
The major activities of the food-processing sector are permitted 100% foreign
equity or 100% NRI and Overseas Corporate Bodies (OCB) investment to meet the
rising demand of the consumers. It is assumed that the consumption of the FMCG
products will have a steady growth with the rising income level in both the rural and
urban areas. The Indian government’s tax sops for the FMCG sector and focus on the
infrastructural developments expedite development of this sector. The consumption of
health and personal care products in FMCG sector have increased in the recent past
with rise in disposable income especially among the early younger generation.
With this back ground information, the researcher has presented the detail of top
most FMCG companies operating in India with various types of products marketed in
India in table 3.1.
78
TABLE 3.1
Top Most FMCG Companies Operating In India
S.No. Company Segments
1 HUL Personal Care, Food Products, Household Care, Baby
Care, Fabric Care
2 Amul India Food Beverage Products
3 Nestle India Food Beverage Products
4 ITC Personal Care, Food Products,
5 Britannia Food Products,
6 Dabur Personal Care, Food Products, Household Care
7 Marico industries Personal Care, Household Care, Food Products
9 CSK Consumer Food Products, Personal Care
10 Cadbury India Food Products
11 Colgate Palmolive Personal Care, Oral Care
12 Procter and Gamble Personal Care, Household Care, Baby Care, Fabric
Care
13 Godrej Personal Care, Fabric Care
Source: Relevant company websites, IBEF Report, “Yearly sales as of March 2010”
Further the researcher has analysed the trend and growth of performance and
sales of FMCG by leading FMCG companies in India for the period 2009 to 2012.The
results of which are presented in Table 3.2.
TABLE 3.2
79
Performance and Sales of FMCGs by Leading FMCGs Companies in India
(Million in US$)
Sl. No.
FMCG Company Year CAGR
%2009 2010 2011 2012 1 Hindustan Uni
Lever
Amount 12,019 17,764 19,691 22,116 2.56Per cent of
Change - 47.80 10.85 12.32
2 Britannia Amount 3,421 3,773 4,605 5,485 17.04Per cent of
Change 10.29 22.05 19.11
3 Nestle India Amount 4,324 5,129 6,255 7,491 20.10Per cent of
Change 18.62 21.95 19.76 4 Dabur India Amount 2,805 3,390 4,077 5,305
23.66Per cent of Change 20.86 20.27 30.12
5 Godrej Consumer Products
Amount 1,393 2,041 3,643 4,866 51.73Per cent of
Change 46.52 78.49 33.57 6 Colgate Palmolive Amount 1,695 1,962 2,221 2,693
16.69Per cent of Change 15.75 13.20 21.25
7 Marico Amount 2,388 2,661 3,128 4,008 18.84Per cent of
Change 11.43 17.55 28.13 8 CSK Consumer
Health Care
Amount 1,542 1,922 2,306 2,686 20.32Per cent of
Change 24.64 19.98 16.48 Source: Report “India FMCG Industry” India Food Guide, Edelweiss, Dinodia Capital Advisors, September 2012
It is understood from table 3.2 that HUL tops the list followed by Nestle India
and Britannia. The Per centage of sale of HUL, Britannia, Nestle India, and Godrej
shows a decreasing trend whereas the Per centage of sale of Dabur India, Colgate
Palmolive and Marico shows an increasing trend. The performance of sales of FMCGs
by leading FMCG companies in India is illustrated in the following figure 3.2.
Figure 3.2
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81
the FMCG sector in rural India increased 3.5 times from 2000 to 2010, as compared to
3.2 times in urban India.81
Market share movements indicate that companies such as Marico Ltd., and
Nestle India Ltd., with domination in their key categories, have improved their market
shares and outperformed peers in the FMCG sector. This has been also aided by the
lack of competition in the respective categories. Single product leaders such as Colgate
Palmolive India Ltd., and Britannia Industries Ltd., have also witnessed strength in
their respective categories, aided by innovations and strong distribution. Strong players
in the economy segment like Godrej Consumer Products Ltd., in soaps and Dabur in
toothpastes have also posted market share improvement, with revived growth in semi-
urban and rural areas.
Rural India offers tremendous growth prospects for the FMCG industry.
Facilities of better rural infrastructure like roads, telecommunication, electricity, supply
chain, and transportation would propel the growth of Rural FMCG Market of India.
The FMCG sector, which is sure to enjoy tremendous growth prospects are food and
beverage sector, health care and personal care. At Present, rural India accounts for 34%
of total FMCG consumption, but it accounts for more than 40% consumption in major
FMCG categories like personal care, hot beverages, and fabric care.
The FMCG sector in India generated revenue worth US$ 34.8 billion in 2011, a
growth of 15.2 Per cent as compared to the previous year. During 2006-11, the sector's
revenue posted a compound annual growth rate (CAGR) of 17.3 Per cent. Food
products are the leading segment, accounting for 43 Per cent of the overall market.
Personal care (22 Per cent) and fabric care (12 Per cent) are the other leading segments.
Growing awareness, easier access, and changing lifestyles have been the key growth
81 Ibid
82
drivers for the sector. Rural demand is set to rise with rising income and greater
awareness of brands. FMCGs have seen over 20 Per cent demand in rural markets
ahead of the 17-18 Per cent growth in urban India. According to AC Nielsen, mainstay
categories like hair oils, toothpastes, shampoos, skin creams and lotions, and even
candies witness more growth in rural markets than urban.
With this back ground information, the researcher has presented the details of
category wise market share of FMCGs sector in India in table 3.3.
TABLE 3.3
Category wise Share of FMCG Sector in India
S.No Product Category Per centage Market
Share
1. Food and Beverages 43
2. Personal Care 22
3. Fabric Care 13
4. Hair Care 9
5. Baby Care 4
6. Home Care 4
7. OTC Products 5
100
Source: www.abhinavjournal.com Volume No: 1, Issue No: 11, ISSN: 2277.1166 From the table 3.3 it is inferred that the market share of food and beverages is
the highest with 43 Per cent followed by the personal care products which account for
22 Per cent, fabric care (13%), hair care (9%), baby care (4%), homecare (4%) and
OTC products (5%). The following chart 3.3 shows the position of category-wise
market share of FMCG sector in India.
Figure 3.3
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84
become one of the major destinations for quality technical education in India. All these
factors along with the fact that its capital - Chennai is also a metro city have propelled
the growth of the city.
The state is one of the largest producers of agro-products like tea, coffee,
sandalwood, cashew, coconut and spices, rice, which have facilitated the growth of
food industry in the state. Important cities like Chennai, Coimbatore, Sivakasi, Trichy,
Erode, Kodaikanal, Ooty help the growth of FMCG sector. Industrialization has led
to the further development of consumerism in the state. This increased consumerism
results in the speedy growth of the FMCG market in Tamil Nadu. The FMCG industry
in Tamil Nadu is shaping up under the umbrella of organized sector and it is distinctly
classified into four different segments like Food and Beverage industry, Cleaning,
Disinfectants and Home Care, Personal care and Electronics.
3.6 BRANDING STRATEGIES OF MNCs ON FMCGs IN INDIAN
MARKET
Good brand management brings about clear differentiation between products,
ensures consumer loyalty and preferences and may lead to a greater market share.
Brands are highly regarded as an important source of capital for business. The term
brand has different meanings attached to it. A brand can be defined as a name, logo,
symbol and identity or a trademark. A powerful brand will enhance a customer’s
attitude, strength of the product association of a brand.
A brand is a promise. With a brand, customer expectations are set. When
someone buys a product or service, they count on those expectations to be fulfilled. The
function and art of branding is a major contributor to the success of a product or service
sold by the company that markets it. Brand management aims to build into customers’
minds a set of perceptions and attitudes relating to an offering, leading to positive
85
buying behaviour. The power of a brand is measured by its effect on buyers. A
powerful brand will cause its customer base to either defer or refuse to purchase if the
brand is not available.
The first is Corporate Strategy, of which branding strategy is in fact the
symbol. The strategy lies in the art of being different. The single brand is an advantage
if one is already a single brand like Philips. In today’s fragmented markets, with their
aggressive distribution networks and consumer segments, it is far better to exploit the
targeted reputation (in terms of product and values) of the brands that people have
bought precisely.
The second parameter is the Business Model. In this respect it is interesting to
compare companies within the same sector, since their brand policy is often a reflection
of their business model, the driving force of their competitive edge and their
profitability. In fact, the business models of these companies are not the same, hence
the different brand strategies. As the inventor of modernity, it must therefore create
brands, with their own particular shapes and characteristics that can subsequently be
offered in a variety of forms to capitalize on the investment in promotion.
The third parameter for choosing branding strategy is Cultural. The United
States has developed the culture of the product brand that produces a single product.
Ivory, the founder brand of Procter and Gamble, is and continues to remain a soap,
which explains the company’s reluctance to extend the brand and even the ideological
opposition of such authors as Trout and Rise who have berated it in their work for the
past 20 years. But the US domestic market favoured this product-brand policy. On the
other hand, it also explains why Europe and Japan have been the main exponents of the
umbrella-brand policy. In Japan, apart from the size of the domestic market, the
concept of the company has also counted for a lot in the sense that, the more products
86
and sectors a company covers, the greater its reputation. It would simply not occur to
the director of a Japanese company not to use the corporate name to promote all kinds
of brand extensions. Yamaha is a typical example, putting its name to such widely
diverse products as motorcycles and pianos.
The fourth parameter is the Pace of Innovation. In this instance, a single-brand
policy covering the entire range is preferable, as in the case of Nokia, Sony-Ericsson,
Alcatel, Samsung and even Whirlpool and GE.
A fifth parameter is the Added-Value Lever on which a product is based.
When the added value in a particular market is linked to reassurance, reputation and
scale, a single brand umbrella strategy is recommended (in the world of industry, this is
often the corporate brand), although a source-branding strategy with two levels one is a
real ‘branded house’ like Garnier or L’Oreal Paris can work equally well. However, the
more segmented the market, with top-quality, personalized products, the more one has
to favour either a portfolio of L’Oreal product brands or an endorsing brand strategy
that sanctions the sub brands.
Finally the brand vision impacts the Choice of Architecture. In the cosmetic
market there are thousands of products and many scientific terms, and innovations are
essential. This is what leads to an opacity in the market. Brands serve as milestones and
a question that is frequently asked is which naming strategy should be used? There is
no single answer to such a general question and it depends a lot on the brand’s
conception of itself.82
82 Sunildro L.S. Akoijam1 and Dr Ch. Ibohal Meitei “Branding Strategies of MNCs: A
Study of Selected FMCG Products in Indian”, Market International Journal of
Research in Management & Social Science Volume 1, Issue 1 (July – September, 2013),
Pp. 50-60.
87
3.7 CONSUMER BEHAVIOUR TOWARDS NEW PACKAGING OF FMCG
Packaging is the container for a product encompassing the physical appearance
of the container and including the design, colour, shape, labeling and materials used.
Packaging has a huge role to play in the positioning of products. Package design shapes
consumer perceptions and can be the determining factor in point-of-purchase decisions
which characterize the majority of shopping occasions.
In recent years the marketing environment has grown increasingly complex and
competitive. A product’s packaging is something which has strong potential to engage
the majority of the target market. This makes it an extremely powerful and unique tool
in the modern marketing environment. In addition to its benefits in terms of reach,
some marketers believe that packaging is actually more influential than advertising in
attracting consumers, as it has a direct impact on how they perceive and experience the
product. In most cases, pack designs are more likely to influence the consumer
perception of the brand. For products with low advertising support, packaging takes on
an even more significant role as the key vehicle for communicating the brand
positioning.
Packaging is an important aspect of product planning. From the company's
point of view, besides protecting, package must give mandatory derails like price,
ingredients, and manufacturing details while retailers' needs, it to be easy to
stock/display, not tear or get damaged easily. as no one will buy a product wit. Besides
these, consumers may look for extra features like freezer-safe packaging for food
products.
88
Packaging must reflect everything that the brand represents, attract consumer
attention immediately and inform how it adds value to consumer’s life. In the era of
supermarkets and malls packaging must bear all information that a person may want to
know, as staff may not be around. It may be immediately discarded for some products
(like soaps) or remain in use till the product is completely used (toothpaste, ketchup).
For the latter group, packaging must be sufficiently sturdy to last this duration and help
in product consumption as well. Thus the package will continue to reflect brand
attributes in that part of the home.
Bru coffee is now available with an aroma lock device. Kissan Jam available in
non-breakable tubes and does not need spoons. Hadrian’s ready-to-eat nankeens are
now available in convenient self-sealing packets and Act II Pop-corn in microwave
packs. Consumers are attracted to packaging features such as easy to hold or dispense,
those with airtight or leak proof caps, measured pouring while others may value eco-
friendly or biodegradable packaging. Some prefer to bring home less plastic wrappings.
Higher package features can mean a costlier product.
Companies transport ready products through their distribution chains in
cartons/boxes to upkeep the good condition for a long time. They may 'test' the
intended packaging prior to the market launch to check its suitability for different
pack sizes, power to comber transportation stress, facility of storage and visibility in a
store shelf/aisle. The packaging must protect the product within from
breakage/contamination. Above all, companies must use packaging materials that do
not have substances, which are harmful to health of consumers.
89
3.8 CONSUMER’S BUYING BEHAVIOUR TOWARDS FMCG SECTOR
Nowadays world purchases are made by a customer to satisfy his or her needs.
All the behavioral activities of a customer during and after the purchase of a product
are termed as “buyer behavior”. A consumer is faced with purchase decision daily but
not all decisions are equal in importance. Some decisions are more complex which
require more effort while other decisions are almost a routine which require only little
effort. In general, consumers face the following four types of problems in making
purchase decisions.
Minor New Purchase: These purchases represent something new to a
consumer but in the customer’s mind it is not a very important purchase in terms of
need, money or other reason
Minor Re-Purchase: These are the most routine of all purchases and often the
consumer returns to purchase the same product without giving much thought to other
product options that is consumer’s brand loyalty.
Major New Purchase: These purchases are the most difficult of all purchases
because the product being purchased is important to the consumer who has little or no
previous experience of purchasing the product. The consumer’s lack of confidence in
making this type of decision often (but not always) requires the consumer to engage in
an extensive decision-making process.
Major Re-Purchase: These purchase decisions are also important to the
consumer but the consumer Whofeels confident in making these decisions because of
previous experience. For marketers it is important to understand how consumers treat
the purchase decisions. If a company is targeting customers who feel a purchase
decision is difficult (i.e., Major New Purchase), their marketing strategy may vary
greatly from a company targeting customers who view the purchase decision as routine.
90
In fact, the same company may face both situations at the same time for some the
product is new, while for others it is routine. The implication of buying behaviour for
marketers is that different buying situations require different marketing efforts.
3.8.1 Factors Affecting the Buyer Behavior towards FMCGs
Disposable Personal Income: The economists make attempts to establish a
relationship between income and spending. Disposable personal income represents
potential purchasing power that a buyer has. The change in income impacts buying
habits.
Size of Family Income: The size of family and size of family income influence
the spending and saving patterns. Generally large families spend more and short
families spend less, in comparison.
Income Expectations: The expected future income has a direct relation with
the buying behavior. The spending plans are drafted in accordance with the expectation
of higher or lower income.
Propensity to consume and to save: This goes to the habit of spending or
saving with the disposable income of buyers. If given importance to present needs, they
dispose of their income. And they spend less if they give importance to future needs.
Liquidity of Fund: The present buying plans are influenced greatly by liquidity
of assets namely cash and assets readily convertible into cash, like. Bonds, bank
balances.
Consumer Credit: “Buy now and pay later” plays a key role in the rapid
growth of markets of car, scooter, radio, furniture and the like.
Internal Influences of Buyers: Psychographics (Lifestyle), Personality,
Motivation, Knowledge, Attitudes, Beliefs, Feelings, Demographics and Consumer
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behavior concern with consumer need consumer actions and the internal factors
influencing the buying habits of consumers.
External Influences of Buyers: Culture, Sub-Culture, Locality, Royalty, Ethnicity,
Family, Social Class, Reference Groups, Lifestyle, and Market Mix Factors. One the
external influences that shape the buying habits of consumers.
3.9 ORGANIZED RETAIL SECTOR FOR FMCGs
3.9.1 Supermarkets
A supermarket, also called a grocery store is a self- service store offering a wide
variety of food and household merchandise, organized into departments. It is larger in
size and has a wider selection than a traditional grocery store and it is smaller than a
hypermarket or superstore.
3.9.2 Hypermarkets
A hypermarket is a superstore which is a combination of a supermarket and
department stores and hence a very large retail facility of purchased of a wide range of
products under one roof, including full lines of groceries and general merchandise. In
theory, hypermarkets help customers satisfy all their weekly shopping needs in a day.
3.9.3 Departmental Stores
A department store is a retail establishment which specializes in satisfying a
wide range of consumer’s personal and residential needs; and at the same time offering
the consumer a choice multiple merchandise lines, at variable price points, in all
product categories. Department stores usually sell products including apparel, furniture,
appliances, electronics, and select other lines of products such as paint, hardware,
toileteries, cosmetics, photographic equipment, jewellery, toys, and sporting goods.
Certain department stores are further classified as discount department stores. Discount
department stores commonly have central customer checkout areas, generally in the
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front area of the store. Department stores are usually part of a retail chain of many
stores situated around a country or several countries.
3.9.4 Shopping Malls
A shopping mall or shopping centre is a building or set of buildings which
contain retail units, with interconnecting walkways enabling consumers to reach all
units.
3.9.5 Specialty Chains
A Specialty Chains is numbers stores which are specialized in a specific range
of merchandise and related items. Most stores have an extensive width and depth of
stock in the item that they specify in and provide high level of service and expertise.
They differ from department stores and supermarkets which carry a wide range of
merchandise.
3.10 EMERGING CHALLENGES OF FMCG SECTOR IN INDIA
3.10.1 Consumer Class in FMCG Sector in India
Consumers play a crucial role in the Indian FMCG sector as the price band of
each FMCG product is fixed depending largely on the consumer class which the
particular company is targeting. A number of variants are offered by each brand in the
FMCG sector. Some of the FMCG companies like Nestle India, Cadbury, Procter and
Gamble and Smith Kline Beecham offer high-priced branded products as these
companies target the elite and upper middle class consumers. These high-priced
branded products do not have as much sales in the rural regions as in the urban section.
Processed food manufacturers gain more profit in the urban areas as the urban
population opt more for ready-to-eat meals. The consumption of personal care items is
high in the rural regions. High literacy rates and increased per capita income led to a
rise in the consumption of the FMCG products.
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3.10.2 Indian Market Conditions of FMCG product GDP
The Gross Domestic Product, known as GDP of economy requires contribution
from major industries to be healthy. India depends largely on agriculture to make the
major contribution to the GDP. Role of major industries in India’s GDP is equal
important as based on this only the total GDP is calculated. In terms of US Dollar
exchange rate India's economy is the twelfth largest. Despite a slowdown, because of
the global recession, India's economy has huge potential of expansion.
3.10.3 The Challenge - New Product Development (FMCG)
In this age of accelerating commoditization, companies are increasingly
gambling on the success of innovative new products, yet companies continue to release
new products the same way they always have. As far as the economic scenario is
concerned, India is surely on a roll. The last twenty years have really proved extremely
beneficial for India. India is expected to cross the 8 Per cent mark and move to 9 Per
cent GDP growth rate. India is the second largest populated country in the world with
over one billion people. Although India has not had a striking 10 Per cent year over
year economic growth as its neighbors China has still managed to grow at a nominal
rate. India's GDP growth has been slow but steady.
According to trade pundits India will take the third position as far as GDP
growth in concerned by 2020 replacing Germany, the UK, and Japan. Only United
States and China will be ahead of it. All the important sectors in India have shown
positive signs of growth in the last five years. India’s exports increased by 26.8 Per cent
and touched US$ 18.9 billion in November 2010 and imports increased to US$ 222
billion. This rapid growth in the exports from India urged the Indian Government to
estimate that the total shipments in 2010-11 might go up to US$ 215 billion.
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3.10.4 Inconveniences of FMCG Products Launch
The inconveniences of FMCG products launch include fast growth, unfulfilment
of customer expectations; new item exists in product mix, unknown/new category and
consumer education and revolutionary product with no market.
SUMMARY
This chapter has discussed various theoretical details relating to production and
marketing of FMCGs such as evolution of Indian FMCG Market, major FMCGs
companies in India, FMCG consumer goods in Asia, Growth of FMCG Sector in India,
exports of FMCGs in India, challenges faced by FMCG sectors for rural marketing,
factors accountable for upcoming paradigms of rural marketing of FMCGs, impact of
modern retail on FMCG sector, branding strategies of MNCs on FMCG in Indian
market, emerging challenges and prospects of FMCG in India, consumer behavior
towards new packaging of FMCG, consumer buying behavior in FMCG sector,
economic factors affecting the buyer behavior towards FMCGs and formats in Indian
organized retail sector for FMCGs. As such, this chapter contains in capsule form all
information on FMCGs relating to the present study.