FMCG Market in India – The

Rise of Indian Companies

IIT Kanpur – Presentation to MBA Students

23.08.14

Who are we?

• Ex-Unilever, Reckitts and PepsiCo senior managers,

providing business advisory services to FMCG and

consumer facing business, especially Small and Mid Cap

Enterprises (SME’s).

• We are 5 years old and comprise of 7 Senior Advisors.

The Core Team - Seasoned Consumer Professionals

Debu Bhatnagar

Founder and MD

30 years experience in

General Management,

Sales and Marketing

Hindustan Unilever,

Benckiser, ICI, RPG

Group, Hemas Sri

Lanka, Bajaj Corp

IIT Kanpur, IIM

Calcutta

Ajay Khanna

Senior Advisor

24 years experience in

General Management,

Sales and Marketing

and Start-Ups

Hindustan Unilever,

PepsiCo, Electronic

Arts

Delhi University, IIM

Ahmedabad

Rajiv Khurana

Senior Advisor

20 years experience in

Product / Packaging

Development, Quality

Assurance and Supply

Chain.

Reckitt Benckiser

Punjab University,

Indian Institute of

Packaging and Asian

Packaging Federation

Our Services

• Management Advisory – strategy formulation and implementation, strategic plan,

annual operating plan & KPI’s

• Distribution – system design, organization structure and sales training

• India Entry – appropriate corporate structure, market mapping, supply chain

structure, identification and evaluation of potential distributors/channel partners,

staffing and recruitment of key personnel

• Human Resources – Search+, Sales Training, Coaching and Mentoring,

Development Centres

• Supply Chain – identification of contract manufacturers, product/packaging

development, techno-commercial feasibility of manufacturing, sourcing, quality

assurance

The FMCG Landscape

India FMCG (CPG) Market

Food43%

Personal Care22%

Fabric Care12%

Hair Care8%

Household Cleaning4%

OTC4%

Baby 2%

Others5%

Valued at $30 Billion growing at 12% CAGR

Headroom for Growth

US$ Per Capita

China Indonesia India

Skin Care 7.9 4.3 0.8

Shampoo 2.3 2.1 0.6

Ice Cream 3.3 1.7 0.4

FMCG Growth Drivers

Extrinsic Factors Intrinsic Factors

Growth in GDP and Disposable Income

Increasing Urbanisation

Media Explosion

Rural Prosperity

Government Policy (NREGA, Tax Reform)

Growth of Modern Trade

Mega Trends in Health/Wellness and Environment Protection

Competition leading to:

Cost effectiveness and keeping pricing in check

Intense market activity (new launches,

relaunches, advertising and sales promotion)

Innovation in product development, marketing and distribution strategies

Increasing usage of IT in FMCG companies

Integration of the product and service experience (Lakme, Streak, Kaya)

Encouraging Up Trading – HUL in Skin Care

India: Large, Diverse, Complex

• 29 States and 7

Union Territories

• 22 Official

languages with over

300 dialects

• 1.2 Billion

population

growing at 1.3% per

year

India Demographics

Town Class by

population

Number of

towns /

villages

Population

(Million)

% to Total

Metro (5 Million +) 6 85 7.0

100,000+ 462 180 14.9

Other Urban 7,467 112 9.3

Total Urban 7,935 377 31.1

Total Rural 638,596 833 68.9

Grand Total 646,531 1,210 100.0

• Metros – Mumbai, Delhi, Kolkata, Chennai, Hyderabad and Bangalore

account for a large part of the upscale products market size.

• The top 20 markets account for close to 60 – 70% of the potential for

premium products.

India Distribution Structure

Factory/Importer

Depot / State Level Carrying and

Forwarding Agent

Town Level Distributor (General

Trade)

Retail Outlets

Modern Trade Distribution Centre

(Specific Chain)

Modern Trade Outlets (Specific

Chain)

Town Level Distributor (Modern

Trade)

Modern Trade Distribution Centers

Modern Trade Outlets

E Commerce Web Sites

• Taxes are levied on interstate

sales. Hence stocks are

transferred to C&FAs in other

states.

• Distributors tend to specialize in

“Modern Trade” or “General

Trade.”

E-Commerce, Small but Growing

• India's e-commerce market was

worth about $2.5 billion in 2009,

it went up to $6.3 billion in 2011

and to $14 billion in 2012.

• About 75% of this is travel

related (airline tickets, railway

tickets, hotel bookings, online

mobile recharge etc.).

• Online Retailing comprises

about 12.5% ($300 Million as of

2009).

• India has close to 10 million

online shoppers and is growing

at an estimated 30% CAGR vis-

à-vis a global growth rate of 8–

10%

FMCG Players• Entrenched, well established MNCs such as HUL, Reckitt Benckiser, ITC or Nestle

who have developed a deep understanding of the Indian Consumer over the years.

They are good examples of ‘think global and act local’ Pepsi and Coke also fall into

this category though they are later entrants.

• Relatively new MNC entrants. Examples such as LÓreal, Amway, Kellogg or P&G. In

general these companies tend to be more global in outlook and treat the Indian

market as an integral part of their Regional/Global Strategy.

• Large Indian companies such as Dabur, Godrej, Marico, Emami and CavinKare. Over

the years these companies have grown rapidly in scale and sophistication and the

quality of their management is rapidly levelling the playing field.

• Single category large Indian companies such as Nirma, Ghari, Power Detergents and

Ruchi Soya.

• Emerging Indian companies, better known for their brands such as Vasmol,

Himgange, Lotus Herbals, Crax, Forest Essentials and others who are currently

regional or limited players but are keen to scale up rapidly.

FMCG - MNC Leader Board

Turnover (Rs Cr)

HUL 27,408

Nestle 9,062

ITC Consumer 8,122

Colgate Palmolive 3,757

Reckitt Benckiser <2,000

Cadbury <2,000

P&G <1,000

Perfetti <1000

J&J Consumer <1000

Henkel <500

Lotte <500

L’Oreal <500

The MNC Landscape

• HUL is still the ‘Big Daddy’ but is steadily losing dominance. Limited local flexibility

• ITC is behaving like a local company in the FMCG space

• Reckitt Benckiser and Colgate driven by profit

• New MNCs are in focused areas – confectionery and personal care companies have done well

• A host of others: Kelloggs, Heinz and many imported brands jostling for space

Established Indian FMCG Players

Turnover (Rs Cr)

Britannia 6,232

Nirma Approx 4,200

Dabur 4,870

Marico 3,682

Ghari Detergents Approx 2,500

Godrej 3,581

Emami 1,705

CavinKare Approx 1,200

Jyothy Laboratories 1,260

Emerging Indian FMCG

Players

• Sub 500 Cr Companies

• Experiencing Rapid Growth especially in

the last 7-10 years

Super

Vasmol from

Hygienic

Research

Institute

Himgange

Cooling

Hair Oil

Amrutanj

an Pain

Balm

Keo

Karpin

from

Dey’s

Medicals

Color

Mate from

Heena

Exports

Tzinga from

Hector

Beverages

What makes them tick?

The ‘Big Daddy’ Story

• Losing Focus: HUL on Detergents– Nirma

• Dominance Woes: Nirma in Detergents– Ghari

– Power

• Money on the Table: Pepsi/Frito in extruded snacks, Reckitt Benckiser in mosquito coils, Colgate in toothpaste– Prakash Snacks with Yellow Diamond Snacks

– Bingo Mad Angles from ITC

– Bharat Box with Chakravyooh Mosquito Coils

– Anchor Toothpaste

The Indian Market

• ‘Bottom of the Pyramid’ – increasing numbers entering the

consumption economy

• ‘Climb the ladder’ – constant growth in economic power at all levels

• ‘Retail and Media Revolution’ – drives consumer choice and

information

• ‘Dilli Chalo’ – increasing urbanisation

‘The mother of all markets’ – Rapidly increasing demand for ALL

classes of products

Category Pointers

Exploitable

EmergingVacated

Exploitable Categories

• ‘Unique to India’ Propositions

• ‘Below the radar’ Brands

‘Unique to India’

• Legacy

– Amrutanjan

– Boroline

– Jabakusum

• ‘Indian’ Categories

– Fairness Cream: not any more!

– Hair Oil: many times bigger than

shampoo

• Herbal/Ayurvedic/Unani

Products

– Shahnaz Husain

– Rooh Afza, Safi

• Indian Habits and Preferences

– Oil Based Hair Dye – Super

Vasmol

– ‘Cooling’ Hair Oil

– Kali Mehndi

– Kajal, Bindi, Sindhoor

– Chywanprash, Hajmola

– Kesh Nikhar

• Indian Taste

– Indian Namkeens

– Masalas

– Idli Dosa Batter

Below the Radar Brands

• Exploit “interstitial” spaces that the vast Indian market offers

• Regional focus

• More wholesale oriented distribution

• Tier 2-3-4 towns

• Lower price

• Higher trade margins

• Positive product tweaks– Perfume

– Packaging

Emerging Categories

• Ready to Cook/Eat

– ID Special; Meatzza

• Deodorants, Perfumery and Male

Grooming

– Park Avenue

– Wild Stone

– Z Talc

Vacated Categories

• Clothes Blue: Robin

– Ujala

• Shaving Cream: Erasmic

– Vi John

MNC Woes

• In the ‘70s and ‘80s HLL behaved like an Indian Company with Global Systems and People– Rin

– Fair & Lovely

– Wheel was the last hurrah

• They attracted the best talent and there was a vast gap between them and the closest Indian competitor

Today….

• There is no difference in the quality of people and systems between HUL, Daburand Marico

• HUL is caught in a trap of its own making

– Power Brands = Low Innovation

– Central Control = Bureaucracy

– All things to all people = nothing to nobody

– Media vs Market

David to Goliath…

• Courage is being scared to death – but saddling

up anyway: John Wayne

• Lack of money is no obstacle. Lack of ideas is: Ken Hakuta

• Gift Karsanbhai Patel an overhead slide

projector: Hindustan Lever in the ‘80s

Final Thoughts

• India is a sea of opportunity.

• Indian entrepreneurs have shown that it is possible to beat MNCs at their own game. The FMCG space is only one example.

• The best minds in the country are right here in this room.

• Don’t only look for a ‘safe’ job with a ‘good’ company.

• Strike out on your own!

Thank You

D. Bhatnagar

Managing Director, YFactor Marketing Private Limited

www.yfactor.in