Industrial Analysis Report

On

“MARKETING STRATEGY OF FMCG COMPANY IN INDIA”

Summitted By:

Abhishek Singh
B.B.A. 4TH Sem.
Roll No. 1705465071002
Sub. Code.407

ALIGARH COLLEGE OF ENGINEERING AND

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 ACKNOWLEDGEMENT

I would like to express my greatest gratitude to the people who have helped
and supported me throughout my project. I am grateful to my teacher for
her continous support for the project, from initial advise and contacts in the
early stage of conceptual inception and through ongoing advise and
encouragement to this day.

A special thanks to mine goes to my friends who helped me to completing

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 PREFACE

The conceptual knowledge acquired by management student is best

The project report entitled “Marketing Strategy of FMCG Company in India”

The report will provided all the information regarding the MARKETING
STRATEGY OF FMCG COMPANY IN INDIA and their importance in
marketing strategy

I also hope that this report will be beneficial .

3
 CERTIFICATE
This is certified that the contents of the projects entitled

Industrial Analysis Report on MARKETING STRTEGY OF FMCG

COMPANY IN INDIA, by Abhishek Singh is a bonafide work of him

for consideration in partly fulfilment requirement of syllabus and

to teach many aspects of business under the supervision of the

professional manager. The original research work was carried out

by him under my supervision in the academic year 2018-2019. On

the basis of declaration made by him , I recommend this project

report for evaluation.

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 CONTENTS

S.No. Particulars Page No.

1. Indian FMCG Sector : Executive Summary 6-7

2 .Indian FMCG Market Outlook 8-25

3. Indian Retail Market Outlook 26

4. Supply Chain Analysis 27-28

5. Government Policies 29-30

6. Market Opportunities and challenges Ahead 31-35

7. Case Study 36-41

8. Objective of the study 42

9. Conclusion 43-44

10 Recommendations 45-48

11. Bibliogprahy 49

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 1. Indian FMCG Sector: Executive Summary

With a population of over one billion, India is one of the largest economies in the world in

terms of purchasing power and consumer spending. The International Monetary Fund has

projected that India’s GDP will grow by 7.4% during 2016–17, making it the world’s

fastest-growing large economy.

The fast-moving consumer goods (FMCG) sector is an important contributor to India’s GDP

growth. The sector includes food & dairy products, packaged food products, household

products, drinks and others. FMCG is the fourth largest sector in Indian economy and

provides employment to around 3 million people accounting for approximately 5% of the

total factory employment in India. The sector is characterized by strong presence of leading

multinational companies, competition between organized and unorganized players, well

established distribution network, and low operational cost. Growth in the country’s FMCG

sector is being fuelled by improving scenario in both demand as well as supply side. Major

demand side drivers include growing affluence and appetite for consumption of the Indian

consumer, growing youth population, rise in per capita expenditure, and increasing brand

consciousness. On the other hand, easier import of materials and technology, reduced barriers

to entry of foreign players, and new product development, rapid real estate infrastructure

development and improvement in supply chain efficiency are the major supply side drivers

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for the sector. The growth of the FMCG sector, which primarily includes Food & beverages,

personal care and household care has been driven in both the rural and urban segments. Rural

consumption growth has outpaced urban consumption with the increase in percentage in

monthly per capita expenditure in rural markets surpassing its urban counterparts over the

past five years. Several government measures such as GST Bill, Food Security Bill and FDI

in retail sector are expected to have a significant positive impact on the country’s FMCG

sector in the coming years.

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 2. Indian FMCG Market Outlook

Fast-moving consumer goods (FMCG) can be defined as packaged goods that are

consumed or sold at regular and small intervals. The prices of the FMCG are low and profits

earned are more dependent upon the volume sales of the products. The FMCG market can

be broadly categorised as Personal Care, Household care, Food & Beverages and Others.

The Indian FMCG sector is the fourth largest sector in the economy with a total market size

of USD49 billion in 2016. The sector is projected to grow at a CAGR of 20.6% to reach

USD103.7 billion by 2020. The FMCG industry in India, has grown rapidly over the last

decade, predominantly on account of increasing income levels and changing lifestyle of

Indian consumers.

2.1.Indian FMCG Market in Comparison with Global FMCG Market:

Currently India accounts for a share of just 0.68% of the Global FMCG market, this share is

expected to increase significantly over the next 5 years mainly due to the macro-economic

factors such as improving demographics, rising disposable income, expansion of organised

retail in tier II & III cities in India, changing consumer preferences etc. Major FMCG

markets include USA, China, European Union, Japan etc. Globally, the FMCG sector is

expected to grow at a CAGR of 4.4%, which when compared to India is a lot slower. Many

foreign FMCG multinationals have established themselves in India.

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Globally, the FMCG companies have now shifted their focus on E-commerce due to the

increasing mobile internet penetration. Globally, the share of online sales of FMCG products

accounted for around 5% in 2015, which is relatively higher than India where online FMCG

sales accounted for a share of just 1-2% of the overall FMCG market in 2015. The global

economic growth has been decelerating as several large economies face decreasing economic

growth, primarily China and the Eurozone, as well as a few key emerging markets like Brazil

and Russia. This offers an advantage to India which has a significantly better economic

condition. According to The World Bank, India’s per capita income is expected to cross

INR100,000 (USD 1,505.4) in FY 2017 from INR93,231 (USD 1,403.5) in FY 2016.

Technology adoption, urbanisation and other structural reforms are the other major drivers

resulting in better market potential compared to other markets

Indian FMCG Market Size, by Value, 2011-2020F (USD Billion)

2.2. Market Size & Forecast:

Indian FMCG sector had a market size of USD43.08 billion in 2015. Well-established

distribution networks, as well as intense competition between the organised and unorganised

segments are the characteristics of this sector. The FMCG market in

FMCG Market Share, By Urban Vs Rural (%), 2015

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Source: TechSci Research

India is anticipated to grow at a significantly high CAGR during the forecast period and is

expected to cross USD100 billion mark by 2020. FMCG in India has a strong distribution

presence across the entire value chain.

Retail Share, Organized Vs Unorganized (%), 2015

Source: TechSci Research

Indian FMCG Market Share, By Segent (%), 2015

Growing share of the organised retail sector in India has been one of the major drivers for

India’s FMCG market. Though the share of organised retailing in India is still very low

compared to the other countries, it is among the fastest growing retail markets, globally. The

urban segment is the biggest contributor to the sector, accounting for two-third of total

FMCG sector revenue. However, with the emergence of new consumption hubs in India,

and economic growth in smaller cities the share of semi urban and rural FMCG markets is

anticipated to grow significantly during the forecast period.

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Over the last decade, India has witnessed a demographic shift, with rapid adoption of internet

and growing digital media, and has significantly altered the purchase decision of Indian

consumers.

2.3. Indian FMCG Market by Type:

Indian FMCG Product Classification by Segments

Health beverages, staples/cereals, bakery products, snacks, chocolates,

ice cream,

tea/coffee/soft drinks, processed fruits and vegetables, dairy products,

Food & Beverages and branded

flour, etc.

Oral care, hair care, skin care, cosmetics/deodorants, perfumes,

feminine hygiene,

Personal Care

baby care, shower products, etc.

Dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners,

insecticides and

Household Care

mosquito repellents, etc.

Others OTC products, Tobacco products etc.

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2.3.1. Food & Beverages:

Food & beverages sector accounted for the largest share in India’s FMCG market. The

changing preferences of the upward middle class families from the urban areas gave

importance to food & beverages sector and thus, fuelled the growth in the last few years.

India is the world’s second largest producer of food, next only to China, and has the potential

of being the largest player in food and agricultural sector. The food processing industry is one

of the largest industries in India and is ranked fifth in terms of production, consumption,

export, and expected growth.

Number of Food Services Outlets in India, By Type, 2014

Type Geographical Presence

QSRs 61,470

Others 1,729,530

Total Standalone 1,791,000

Total Café Outlets 21,889

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 Total Retail Outlets 136,100

Total Lodging Facilities 68,800

Total Food Services Outlets 2,017,789

Growing food services sector that includes both Indian and foreign food services restaurants

boosted growth of organised food services sector in India. Furthermore, various policies

undertaken by the government such as allowing 100% FDI in food services sector in 2012

catalysed growth in Indian food services market.

Indian Food & Beverages Market Size, (USD Billion), 2015-2020F

In the food and beverages industry, emerging presence of private labelling has altered the

buying habits of consumers. Many companies in food and beverages segment are now

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focusing on innovation to offer various categories across various price points in order to

penetrate majority of buyers across each income group.

Some common trends which are being witnessed in this segment are growing affordability

among increasing income groups in urban India, greater consumer acceptability of newer

products due to the factors such as younger population, faster urbanization, more working

women and smaller families, easier availability due to better distribution

Leading FMCG Companies in Food & Beverages Segment along with key products

Aashirvaad, Sunfeast, Bingo! Yippee! Kitchens of

India, B Natural, mint-o,

ITC

Candyman

Amul Milk, Cheese, Ice Cream, Mithai Range,

Chocolates, Butter milk,

Amul

Beverages

Frooti, Café Cuba, Hippo, Maaza, Parle-G,

Melody, Mango Bite, Poppins,

Parle Agro

Kismi Toffee Bar, Monaco and Krack Jack

Britannia Industries Dairy products, Biscuits (Vita Marie Gold, Tiger,

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 Nutrichoice Junior, Good day,

50 50, Treat, Pure Magic, Milk Bikis, Good

Morning, Bourbon), breads, etc.

Nestle Nescafé, Kit Kat, Maggi, etc.

2.3.2. Personal Care:

Personal care products (PCP) market in India is estimated to be worth USD9.91 billion in

2015. Personal hygiene products such as bath and shower products, deodorants, etc., hair

care, skin care, colour cosmetics and fragrances are the key segments of the personal care

market. Each of these segments exhibit their unique trends and growth patterns.

Globally, the personal care market stood at USD700 billion in 2015, of which India’s share

stood at around 1.4%. Bath and shower products which includes bar soap, body wash, shower

gel, etc. occupied the max-imum share in the market followed by hair care prod-ucts.

Lower priced small quantity products offered by the companies have improved the pace of

penetration of FMCG personal care products market. Growing literacy levels, higher

government spending on welfare programs, increasing support to agricultural sector, and

rising DTH and mobile connections have also acted as a catalyst in bolstering rural demand

for FMCG personal care products in rural areas.

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Penetration of Select FMCG Personal Care Products in India (%), 2014

Source: TechSci Research

Leading FMCG Companies in Personal Care Segment along with key prg FMCG

Companies in Personal Care Segment along with key products

Clinic Plus, Lifebuoy, Pears, Dove, Lakme, Sunsilk, Vaseline, Fair &

HUL Lovely etc.

ITC Vivel, Fiama Di Wills, Engage, Savlon, Superia

GCPL Cinthol, Godrej No. 1, Godrej Nupur, Godrej Expert, Renew, etc.

P&G Vicks, Oral-B, Olay, Gillette, Pampers, etc.

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 Toothpastes, Toothbrushes, Mouthwash, Toothpowder, Palmolive thermal

Colgate Palmolive India spa, etc.

2.3.3. Household Care

The household care segment mostly includes fabric wash and household cleaners. This

segment is a volume driven market with low margins and is marked with stiff competition.

This segment occupied a share of 11% in Indian FMCG market and recorded robust growth

in the past five years due to focused innovation in the product portfolio to provide greater

consumer value. The increasing household budgets have allowed for new categories of

household care products to enter the Indian market.

Leading brands in household care categories such as laundry care, air care and toilet care

have launched variants of their regular products with additional benefits such as fragrance,

germ-fighting capabilities, bettercleaning and packaging in order to increase their sales

value.

Although, majority of household care products sales are generated through local independent

small grocers, modern grocery retailers. Internet retailing has emerged as a potential channel

for the growth of household care segment in cities.

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Indian Household Care Market Size, (USD Billion), 2015-2020F

Source: TechSci Research

Indian Household Care Market Share, by Product Type (%), 2015

Source: TechSci Research

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 Leading FMCG Companies in Household Care Segment along with key products

Wheel detergent, Cif Cream Cleaner, Comfort fabric

softeners, Domex

HUL

disinfectant, Surf Excel detergent, Vim, etc.

Reckitt Benckiser Lysol, Air Wick, Mortein, Harpic, etc.

Rohit

Xpert Ultra Gel (Liquid), Ghari Detergent Powder, Ghari

Detergent

Surfactants

Cake, etc.

P&G Ariel, Tide, Ambi Pur, etc.

GCPL Goodnight, HIT, Aer, Ezee, etc.

2.3.4. Other FMCG Products:

Other FMCG products include OTC drugs and tobacco products, which had a combined

market share of 20% in 2015. Rising awareness about preventive care is driving the growth

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of various categories like nutraceuticals, vitamins, and dietary supplements. However,

declining market of chewing tobacco products has affected the overall tobacco market of

India. Stringent anti-tobacco measures taken by the government such as a ban on the sales of

loose cigarettes and consecutive hikes in excise duty on cigarettes is expected to decrease the

segment’s share to 17% by 2020.

2.4. Online Vs Offline:

FMCG sales through E-commerce channels have been increasing on account of mounting

smartphone sales leading to rise in the number of mobile internet users, internet penetration

rate in the country grew from 19% in 2014 to around 25% in 2015. Online shopping has

emerged very fast in recent years.

Nowadays, online shopping has caught attention of major Indian retail and FMCG players.

Current online shoppers, typically middle and upper class, tend to favour branded products.

Consumers are embracing the idea of buying branded packaged goods online. Although, the

share of FMCG products sold online in India is still low compared to other major economies.

According to the report published by Internet & Mobile Association of India (IAMAI) and

the Indian Council for International Economic Relations (ICRIER) on mobile app economy,

as of 2015, over 100 million app downloads, per month, were done by users across the

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country. With increasing popularity of E-commerce and shopping portals in India, many

FMCG companies are launching their websites to sell their products through online channels.

2.5. Indian Vs Multinational Companies:

Indian companies such as ITC, Patanjali, Amul, Godrej, etc. have witnessed a higher revenue

growth compared to foreign brands namely HUL, GSK, Nestle, etc. Indian companies have

increased their product portfolios, improved their supply chain, and increased their market

share through inorganic growth.

Indian companies have focussed on increasing their presence in unexploited

markets such as Ayurvedic products. Other factors such as increasing product innovations,

proper product pricing, growing international business have also helped these companies

improve their presence compared to the multinational firms.

Performance of Selected Indian FMCG Companies

Revenue USD EBITDA USD PAT USD PAT

Million Million EBITDA Million Margin,

Company

Name y-o-y Margin, FY1

FY16 FY15 FY16 FY15 FY16 FY16 5 FY16

2,468.0 1478

ITC Ltd. 5,944.79 5,853.93 1.55% 0 2,310.26 41.52% 1514.57 .11 25.48%

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 Britannia

Industries 95.7

1,222.75 1,104.0 10.76% 172.54 140.55 14.11% 115.24 6 9.43%

Ltd.

Dabur India 117.

Ltd. 884.62 835.58 5.87% 169.04 140.70 19.11% 144.54 32 16.34%

Patanjali 47.5

Ayurved 769.23 312.31 146.31% - 70.32 - - 1 -

83.8

Marico Ltd. 761.14 720.19 5.69% 129.58 101.84 17.02% 107.98 7 14.19%

Amul 743.69 637.97 16.57% 3.34 2.47 0.45% 2.38 1.80 0.32%

Godrej 100.

Consumer 740.24 681.51 8.62% 151.13 130.85 20.42% 113.80 68 15.37%

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 Performance of Selected Indian FMCG Companies

Revenue USD EBITDA USD PAT USD PAT

Million Million EBITDA Million Margin,

Company

Name y-o-y Margin, FY1

FY16 FY15 FY16 FY15 FY16 FY16 5 FY16

Hindustan 4,921.1 663.

0 4,739.33 3.84% 875.52 903.47 17.79% 628.06 89 12.76%

Unilever Ltd.

Nestle India 1,257.7 (17.04 182.

Ltd. 4 1,516.13 %) 162.17 313.66 12.89% 86.66 26 6.89%

1,250.7 (43.

PepsiCo India 7 1,106.88 13.00% - - - (27.23) 08) (2.18%)

Glaxosmithkline

Consumer 89.7

Healthcare Ltd. 662.88 662.71 0.03% 128.44 112.32 19.38% 105.68 8 15.94%

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 Colgate-

Palmolive 86.0

(India) Ltd. 640.35 612.61 4.53% 138.45 126.50 21.62% 88.69 0 13.85%

Procter &

Gamble

Hygiene & 53.2

382.20 359.04 6.45% 93.02 74.53 24.34% 65.10 5 17.03%

Health Care Ltd.

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.3 24

Gillette India 321.6 318. 0.88 55.6 44.5 0 32.7 .3 10.1

Ltd. 2 82 % 3 3 % 7 3 9%

2.6 Market Drivers & Trends

• Government initiatives such as FDI, Food Security Bill, and GST are expected to boost

the FMCG market sentiments. Moreover, government’s focus on rural areas have also

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 encouraged many FMCG companies to expand their rural network and increase their

product penetration.

Future growth of FMCG sector in India is mainly dependent upon multiple market drivers.

Continuing upward trend in the country’s economy has been boosting the per capita income,

which is leading to growing appetite for premium products, primarily in the urban areas of

India.

• FMCG companies are investing in innovation by launching new products to take advantage

of the rapidly evolving retail landscape and the changing purchasing behaviour of consumers.

• Growth in rural consumption has increased and, hence there is an increased demand for

branded products

in rural India which has made rural India a huge untapped market. Godrej launched OneRural

programme to generate more revenues from rural areas. Rural India is estimated to account

for ~50% of the total FMCG market in 2016.

• Growth in organised retail and E-commerce is also a major driver for the FMCG sector as

the availability of products have become way easier due to the growing organised retail stores

and rising internet penetration. E-commerce websites such as Grofers, Flipkart, Amazon are

making the FMCG products readily available to the Indian consumers.

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3. Indian Retail Market Outlook

Healthy economic growth, changing demographic profiles, increasing disposable incomes,

changing consumer tastes and preferences are driving growth in the retail market in India.

Over 20% of India’s gross domestic product (GDP) is contributed by retail sector and in

terms of total employment it contributes 8%.

The market has witnessed some significant trends such as shift towards smaller cities and

rural areas, entry of international brandsdue to FDI in single-brand retail up to 100% from

51%, increase in private label brands by retail players (in India, the share of private

label brands was 5% in 2015) and growth in E-commerce Food & grocery products

occupied a major chunk of the retail market in India. It is expected that the share of

organised retail would increase to 13% thereby becoming a major demand driver for

the industry.

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4. Supply Chain Analysis

The FMCG industry is characterised by complex distribution network and intense

competition, forcing firms to constantly work on supply chain innovation. Although, the

basic structure of supply chain in the Indian FMCG sector has not changed over the years.

Micro-economics play an important role in the supply chain structure of India.

The Indian FMCG sector is a low margin business, where success mostly depends on the

volume of products sold. In order to develop and maintain an efficient supply chain, the

companies focus on availability of products in the complex distribution network. Presence of

multiple layers between company and end customer results in increase in the number of

Stock Keeping Units (SKUs), to ensure availability at the last stage of distribution. In order

to increase market penetration, a growing number of companies are focusing on launching

smaller packaged size products to address needs of consumers present at the lower end of the

economic scale. The entry of large third party logistics (3PL) carriers and the expansion of

domestic networks of Indian firms like Gati and Shreyas Shipping is transforming the nature

of services and the business practices across the sector.

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 India Logistics Sector Facts

Logistics Performance Index

(2016) 3.42 (35th Rank)

Logistics cost as % of GDP 13%

Transportation cost as a % of

GDP 8.2%

Warehousing cost as a % of GDP 3.8%

Other logistics costs as a % of

GDP 1.0%

FMCG Logistics as a % of

revenues 6%-8%

Emergence of modern retail formats have an advantage over small stores as they are able to

demand huge discounts from FMCG companies. Moreover, a huge emphasis is laid by

modern retailers on ensuring permanent on-shelf product availability during peak periods;

cost optimization and R&D.

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5. Government Policies

Goods and Service Tax (GST)

GST, upon being implemented shall replace the multiple indirect taxes levied on FMCG

sector with a uniform, simplified and single-point taxation system. A swift move to the

proposed GST may reduce prices, bolstering consumption of FMCG products.

Food Security Bill

The Food Security Bill has been passed recently by the Union Cabinet. As per the bill, 5Kg

of food grains per person per month will be provided at subsidized prices by the State

Governments under the targeted public distribution system. This is expected to result in

higher inflow of investments into the agriculture sector in the coming years.

Excise Duty

Excise duty on other beverages and lemonade would be decreased to reduce retail sale price

by 35%. Excise duty on various tobacco products other than beedi would be increased,

resulting in retail price of tobacco products going up by 10-15%.

Relaxation of License Rules

Industrial license is not required for almost all food and agro-processing industries, barring

certain items such as alcoholic beverages, cane sugar, and hydrogenated & animal fats as well

as items reserved for exclusive manufacture in the small-scale sector.

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FDI in Organised Retail:

The government approved 100% FDI in selling of food products through E-commerce in

2016. This is expected to boost the online food market in the country in the coming years. It

also allowed 100% FDI in the cash and carry segment and in single-brand retail.

Other government initiatives such as Pradhan Mantri Jan Dhan Yojana through which wage

seekers are encouraged to open up bank accounts under Mahatma Gandhi National Rural

Employee Guarantee Act.

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6. Market Opportunities & Challenges Ahead

Market Opportunities

6.1. Market Opportunities

Rural Market

Rural consumption of FMCG products has outpaced urban consumption with the percentage

increase in monthly per capita expenditure in rural markets surpassing its urban counterparts.

Leading companies in the FMCG sector have a strong distribution network in rural India and

are benefitting from the contribution of technological advances such as internet and better

logistics services.

Innovative Products

Indian consumers are highly adaptable to new and innovative products. As Indian consumers

become increasingly exposed to global products, their demand for innovative products has

been increasing, which is resulting in higher R&D expenditure by the leading market players.

Premium Products

With growing disposable incomes, middle and upper middle class income consumers in

urban areas have shifted their purchasing trends from essential to premium products.

Premium brands are manufacturing smaller packs of premium products. In response, firms

have started enhancing their premium products portfolio

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India as an Export Hub

With emergence of India as a strong regional economy, domestic and multinational FMCG

players can leverage India as a strategic sourcing hub for cost-competitive products to cater to

international markets. This has been witnessed as a strategy of several FMCG companies

whose revenues from the international markets has been increasing.

Inorganic Growth Strategies for a Wider Footprint

Companies are entering into partnerships that will help them to cater to the market, and

improve their distribution networks and skills to deliver to the last mile. The domestic

companies have been quite active in M&A activities in order to gain significantly from an

inorganic growth route.

Low Market Penetration

Most of the household and personal care products sold in India still have low market

penetration in rural and semi-rural areas. This offers a wide opportunity for market players to

tap these markets by offering low cost, small packaging products.

Market Challenges

6.2. Market Challenges

Counterfeiting:

In 2015, sales of counterfeit products stood at more than USD1 billion. Counterfeit

products have an economy-wide effect on trade, investment, employment, innovation,

environment, and most importantly on the health and safety of consumers.

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Indian retail sector is heavily dependent upon the unorganised sector. While the growing

retail landscape provides great shopping choices and experiences to Indian shoppers today,

there has also been a growth in the availability of counterfeit goods in the marketplace as

well. The counterfeiting issue certainly encompasses many facets of the economy, including

intellectual property rights (IPR), security concerns, and global trade. Distribution centres,

retail outlets, and third party logistics providers are the most vulnerable to infiltration of

counterfeit products. Indian supply chains are not equipped in terms of their ability to protect

and detect the penetration of counterfeit goods into legitimate and secured supply chains.

Several leading online marketplaces were accused by many consumer brands and channel

partners for undercutting prices and encouraging the sales of counterfeit goods by sellers of

dubious origins on their sites. There has been an increase in the number of cases about the

quality of products sold.

Some of the technologies used by FMCG players to tackle counterfeiting include usage of

tamper evident packaging, barcodes with proper standards, barcodes & RFID, laser coding,

and optically variable features.

Companies should focus on utilizing universally accepted global standards, and organizations

should implement a comprehensive track and trace system.

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Poor Supply Chain Infrastructure:

Lack of storage and transport facilities coupled with rising costs of raw materials and energy

has been a major challenge for the Indian FMCG market. Food items tend to have a

significantly shorter shelf life and requires quick delivery systems, regular replenishment of

products on the shelf, and vast different distribution and storage requirements.

In the F&B segment, shelf life can vary from seven days to three months on average, while in

the HPC space the shelf life can be up to three years. Many small towns and villages in India

lack adequate infrastructure, a major bottleneck in setting up supply

Multiple Micro-markets:

Multiple micro-markets across geographies have distinct needs, which triggers category

preferences that vary from state to state and from one district to another. This poses a

continuous challenge for players to balance out the market needs and the inefficiencies

related to customization.

Fragmented Retail Landscape:

The estimated 8 million retail outlets in India selling F&B are direct indicators of this

fragmentation. Even the best in class companies are able to reach around 2 million outlets

directly and approx. 6 million outlets totally

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Large Geographical Expanse:

Large states in India such as Madhya Pradesh presents a problem of large distances between

two adjacent markets. This has a crippling effect on viability of channel partners, which are

serving the isolated markets.

Limited Cold Chain Infrastructure:

Growth of many categories have been severely constrained by the lack of cold chain

infrastructure in the Indian market landscape.

Multiple Layers of Taxation:

Multiple and inconsistent taxes levied on FMCG products have made it difficult for the

companies to offer their products at a proper/consistent prices. Implementation of GST would

simplify taxation system in the country; thereby, reducing the burden of optimum product

pricing amongst the companies.

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7. Case Study

Impact of GST on Indian FMCG Market

The Union Cabinet’s approved the Constitution amendment Bill for implementing the goods

and services tax (GST) in the monsoon budget session (8-August, 2016 in Lok Sabha). This

system of taxation which is to be implemented in India proposes a comprehensive indirect tax

imposed on manufacture, sales and consumption of goods and services at a national level.

GST is currently used in more than 140 countries globally.

GST Rates and Model in selected Countries

Canada 5% Dual Structure

Australia 10% Single Structure

Singapore 7% Single Structure

New Zealand 15% Single Structure

European Union 15% Dual Structure

China 17% Single Structure

36
 Japan 5% Single Structure

South Korea 10% Single Structure

Malaysia 6% Single Structure

Salient features of GST:

• GST would be applicable only on supply of goods and services as compared to the current

concept of tax on sales of goods or on the manufacture of goods or on provision of services.

It would be a dual GST where Centre and States would be simultaneously imposing Goods

and Services Tax on a common base. The GST which is to be levied by the States would be

called State GST (SGST) and that to be imposed by the Centre would be called Central GST

(CGST).

• An Integrated GST (IGST) would be levied on inter-State supply of goods or services

including stock transfers. In order to maintain the credit chain from being disrupted, the

Centre would be collecting this tax.

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 • Import of goods or services is expected to be considered as inter-State supplies and

therefore, would be subjected to IGST along with the applicable custom duties.

• CGST, SGST & IGST would be imposed at rates upon which Centre and the States have

mutually agreed under the guidance of Goods & Services Tax Council (GSTC).

Impact on FMCG Sector : If the GST rate is less than or equal to 18%, then it should be

positive for most consumer goods companies. Indian FMCG sector contributes around USD6

billion in direct and indirect taxation. A shift from the current indirect tax system to the GST

regime would have a positive impact on pricing of the products.

Many FMCG companies that have manufacturing units in excise free zones enjoy excise

holidays. Currently, no decision has been taken on the treatment of excise free zone units

under the GST regime, and there is a possibility that the excise exemption schemes could be

converted in to refund schemes.

Supply Chain Revamp: GST would lead to a revamping of procurement and distribution

arrangements. The resulting removal of excise duty on products would result in cash flow

improvements. The proposed rate of GST on services is likely to be 16% and on goods to be

20%.

Pricing and Profitability: Elimination of multiple indirect tax system would result in lower

input costs and improved profitability. Application of tax at all points of supply chain is

likely to require adjustments to profit margins, especially for distributors and retailers.

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Cash flow: Distributors shall receive cash flow from collection of GST in their sales, before

returning it to the government during the tax-filing period.

Changes in System and transition management: Changes would be made to accounting and

IT systems to record transactions, which have to be in line with GST requirements,

appropriate measures need to be taken in order to ensure smooth transition to the GST.

Implementation of GST will reduce the transactions cost of conducting business and bringing

down prices.

FDI in Food Sector

Food processing industry of India is one of the biggest in terms of production, consumption,

export and growth prospects. This sector has become an attractive FDI destination. Demand,

growth, and supply advantages, have been instrumental in attracting FDI in food sector.

The government has allowed 100% FDI in trading of food products, including through digital

marketing. The move was made in a bid to strengthen the sector, provided these items are

produced, processed or manufactured in India. This will allow multi-brand retail giants to

focus on increasing their food business in India. Also, it will help Indian hyperlocal grocery

start-ups, like Grofers and Big Basket, etc., to raise funds easily. Moreover, implementation

of100% FDI in food sector will consequently result in strengthening of the back-end

infrastructure such as logistics and warehousing and lead to direct purchase by the retailers.

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FDI also enables the inculcation of global best practices within the food sector industry. The

move is also expected to bolster employment and supply chains, apart from providing high

visibility for FMCG food companies in organised retail markets, which in turn would boost

consumer spending and encourage more product launches.

Automatic approvals are provided for foreign investments and technology transfer in most

cases. Units based on agri-products that are 100% export-oriented are allowed to sell up to

50% in the domestic market. Government of India is promoting the concept of Mega Food

Parks (MFPs) and is expected to set up 30 such parks across the country to attract FDI

Success Story: Patanjali Ayurved Limited (PAL)

Headquartered at Haridwar, Uttarakhand, Patanjali Ayurved Limited is the fastest growing

FMCG company in India. The company was established on 13th January, 2006. The

company is involved in manufacturing as well as distribution of products ranging from food,

beverages to cosmetics and fabric care

Patanjali Ayurved has turned out to be the most disruptive force in the fast moving consumer

goods market. Initially, the company focused only on the development of Ayurvedic

medicines and gradually started manufacturing food items and cosmetics.

The company’s products are available in 15,000 exclusive retail outlets, 3,000 Patanjali

Chikitsalaya Kendra and retail chains such as Big Bazar, Reliance

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Fresh, etc. In product development, the company mainly focuses on factors such as

competitive pricing, innovation and good quality with natural ingredients. The company has

been able to maintain its brand image over the years and has significantly increased its brand

awareness initially through word of mouth, gradually moving towards televised marketing.

With around 500 products many of them in FMCG category the company has significantly

increased its market share in many FMCG categories. Many of the company’s product

launches have impacted the share of other FMCG companies in that product category. For

example, PAL’s products such as Dant Kanti, Atta Noodles, and Kesh Kanti have impacted

the sales as well as market share of Colgate, Nestle’s Maggi, and hair care range of HUL,

P&G and Marico. Moving forward, the company is focusing on improving its supply chain to

increase its volume sales in India and abroad.

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8. Objective of the study :

The study of topic has been undertaking with a number of objective.

Following are the objective of the company

 To understand FMCG sector with related to baby care product and find out the

practices adopted by the leading company regarding marketing promotion strategies

and their effects, difficulties faced in it by the selected company.

 To study the tool and technique of marketing mix impact on sales, practice involve

in marketing mix.

 Its important role and strategy of marketing mix in progress of number of customers

sales volume, profit and progress of the business as a whole.

 On the basis of study to summarizing the finding and giving suggestions for further

improvement in marketing promotion strategies practices.

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9. Conclusion

Indian FMCG market is expected to exhibit a positive growth trend in the coming years.

Positive economic environment, low inflation rates and development initiatives led by the

new government mainly are instrumental in the uptick of the market.

The FMCG industry fared well in India in the recent years with consumer food services, soft

drinks, household and personal care segments experiencing a tremendous growth with the

increasing disposable income and the growing economy. The alcoholic drinks, tobacco had

witnessed low growth given the stricter government policies and the increasing health

awareness among the consumers.

Ready to eat food segment such as instant noodles and pasta would be experiencing

enormous growth given the new FSSAI guidelines with clearly designed rules, along with

the relaunch of the most preferred brand of noodles in the country and with Patanjali starting

its own ready to eat food range. The personal care products are anticipated to witness huge

advancements especially among the haircare segment.

Local Players such as Patanjali, with their aggressive marketing and expansion strategies and

ever diversifying product portfolio would dominate the market in the forthcoming period.

Most of the consumer goods products are moving to Online platforms and most of the major

super markets have their own online ordering portals and mobile apps making it convenient

for the consumers to order online with just a click of a button during their busy schedules.

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Owing to lack of awareness and security issues Cash on Delivery (CoD) remains the most

preferred method of payment among the Indian consumers.

An increasing demand from the rural and tire-2 population can be witnessed given the

increasing annual income and the awareness for the products and the increasing digitization

making them one of the major influencers of the FMCG sector. Given the fact that more than

66% of the population in India is rural it widens the scope for the FMCG segment digitally

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10. Recommendations

The emerging trends in new product launch (FMCG), has seen a wide range of

innovations in India. Companies can benefit by adopting certain strategies.

Capturing the Digital Consumer:

Growing internet connectivity, new business models and increasing digital media has

provided many companies an opportunity to create their product awareness. This can be done

by creating effective supply chain, engaging in online retail partnerships.

Nowadays, companies are spending around 8-10% of their marketing spend in digital

marketing. Creating a personalised E-commerce portal, associating with horizontal E-

commerce players or engaging with vertical E-commerce specialists are the three commonly

used approaches in E-commerce these days.

Understanding the Right Nerve of the

Consumer:

In order to create a loyal consumer base for a particular product, it is imperative for the

FMCG companies to understand the nature and target of their proposed product. In order to

create an effective customer loyalty, the segmentation, target and positioning of a particular

product must be emulated. Factors such as geography, income segment, consumption

demand, etc., must be looked after.

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Increased Focus on TVC for Aggressive Advertising:

Advertisement is the main source for FMCG companies to increase their product awareness.

FMCG sector was the most dominant sector with 28% share of the total Indian advertising

industry in 2015

Six out of top ten advertising companies in India are FMCG companies.

Television advertising holds the maximum market share of 40% in Indian advertising market

wherein FMCG contributes a significant 52% of the revenue share. This shows the

significance of Indian TV advertising market. Small as well as growing companies must

focus on advertising through TVC to create maximum awareness.

Analysing the most Efficient Sales Channel:

In order to maximise their volume sales and product penetration the companies need to

identify the most feasible sales channel route. Both national or multinational companies, give

importance to supply chain management system to enhance their business especially in rural

areas.

Ineffective supply chain can lead to significant losses for the companies, many offers and

schemes launched by the companies are unable to cause a significant impact on the market as

most of these schemes are unable to reach the end consumer due to inefficiency in supply

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chain. To prevent such losses, FMCG companies in India have to ensure that they exercise

greater control over their distribution channel and not just leave it to the market forces.

Prevention of Counterfeiting:

In Indian FMCG sector, counterfeiting has been a major issue which has a potential to

significantly affect the market in a negative way. Since India is an attractive prospect due to

low-cost of manufacturing, it also becomes an attractive base for the production of counterfeit

goods both for domestic sale and export. Counterfeiting leads to brand dilution and losses to

companies.

One of the key reason for the growth of counterfeiting in India is the inability of current

supply chain systems to counter this activity. It is imperative of Indian FMCG companies to

collaborate with the retail industry to offer greater visibility, traceability. Measures such as,

regular spot checks, proper monitoring system, collaboration with local and national law

enforcement agencies can be taken to curb counterfeiting

FDI and its Implications:

Implementation of FDI in various sectors such as food processing, retail, etc. has been largely

beneficial for the sector. Various multinational companies have now entered India’s retail and

FMCG sector thereby increasing the competitiveness of the sector. Companies in order to

remain profitable in this competitive environment need to focus on innovation and untapped

markets.

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Focus on innovation & Volume Sales

Rising income levels, continuously growing demands has led to the development of new

FMCG products. This continuous demand for new innovative products has led to growth in

breakthrough innovation of FMCG products. To meet this demand, FMCG companies need

to focus on R&D and innovation as a means to grow the business. Strategies such as

innovation in packaging, rebranding of products, product innovation etc. are some of the

innovation strategies adopted by the companies to cater the demand market.

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 BIBLIOGRAPHY

1. Indianinfoline.com

2. Indian Insight, SPC Asia, June 2001, Issue 25 pg. 15. Ray Anjan.

3. Whipping upto an FMCG Excitement, Indian Express online, 19 June 2000

4. Personal Product Gaint in the making Financial Express, 13 February 1998 pg. 12,

Namrata Singh.

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