FMCG: SWOT Analysis
BITS Pilani
Pilani Campus
SAGAR KUMAR SHARMA
2012H142136P
Agenda
What is FMCG ?
FMCG @ world
FMCG @ India
SWOT analysis
Proposed strategies
BITS Pilani, Pilani Campus
What is FMCG
FMCG is Fast Moving Consumer Goods.
It also called the consumer packaged goods sector.
Definition: Fast Moving Consumer Goods (FMCG) as
products that have a quick shelf turnover, at relatively low
cost and dont require a lot of thought, time and financial
investment to purchase. Fast Moving Consumer Goods is a
classification that refers to a wide range of frequently
purchased consumer products
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Key Segments Of FMCG Sector
Household Care
Personal Care
Food & Beverages
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)
Oral care
Hair care
Skin care
Personal wash
(soaps)
Cosmetics
Toiletries
Perfumes
Deodorants
Feminine hygiene
Health beverages
Soft drinks
Staples/cereals
Bakery products (biscuits,
bread, cakes)
Snack food
Chocolates
Ice cream
Tea & Coffee
Processed fruits &
vegetables
Dairy products
Bottled water
Branded flour
Branded rice
Branded sugar
Juices
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Main characteristics of
FMCGs
From the consumers' perspective:
Frequent purchase
Low involvement (little or no effort to choose the item)
Low price
From the marketers' angle:
High volumes
Low contribution margins
Extensive distribution networks
High stock turnover
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Top 10 FMCG companies in
world
Ranking
Company Name
1
Procter & Gamble
2
Pfizer
3
Unilever
4
L'Oral
5
Kimberly-Clark Corp.
6
Reckitt Benckiser
7
Johnson & Johnson
8
Avon Products, Inc.
9
Henkel
10 Alcon Laboratories, Inc.
2011 sales
$82.6 B
$67.4B
$64.7 B
$25.8 B
$20.8 B
$15 B
$14.9 B
$11.3 B
$10 B
$9.9 B
Source: Hunt Executive Search, 2012
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FMCG growth in Emerging
and developed Markets
Roughly 70 percent of
the worlds population in
emerging-market
account for only 35
percent of the worlds
GDP.
By 2020 the collective
GDP of the emerging
markets will overtake
that of the developed
economies
Source: Global Growth Compass, Mckinesy analysis
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FMCG in India
Fourth largest sector in the
economy.
Market size US$ 13.1 billion as
of the year 2012.
Expected market USD 33.4
billion by the year 2015
Market growth rate :
Rural ---40%, urban ---25%
Source:
1. The Confederation of Indian Industry (CII)
2. IndustryPractices | Altavis
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Top 10 FMCG companies in
India:
Ran
Company Name
k
1
2
India Tobacco
Company (ITC)
HINDUSTAN
UNILEVER
2012
sales
(Rs.Cr)
151,07
8
67,858
NESTLE INDIA
39,819
DABUR INDIA
18,632
GODREJ
CONSUMER
PRODUCTS
13,335
Ran
Company Name
k
2012
sales
(Rs.Cr)
PROCTER & GAMBLE
INDIA
12,838
COLGATE-PALMOLIVE
12,764
GLAXOSMITHKLINE
CONSUMER
HEALTHCARE (GSK)
9,842
MARICO
9,078
10
EMAMI
6,836
Source: AC Nielsen Report 2012
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Other FMCG companies in
India
Britannia Industries Ltd.
Parle Agro
Nirma
Johnson & Johnson
Himalaya Herbal
Healthcare
Amul India
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SWOT analysis
Strengths
Weaknesses
1. Low operational costs
2. Presence of established
distribution networks in both urban
and rural areas
3. Presence of well-known brands in
FMCG sector
4. Deep roots in local culture &
great understanding of consumer
needs
1. Lower scope of investing in
technology and achieving
economies of scale,
especially in small sectors
2. Low exports levels
3. Counterfeit Products. These
products narrow the scope of FMCG
products in ruraland semi-urban
market.
Opportunities
Threats
1. Untapped rural market
1. Removal of import restrictions
2. Rising income levels, i.e.
resulting in replacing of domestic
increase in purchasing power of
brands
consumers
2. Slowdown in rural demand
3. Large domestic market- a
3.Tax and regulatory structure
population of over one billion.
4. Export potential
Source: The Confederation of Indian Industry (
5. High consumer goods spending
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Strengths
1. Low operational costs
2. Presence of established distribution networks in both
urban and rural areas
3. Presence of well-known brands in FMCG sector
4. Deep roots in local culture & great understanding of
consumer needs
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WEAKNESSES
"Me-too" products: which illegally mimic the
labels of the established brands, narrow the
scope of FMCG products in rural and semimarket.
urban
Detention
of counterfeit and pirated goods at EU borders in
2010
Source: Europa Press
releases
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WEAKNESSES
High Advertising Costs. Increase in Ad spending, which may
affect the margins
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OPPORTUNITIES
1. High consumer goods spending
15
40
8
10
11
16
Savings
Others
Clothings
Entertainment
Personal Care
Grocery
Source: Consumer Survey 2010 by KSA-Techno
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OPPORTUNITIES
2. Changing Lifestyles & Rising income levels
97.4
91.5
91.4
90.7
87.4 88.6 88.9
84.1 86.1
100
90
74.9
80
70
59.9
60
52.1
48.6
50
37.6
40
30
17.8
20
5.5
0.6 2.1
10
31.9
31.5
38
28
22
14.6
15.5
2.8
6.6
0
0
SOURCE:HLL INVESTOR MEET 2006
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OPPORTUNITIES
3.Large domestic market- a population of over one billion.
4. Large untapped market available, especially the rural areas.
5. Export potential- expansion of horizons towards more and
more countries.
6. Opportunity in food sector.
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THREATS
Intense and increasing competition from local as well as
MNC players
The standardization of packaging norms that is likely to be
implemented by the Government by Jan 2013 is expected to
increase cost of beverages, cereals, edible oil, detergent,
flour, salt, aerated drinks and mineral water.
Steadily rising fuel costs, leading to increased distribution
costs.
The declining value of rupee against other currencies may
reduce margins of many companies, as Marico, Godrej
Consumer Products, Colgate, Dabur, etc. who import raw
materials.
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Issues in Tax Policy in India
Major Threat: Tax and regulatory structure
1) Extremely high incidence of tax on certain product
categories
Some FMCG products such as shampoos, processed food,
soft drinks and toiletries containing alcohol attract high rates of
excise duty and sales tax. The total tax incidence in some
cases is more than 60 per cent of the cost or more than 30
per cent of MRP. Such high tax incidence hampers growth of
these product categories besides encouraging manufacture of
spurious products and smuggling.
Source:
1. India Policy Forum
2. "IMF lowers India's growth forecast to 6.1% for
2012". The Hindustan Times. 16 July 2012
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Issues in Tax Policy
2) Cascading effect of Special Excise Duty
In production process, raw material passes through
various processes stages till a final product emerges.
Thus, output of the first manufacturer becomes input for
second manufacturer and so on.
In other words, the tax burden goes on increasing as raw
material and final product passes from one stage to other
because, each subsequent purchaser has to pay tax
again and again on the material which has already
suffered tax. This is called cascading effect or double
taxation.
Source: Business portal of India
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Issues in Tax Policy in India
3) Inverted Duty structure for selected inputs
Duty on certain raw materials is higher or the same as
compared to finished products in which these materials are
used. Such raw materials include oils and chemicals like Soda
ash, caustic soda etc. In addition to customs duty, raw
materials are also subject to sales tax and therefore total tax
incidence and cost of local manufacture goes up.
4) High taxes on processed foods
The existing tax structure and its high overall incidence,
hampering the growth of the processed industry. The increase
in excise duty in last years budget from 8% to 16% has
adversely affected the growth of processed foods industry.
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Issues in Tax Policy in India
5) Irrational domestic tax structure encouraging imports
Significant reduction in custom duty rates of consumer
goods has made imported product cheaper as compared to
local manufactured products.
For instance, goods manufactured in India suffer from
cascading effects of taxes on inputs as additional cost
compared to imports.
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Proposed strategies
The main objective is to generate a competitive advantage,
increase the loyalty of customers and to beat
competitors.
1. Expansion Strategies
2. Distribution Strategies
3. Innovation Strategies
4. Promotional Strategies
5. Pricing Strategies
6. Digital Strategies
7. Sustainable Growth Strategies
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1. Expansion strategies
1.1 Expansion through Concentration
1.2 Expansion through integration
1.3 Expansion through diversification
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CONCENTRATION
STRATEGIES
When an organisation focuses on intensifying its core
businesses with a view on expanding through either
acquiring a new customer base or diversifying its product
portfolio, it is having a concentration strategy
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TYPES OF CONCENTRATION
STRATEGIES
MARKET PENETRATION Selling more products in the
same market
MARKET DEVELOPMENT Selling same products to new
markets
PRODUCT DEVELOPMENT Selling new products to the
same market
Example:
Bajaj Auto has undertaken all the above mentioned
strategies
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INTEGRATION STRATEGIES
Integration means combining activities related to the
present activity of a company
Integration is part of the diversification strategy
It widens the scope for a company as far is the market
penetration is concerned.
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TYPES OF INTEGRATION
STRATEGIES
Horizontal Integration
Vertical Integration
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HORIZONTAL INTEGRATION
Horizontal Integration: When an organization takes up the
same types of products at the same level of production
or marketing process, it is said to follow a strategy of
Horizontal Integration (Also known as
Merger/Acquisition)
Example: Takeover of Satyam by Mahindra
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VERTICAL INTEGRATION
Vertical Integration: Expansion to serve its own needs.
Vertical Integration is of two types, namely Backward
and Forward Integration
- Backward Integration means going back
to the
source of raw materials
(Example: A Thermal power company may do coal-mining)
- Forward Integration implies moving
closer to
the finished product (example: A car spare parts
manufacturer would start manufacturing passenger cars)
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2. Distribution Strategies
A plan created by the management of
a manufacturing business that specifies how the firm intends
to transfer its products to intermediaries, retailers and
end consumers.
Larger companies involved in making products will usually
also put together a detailed production distribution strategy to
guide its entry into its intended market.
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Basic Channels of
Distribution
Manufacturers/products
Agents/brokers
Wholesalers/distributors
Retailers
Retailers
Consumers and organizational end users
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Distribution Strategies
Exclusive Distribution
Limiting the distribution to only one intermediary in the
territory
Intensive distribution
Distribute from as many outlets as possible to provide
location convenience
Selective distribution
Appoint several but not all retailers
33
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Exclusive Distribution
It
is
situation
where suppliers and distributors enter
into
an exclusive agreement that only allows the named distributor
to sell a specific product
Means that the producer selects only very few intermediaries.
Exclusive distribution is often characterised by exclusive dealing
where the reseller carries only that producer's products to the
exclusion of all others
34
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Exclusive Distribution:
Advantages
Maximize control over service level/output
Enhance
products
image
&
allow
higher
markups
Promotes dealers loyalty, better forecasting,
better inventory and merchandising control
Restricts resellers from carrying competing
brands
35
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Exclusive Distribution:
Disadvantages
Betting on one dealer in each market
Only suitable for high price, high margin, and
low volume products
36
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Intensive Distribution
The producer's products are stocked in the
majority of outlets.
It is a strategy under which a company sells its
product through as many outlets as possible so
that the customers encounter the product
virtually everywhere they go.
37
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Intensive Distribution
Advantages:
Increased sales, wider customer recognition,
and impulse buying
Disadvantages:
Characteristically low price and low-margin
products that require a fast turnover
Difficult to control large number of retailers
38
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Example of Intensive
Distribution
Newspapers, soft drinks
Most of the fast moving consumer goods
39
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Selective Distribution
Selective Distribution is a type of distribution
that lies between intensive and exclusive
distribution.
This basically involves using more than one,
but lesser than all the intermediaries who carry
the companys products
40
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Selective Distribution
Advantages:
Better market coverage than exclusive distribution
More
control
and
less
cost
than
intensive
distribution
Concentrate effort on few productive outlets
Selected firms capable of carrying full product line
and provide the required service
41
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Selective Distribution (contd)
Disadvantages:
May not cover the market adequately
Difficult to select dealers (retailers) that can
match your requirement and goals
42
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Multiple-Channel Strategy
Using two or more different channels to distribute
goods and services
Why?
Permits optimal access to each market segment
Increase market coverage, lower channel cost and provide more customized
selling
What to look out for?
More channels usually means more conflict and control problems
43
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Complementary Channels
Each channel handles a product or segment that is different
or non-competing e.g.
Toyota Lexus
MPH online portals
Magazine distributions
44
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Competitive Channels
The same product is sold through two different and
competing channels e.g.
Non-prescriptive drugs
Electronic goods
Why? To increase sales
What to look out for?
Over extending yourself
Dealers resentment
Control problems
45
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Modifying Distribution
Strategies
Modify when the following changes occur:
Consumer markets and buying habits
Customer needs
Competitors perspectives
Relative importance of outlet types
Manufacturers financial strength
Sales volume level of existing products, and
The marketing mix
46
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E-Commerce: Online
Distribution
One of the importance of any website or business
is to bring the products or services to the right
people and to reach the target audience.
There are a number of different distribution
channels available on the Internet which could be
utilised efficiently to the benefits of any company
47
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Selecting Channels of
Distribution
In either the presence or the absence of a
traditional channel, a primary constraint is that of
the availability of various types of middlemen
Selecting a channel of distribution can hinge on
one of these factors
Distribution coverage required
Degree of control desired
Total distribution cost
Channel flexibility
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Selecting Channels of
Distribution
Distribution coverage Channel selection may
depend upon the nature of market coverage
desired
Intensive distribution Using as many
wholesalers and retailers as possible
Selective distribution Using only the best
available per geographic area
Exclusive distribution Selected intermediaries
are given exclusive rights within a particular territory
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Selecting Channels of
Distribution
Degree of control desired Achieved by the seller is proportionate
to the directness of channel
Total distribution cost Channel should be viewed as a total
system composed of interdependent subsystems
Objective should be to optimize total system performance
Generally assumed that the total system should be designed to
minimize costs, other things being equal
Channel flexibility Ability of the manufacturer to adapt to
changing conditions
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3. INNOVATION STRATEGIES
Innovation is introducing something new in the economy,
that can be new means of sources of raw materials, new
methods of production, etc..
Advantages:
Use open innovation to reduce R&D costs
Use process innovation to reduce operating costs
Use innovation to match supply and demand
Solve your customers pain
Use innovation to improve your suppliers business
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Types Of Innovative Strategies
1. INVENTIVE (First to market)
2. ADAPTIVE (Second but best)
3. ECONOMIC (Low cost producer)
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Ways Of Innovation Strategies
Radical
Open source
Sustainable
Incremental
(Explore new technology)
A problem shared is problem
solved
Sustaining innovation for a
longer time
Exploring the Existing
Technology
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4. Promotional Strategy steps
1. Identify and analyze the target market
2. Define advertising objectives
A. Specific, obtainable, measurable
B. Communication and sales
3. Create the advertising platform
4. Determine the advertising appropriation
5. Develop the media plan
A. Type of media
B. Specific vehicles
C. Reach and frequency
D. Message content
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4. Promotional Strategy steps
6. Create the advertising message
A. Consider type of media and platform
B. Copy and artwork
7. Execute the advertising campaign
8. Evaluate the effectiveness of the advertising
A. Extent of reaching objectives
B. Testing procedures
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5. Pricing Strategies
Market-penetration pricing
- setting the price as low as possible to win a large market
share, then cut price further as falling costs are
experienced (Ex: IKEA Home Furnishings)
May be adopted under the following conditions:
a. the market is highly price sensitive and a low price
stimulates market growth;
b. production and distribution costs fall with accumulated
production experience;
c. a low price discourages actual and potential competition.
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5. Pricing Strategies
Mark-up pricing
- the most elementary pricing method which adds a
standard mark-up to the products cost
- the most popular pricing strategy
Advantages of mark-up pricing:
a. sellers can determine costs much more easily than they
can estimate demand
b. where all firms in the industry use this pricing method,
prices tend to be similar and price competition is minimized
c. many people feel that cost-plus pricing is fairer to both
buyers and sellers
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5. Pricing Strategies
Target-return pricing
- determining the price that would yield its target
return on investment (ROI) (Ex. General Motors
priced its automobiles 15%-20% ROI)
- tends to ignore price elasticity and competitors
prices
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Pricing Strategies
Perceived-value pricing
- made up of several elements, such as the
buyers image of the product performance, the
warranty quality, customer support, and softer
attributes such as the suppliers reputation,
trustworthiness, and esteem.
- firms use the other marketing mix elements,
such as advertising and sales force, to
communicate and enhance perceived value in
buyers minds.
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Pricing Strategies
Value pricing
- charging a fairly low price for a high-quality
offering
- reengineering the companys operations to
become a low-cost producer without sacrificing
quality, to attract a large number of valueconscious customers
Practitioners of value pricing: IKEA Home
Furnishings, Procter & Gamble
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Pricing Strategies
Going-rate pricing
- the firm bases its price largely on competitors
prices, charging the same, more or less than major
competitors
- smaller firms follow the leader when the market
leaders prices change rather than when their own
demand or costs change
- where costs are difficult to measure or competitive
response is uncertain, firms feel the going price is a
good solution because it is thought to reflect the
industrys collective wisdom
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Pricing Strategies
Auction-type pricing
- usually done using the Internet (Ex. Ebay) to dispose of excess
inventories or used goods.
3 major types of auctions:
1. English auctions (ascending bids) where there is one seller and
many buyers
2. Dutch auctions (descending bids) where there is one buyer and
many sellers. The buyer announces what he/she wants to buy and
potential sellers compete by offering the lowest price
3. Sealed-bid auctions would-be suppliers can submit only one bid
and cannot know the other bids
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Pricing Strategies
Geographical pricing
- the company decides how to price its products to
different customers in different locations and
countries
- company may charge higher prices to distant
customers to cover the higher shipping costs
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Pricing Strategies
Geographical pricing
Pricing options for geographical pricing:
Barter the buyer and seller directly exchange goods, with no
money and no third party involved
Compensation deal the seller receives some percentage of
the payment in cash and the rest in products
Buyback arrangement the seller sells a plant, equipment, or
technology to another country and agrees to accept as partial
payment products manufactured with the supplied equipment
Offset the seller receives full payment in cash but agrees to
spend a substantial amount of the money in that country
within a stated time period
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Pricing Strategies
Promotional pricing
- companies use several pricing techniques to stimulate early
purchase
Techniques:
Loss-leader pricing
Special-event pricing
Cash rebates
Low-interest financing
Longer payment terms
Warranties and service contracts
Psychological discounting
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Pricing Strategies
Differentiated pricing
- companies often adjust their basic price to accommodate
differences in customers, products, locations, and so on
Customer-segment pricing
Product-form pricing
Image pricing
Channel pricing
Location pricing
Time pricing
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6. Digital marketing
Digital marketing is marketing that makes use of electronic
devices such as computers, tablets, smartphones,
cellphones, digital billboards, and game consoles to
engage with consumers and other business partners.
Internet Marketing is a major component of digital
marketing.
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6. Digital marketing
Why is digital marketing so important?
Its targeted, scalable and trackable
Consumers search products/services online
86% of mobile internet users are using their devices
while watching TV
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Types of digital marketing
efforts
Facebook Advertising
Paid Search
Mobile Marketing
Your Website
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Facebook Advertising
Two Types of FBA - Ads & Sponsored Stories
Drives engagement to page and posts
Supports branding, showcasing product & events
Target based on location, age, status, etc.
Only pay for click throughs, which are a fairly engaged
consumer.
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Paid Search
Nearly all consumers (97 percent) now use online media
when researching products or services in their local area
BIA/Kelsey and ConStat.
Among consumers surveyed, 90 percent use search
engines with 67% being Google
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Paid Search Inches
More than just keywords
Broad match
Eg. women's jewelry: our ad may show if a search term
contains your keyword terms in any order, possibly along
with others buy ladies jewelry
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Mobile Marketing
Smartphone ownership has surpassed 50
percent and growing.
70 percent of mobile searches lead to action
within an hour, in comparison to 30 percent
from desktop searches. (Mobile Marketer 2012)
61 percent of smartphone users perform local
searches on their device. (ComScore, January
2012)
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Types of Mobile Marketing
Pay Per Call Mobile - A form of mobile marketing where a potential
customer can directly tap or click a phone number placed in the
mobile ad
Mobile Banner Ads - Like a standard banner ad but now
customized to fit and cater to mobile websites.
Mobile Applications - A from of mobile marketing that involves
placing ads inside of an application design.
Text/SMS Marketing - Advertisers can send relevant marketing
messages in form of texts.
Barcodes/QR (quick-response barcodes) - allows mobile users to
easily obtain information via the use of their mobile.
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Our website and its
importance
Is now the first exposure to YOUR brand
Content is more important than ever
Web responsive design
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Budgeting for digital
marketing
Within the next few years digital media spends will
account for 25% or more of overall marketing budget.
(ComScore, February 2013)
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7. Sustainable Growth
Strategies
SGS provides strategic, analytic and executive
management services to for-profit, non-profit and
entrepreneurial organizations. SGS focuses on longterm, sustainable business strategies through the multifunctional integration of corporate strategy, business
development, marketing, multi-channel sales,
operations, finance and competitive and industry
research.
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Developing a Sustainability
Strategy
Step 1 - Determine Business Drivers
Identify the pressures that are driving your business to become
more sustainable. They may include:
Potential to improve the bottom line through increased
efficiencies;
Demonstrating leadership and improving your image and
reputation;
Compliance and risk management;
Personal passion and commitment to making a difference.
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Developing a Sustainability
Strategy
Step 2 - Set a Vision
A vision statement announces your future goals it is
your compass to show the outside world where your
organisation is heading. The best vision statements are
short, clear and concise, realistic and have measurable
outcomes.
You may choose to draft a sustainability policy that
formalizes your companys commitment to the vision,
and display it prominently in your workplace.
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Developing a Sustainability
Strategy
Step 3 - Set Objectives
Your objectives relate to your sustainability goals. They are
more specic than your goals as they contain numbers
and dates.
Step 4 - Establish Current Position
In order for you to reach your goals, you will need to
develop a good understanding of the current position of
your business which includes an understanding of its key
impacts. Use the Sustainability Self Assessment tool to
establish benchmarks and raise awareness about what
sustainability means in the context of running your
business.
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Developing a Sustainability
Strategy
Step 5 - Analyse Gaps
Identify the areas of your business that have the greatest
impacts - these areas are likely to reap the greatest
potential benets.
Step 6 - Develop Strategies
Now its time to develop appropriate strategies to
address the most signicant impacts of your business. A
strategy describes how you will reach your objectives
and should be aligned to the business drivers identied
in Step 1.
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Developing a Sustainability
Strategy
Step 7 - Develop Action Plan
The action plan is the key planning document that describes
what actions you will undertake to achieve your objectives.
It identies aspects required for implementation including:
Cost/benet calculations and payback periods
Targets, milestones and target dates
Budgets
Other resources, including staff, technical expertise, external
agencies
Monitoring, evaluation and reporting processes
BITS Pilani, Pilani Campus
Developing a Sustainability
Strategy
Step 8 - Implementation
After all this planning, its now time for the doing! Integrate
actions into core business processes and regular reporting
cycles. This is also where you may need to develop or adjust
policies and procedures for the various aspects of your
business to ensure that each staff member understands their
role in the business.
Step 9 - Monitoring and Review
This is critical to gauge your progress towards your overall
objectives. Regularly monitor using graphs and diagrams to
help with the communication process. You can use your
Sustainability Self Assessment tool to track and monitor your
progress.
BITS Pilani, Pilani Campus
Developing a Sustainability
Strategy
Step 10 - Improve
Incorporate this process into the companys overall
continuous improvement process.
Tips
Gain senior management support at every step
Be realistic about the time and effort required for
implementation
Involve others
Display simple reports in staff room
Acknowledge & reward outcomes
Share your successes with others
BITS Pilani, Pilani Campus
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
