FMCG in India

MARKET SEGMENT

Household Care

PersonalCare

Food & Beverages

Health Care

FMCG

Fabric wash, Household cleaners

Oral care, hair care, skin care, cosmetics / deodorants, perfumes, feminine hygiene and paper products

OTC products & ethicals

Health beverages, staples/cereals, bakery products, snacks, chocolates, ice cream, tea/coffee/soft drinks, processed fruits & veg’bles, dairy products, branded flour

2

2013 2020E

44.9

135

2006 2007 2008 2009 2010 2011 2012 2015F 2020F

15.7 17.8 21.3 24.2 30.2 34.8 36.847.3

103.7

CAGR 15.3%

43% 22% 12% 8% 4% 4% 2% 5%

Food Products Personal Care Fabric Care Hair Care Households OTC Products Baby Care Others

$ 19.3 Bn $ 9.9 Bn $ 5.4 Bn $ 3.6 Bn $ 1.8 Bn $ 1.8 Bn $ 0.9 Bn $ 2.2 Bn

66% 34%

Urban Rural

$ 29.6 Bn $ 15.3 Bn

MARKET SIZE

Segment wise Market Size

Geography wise Market Size

3

(Values in USD Bn)

YoY Sales Projection (USD Bn):

MARKET PENETRATION LEVEL

Branded Baby Oil

Toothpowder

Glucose

Toilet Cleaners

Shampoo

Hair Oils

Toothpastes

2%

22%

10%

12%

56%

72%

63%

4%

13%

21%

45%

69%

84%

91%

Urban Rural

Area wise: Top FMCG Products Penetration Level

Hair oils, toothpastes and shampoos have significantly high penetration in both urban and rural markets

Glucose and toilet cleaners are picking up in the rural areas due to increased awareness

Toilet Soap

Washing Powder

Detergent Bar

Hair Oil

Tooth Paste

Shampoo

Talcum Powder

Fairness Cream

Anticeptic Cream

Cold Cream

95.7%

92.3%

88.6%

74.5%

72.8%

60.4%

51.0%

18.6%

1.6%

1.1%

Category wise FMCG Products Penetration Level

Among those where the penetration is higher, per capita consumption is comparatively low, hence offering scope for high growth in future

Penetration of major products such as fairness cream, antiseptic cream & cold cream, is just 18.6%, 1.6% & 1.1%, respectively

4

MARKET DISTRIBUTION NETWORK

Grocers

General Stores

Chemists

Paan Plus

Modern Trade

Food Stores

Others

59%

13%

8%

6%

6%

3%

5%

Sales Channel Breakdown

In 2013, 8.4 million outlets served 1.26 billion people and accounted for US$37 billion in sales

Grocers are the dominant retail format, accounting for 59%

Majority of sales still move through traditional trade, availability of products in stores will continue to drive sales to a large extent.

A blanket approach to store expansion might not help; going to stores which matter more for the respective category and brand, will make all the difference in maximizing returns and growth.

A small proportion of stores account for a large proportion of sales; hence going to these stores and ensuring presence and avoiding churn will play a pivotal role.

Distribution Remains a Priority:

NOT JUST DISTRIBUTION EXPANSION BUT THE RIGHT DISTRIBUTION EXPANSION CAN MAKE ALL THE

DIFFERENCE TO GROWTH.“

5

GCPL Dabar Marico HUL(F&B) ITC (Foods)

10121102

828 830 774

1177 1132

844 825 847

FY12 FY13

MARKET LEADERS

Hair Oil Shampoo

Oral Care

Skin Care

Fruit Juice

42% 46% 50% 58% 50%

Dabar – 15%Bajaj – 8%Emami – 5%

P&G – 24%

CavinKare – 10%Dabar – 6%

HUL – 22%

Dabar – 13%

L’oreal – 13%P&G – 10%Emami – 9%

Pepsico – 45%

Market Leader

Other

6

(Values in USD Mn)

MARKET STRATEGY

Research Online &

Purchase Offline

Promotions &

Offers

Production Innovation

•FMCG companies are trying to influence consumers with intelligent deals

•Firms like ITC offers combo deals to the consumers. For example, in the case of soaps and cosmetics; four soap cases are offered at the price of three, selling the range of deodorants for men and women at a discounted price

•The internet enables consumers to make their own research on the kind of products or commodities they want to purchase. One in three FMCG shoppers goes online first and then to the stores

•Almost half of the automobile consumers follow the Research Online Purchase Offline (ROPO) method

•Indian consumers have become choosy and are less likely to stay loyal to a brand

•Emami is coming up with a new glucose energy drink under Zandu known as Zandu Gluco Charge

•Dabur has launched India’s first drinking yogurt and Real Supafruits under its brand Activ.

7

MARKET FACTORS - DRIVING SALES

CONTROLLABLE

AVAILABILITY

SACHETOFFERINGS

AWARENESS

VALUEPACKS

NOT DIRECTLYCONTROLLABLE

EMPLOYMENTRATE

INDEX OF INDUSTRIALPRODUCTION (IIP)

GDP

CRUDE OILPRICES

33%

18%

03%

01%

20%

13%

07%

05%

55% 45%

8 Factors

INNOVATIONS THROUGH SACHETS AND THE RIGHT ASSORTMENT:

•Reports say, Marketers now need to boldly innovate and come out with appealing packs which are affordable and can get consumers into the fold.

•Given the economic environment, affordable low volume packs will play an important role in driving consumer adoption and sales.

•Sachets/ low volume packs are a part of assortment theme and stand out as a key driver given the nature of the Indian market and purchase dynamics.8

MARKET TRENDS - FMCG

9

ConsolidationIndian FMCG companies are consolidating their existing business portfolios

Product Innovation Several companies have started innovating or customizing

their existing product portfolios for new consumer segments

Brand Consciousness

Consumers are becoming more brand conscious and prefer lifestyle and premium range products given their increasing disposable income

Focus on Rural Market

Companies are now focusing on the rural market segment which is growing at a rapid pace and contributes about 34 per cent to the total FMCG market

Expanding Distribution Network

Companies are now focused on improving their distribution networks to expand their reach in rural India

Third Party Manufacturing

•This approach has helped FMCG companies focus on front-end marketing

•Reservation of several items for SSI as well as additional tax incentives have made third party manufacturing a popular route for many big players

Focus on Smaller Size Packs

Companies are increasingly introducing smaller stock keeping units at reduced prices. This helps them to sustain margins, maintain volumes from price-conscious customers and expand their consumer base

Enhancing Presence in Africa

•FMCG companies entering Africa as it helps to be close to consumption markets within Africa

•Such foreign investments are encouraged by local governments, as they offer incentives to enter the markets

Reducing carbon footprint and eco-friendly products

FMCG players in India are increasingly focusing on reducing their carbon footprint by creating eco-friendly products. They generate the required energy from renewable sources and earn CER credits for the same

Private Label Penetration

With the rise of retail players, private label has become popular in the FMCG space. Private Label goods are considered substitutes of premium branded goods

Thank You

Reference : India Brand Equity Foundation Report – FMCG Aug’14 , Featured Insights Delivering Consumer Clarity by Nielsen