INTRODUCTION

FMCG Industry:

• FMCG products are products that have quick shelf turnover, at relatively low cost and don’t require a lot of thought, time and financial investment to purchase.

• FMCG Industry mainly deals with production, distribution & marketing of packaged goods to all consumers

FMCG Industry in India:• Present– Fourth largest sector in the economy– Size - US$13.1 billion– Strong MNC Presence–Well established distribution network– Competition between organized and

unorganized sector– Low Costs of labour and Easy

availability of key raw materials

FMCG – Major Domestic Players• Domestic Players

– Britannia India Ltd (BIL)– Dabur India Ltd– Indian Tobacco Corporation Ltd (ITCL)–Marico– Nirma Limited

FMCG – Major Foreign Players• Foreign Players– Cadbury India Ltd (CIL)– Cargill– Coca Cola– Colgate-Palmolive India– H J Heinz Co– Hindustan Unilever Ltd (HUL)– Nestle India Ltd (NIL)– PepsiCo– Procter & Gamble Hygiene and Health Care

Limited

Hindustan Unilever Ltd

• HUL touches the lives of two out of every three

Indians everyday

• Part of the €40 billion Unilever Group. The Group

has more than 400 brands spanning 14 categories

of home, personal care and food products

• Presence in over 100 countries and employs more

than 174,000 people worldwide

• The Company was incorporated in 1933 but its

products have been sold in India since 1888

Hindustan Unilever Ltd

• India’s largest FMCG Company• Headquartered in Mumbai• Over 700 million consumers• More than 15,000 employees, including

1,300 managers• More than 200 highly qualified scientists

and technologists• Shares listed at BSE (Stock code -

500696) and NSE (Stock code – HINDUNILVR)

• Shareholder base of over 3.5 lakh

HUL – The Journey so far…

2000: Modern Foods Acquisition

1986: Pond’s Acquisition

1984: Brooke Bond Acquisition

1972: Lipton Acquisition

1956: HUL offered 10% of its equity to the Indian public

1931: HUL set up its first subsidiary

HUL – Mission

Mission

Unilever's mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life.

HUL – Geographic Presence

• Production

More than 35 manufacturing locations

across India, with major hubs being Assam,

Uttaranchal, Himachal Pradesh,

Pondicherry and Dadra & Nagar Haveli

• Marketing – All States in India, Project

Shakti

HUL – Product Portfolio

Soaps and Detergents

48%

Personal Products

26%

Beverages11%

Exports4%

Foods (Bakery)1%

Other Operations 8%

Ice Creams2%

Revenue Share

Soaps and Detergents

Personal Products

Beverages

Exports

Foods (Bakery)

Other Operations ( Water etc.)

Ice Creams

SWOT - HUL

STRENGTHS

Strong parentage and R&D, healthy cash coffers to support innovation

Strong position in most of the categories of its presence

Unmatched distribution network , a must to cater rural markets

Presence across price points to straddle across entire income pyramid

Healthy Shareholder Returns in the form of RoE and dividend yield

Native Know How

STRENGTHS

WEAKNESSES

49% of HUVR's sales come from detergents and personal wash

Increase in Ad Spending, which may affect the margins

WEAKNESSES

• Change in Rural India’s source of income

• Government Focus• Futures Market• Increase in MSP• Massive Election

Spending

Growing opportunities in Rural India

• Favorable Demographics

• Increasing Consumer aspirations

• Buoyant topline for FMCG companies

Consumer sector on a secular growth trend

• Consumer expenditure in food sector rose by 13%

• Valued at USD240mn – packaged foods – 5%, 14%(g)

• Modern retailing gaining coverage

Opportunity in Food Sector

OPPORTUNITIES

OPPORTUNITIES

THREATS

Losing market share in most of the categories , Matured and Growing

Stiff competition from local as well as MNC players

Receding pricing power

- Rural income is yet dependant on agriculture and in turn monsoon- Spurious Products

THREATS

FIVE FORCE MODEL

PORTER’S FIVE FORCE MODEL…

Buyer Power• Number of Customers• Size of Each Order • Differencebetween

Competition• Price Sensitivity• Ability to Substitute• Cost of Changing

Threat of New Entrant•Time and Cost of Entry•Specialist Knowledge•Economies of Scale•Cost Advantage•Technology Protection•Barriers to Entry

Supplier Power• Number of Suppliers•Size of Suppliers•Your Ability to Change•Cost of Changing

Competitive Rivalry• Number of Competitors•Quality Differences•Other Differences•Switching Costs•Customer Loyalty•Costs of Leaving Market

Threat of Substitution•Substitute Performance•Cost of Change

THREAT OF NEW ENTRANT

• In early 2000, HUL decided to enter Retail Market through direct selling brand (B2C) by the name SANGAM direct

• Started in Bombay…with 2 stores, Sangam has vision to grow to 15stores.

• With highly competitive retail market, Sangam faced 3 problems:

– Specialized knowledge

• Space constraints

• Cost disadvantage (No disc on competitor’s product)

• Time and Cost

COMPETITIVE RIVALRY

• Number of Competitors

• Quality Differences

• Other Differences

• Switching Costs

• Customer Loyalty

SUPPLIER POWER 

• Large economies of scale

• HUL adopts Backward Integration, therefore –  No. of suppliers are less– Size of Suppliers are moderate– Ability to Change is Flexible– Cost of Changing is Low

BUYER POWER 

• No. of customer’s is moderate

• Size of Each Order is in Bulk quantity

• Price Sensitivity

• Ability to substitute

• Cost of changing

• Tie-ups with local complementary product manufacturer to get products at cheaper and minimal rates

HUL VALUE CHAIN

HUL VALUE CHAIN

• Business optimisation through

Technology

• Integrating suppliers and distributers

through SAP

• Best marketing talent from top B schools

• TPM and product flexibility in Operations

• Emotional buying of satisfied customer