Strategic MarketingFMCG Sector

Group Members

• Vivek • Varun • Saurabh• Ayushi• Ashima• Neha

FMCG Sector• FMCG are products that have a quick shelf turnover, at relatively

low cost and don't require a lot of thought, time and financial investment to purchase

• ‘Fast Moving Customer Goods’ is in opposition to consumer durables such as kitchen appliances that are generally replaced less than once a year

• FMCG is characterized by strong presence of MNC and well established distribution network.

• The intense competition between the organised and unorganised segments operating at low operational cost.

Marketer Point of View• Product Analysis

– Product – Price– Place– Promotion

• Market Analysis– Size ( Past , Present and Future)– Growth ( Expected Trends )– Profitability– Risks / Threats– Distribution Channels

Market Analysis

SIZE Growth

Profit Risk

FMCG Sector Size• The Indian FMCG sector is an important contributor to the

country's GDP.

• It is the fourth largest sector in the economy and is responsible for 5% of the total factory employment in India

• This has been due to liberalization, urbanization, increase in the disposable incomes and altered lifestyle

• The lower-middle income group accounts for over 60% of the sector's sales. Rural markets account for 56% of the total domestic FMCG demand

FMCG Sector Size (cont.)

• Fast moving consumer goods has gained importance with retailing gaining prominence.

• Over the last one decade the market is growing at the rate of 18.7 %.

• Total market size in excess of US$ 13.1 billion

• Availability of key raw materials, cheaper labour costs and presence of highly effective supply chain system gives competitive advantage.

Growth Prospects• The FMCG market is set to treble from US$ 11.6 billion in

2003 to US$ 33.4 billion in 2015.

• The FMCG sector will witness more than 50 per cent growth in rural and semi-urban India by 2010.

• Penetration level as well as per capita consumption in most product categories is low indicating the untapped market potential , hence the market potential of growth is very high.

Growth Prospects• Burgeoning Indian population, particularly the middle

class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products.

• With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing industry.

• With the retail gaining momentum, the FMCG prospective growth can be realized with increase in sales volumes.

Growth Prospects• There is an increase in the disposable incomes and altered

lifestyle which is being fueled by the increase in the per capita income.

• The increase the population will increase the demands many fold.

Profitability of the sector

• Hindering ( Down)– Increase in competition resist the growth of the profit

margin. – Margins remain under pressure due to unprecedented

rise in input costs.

• Pushing (Up)– FMCG sector depends upon bulk sales only. High the

volume of the sales , higher is the profit.

Profitability of the sector

• Balancing (Up/Down)– Small packaging typically known as ‘Sachet’ - Is a two

edged sword. Helps in trapping the bottom segment of the Customer Pyramid .

– But it decreases the profit margin per unit sale.– In the long run increases the volume of sales.– Thus must be used very wisely.

Threats / Risks

• Due to cut throat competition there is severe pressure on margin for the manufacturers of FMCG products.

• The rural and semi urban population is growing but the problem faced by the FMCG manufacturers is the logistics.

• Some problems associated with rural markets is acute dependence on the vagaries of the monsoon, seasonal consumption linked to harvests, festivals and special occasions, poor roads and power problem.

Threats / Risks

• Once the product fails its not easy to revive it back.

• When the company launches a new product its competitor will also launch the new product in the same line, within the short span.

• Hopping from one product to another is too high , due to very large pool of products. Customer Loyalty is big issue.

• Tolerance level in the customer satisfaction is quite low , due to easy availability of other options.

Hopping Nature

Customer Loyalty

The major issue with this sector is the 80% of the customers are Fence Sitter. Hopping from one product to another is too high , due to very large pool of products.

Die Hard Loyalist

Die Hard Opponent

Switchers SwitchersFence Sitters

Market Analysis

Growth

Profit Risk

DistributionChannels

SIZE

Distribution channel • Existing distribution channels

– Can be described by how direct they are to the customer in other words how many channels it take the goods to reach customer.

• Trends and emerging channels – New channels can offer the opportunity to develop a

competitive advantage shorten the channel length.

• Channel power structure – For example, in the case of a product having little brand

equity, retailers have negotiating power over manufacturers and can capture more margin.

Distribution channel This is typical example any FMCG company say HUL

Thank You