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MATINEE BIZZ

Real Estate at a glance

US Real Estate the genesis of Global US Real Estate the genesis of Global MeltdownMeltdown

Indian Real Estate OverviewIndian Real Estate Overview

Real Estate industry currently estimated to be US$ 48bnReal Estate industry currently estimated to be US$ 48bn CAGR of 30%CAGR of 30% Total Economic Value of US$ 40-45bn accounting for 4-5% of Total Economic Value of US$ 40-45bn accounting for 4-5% of

the GDPthe GDP Factors contributing to the growth in real estateFactors contributing to the growth in real estate SegmentationSegmentation Market structureMarket structure

Effects of recession on Real EstateEffects of recession on Real Estate

Credit crunchCredit crunch Stalling of existing WIP projectsStalling of existing WIP projects Drop in demandDrop in demand Decrease in property rates only in Tier II and Tier III citiesDecrease in property rates only in Tier II and Tier III cities Tier I cities experienced fluctuating prices due to cartelisationTier I cities experienced fluctuating prices due to cartelisation

Marketing Strategies adopted to tackle recession

Innovations to cut costsAggressive future launch plans with “right product & price

combinations”Renewed focus on the middle income housing segmentIncrease in advertising budgetsUse of tactical promotional strategies create high recall value

Lessons to be learntLessons to be learnt

Focus on middle income consumersFocus on middle income consumers Low cost housingLow cost housing More concentration on Tier II & small townsMore concentration on Tier II & small towns Dynamic shift in product mixDynamic shift in product mix Innovation in promotional strategiesInnovation in promotional strategies Do not underestimate the uncertainty factorDo not underestimate the uncertainty factor

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INDUSTRY BACKGROUND

• Yields will decline by 3%

• Industry revenues are expected to decline to US$501 billion

• Cargo traffic is expected to decline by 5 %, following a drop of 1.5 % in 2008

INDUSTRY BACKGROUND

PARTICULARS AMOUNT

North America 3.9Bn$ loss

Europe 1Bn $ Loss

Latin America 200Mn$ Loss

India 1.25Bn$ Loss

Africa 300Mn$ Loss

China 613Mn$ Loss

Middle East 200Mn$ Loss

IMPACT OF RECESSION

• Dilution of Yield

• Uncertain increase in Fuel prices

• Huge Debt Burden

• High taxation policies

• Poor Infrastructure

• Sticky price point syndrome

• Acquisition of new airplanes – pilling inventory

CURRENT SCENARIO

PARTICULARS AMOUNT (loss)

British Airways 245Mn $

Singapore Airlines 213Mn $

Air china 9.3bn Yuan

Kingfisher 408.9 Cr

Jet airways 253 Cr

Kingfisher Red 798.3 Cr

Jetlite 441.5 Cr

Strategies adopted

• Target Pricing

• Aggressive promotional strategies

• Co-branding

• Government Initiatives• Tax breaks and loans given in China

• Alternative fuel emission attributes, eg: Qatar Airways flies first commercial passenger flight powered by a fuel on Natural Gas Liquid Blend

• Smaller airports in India need to be developed

• Alliances

• Cartelization

• Leasing out their aircrafts

Lessons to be learnt

• More concentration on emerging countries like India, China and Africa

• Product differentiation

• Ethnic Marketing

• Different incentives to promote high end travel in bad times

IT Sector

Brief Overview of Global IT Sector

• The global software market grew by 6.5% in 2008 to reach a value of $303.8 billion

• In 2013, the global software market is forecast to have a value of $457 billion, an increase of 50.5% since 2008.

• General business productivity and home use applications segment accounts for 22.7% of the global software market's value.

• Americas accounts for 42.6% of the global software market's value.

• IBM Corporation, Microsoft Corporation, Oracle Corporation, SAP AG

 

   Revenues:

Brief Overview of Indian IT Sector

• TCS, Infosys, Wipro and IBM

• $39.52billion 2009, $32.12billion 2008

• 5.8% of India’s GDP

• Growth rate dipped to 16-17 percent from about 30 percent in 2004-2008

• Expected to grow at 15% annually till 2010-2011

Impact of recession

• Slowdown in US economy

• Slump in financial sector

• Reduction in IT expenditure

• Microsoft reported quarterly loses in April 2009

• Sun Microsystems posted loses of $210 mn for the quarter ending Mar 29

Possible marketing strategies

• Product

• Price

• People

• Promotion

Lessons to be learnt

• Counter cyclical approach

• Mitigation of risk- Geographic and industry wise

• Lowering dependence on American market

Retail sector

Slowdown impacts retailers

Current economic uncertainty Operating costs remain high Consumer spending is low Low sales in metros Business down by 15-20 % Declined profit margin

Actions to be taken

1. Minimize losses

2. Retain customers

3. Exploit potential untapped areas

4. Tackle real estate pressure

1. Minimize losses

Reduce Operating costs (e-tailing) Maintain marketing and advertising budgets Explore alternate advertising media Hold on the expansion plans in metros

Retain customers

Fully integrated VMS Total control over strategy Self sufficient Direct contact with consumers Higher retail markups without raising prices

3. Exploit potential untapped areas

Migrate towards Tier II and Tier III cities Rural areas

Tackle real estate problem

Pressure on real estate High rentals Right location for retail Franchise system Quick Global presence with lower investments

Lessons to be learnt

Be selective in expansion plans Revenue from rural retailing will grow by 60% till

2012 Consumer and household products Less resistance as compared to metros Creating employment to rural people

FMCG Industry

• FMCG industry deals with the production, distribution and marketing of consumer packaged goods.

• Provides a wide range of consumables and the absolute profit made on FMCG products is relatively small but they generally sell in large quantities

• Generally replaced or fully used up over a short period of days, weeks, or months, and within one year

Industry background

Major Players in FMCG SectorCompany Sales ($ bil) Profit ($ bil)

Nestlé 103.01 16.91

Procter & Gamble 83.68 14.08

Unilever 56.44 7.00

PepsiCo 43.25 5.14

Kraft Foods 42.20 2.90

Coca-Cola 31.94 5.81

Henkel Group 19.68 1.70

Colgate-Palmolive 15.33 1.96

Reckitt Benckiser Group 9.58 1.64

Source: The Global 2000- Forbes.com, 04-08-09

Percentage change in sales (October 2008-09 over October 2007-08)

Consumer Non-durables Change (%)

Chocolate and Sugar Confectionery 2.7

Hair Oil / Ayurvedic Hair Oil 5.5

Tea 11.0

Toothpaste 12.1

Soap 13.5

Beer 16.6

Soft Drinks and Soda 16.9

Coffee 23.5

Biscuits 25.8

Groudnut Oil 27.1

Sugar 30.1

Source: The Economic Times, 18-12-2008

Impact of Recession

Is the FMCG Industry In Recession?

• FMCG has shown positive sales regardless of a slowdown in the Economy

• Some companies in Q3 (Oct-Dec 2008) like HUL, Godrej Consumer Products, Emami showed decline in Profits

• Whereas ITC, Dabur, Marico, Colgate-Palmolive, P&G, Britannia reported y-o-y profit growth

Current Scenario

• The number of rural households using FMCG products has grown in the past years

• Urban population cutbacks on eating out thus affecting full service restaurants and café/bars

• Tea has become the cuppa that cheers in the times of recession

Challenges of FMCG Industry

• To boost the urban consumer demand which has slowed down due to recession

• Meeting rural demand considering the poor infrastructure

• Increasing Price sensitivity among consumers

Road to Recovery

• Intensified measures to cut costs, Eg: HUL: Consolidated R&D

• Focusing more on basic products like soaps, detergents, packaged foods

• Sustaining the advertising expenditure

Brand Investment during recessionB

ran

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ity

Brand InvestmentLOWHIGH

LOW

HIG

H

HIGH LOSS POTENTIALRECESSION

IS OPPORTUNITY

SURVIVAL GAME DOUBLE OR NOTHING

(1) (2)

(3) (4)

Summary

Research the customer

Maintain marketing

spending

Adjust product

portfolios

Stress market shareDesigned by TheTemplateMart.com

Adjust and don’t cut the prices

Spend smarter, make the buck longer

Instant gratificationDeliver value, create delight

Touch the customer at unexpected momentsDesigned by TheTemplateMart.com

Poorva Adkaras

TV Reporter

Varun DigheAs

Real Estate Consultant

Prachie AgrawalAs

Aviation Consultant

Viraj ChavanAs

Retail consultant

Kartik BarangaAs

IT consultant

Saidas NaikAs

FMCG consultant

Suppported byTejashree RajePradnya Patil

Smita PavaskarAmol Dhiwari

Our Sincere Thanks To

Mrs. Seema AgrawalMrs. Sonal Dabke