FMCG Roadmap 2020- THE Game changer

Presented by: Pallavii Pant

Bisleri International Pvt. Ltd.

Historical growth in FMCG sector

Growth across FMCG categories

Fruit juices have reported

exponential growth, moving from near-zero

levels in FY2000 to INR 9 billion at

present.

food products nearly accounts for 45 % of

the industry size, staple products have grown at single digits

due to high penetration usage

patterns

EVOLUTION OF INDIAN

CONSUMER

personal products category

with skin-care creams outpaced growth of highly usable product s

lines such as toothpaste.

Growth across FMCG players

• Foreign players with indian subsidiaries:

• HUL, P&G, Nestle, Pepsico etc.

• Indian players with strong presence:

• Dabur, Marico, Godrej.

• Regional/small domestic players:

• Ajanta, Cavincare etc.

Three well-identified & distinguished set of players operate within a highly developed and intensely competitive landscape.

Category growth V/S sector growth

Key drivers of FMCG growth• Most categories of consumer products tend to follow an S-curve of growth with the initial

consumption driven by rich consumers and early adopters• At the trigger point though, the consumption becomes more wide-spread and then increases

exponentially. • Subsequently, the categories of consumer products mature as consumers move from a ‘need-driven’

to a more ‘want-driven’ consumption pattern.

•While the Indian GDP per capita is low, many Indian consumer segments which constitute rather large absolute numbers are either close to or have already reached the tipping point of rapid growth. •This is true for most categories of consumer durables, beauty and wellness goods, such as, skin-care products and even edibles such as packaged beverages, all of which have reported significantly faster growth rates.

FMCG growth ladder

Megatrends shaping Indian FMCG industry

Consumer

related

trends

•premiumization.

•evolution of consumption behavior lead to significant changes within and across product categories.

• increasing value at the Bottom of the Pyramid (BOP) by serving products customized to specifically meet the requirements of this large market

Market

related

trends

•the viability of sub-markets in India,

•growing organized retail

•and the increasing globalization of FMCG players

Environme

nt relate

d trend

s

•sociopolitical, legal, environmental and technological reprioritizing

•Changing government policies, growing importance of sustainability, evolving media platforms and technology will compel FMCG players to adopt business strategies which keep the interests of communities and the environment in mind for inclusive development

Key Trends Shaping the FMCG Market in India

Possible Strategies for FMCGPlayers

• Product strategy• Marketing • Sales and distribution

Goldmine at the Bottom of thePyramid

•consumers who earn less than INR 200 thousand per annum per household.•This group currently constitutes about 900-950 million people in India.•BOP markets are largely rural, poorly-served and uncompetitive. Thesecond characteristic of BOP markets is that a lot of their basic needs are yet unmet: financial services, mobiles phones and communication, housing, water, electricity and basic healthcare are lacking.

It is heartening to note that by 2025, percentage rural population in the INR 200 thousand to INR 500 thousand category is projected to increase to 22 per cent from thepresent level of 3 per cent

Retail growth in rural and urban India

Affordability is a challenge for BOP consumers.

For affording high ends brands BOP consumers want a price point which is affordable and hence demand smaller

SKU

‘The corporate sector has realized that the next growth in its business will come from the rural sector. Rural is a much discussed topic in boardrooms’—Pradeep Kashyap,Founder and CEO, MART

HUL brand building initiative “Khushiyon ki Doli”

International Growth of Indian FMCG Players & Rapid Globalisation

Hedging againstDomestic Competition

• Organic growth

• Target Indian Diaspora of other

• markets with existing product portfolio

• Exports / limited channel reach

Brand Sharing

• Inorganic growth by acquiring international companies with strong FMCG brands

• Broadening brand / product portfolio for all target markets

• Increased sales and distribution as distribution channels are augmented through acquisition

Growing modern trade “Organized Retail”

• FMCG industry depends on retail for consumer sales.• While India’s retail sector has been growing at over 7 per cent annually, a large

proportion of it is unorganized retail in the form of scattered mom and-pop stores which require a very resource-intensive distribution process in terms of manpower and logistics.

• volume per retail store is very low. However, modern trade or organized retail has created a concentrated (high volume) channel for distribution by FMCG players.

• Share of modern trade in retail last year was only about 5%.

• Highest area• 70% of total

area under modern trade

Hypermarts

• Highest share

• 85% of total modern trade

Supermarts

• Still at a nascent stage but growing.

• Metro cash & Carry.

Cash &

Carry

Modern trade/organised retail industry trends

Eco-consciousness

GovernmentReduction of carbon emission by 25% by

2020.

ConsumersEnvironmental concerns

affetcs the buying behaviour

Media & NGOCSR activities by FMCGs.

CompetitorsSustanability practices by

FMCGs

Investors/ChannelsDriving sustanability with

benchmarking global practices

Increased eco sustainability of business will be extremely important for FMCG companies in the future. Global climatic changes and the growing scarcity of natural resources have already led to increased concerns about the environment. Stakeholders for environmental concerns are:

Some of the top sustainability issues worldwide have also been identified for the FMCG industry

in India are

Packaging Harmful emission Water utilization

Rising cost of resources Affordable green technology

Health impact Impact on top line & bottom line

Game changing technologies

• Coca-Cola has invested in customized wireless hand-held devices for its sales persons. The devices have wireless receipts of the list of customers to be visited and other customer details.

• HUL has an internet-based supply chain management system which connects it to the redistribution stockists. This focuses on primary sales (HUL to stockists) and secondary sales (stockists to retailers) along with enhanced communication

social marketing

advent of 3G

marketing campaigns on

mobile online advertising

IT-enabled Supply Chain Management at HUL

Charateristics of Indian FMCG industry

The FMCG industry in 2020 will be charactised by the following factors:

1)Large Size: The Indian FMCG industry in 2020 is expected to reach a size of INR 3700 billion–INR 5200 billion. As a major contributor to economic growth in the next decade it will contribute close to 3 per cent of the GDP.

2) Increased Product Complexity: increasing consumer segments with very different needs

3) Evolving Consumers:4) Increased Competitive Intensity5)Channel evolution6)Environmental concerns

Divergent choices in FMCG business

Implications…

• Disaggregating the Operating Models• Winning the Talent Wars• Bringing Sustainability into the Strategic Agenda:

– Sustainability as a Core Business Strategy– Sustainability in Product Innovation– Using the Sustainability Lens throughout the Product Lifecycle– Sustainability Driving Major Decisions– Integrating Sustainability into Marketing and Messaging

• Reinventing Marketing for ‘i-Consumers• Re-engineering Supply Chains• Partnering with Modern Trade

Implications for other stakeholdersGovernment

Supporting growth through backward

linkages

RetailerCollaboration of organised and

unorganised retail for breakthrough growth

InvestorsIndia serves an

attractive market opportunity for

foreign investors

NGOsMajor role in

driving sustanability

efforts