FMCG Marketing

Market Applications & Practices – Session 2

Sonal Dabke

MARKETS are changing and so marketing must also change. As the days of mass marketing draws to an end, marketing needs to move from a ‘command and control’ to a ‘connect and collaborate’ mindset that relies on customer engagement, dialogue and collaboration.

Fast Moving Consumer Goods (FMCG)

• Alternatively called as CPG (Consumer packaged goods) industry

• Products that are sold quickly at relatively low cost.

• Generally sell in large quantities

• Absolute profit may be small but cumulative profit can be large.

• Replaced or fully used up over a short duration

Fast Moving Consumer Electronics (FMCE)

• Innovative electronic products

• Replaced more frequently than other electronic products

• Mobile phones, MP3 players, digital cameras, GPS Systems, and laptop computers

Neutraceuticals – The New age Fast Moving Health care Goods (FMHG)

• Essentially foodproducts and derivatives which have a health promoting or medicinal value

• Functional Foods, dietary suppliments, sports & energy products etc.

• Positioned as strong line of defence against lifestyle illnesses and ailments

Neutraceuticals

• 1989 – Dr. Stephen Defelice Founder & Chairman of the foundation for innovation in medicine

• Traditionally available in forms similar to other pharmaceutical products

• New generation Neutraceutical products- probiotic drinks & yoghurts available in supermarkets

Neutraceuticals

• Main ingredients are Neutrients, herbal products and dietry supplements

Neutraceuticals

• Genetically engineered foods with anti oxidents

• Herbal & organically grown foods

• Foods for vitality; sports and energy products

• Food with medicinal value

• Dietary suppliments & vitamins

Neutraceutical manufacturing companies

• Raptacos Brett & Co Ltd Mumbai :Threptin Biscuit

• Pfizer Ltd : Protinex

• Dabur India : Chawan Prash

• Himalaya Herbal health care

• Amway

• Wockhardt

Common FMCG products

• Food and dairy products

• Glassware

• Paper products

• Pharmaceuticals

• Consumer electronics

• packaged food products

Common FMCG products

• Plastic goods

• Printing and stationery

• Household products

• Photography

• drinks etc.

• Confectionaries

Leading FMCG companies & Brands

FMCG industry economy

• FMCG industry is regarded as the fourth largest sector in India with total market size of Rs 450 Bn (2006)

• FMCG Sector in India is estimated to grow 60% by 2010. (Report by HSBC)

FMCG Industry Economy

• Per capita consumption is the lowest in the world

• Demand for new generation products at reasonable & affordable prices

• Changing Lifestyles and higher disposable income will fuel the demand for branded products

Source India Today - R K Swamy BBDO Guide to Urban Markets

Rank Towns Average Monthly Spending on FMCG Products* in Rs.

1 Chandigarh 3,4182 Greater Mumbai 2,9553 Chennai 2,8864 Ahmedabad 2,8695 Vadodara 2,8166 Pune 2,8047 Coimbatore 2,6848 Ludhiana 2,6749 Faridabad 2,59610 Hyderabad 2,533

Growth Drivers

Growth witnessed in both rural as well as urban areas

Business aquisitions & focus on efficiencies along with strong demand will drive the growth

Rapid urbanization, increased literacy levels, and rising per capita income.

Growth Prospects

12.2% of the world population in the villages of India

Increased focus on farm sector will boost rural incomes

Better infrastructure facilities will improve their supply chain

Low per capita consumption

Growth Prospects

Urban India

66% of total FMCG consumption,Home and personal care category, including skin care, household care and feminine hygiene

Rural India

34% of total FMCG consumption,More than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages.

Go Rural !!!

70% of Indian population in 627,000 villages

Two big Indian companies – HUL & ITC

Toothpaste, hairoils & shampoos are the highest growing categories

Growth of shampoos was 30.8% in rural India vis a vis 11% in urban India

Drastically lower penetration levels

ITC's Agri Business Division

Choupal Saagar

Choupal Fresh

Choupal Pradarshan Khet

Innovation !!! Innovation and not price war will be the key

driver Innovation in product, distribution, marketing

and creating brand names e.g. ITC e-choupal network

Hiking add spends Rationalizing brand portfolios Pricing strategies High decibel promotional campaigns

Innovations by Marico

• Parachute Advanced Revitalizing Hot Oil’.

• Cooling Hair Oil under the Nihar & Parashute Brand

• Extend the Saffola brand into functional foods category

– Low sodium salt– Saffola Rice (Low GI

Index)– Saffola Zest (Baked

Snax)– Saffola Atta Mix

Acquisition!!!

• Dabur acquired Balsara, Fem Care

• P&G Acquired Gillette

• HUL’s Acquisitions of BrookBond, Quality, Kissan etc

• Godrej Bought Keyline’s Brands (UK)

• Marico acquired Nihar from HUL, Code 10 (Colgate)

• Wipro acquired Chandrika Soap

• Godrej eyeing Sara Lee stake

• Kraft and Nestle are eyeing Cadburys

• Emami in talks with Godrej Hershey’s (Jumpin & XS)

• Emami , WIpro, Marico & GCPL want to acquire Simple Skin Care Brand (UK)

Why …………………...?

• Cheap exercise

• Time Constraints

• Diversification of Portfolio or complementing current portfolio

Why ……………………?

• Size or Scale related• Increased turnover

• Increased market share

• Increased market capitalization

• Presence on the world map

• Enhanced Distribution

• Economies of scale

Some areas of concern…….

• Overlap / Sales Cannibalization

• More Brands less power….

• HUL has decided to divest and concentrate on 30 Super Brands

Indian Competitiveness and Comparison with the World Markets

• Availability of raw materials

• Labor cost comparison

• Presence across value chain – Amul supplies milk as well

as dairy products like cheese, butter, etc.

Top 10 FMCG Companies

Hindustan Unilever Ltd.

ITC (Indian Tobacco Company)

Nestlé India

GCMMF (AMUL)

Dabur India

Asian Paints (India)

Cadbury India

Britannia Industries

Procter & Gamble Hygiene and Health Care

Marico Industries

The Secondary Players

Scenario Change since 1991

Market Share in %

MNCs 1992 2004 1992 2004

2 25 100 0 52 48

6 35 100 0 37 63

40 570 98 2 51 49TV 630 3030 97 3 49 51

Market Size in $ million

   

    Indian Companies  

Indian Companies   MNCs  

  Breakfast cereals Wafers, potato chips

Washing Machines

1992 $=30 rupees 2004 $=45 rupeesSource: Center for Monitoring Indian Economy (CMIE)

Analysis of FMCG Sector

Strengths

Low operational costs

Presence of established distribution

networks in both urban and rural areas

Presence of well-known brands in

FMCG sector

Analysis of FMCG Sector

Weaknesses

Lower scope of investing in technology and

achieving economies of scale, especially in small

sectors

Low exports levels

Limited exposure to oversees markets

Analysis of FMCG Sector

Opportunities: Untapped rural market

Rising income levels, i.e. increase in

purchasing power of consumers

By 2015, Indians under 20 are estimated to

make up 55% of the population

Large domestic market- a population of over one

billion.

Analysis of FMCG Sector

Opportunities:

Export potential

High consumer goods spending

Highly fragmented market with roughly half the

market going to unbranded, unpackaged home

made products.

Analysis of FMCG Sector

Threats: Removal of import restrictions resulting in

replacing of domestic brands

Dependence on agriculture and monsoon for rural

demand

The increased scale of operations of retailers is shifting

the bargaining power from FMCG companies to retailers.

Analysis of FMCG Sector

"Me-too" products, which illegally mimic the labels of

the established brands. These products narrow the

scope of FMCG products in rural and semi-urban

market.

The growing adoption of private labels in the

household care segment

Threats

Think of it ................

Most commodities in the retail market such as milk, salt, water, atta have made their mark in the market due to their brand names. But it is a wonder that sugar has not taken any packaged format till now........

Shagun – Triveni Engineering

Originale -Modi Sugars

Trust -Simbhaoli Sugars

Indian Consumer Class

Dealing with many small markets at one time

High distinctiveness in demand

Different social customs and food habits

Several religious and personal beliefs

Indian Consumer Class

Youngest population amongst the major countries

Different income categories.

15 official languages

population of over 1 billion and 4 climatic zones

Indian consumer class can be classified according to the following criteria:

1. Income

2. Socio-Economic status

3. Age demographics

4. Geographical dispersion

The Indian Consumer

5 groups on the basis of annual household income

1. Higher income

2. Upper middle income

3. Middle middle income

4. Lower middle income

5. Lower income

Income

Does not represent a real scenario for an international business

Income Classification

Purchasing power of currencies differs significantly.

Consumption and ownership trends in the economy do not completely depend on the income

National Council of Applied Economic Research (NCAER) there are 5 consumer classes

• The Rich

•The Consuming Class

•The Climbers

•The Aspirants

•The Destitute

Consumer Classification

Consumer Classification

Consumer Classes 1996 2001 2007 Change

The Rich 1.2 2 6.2 416.00%

The Consuming Class 32.5 54.6 90.9 179.00%The Climbers Rs. 22-45,000 54.1 71.6 74.1 37.00%The Aspirants Rs. 16-22,000 44 28.1 15.3 -65.00%

The Destitute 33 23.4 12.8 -61.00%

Total 164.8 180.7 21.00%

Annual Income in Rs.

Rs. 215,000 and more

Rs 45- 215,000

Below Rs. 16,000

  199.

2

Factors responsible for choice of FMCG Products

Pepsodent 36%

Colgate 33%

Close up 27%

Dabur Lal 4%Others 1%

Awareness of Different Brands of Tooth Paste

Factors responsible for choice of FMCG Products

Pepsodent 37%

Colgate 34%

Close up 25%

Dabur Lal 2%Others 2%

Present Brands Being used

Factors responsible for choice of FMCG Products

Tv Advt 63%

Peer Group 14%

Others 14%

Internet 2%News Paper 7%

Source of Brand Knowledge

Factors responsible for choice of FMCG Products

Regular 30%

Gel 41%

Both 29%

Preference of Flavours

Case Study published in Indian Journal of Marketing – August 2009

Inference...........

3 main factors Total Dental Care

Decay Protection, Stronger teeth, Fight germs, fresher breath, health gums, white teeth

Product Features Taste, flavor, color, foam

Price Consciousness Price, scheme, packaging

Points to be addressed .....

Customer evaluates a brand based of various factors

Customer exhibits some amount of Brand Loyalty but why........?

Hence the need to highlight the core product features with a value addition keeping in mind the need of the customer while making the product

Points to be addressed .....

Advertisement not effective unless the product can meet the innate need of the customer

Message content needs to be strong A new P called Perception , if strong then it

increases Brand Loyalty

Creating Winning Brands – Brand Mantra & Positioning

Saffola :

Brand Mantra : Positioning

Good for the heart “Dil ko rakhiye jawan”

www.saffolalife.com 70% rice bran oil

Dial a dietician- 1800-22-2929 30% safflower oil

Marketing Strategies

Marico Industries

with the lady’s bag. Her husband runs after the stealer but soon gets exhausted.

The film opens on a couple walking along a road when a man comes and runs away...

An old man sitting nearby sympathizes with the man’s stamina. Gasping for breath.

...our man tells his wife, “bach gaya mere haath se. Haath aa jata toh main… Lootere!”

TVO: “Waqt hai Saffola Gold...

...apnane ka. Yeh cholestrol ghatane mein madad kare. Saffola Gold. Dil ko rakhiye jawaan.”

Brand: Saffola Gold

Agency: McCann-Erickson (India) Ltd.

Flanker Brands

A flanker brand is a Line extension by the company

Competes in the category without damaging the existing item’s market share by targeting a different group of consumers.

Fighter branding or multi-branding

E.g. Wheel, P& G Luv Diapers, Tide Naturals, Sweekar oil, Thums up

A company’s brands should attract customers from competing brands and not each other.

Branding Strategies

Advantages of Flanker Brands

Gain more shelf space for the company

Increases retailer dependence on the company’s brands.

Capture “brand switchers”

Protects the company in case of product failure

Prevents the dilution of main Brand’s equity

Branding Strategies

Cause Related Branding

Not just a solution provider but also projected in the framework of social marketing

Paras Pharma's “Moov” and Dermicool, Tata tea, P& G

HUL, ITC

Branding Strategies

Cause Related Branding

Jerry Welsh, a Sr. Vice President of American Express, first coined the phrase “Cause Related Marketing” in the 1980s while raising money for the restoration of the Statue of Liberty in New York City. American Express pledged to donate one cent towards the restoration of the Statue for each use of its card and a dollar for each issue of new card. This yielded amazing results – American Express donated $1.7 mn towards the restoration; also, there was a 28% increase in card usage by American Express cardholders along with a 45%

Brand Revitalization Strategy

Causes• Positioning looses

relevance eg Dalda,

• Core values become redundant eg Lifebuoy

• Hackneyed Imagery eg Liril (Karen Lunel)

• Positioning of competing brands eg Robin Blue & Ujala

What to do?• New Brand Associations

e.g. Brylcream – 'Style is for everyone', Wheel Lemon Fresh Brand

• New Elements eg Britannia created a new logo, new tagline- 'Eat healthy, think better'

• New Varients eg Tiger glucose

Brand Revitalization Strategy

Repositioning• Brand in the decline stage

• Eg Lifebuoy- “Koi Dar Nahi' was repositioned to target a more upmarket segment

• Further enhancements by using new associations and elements eg 'neem & tulsi', 'Swine flu se darne ka nahi ladne ka'

• Eg Cadbury's-Chocolates as Deepavali gift

Pricing Strategies

Psychological Pricing

Discount Pricing

Captive Product Pricing

Bundled Pricing

Marketing Strategies : Advertising

Out-of Home Advertising

Advantages:• Wide coverage of local

markets

• Frequency

• Geographic flexibility

• Impact

• Ability to create awareness

• Avoiding zipping & Zapping

Out-of Home Advertising

Advantages:• Wide coverage of local

markets

• Frequency

• Geographic flexibility

• Impact

• Ability to create awareness

• Avoiding zipping & Zapping

Out-of Home Advertising

Dis -advantages:• Short exposure time

• Quick Wear out

• Measurement problems

• Blind spot effect

Media/Origin: OOH / Indian

Product Group: Beverages

Brand: Horlicks

Media/Origin: OOH / IndianProduct Group: Cosmetics | Toiletries | Personal care Brand: Garnier

Media/Origin: OOH / Indian Product Group: Cosmetics | Toiletries | Personal care Brand: Fiama Di Wills

Media/Origin: OOH / Indian Product Group: Beverages

Brand: Red Bull

FMCG…… The Road Ahead

• Excellence in operations - through Value Chain De-Verticalisation

• Asset Light FMCG Company and an Asset Heavy Supply Chain Company

• Rural marketing – Value / Volume Focus

• Distributions• Reduce Intermediaries

• Increase sales by driving channel width

• Brand managers to Business managers

"Only the Paranoid Survive "

.........Andy Grove