Company Report

Chapter - 1
PREPARED BY
Gautam Nakrani
(BBA SEMESTER – IV)
ENROLLMENT NUMBER
20FOMBA11094
FOR THE SUBMISSION OF CIE - I
GUIDED BY
PROF. Vivek Patadiya
SUBMITTED TO
SCHOOL OF MANAGEMENT
RK UNIVERSITY RAJKOT

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 INDEX
Chapter–1

1. Industry Background ………………………………..……………………………... 03

1.1 Origin and History ……….………………………………….….... 03

1.2 Forerunners of the industry.………………..………….……. 04

2. Economic Characteristics ………………………………..…………………….... 05

2.1 Market Size and Growth Rate ………..………………….…. 05

2.2 Number of Rivals ….………………………..….…………………. 09

2.3 Scope of Competitive Rivalry ……………....…………….…. 09

2.4 Buyer Need and Requirements …………….………………. 09

2.5 Degree of Product Differentiation …..….………………… 10

2.6 Product Innovation ……………..…..…………………………... 11

2.7 Pace of Technological Change ………….………..…………. 11

2.8 Vertical Integration ………………………….…………………....12

2.9 Economies of Scale ………………………………………….…... 13

3. Key Success Factor ………………………………………………….……………..... 14

4. Major Companies ………………………………………………….…………………. 16

5. Industry Prospects ……………………………………………….…………………… 19

6. Overall Attractiveness …………………………………………….……………….. 21

1. Industry Background
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1.1 Origin and History:
Between 1950 and 1980, there was limited investment in
the FMCG sector. Local people had lower purchasing power, which meant that
people opted for necessity products rather than premium products. Indian
government was inclined towards favouring the local shops and retailers.
Between 1980 and 1990, people wanted more variety of products which
encouraged FMCG companies to increase the availability of products.

FMCG Industry started getting traction and other companies started

entering the industry. Media industry in India also boomed during the same
time which gave new companies even more incentive to make their business
profitable. Prior to 1991, when globalization and liberalization occurred in
India, western apparels and foreign food products were not available to local
customers. Common people weren’t very aware of brand recognition. After
1991, FMCG industry was inspired by the international companies which also
allowed government intervention to incentivize foreign FMCG companies to
operate in India. Big Bazaar store in Ahmadabad, Gujarat The Indian FMCG
industry generates massive employment opportunities and currently employs
more than 3 million people.

Departmental stores, grocery stores, and supermarkets are the places

where consumers buy the necessary products for daily consumption. In the
21st century, people don’t want to move across different stores to acquire the
common household goods. Hence, the introduction of supermarkets, where
customers have a variety of choices for different household products, into
localities are proving to be extremely convenient to the customers. Some of
the most common stores in India are: Reliance Retail, Big Bazaar, D-Mart, Easy
day, MORE, Spencer’s, Spar, Hyper City, and Star Bazaar. Although the
operations of supermarkets are profitable, local grocery stores are suffering
due to lack of variety of products. Unlike other emerging FMCG industry
around the world, FMCG sector in India is still quite conventional. Despite
street markets are still one of the most visited places for shopping in urban and
rural settings, online platforms are leading the way to buy FMCG products.

1.2 Forerunners of the Industry:

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1. Hindustan Unilever

Sanjiv Mehta (Chairman & Managing Director)

2. ITC Limited

Sanjiv Puri (Chairman & Managing Director)

3. Nestle India Ltd

Suresh Narayanan (Chairman and Managing Director)

4. Britannia Industries Ltd.

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Nusli Wadia (Chairman)

5. Dabur India Ltd.

Amit Burman (Chairman)

2. Economic Characteristics
2.1 Market Size and Growth Rate:
Market Size: The retail market in India is estimated to reach
US$ 1.1 trillion by 2020 from US$ 840 billion in 2017, with modern trade
expected to grow at 20 25% per annum, which is likely to boost revenue of
FMCG companies. The FMCG market in India is expected to increase at a CAGR
of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020.
According to Nielsen, the Indian FMCG industry grew 9.4% in the January-
March quarter of 2021, supported by consumption-led growth and value
expansion from higher product prices, particularly for staples. The rural market

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registered an increase of 14.6% in the same quarter and metro markets
recorded positive growth after two quarters. Final consumption expenditure
increased at a CAGR of 5.2% during 2015-20. According to Fitch Solutions, real
household spending is projected to increase 9.1% YoY in 2021, after
contracting >9.3% in 2020 due to economic impact of the pandemic. The FMCG
sector's revenue growth will double from 5-6% in FY21 to 10-12% in FY22,
according to CRISIL Ratings. Price increases across product categories will
offset the impact of rising raw material prices, along with volume growth and
resurgence in demand for discretionary items, are driving growth. The FMCG
sector grew by 36.9% in the April-June quarter of 2021 despite lockdowns in
various parts of the country.

In September 2021, rural consumption of FMCG increased 58.2% YoY; this is 2x

more than the urban consumption (27.7%).

The domestic FMCG market increased 36.9% YoY in April-June 2021.

In the third quarter of FY20 in rural India, FMCG witnessed a double-digit

growth recovery of 10.6% due to various government initiatives (such as
packaged staples and hygiene categories); high agricultural produce, reverse
migration, and a lower unemployment rate. Rise in rural consumption will
drive the FMCG market. The Indian processed food market is projected to
expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20.

FMCG giants such as Johnson & Johnson, Himalaya, Hindustan Unilever, ITC,
Lakmé and other companies (that have dominated the Indian market for
decades) are now competing with D2C-focused start-ups such as Mamaearth,
The Moms Co., Bey Bee, Azah, Nua and Pee Safe. Market giants such as Revlon
and Lotus took ~20 years to reach the Rs. 100-crore (US$ 13.4 million) revenue
mark, while new-age D2C brands such as Mamaearth and Sugar took four and
eight years, respectively, to achieve that milestone.

Companies with dedicated websites recorded an 88% YoY rise in consumer

demand in 2020. Since then, more businesses have begun to adopt the D2C
model, and India is now home to >800 D2C brands looking at a US$ 101 billion
opportunity by 2025.

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 Growth Rate: The FMCG sector of India is considered to be
the fourth largest one across the globe with profits of over US $672 billion
(IBEF, 2018). This contributes a high portion to the GDP growth of India. It is
predicted that the FMCG market share would double from US 1.1 Trillion by
2020 (IBEF, 2018).

Growth in FMCG Industry of India (US$)

(Source: IBEF, 2018)

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The FMCG sector is likely to see a growth factor of around 60 percent in both
rural and semi-urban areas of India by 2020. Hair care products, household
items, male grooming, female hygiene, chocolates and confectionary items are
found to be growing quickly. Today, urban India is consuming over 66% of
these fast moving consumer goods while rural India is consuming over 34%.
However, it is expected that rural India would increase the consumption of
goods to 40% in key FMCG categories (IBEF, 2018). In urban areas people are
most fond of using items like personal care, skin care, household care and
female hygienic products. The demand for these products would be increasing
day by day and are sold at an attractive price. In food segment, the processed
foods, bakery, daily products observes a long term growth in both urban and
rural areas. Growing population in both urban and semi-urban areas have
resulted in the rise of consuming FMCG products. The manufacturer is likely to
receive huge sales volumes in the coming years.

Key players in the FMCG sector are Hindustan Unilever Ltd, Nestlé India,
AMUL, Dabur India, Asian Paints (India), and Cadbury India, Procter & Gamble
Hygiene and Health care, Britannia, Pepsi, Coca-Cola and other companies. As
per the study conducted by ASSOCHAM, companies like Hindustan Unilever
Limited and Dabur India sales are on the rise in rural India. In fact, half of the
sales of these products are from rural areas (Sauer, 2001). The products that
are manufactured by Colgate Palmolive India and Marico have 37% of
consumption while the products manufactured by Nestle India Ltd and GSK
Consumer drive see a rise of 25% sales from rural India.

With the increase in urban areas, there are is a steep rise in young population
which is giving ample opportunities for FMCG sector to produce products that
are used by youngsters to reap huge profits (Vibuti, 2014). The Finance
Ministry has introduced Goods and Service Tax (GST) in 2017. This a great
move that have increased the consumption, production and employment
opportunities directly while reducing all indirect taxes that costs not less than
35% of total cost of consumer goods, which is the highest in Asian countries.
The key thing to understanding from this is that, the India market is growing at
a faster pace and is showing many business opportunities. In this viewpoint,
we have decided to carry out a study on consumer behaviour and their buying
decisions while buying FMCG products.

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2.2 Number of Rivals:
1) P&G

2) Pepsi
3) Coke
4) Nestle
5) Kraft foods
6) Parle
7) Britannia
8) Amul
9) Kwality walls
9) Colgate
10) Pepsodent

2.3 Scope of Competitive Rivalry:

Many players are expanding into new geographies and
categories and modern retail share is expected to be valued $180 billion
in 2020. The FMCG industry has been a highly fragmented industry as
more companies enter the market. If Wipro is diversifying and
expanding its product range in energy drinks, detergents and fabric
conditioners, Patanjali will spend US$743.72 million in various food
parks across the country. Also, launch of private label brands by big
retailers, which are competitively priced with offers and discounts, will
limit competition for weak brands.

2.4 Buyers Needs and Requirements:

Behaviour of consumers plays a crucial role in marketing the
FMCG used by consumers and it depends on various factors. In the current era
of globalization, the customer needs and tastes are changing over time.
Undeniably, the fast moving consumer goods (FMCG) is contributing high to
the growth of Indian GDP. It is necessary for marketers to learn about the

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factors that are affecting the behaviour of consumers in buying fast moving
consumer goods. The main purpose of this paper is to find out the factors that
are affecting the buying behaviour of consumers in purchasing fast moving
consumer goods. It was found that the behaviour of consumers vary by
location, price, promotion, product and physiological factors. However, the
effect of these factors affecting the decision of consumers would vary from one
product to another.

What consumer is buying, how they are buying, from where they
are buying and when they are buying and how much quantity they are buying
would depend on the family sized, social and cultural background, perception,
self-concept, attitudes, belief values, motivation, social class, personality and
various other factors. While buying any product, one would think of whether
or not to buy or from which place they want to buy. In certain areas, there
would be rich people who can afford to buy the items in huge quantities in
shorter period of time. In poor societies, people could not meet their day to
day needs. The marketers would understand the needs of every consumer and
their buying behaviours (IBEF, 2018). However, to understand this, they have
to do extensive research on internal and external environment and then come
up with right marketing tactics (Kardes, et. al., 2011).

2.5 Degree of Product Differentiation:

Product differentiation is a marketing strategy designed to distinguish a
company's products or services from the competition. Successful product
differentiation involves identifying and communicating the unique qualities of
a product or company while highlighting the distinct differences between that
product or company and its competitors. Product differentiation goes hand in
hand with developing a strong value proposition so that a product or service is
attractive to a target market or audience. If successful, product differentiation
can create a competitive advantage for the product's seller and ultimately
build brand awareness.

Product differentiation is fundamentally a marketing strategy to encourage the

consumer to choose one brand or product over another in a crowded field of
competitors. It identifies the qualities that set one product apart from other
similar products and uses those differences to drive consumer choice.

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Differentiation marketing can also involve focusing on a niche market. For
example, a small company might find it challenging to compete with a much
larger competitor in the same industry. As a result, the smaller company might
highlight exceptional service or a money-back guarantee.

2.6 Product Innovation:

The FMCG industry is undergoing a significant
transformation in response to the demand for more convenience and changes
in customer behavior. The major FMCG industry trends that address these
changes involve sustainable solutions for product development and packaging,
improving customer experience, and implementing digitalization. To offer
better experiences to their customers and gain a competitive edge, FMCG
companies seek omnichannel sales and e-commerce in addition to deploying
big data analytics and Artificial Intelligence (AI) solutions, among others. The
Internet of Things (IoT) sensors and devices and 3D Printing technology further
enable FMCG companies to focus on direct distribution to meet the growing
customer expectations.

The marketers created and design the products that would

eventually satisfy all the needs of the customer that were previously unfulfilled
(George, 2010). They further layup Decisions regarding the product’s shape,
size and features of the same. They are also expected to determine and place
an attractive package containing warranties, service and accessories of the
product sold. Nestle was the first to bring the concept of Maggie in capsicum
flavor. Relating to this they shifted their innovation based on geographic
locations and ended up introducing sambar, mixed vegetables and dal Atta
noodles as well.

2.7 Pace of Technological Change:

Digitization is increasingly becoming a priority for FMCG
brands as customers interact with brands across multiple online and offline
channels. Companies get access to valuable data from multiple sources
including various social media platforms, web, and mobile applications, and
also engage with their customers directly. Integrating digital technologies not

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only offers an omni channel experience to customers but also converts one-
time buyers into repeat customers.

US-based startup Repeat works on a Smart Replenishment

platform to turn one-time buyers into repeat customers. The startup powers
frictionless reordering experiences that are easy from the customer-end and
increase revenue for companies. The solution analyzes order data to
determine baseline replenishment intervals and automates replenishment
workflows to increase operational efficiency.

The share of sales coming from e-commerce is increasing

exponentially. The outbreak of the COVID-19 pandemic has further shifted
consumers’ shopping habits towards online channels. Brands are now building
their online presence to boost their engagement with consumers. Social media
also plays a significant role in the world of e-commerce as more items are sold
via social platforms such as Instagram. To this end, FMCG startups actively
incorporate diverse social traditional and media, leveraging mobile and
headless commerce, to market their products.

FMCG companies actively leverage Big Data to innovate and

compete in the industry. As data is becoming more and more accessible with
consumers shopping online, brands explore new ways to increase relationships
with their customers and gain insights from their behavior. Data analytics
explores customer preferences and behavior to provide FMCG companies with
a deeper understanding of their customers. Big data solutions allow brands to
optimize communication with their customers and offer more personalized
experiences.

2.8 Vertical Integration:

Vertical integration, by definition, is the combination in one
company of two or more stages of production normally operated by separate
companies. This is typically done for reasons that tie back to quality control,
reduced costs through economies of scale and even increased market share
due to the high barriers of entry. Vertical integration is an arrangement in
which the supply chain of a company is integrated and owned by that
company. Usually each member of the supply chain produces a different

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product or (market-specific) service, and the products combine to satisfy a
common need.

Vertical integration through production and marketing

contracts have also become the dominant model for livestock production.
Currently, 90% of poultry, 69% of hogs, and 29% of cattle are contractually
produced through vertical integration. The USDA supports vertical integration
because it has increased food productivity. However, "... contractors receive a
large share of farm receipts, formerly assumed to go to the operator's family".

Under production contracts, growers raise animals owned by integrators. Farm

contracts contain detailed conditions for growers, who are paid based on how
efficiently they use feed, provided by the integrator, to raise the animals. The
contract dictates how to construct the facilities, how to feed, house, and
medicate the animals, and how to handle manure and dispose of carcasses.
Generally, the contract also shields the integrator from liability. Jim Hightower,
in his book, Eat Your Heart Out, discusses this liability role enacted by large
food companies. He finds that in many cases of agricultural vertical integration,
the integrator (food company) denies the farmer the right of
entrepreneurship. This means that the farmer can only sell under and to the
integrator. These restrictions on specified growth, Hightower argues, strips the
selling and producing power of the farmer. The producer is ultimately limited
by the established standards of the integrator. Yet, at the same time, the
integrator still keeps the responsibility connected to the farmer. Hightower
sees this as ownership without reliability.

Under marketing contracts, growers agree in advance to sell their animals to

integrators under an agreed price system. Generally, these contracts shield the
integrator from liability for the grower's actions and the only negotiable item is
a price.

2.9 Economies of Scale:

India's fast-moving consumer goods, or the FMCG sector, has been able
to weather the impact of an economic slowdown and rising input costs yet
another quarter, as firms led by HUL beat street expectations both on top line
and bottom line growth.

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 A study of the aggregate financial performance of the leading 10 FMCG
companies over the past eight quarters shows that the industry has grown at
an average 16-21% in the past two years with average operating margins being
22%.
Very few other industries can boast of having such a performance track
record. "The consumer sector typically is the last and the least to suffer during
a slowdown," says Manoj Menon, senior analyst at Kotak Institutional Equities.

Most companies are reaping the benefits of the direct distribution

expansion mostly in rural India. HUL, for instance, has tripled its rural
penetration in the last couple of years. Sales from modern trade have also
been a strong growth driver for companies. Marico has posted a growth of
over 45% in revenues from its rural and modern trade businesses during FY12.
The quarter to March performance of FMCG companies like HUL, Dabur,
Godrej Consumer Products, Marico, Asian Paints, GSK Consumer Healthcare,
Procter & Gamble Hygiene and Healthcare and Jubilant Foodworks is also a
reflection of consumption-driven growth.

3. Key Success Factor

It's a battle out there, there is no doubt. No longer can companies
expect to grow on the back of the India growth story by simply going through
the motions of time-honoured tactics such as penetrating more towns and
villages, putting cricket or Bollywood celebrities on their adverts and passing
on inflationary price increases. When times get tougher, then out-of-the-box
strategic thinking will win through - those companies closest to the consumer
and with leadership that can truly focus on what really matters will win
through.

If we look empirically at what the fastest-growing companies in the fast-

moving consumer goods (FMCG) sector did in 2012, then there are clear
lessons on how to win when the market slows down. While five per cent GDP
growth may still be the envy of most of the developed world, we all know in
India that this has put tremendous pressure on the country. Graduates will no
longer be guaranteed that job at the end of their study, uncertainty will prevail

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around issues such as foreign direct investment and the consumer will think
more carefully than ever about the value of her purchase.

Some sectors such as automobiles have particularly felt the brunt of the
changed consumer sentiment. Even with FMCG companies, which historically
are more resilient, given the everyday essential nature of many of their brands
in a shopper's basket, we have seen a slowdown. The 15-18 per cent annual
growth rate seen over the last few years has come down by a few points in
2013, and is likely to remain muted for some time to come.

So, what have the most successful companies done to set them apart?
Let's look at the differentiating mind-sets of the companies that managed to
significantly out-perform the industry norm.

First, they decided that quality is more important than quantity, at least
when it comes to distribution. The fastest-growing companies added 400,000
stores, and 70 per cent of the new stores were in rural India - it is Bharat that is
going to take India out of slowdown. However, impressive as the expansion of
their distribution networks was, it didn't actually set them apart from
competition. It was actually the quality of the distribution: The successful
companies showed significant growth within these stores by focusing on
developing store-owner relationships to build word-of-mouth
recommendations, creating the right in-store merchandising and scientifically
selecting the right items for the right store by understanding the catchment
area. Nowadays, there are tools that allow companies to get smart about
quality distribution and the winners took full advantage.

Second, they recognised the increased stress the consumer was under.
Inflationary increases without a truly step-change consumer value proposition
were never going to fly. While there are some great success stories around
premiumisation, the successful companies passed on lower-than-inflation price
increases and, as a result, built volume and value. The Indian consumer is the
most price-sensitive in the world and this has only increased in recent times.

The successful companies grew their volume on average by 19 per cent,

as opposed to average companies that grew about nine per cent in 2012 and in
the process, lost some connection points with their consumer base.

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 Third, they thought medium term and not just short term. One example
is innovation - despite the slowdown, the most successful companies invested
more in R&D, recognising that the Indian consumer is inquisitive and is
constantly looking for new benefits. Innovative products for the successful
companies accounted for four times the percentage of sale experienced by the
average FMCG player. Another example is modern trade - the winners
committed senior resources, invested in the right promotional programmes
and in-store theatre, and reaped the rewards as a result. They grew faster in
this channel, which will inevitably become the key channel in India in the years
to come.

Don't get me wrong, the long-term picture is as rosy as ever - with a per-
capita consumption of $31 (Rs 1,911) compared to China's $128 (Rs 7,891),
there is incentive to invest. However, leaders will increasingly be judged and
rewarded by how they heed the lessons of others, and turbulence provides a
terrific learning environment. As the expression goes: "Calm seas do not make
great sailors." We are going to see some great sailors emerge in the next few
years.

4. Major Companies
List of the best FMCG companies in India 2021: All our lives depend on
FMCG (Fast Moving Consumer Goods) products that satisfy our basic needs.
FMCG products are those that have a short shelf life that is produced in high
volumes with low cost and are made for rapid consumption.

This industry includes household items, over-the-counter medicines,

food, personal care items, stationery and consumer electronics, etc. The fast-
moving consumer goods (FMCG) sector is India’s fourth-largest sector and has
created employment for more than three million people.

Today, we take a look at the top 5 FMCG companies in India that are
responsible for keeping over 1.3 billion Indians on their feet every day.

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Top 5 FMCG companies in India in 2021

1. Hindustan Unilever Limited (HUL)

Market cap: Rs 5,45,762.50 Cr

HUL is one of India’s oldest FMCG

companies. It is a subsidiary of Unilever,
a British-dutch company. The company
was established in 1933 and has
headquarters in Mumbai. HUL has served
over 2 billion customers for over 87
years.

HUL has over 35 brands across 20 categories such as soaps, detergent,

skincare, cosmetics, tea, toothpaste. The brand includes famous names like
Surf, Excel, Dove, Lux, Lifebuoy, Clinic Plus, Wheel, Sunsilk, Knorr, Axe, etc.

2. ITC Limited
Market Cap: Rs 2,61,993.75 Cr

ITC Ltd. has flourished in the Indian markets for over 110 years giving them a
deep understanding of the Indian
Consumer. The ITC is known to
guarantee a certain standard in
production and packaging. They
have broad distribution channels
in India. This has allowed them
to penetrate into even the most
rural areas through several retail
shops.

Their products include Bingo, Sunfeast, Aashirvaad, Fiama Di Wills, Vivel,

Savlon soaps and handwash, Papercraft, and Classmate. ITC has 77% monopoly
in the Indian Cigarettes market share and offers brands like Wills Navy Cut,
Gold Flake Kings, Silk Cut, India Kings, Bristol, Gold Flake Super Star, Gold Flake
Premium Lights, Classic Menthol, etc. In FY2020, ITC made a net profit after tax
of Rs 15,300 Crores.
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3. Nestlé India
Market Cap: Rs 1,68,800.78 Cr

Nestle is a transnational food and beverage company headquartered in

Switzerland. Globally the company has been around for more than 150 years.
In India, Nestle dates back to 1912
when it began operating as Nestle
Anglo-Swiss Condensed Milk
Company. They cater to the
nutritional and wellness
requirements of Indian
consumers.

Nestle sells a plethora of products

including beverages, bottled
water, milkshakes, breakfast cereals, instant foods, performance, and health
care nutrition, etc. A few of the 2000 brands they currently own are Nescafe,
Maggi, Milky Bar, Kit Kat, Bar One, Milkmaid, Nestea, etc. Further, Nestle
Cerelac has an undisputed market share of 96.5% in infants 6 months and
older as a supplement for breast milk, despite functioning in an open to all
industry.

4. Britannia Industries
Market cap: Rs 82,414.29 Cr

Britannia Industries is one of the oldest food-producing companies in the

country. It was established in 1892 in Kolkata with an initial investment of
merely Rs. 295. Their products are
available in more than 5 million retail
outlets.

More than 50% of Indian households are

proud users of their range of food items.
The FMCG is known as the first Zero
Trans Fat Business in the country. They
have an extensive distribution network in India and 60 other countries.

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How britannia ind makes money

Their products include Good Day, Tiger, Milk Bikis, Bourbon, Marie Gold, Cake,
Cheese, Milk, and Yogurt. The company is the largest brand in the organized
bread market.

5. Marico
Market cap: Rs 60,816.91 Cr

Marico was established in 1990 in Mumbai. It began as a brand for coconut

and refined edible oil and later expanded into various kinds of consumer
goods. The majority of its success
lies in its two brands ‘Saffola’ and
‘Parachute’. The company has
come a long way in the segment
despite being around for only 3
decades. Safola which competes in
the premium refined edible oil
segment has maintained its market
leadership with a share of 73%. ‘Parachute’ on the other hand holds a market
share of 59%. These also form up to 90% of their income.

It is currently operating in 25 countries in the emerging markets of Asia and

Africa. They maintain their innovation in manufacturing and packaging to
preserve the tagline “Make a difference”.

Marico’s household brand includes Parachute, Saffola, Nihar, Livon, Set Wet,
Mediker. Its global products include Parachute, Haircode, Caivil, Black Chic,
Isoplus, Code 10, and X-men.

5. Industry Prospectus
Market research - Market research is the key. Without the necessary
information, it becomes difficult to understand the requirements of the
customers. It provides critical information and direction. It identifies market
needs and wants, product features, pricing, decision makers, distribution
channels, motivation to buy. They're all critical to the decision process.

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Timing - Are elements of the process coordinated? Is production on the same
time schedule as the promotion? Will the product be ready when you
announce it? Set a time frame for the rollout, and stick to it. Many products
need to be timed to critical points in the business cycle. Miss it, and invite
failure. There are marketing tales galore about companies making new product
announcements and then having to re-announce when the product lags behind
in manufacturing. The result is loss of credibility, loss of sales, and another
failure.

Capacity – If the new product or service is successful, do you have the

personnel and manufacturing capacity to cope with the success? Extended
lead times for new products can be just as deadly as bad timing.

Testing - Test market the new product. Be sure it has the features the
customer wants. Be sure the customer will pay the price being asked. Be sure
the distributor and sales organization are comfortable selling it. You may need
to test your advertising and promotion as well.

Distribution – Who’s / Which’s going to sell the product? Can you use the
same distribution channels you currently use? Can you use the same
independent representatives or sales force? Is there sufficient sales potential
in the new product to convince a distributor, retailer, or agent to take on the
new line? There are significant up-front selling costs involved in introducing
new products. Everyone in the channel wants some assurance that the
investment of time and money will be recovered.

Training - The sales organization involved in the marketing/selling, inside

employees, and distribution channels will need to be trained about the new
product. If the product is sufficiently complex, face-to-face training needs to be
provided. Or perhaps some type of multimedia program will do the job. If the
product is not that complex, literature may work. Again, timing is critical. Train
before the product hits the shelves, not after.

Promotion - The promotional program to support the introduction:

advertising, trade shows, promotional literature, technical literature, samples,
incentives, Web site, seminars, public relations. Time it all with production,
inventory, shipments, and training. The new product will simply sit in the

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warehouse without the right support materials. Research, timing, and planning
can all help increase the probability of success.

6. Overall Attractiveness
Fast moving consumer goods (FMCG) is the fourth-largest sector in the Indian
economy. There are three main segments in the sector food and beverages,
which accounts for 19% of the sector; healthcare, which accounts for 31% of
the share; and household and personal care, which accounts for the remaining
50% share. The urban segment contributes to about 55% of the revenue share,
while the rural segment accounts for 45%. Rise in rural consumption will drive
the FMCG market.

According to Nielsen, the Indian FMCG industry grew 9.4% in the January-
March quarter of 2021, supported by consumption-led growth and value
expansion from higher product prices, particularly for staples. Final
consumption expenditure increased at a CAGR of 5.2% during 2015-20.
According to Fitch Solutions, real household spending is projected to increase
9.1% YoY in 2021, after contracting >9.3% in 2020 due to economic impact of
the pandemic. The FMCG sector's revenue growth will double from 5-6% in
FY21 to 10-12% in FY22, according to CRISIL Ratings. Price increases across
product categories will offset the impact of rising raw material prices, along
with volume growth and resurgence in demand for discretionary items, are
driving growth. The Indian FMCG industry grew by 36.9% in the second quarter
of 2021, despite nationwide lockdowns.

In September 2021, rural consumption of FMCG increased 58.2% YoY; this is 2x

more than the urban consumption (27.7%). The domestic FMCG market
increased 36.9% YoY in April-June 2021.

The FMCG market in India is expected to increase at a CAGR of 14.9% to reach

US$ 220 billion by 2025, from US$ 110 billion in 2020. The Indian processed
food market is projected to expand to US$ 470 billion by 2025, up from US$
263 billion in 2019-20.

Indian online grocery market is estimated to exceed sales of about Rs. 22,500
crore (US$ 3.19 billion) in 2020, a significant jump of 76% over the previous
year. The gross merchandise value (GMV) of the online grocery segment in

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India is expected to increase 18 times over the next five years to reach US$ 37
billion by FY25. As of February 2021, out of 39 Mega Food Park projects, 22 are
operational, 15 are under implementation and 2 are in-principle approval.
Many FMCG brands partner with e-commerce platforms such as Dunzo,
Flipkart, Grofers and BigBasket to deliver products at the doorstep of
consumers during the COVID-19 pandemic. In the fourth quarter of FY21, e-
commerce sales of Marico Ltd., Hindustan Unilever Ltd., Dabur India, ITC and
Godrej Consumer Products Ltd. were 8%, 6%, 5%, 5%, and 4%, respectively, of
the total FMCG sales. As of June 2021, e-commerce share has already touched
7-8% for some of the largest FMCG companies in the country, according to
Accenture India.

In October 2021, Procter & Gamble announced an investment of Rs. 500 crore
(US$ 66.8 million) in rural India. In October 2021, Setwel Industries entered the
FMCG market with The Food Folks, a company specialising in gourmet
formulations.

FMCG companies are looking to invest in energy efficient plants to benefit the
society and lower cost in the long term. Dabur India has grown its rural
network to over 52,000 villages in March 2020, from 44,000 villages in March
2019. For 2020-21, the company aims to have up to 60,000 villages. The sector
recorded an FDI of US$ 18.59 billion between April 2000 and June 2021.

In January 2021, Udaan raised US$ 280 million (~Rs. 2,048 crore) in funding
from existing and new investors, including Lightspeed Venture Partners and
Tencent. With the latest infusion of capital, Udaan has earned a total of US$
1.15 billion to date. Although the company did not reveal the valuation
information, sources stated that the valuation exceeded US$ 3 billion after this
deal.

In September 2021, PepsiCo commissioned its Rs. 814 crore (US$ 109.56
million) Kosi Kalan foods facility in Mathura, Uttar Pradesh; it is the company's
largest greenfield manufacturing investment in India.

Growing awareness, easier access, and changing lifestyle are the key growth
drivers for the consumer market. The focus on agriculture, MSMEs, education,
healthcare, infrastructure and tax rebate under Union Budget 2019 20 was
expected to directly impact the FMCG sector. Initiatives undertaken to increase
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the disposable income in the hands of common man, especially from rural
areas, will be beneficial for the sector.

Thank you

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