GROUP 7 PRESENTS

ECONOMICS PROJECT :
ANALYSIS OF a COMPANY IN
THE FMCG SECTOR
FMCG SECTOR OVERVIEW
 FMCG is an acronym for Fast Moving Consumer Goods,
which refer to things that we buy from local shops &
supermarkets on daily basis.

 These products have a high turnover and are relatively

cheaper.

 The most common items are toilet soaps, detergents,

shampoos, toothpaste, shaving products, shoe polish,
packaged foodstuffs, beverages and extends to certain
household accessories.
DID YOU KNOW….?
 The Indian FMCG sector with a market size of US$13.1 billion is the fourth
largest sector in the economy.

 FMCG Sector has grown by 60% over a 5-year period from FY05 to FY10
which translates into an annual growth rate of 10%.

 It generates 5% of total factory employment and is creating employment

for three million people, especially in small towns and rural India.
 The FMCG market is set to reach US$ 33.4 billion in 2015.

 This growth is largely fuelled by burgeoning population, rise in income of

middle class consumers, change in the mindset & boosting purchasing
power of rural consumers and continued high demand in urban areas.
 INTRODUCTION TO HUL
 Formed in 1933 as Lever Brothers India Limited.

 Named as Hindustan Lever Limited in 1956 through a merger of Lever

Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd.

 The company was renamed in June 2007 to “Hindustan Unilever

Limited”.

 India's largest FMCG company, touching the lives of every 2 out of 3

Indians.

 The Anglo-Dutch company Unilever owns a

majority stake (52%) in HUL.
 Rated as the most respected company in India for the past 25 years
by Businessworld magazine.

 HUL is the market leader in consumer products with presence in

over 20 categories with over 700 million Indian consumers using its
products.

 One of the eight Indian companies to be featured on the Forbes list

of World’s Most Reputed companies in 2007.

 HUL is one of the country's largest exporters; it has been recognised

as a Golden Super Star Trading House by the Government of India

 It has a distribution channel of 6.3 million outlets and owns 35

major Indian brands
MAJOR BRANDS OF HUL
 MAJOR COMPETITORS
1. ITC
2. Nestle
3. Amul
4. Dabur
5. Asian Paints (India)
6. Cadbury India
7. Britannia Industries
8. Procter & Gamble
9. Marico
 HUL’S FINANCIAL
PERFORMANCE OVER THE
YEARS

A Comparative Study
Segmental Revenue in 2009-2010 (%)
ICE CREAMS

6%
2%1% 4% FOOD
12%
BEVERAGES

PERSONAL
PRODUCTS

SOAPS &
47% 28%
DETERGENTS

EXPORTS

OTHERS
PERFORMANCE OF THE MAIN BRAND SEGMENTS AT A GLANCE
BRAND CATEGORY SALES GROWTH CAUSES & CORRECTIVE ACTIONS TAKEN
OVER
PREVIOUS
YEAR

6.6 % While underlying volume growth was higher,

aggressive price reductions effected due to
1. Home & Personal Care heightened competitive intensity

1.5 % Prices of products reduced taking into account

the reduction in commodity prices; Re-launch
2. Soaps & Detergents of premium brands- Wheel, Vim, Lifebuoy &
Lux

16.2 % Innovation, high quality and compelling

3. Personal Products (Hair, advertising & field activation
Skin & Oral Care)
Strong Double High competitive intensity from national & local
Digit Growth players; Food inflation; Down trading 
Increased brand investments; Judicious pricing;
4. Foods Supply Chain cost savings; Launch of innovative
products—’Knorr Soupy Noodles'
 Sales Net Sales (Cr)

22,000.00 20,504.28
20,000.00
17,769.12
18,000.00
16,000.00
13,880.56
14,000.00 12,244.02
11,193.88
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
0.00
Dec/05 Dec/06 Dec/07 Mar/09 Mar/10
11
 Sales Net Profit (Cr)
2,500.71
2,600.00
2,400.00 2,202.03
2,200.00
2,000.00 1,855.37
1,769.06
1,800.00
1,600.00 1,408.10
1,400.00 Net Profit (Cr)
1,200.00
1,000.00
800.00
600.00
400.00
200.00
0.00
Dec/05 Dec/06 Dec/07 Mar/09 Mar/10
12
 Sales Return on Capital employed (ROCE)

200.00

180.00

160.00
138.72
140.00
118.59
120.00 106.78
Return on Capital
employed (ROCE)
100.00

80.00 67.66 65.89

60.00

40.00

20.00

0.00
Dec/05 Dec/06 Dec/07 Mar/09 Mar/10
13
 Sales Return on Net Worth (RONW)

200.00

180.00

160.00

140.00 122.97 121.34

120.00 Return on Net Worth
(RONW)
100.00 85.25
80.00 68.14
61.09
60.00

40.00

20.00

0.00
Dec/05 Dec/06 Dec/07Mar/09Mar/10
14
 Sales Current Ratio

1.00 0.92
0.90 0.84

0.80 0.73
0.70 0.68
0.70

0.60
Current Ratio
0.50

0.40

0.30

0.20

0.10

0.00
Dec/05 Dec/06 Dec/07 Mar/09 Mar/10
15
 Sales Debt-equity Ratio

1.00

0.90

0.80

0.70

0.60
Debt-equity Ratio
0.50

0.40

0.30
0.20
0.20
0.06
0.10 0.02 0.03

0.00
Dec/05 Dec/06 Dec/07 Mar/09 Mar/10
16
 Sales Dividend per share

10.00
9.00
9.00

8.00 7.50

7.00 6.50
6.00
6.00
5.00 Dividend per share
5.00

4.00

3.00

2.00

1.00

0.00
Dec/05 Dec/06 Dec/07 Mar/09 Mar/10
17
 Sales Earning per share

20.00

18.00

16.00

14.00
11.47
12.00
10.09 Earning per share
10.00 8.41 8.12
8.00 6.40
6.00

4.00

2.00

0.00
Dec/05 Dec/06 Dec/07 Mar/09 Mar/10
18
STOCK PRICE MOVEMENT
MERGERS, ACQUISITIONS &
DIVESTMENTS
 In October 2006, the Company divested its 51%
controlling stake in Capgemini Business Services (India)
Limited (CGSL) to Cap Gemini SA

 Cap Gemini SA had a call option for the balance 49%

stake in CGSL

 Consequent to the exercise of the call option by Cap

Gemini SA in March 2010, the balance stake of 49% in
the business held by the Company has been sold to Cap
Gemini SA for a consideration of Rs. 91.1 crores

 The Company believed that the business would benefit

from the systems and processes brought in by a leading
player in the BPO space
KEY DEVELOPMENTS - HIGHLIGHTS

 Strong growth potential has attracted many

new competitors; Decisive actions by HUL
combining innovation, right pricing and competitive levels of
advertising investment

 HUL registered overall growth rate of 6.4% in 2009-10; Over the

last 5 years, HUL has performed well with a CAGR of 10% for
total sales and 11.5% of FMCG sales

 Strengthening their go-to-market capability; continue leveraging

Unilever’s brands, technologies, business processes, global scale
KEY STRATEGIES FOR CONTINUOUS
IMPROVEMENT & INNOVATION

 Some major innovations: Pure-it Compact-in-home water purifier –for low-income

consumers priced at Rs. 1000/-; Knorr Soupy noodles, Brooke Bond Sehatmand Tea; Cif
multi-purpose cleaner

 Fast & flexible supply chain management system, resulting in significant reduction of
working capital

 Running of ‘twin track’ on single production lines in some detergent factories; End-to-
end technology solution which helps reduce inventory cycles while enabling optimum
service levels

 Rural markets were brought under direct coverage, enabling better servicing and
control. Rural salesmen being equipped with handheld terminals to facilitate order
taking process and billing
 With strong linkages with the Global R&D and the brand
development capabilities, HUL well placed to meet the
challenges from the increased competition intensity.

 Continuous improvement in Return on Marketing Investments

(ROMI); For eg, HUL has identified the media elasticity of each
of its brand which helps to optimise its advertising spends.

 Energy conservation activities and use of sustainable

alternative bio-fuels have helped reduce fuel costs and carbon
emissions.

 Talent strategy to first attract top talent from the market

through putting significant impetus behind improving the HUL
Employer Brand in top business schools.
CHALLENGES AHEAD
 Managing growth and inflation at the
same time will be a key challenge

 Lot of competitors in FMCG market  As inflation

rises, consumers tend to move towards cheaper
product  This will reduce HUL product acceptance in
market  So a challenge for HUL to maintain the
steady profit rate
GROWTH PROSPECTS
 The FMCG categories in which the Company
operates have significant low per capita
consumption levels relative to many other
Asian economies  Opportunity to tap
these and thereby increase penetration
levels

 Agricultural growth expected to pick up on

account of good monsoons and thereby a
good Rabi crop

 Over 1/3rd of India’s manufacturing output

is exported and export growth has been
positive since November 2009  An
encouraging sign for the manufacturing
sector
 HUL is a company which the customers in rural as well as urban
India relate to  ‘Right from the morning tea to brushing of teeth
at night’!

 This explains the deep penetration of HUL in Indian market

 The future for HUL is demanding newer and high level innovations
so as to cope up with increasing competition

 However, HUL is well equipped with all that is needed of this Indian
Giant.
THANK YOU !
PRESENTED BY: GROUP 7

SUBODH GHOSALKAR 91
SUDHINDRA GADAG 92
SUJEET SALIAN 93
VARSHA BHAT 94
VIDHI TARKAS 95