Risk FMCG

Risk Management of
FMCG Sector
Overview Of FMCG
Sector
• Fast Moving Consumer Goods (FMCG) goods

are popularly named as consumer packaged
goods.
• The volume of money circulated in the
economy against FMCG products is very high,
as the number of products the consumer use
is very high.
• Competition in the FMCG sector is very high
resulting in high pressure on margins.
FMCG Sector
• The market is more pressurized with presence of

local players in rural areas and state brands.
• Companies spend a large portion of their budget on
maintaining distribution networks.
• Fast Moving Consumer Goods, which refer to things
that we buy from local supermarkets on daily basis,
the things that have high turnover and are relatively
cheaper.
• The Indian FMCG sector with a market size of
US$13.1 billion is the fourth largest sector in the
economy
Top 10 FMCG Companies
3 2
4
10
7
6
8
1 5
Characteristics Of
FMCG
• From the consumers' perspective:

– Frequent purchase
– Low involvement (little or no effort to choose the item --
products with strong brand loyalty are exceptions to this
rule)
– Low price
• From the marketers' angle:
– High volumes
– Low margins
– Extensive distribution networks
– High stock turnover
Growth Prospect
• Large Market
• Spending Pattern
• Changing Profile and Mind Set of

Consumer
Advantages To The
Sector
• Governmental Policy
• Central & State Initiatives
• Foreign Direct Investment (FDI)

STRENGTHS WEAKNESS
- Low operational costs - Lower scope of

- Presence of established investing in technology
distribution networks in and achieving
both urban and rural areas economies of scale,
- Presence of well-known - Low exports levels
brands in FMCG sector - "Me-too" products,
- Untapped rural market - Removal of import

- Rising income levels, i.e. restrictions resulting in
increase in purchasing power
of consumers replacing of domestic
- Large domestic market- a brands
population of over one billion. - Slowdown in rural
- Export potential
- High consumer goods
demand
spending - Tax and regulatory
structure
OPPORTUNITIES THREATS
PEST Analysis
Political (incl. Legal) Economic Social Technological
Environmental regulations and Government research
Economic growth Income distribution
protection spending
Interest rates & monetary Demographics, Population Industry focus on
Tax policies
policies growth rates, Age distribution technological effort
International trade regulations New inventions and
Government spending Labor / social mobility
and restrictions development
Contract enforcement law
Unemployment policy Lifestyle changes Rate of technology transfer
Consumer protection
Work/career and leisure
Life cycle and speed of
Employment laws Taxation attitudes
technological obsolescence
Entrepreneurial spirit
Government organization
Exchange rates Education Energy use and costs
attitude
(Changes in) Information
Competition regulation Inflation rates Fashion, hypes
Technology
Health consciousness &
Political Stability Stage of the business cycle (Changes in) Internet
welfare, feelings on safety
(Changes in) Mobile
Safety regulations Consumer confidence Living conditions
Technology
Structural Analysis
• Price and income elasticity of demand varies across products and

consumers.
• Individual items are of small value (small SKU's) although all FMCG
3 Important products put together account for a significant part of the
Aspects: consumer's budget.
• The consumer spends little time on the purchase decision.
• Brand loyalties or recommendations of reliable retailer/ dealer drive
- Necessity
purchase decisions.
- Comfort • Limited inventory of these products (many of which are perishable)
- Luxury are kept by consumer and prefers to purchase them frequently, as
and when required.
• Brand switching is often induced by heavy advertisement,
recommendation of the retailer or word of mouth.
Budget
Risks in FMCG sector
• Due to cut throat competition there is severe pressure

on margin for the manufacturers of FMCG products.
• The rural and semi urban population is growing but the

problem faced by the FMCG manufacturers is the
logistics.
• Some problems associated with rural markets is acute

dependence on the vagaries of the monsoon, seasonal
consumption linked to harvests, festivals and special
occasions, poor roads and power problem.
Risks in FMCG sector
• Once the product fails its not easy to revive it back.
• When the company launches a new product its

competitor will also launch the new product in the same
line, within the short span.
• Hopping from one product to another is too high , due to

very large pool of products. Customer Loyalty is big issue.
• Tolerance level in the customer satisfaction is quite

low , due to easy availability of other options.
Hopping Nature
Customer Loyalty
Die Hard Switchers Fence Switchers Die Hard

Loyalist Sitters Opponent
The major issue with this sector is the 80% of the customers
are Fence Sitter. Hopping from one product to another is
too high , due to very large pool of products.
Market Analysis
Growth
Size Distribution
Channels
Risk Profit
DISTRIBUTION CHANNEL
Introduction About
The Industry Players
COMPREHENSIVE RISK
MANAGEMENT SYSTEM
RISK MANAGEMENT
Risk Management At
AT
Strategies At Dabur
• Cost
- Variable Costs
- Fixed Costs
• Competition
• Consumer demand
- The majority of Indian population tends to
go towards the Indianised natural and herbal
products thus they made it their USP.
Risk identification
Chief Risk Officer
Risk Mitigation
A team of Risk officers at each

company location
Employees
Risk Register
Risk Register
Human
Regulatory
Marketing Operations Finance Resource
Affairs
Development
The Risk Register is reviewed

periodically by senior management and
is presented to the Audit Committee on
a quarterly basis.
Risk Analysis
• One of the key risks - rising inflationary trend and high food prices which can
lead to compression in demand for nonfood consumption activities.
• A poor monsoon, if it happens, can impact rural incomes and dampen rural
consumption and spends.
• Increase of imitation / fake products and brands can hamper our growth.
• Any unexpected changes in regulatory framework pertaining to fiscal benefits
and health related issues which may impact parts of our business or
profitability is one of risks faced by the company.
• A slowdown in overall economic growth can lead to pressure on disposable
incomes and spending power of people.
• The Company is well aware of these risks and challenges and has put in place
mechanisms to ensure that they are managed and mitigated with adequate
timely actions.
Internal Control
Systems
• Standard Operating Procedures (SOPs)

• Introduced the COSO framework for
internal controls and adequacy of
internal audit.
• The Internal Audit Department reports
to the Audit Committee of the Board of
Directors, which recommends control
measure from time to time
THANK YOU

Risk FMCG

Uploaded by

Copyright:

Available Formats

Risk FMCG

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Risk FMCG

Uploaded by

Copyright:

Available Formats

Risk Management of

• Fast Moving Consumer Goods (FMCG) goods

• The market is more pressurized with presence of

• From the consumers' perspective:

• Changing Profile and Mind Set of

• Central & State Initiatives

• Foreign Direct Investment (FDI)

- Low operational costs - Lower scope of

- Untapped rural market - Removal of import

• Price and income elasticity of demand varies across products and

• Due to cut throat competition there is severe pressure

• The rural and semi urban population is growing but the

• Some problems associated with rural markets is acute

• Once the product fails its not easy to revive it back.

• When the company launches a new product its

• Hopping from one product to another is too high , due to

• Tolerance level in the customer satisfaction is quite

Die Hard Switchers Fence Switchers Die Hard

A team of Risk officers at each

The Risk Register is reviewed

• Standard Operating Procedures (SOPs)

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.