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Strategic Marketing

FMCG Sector
Group Members
• Vivek
• Varun
• Saurabh
• Ayushi
• Ashima
• Neha
FMCG Sector
• FMCG are products that have a quick shelf turnover, at relatively
low cost and don't require a lot of thought, time and financial
investment to purchase

• ‘Fast Moving Customer Goods’ is in opposition to consumer


durables such as kitchen appliances that are generally replaced
less than once a year

• FMCG is characterized by strong presence of MNC and well


established distribution network.

• The intense competition between the organised and unorganised


segments operating at low operational cost.
Marketer Point of View
• Product Analysis
– Product
– Price
– Place
– Promotion

• Market Analysis
– Size ( Past , Present and Future)
– Growth ( Expected Trends )
– Profitability
– Risks / Threats
– Distribution Channels
Market Analysis

SIZE Growth

Risk Profit
FMCG Sector Size
• The Indian FMCG sector is an important contributor to the
country's GDP.

• It is the fourth largest sector in the economy and is


responsible for 5% of the total factory employment in
India

• This has been due to liberalization, urbanization, increase


in the disposable incomes and altered lifestyle

• The lower-middle income group accounts for over 60% of


the sector's sales. Rural markets account for 56% of the
total domestic FMCG demand
FMCG Sector Size (cont.)
• Fast moving consumer goods has gained importance with
retailing gaining prominence.

• Over the last one decade the market is growing at the rate
of 18.7 %.

• Total market size in excess of US$ 13.1 billion

• Availability of key raw materials, cheaper labour costs and


presence of highly effective supply chain system gives
competitive advantage.
Growth Prospects
• The FMCG market is set to treble from US$ 11.6 billion in
2003 to US$ 33.4 billion in 2015.

• The FMCG sector will witness more than 50 per cent


growth in rural and semi-urban India by 2010.

• Penetration level as well as per capita consumption in most


product categories is low indicating the untapped market
potential , hence the market potential of growth is very
high.
Growth Prospects
• Burgeoning Indian population, particularly the middle
class and the rural segments, presents an opportunity to
makers of branded products to convert consumers to
branded products.

• With 200 million people expected to shift to processed and


packaged food by 2010, India needs around US$ 28 billion
of investment in the food-processing industry.

• With the retail gaining momentum, the FMCG prospective


growth can be realized with increase in sales volumes.
Growth Prospects
• There is an increase in the disposable incomes and altered
lifestyle which is being fueled by the increase in the per
capita income.

• The increase the population will increase the demands


many fold.
Profitability of the sector
• Hindering ( Down)
– Increase in competition resist the growth of the profit
margin.
– Margins remain under pressure due to unprecedented
rise in input costs.

• Pushing (Up)
– FMCG sector depends upon bulk sales only. High the
volume of the sales , higher is the profit.
Profitability of the sector
• Balancing (Up/Down)
– Small packaging typically known as ‘Sachet’ - Is a two
edged sword. Helps in trapping the bottom segment of
the Customer Pyramid .
– But it decreases the profit margin per unit sale.
– In the long run increases the volume of sales.
– Thus must be used very wisely.
Threats / Risks
• 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.
Threats / Risks
• 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 Switcher Fence Switcher Die Hard


Hard s s Oppone
Loyalist Sitter nt

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

SIZE Growth

Distribution
Channels

Risk Profit
Distribution channel
• Existing distribution channels
– Can be described by how direct they are to the
customer in other words how many channels it take the
goods to reach customer.

• Trends and emerging channels


– New channels can offer the opportunity to develop a
competitive advantage shorten the channel length.

• Channel power structure


– For example, in the case of a product having little brand
equity, retailers have negotiating power over
manufacturers and can capture more margin.
Distribution channel
This is typical example any FMCG company say HUL
Thank You