Power Pack

FMCG

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•Industry Overview :3

•Category Analysis - Illustration

• Bath and Shower : 17

• Company Analysis - Illustration

•HUL : 25
 Overall Industry Trends

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 FMCG industry is expected to double between 2016 to 2020
despite short-term pressures.

FMCG: MARKET SIZE AND GROWTH

Impact of
Demonitization
and GST

Source: IBEF
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 Rural markets contribute to 40% of the industry revenues and has
been growing faster than the urban market in the last few years.

IMPORTANCE OF RURAL MARKET

URBAN – RURAL BREAK-UP (2017) RURAL FMCG MARKET GROWTH

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FMCG PER -CAPITA CONSUMPTION

Indian FMCG per capita consumption is

• half of Indonesia,

• one‐fourth of China and

• one‐twelfth of Thailand.

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 Modern trade constitute 9% of the overall FMCG sales which is
much lower than that of other developing or developed countries.

SHARE OF MODERN RETAIL IN FMCG

Source: Tech Sci Research

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 Food and Beverages constitute 44% of FMCG industry.

FMCG: SEGMENTAL SHARE

Source: Tech Sci Research

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CHANGING CONSUMER BEHAVIOR ( Excerpts from Interview of Mr.
SanjivMehta, MD&CEO, HUL to Edelweiss Securities)
• Living the moment is more important (FOMO and YOLO)
• Self Identity: Packaging and showcasing oneself loudly is the new mantra.
There is tabloidization of self with every aspect of one’s life being curated
and performed.
• More personalisation: Designed for me and not designed for masses.
Manifestations are seen in:
(1) Products that fit me – Bespoke is all about me;
(2) Learn about me – the product needs to know what I need; and
(3) I am the curator – so I decide what I will have, how I will have.
• Belongingness in Social groupings (overcoming loneliness)
• Like aggressive and even attritional messaging
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CHANGING CONSUMER BEHAVIOR ( Excerpts from Interview of Mr.
SanjivMehta, MD&CEO, HUL to Edelweiss Securities)
• Breaking stereotypes of gender and professional to script its own success:
Manifestations are: (i) Reject labels by challenging social prejudices and
taboos; (ii) Incorporate the unconventional by embracing unconventional
roles and ways of doing; (iii) I do it ‘My’ way trend and rejecting scripted
paths in order to leapfrog towards success.
• Allure of authenticity: India is seeing renewed connect with traditions,
nature and authentic values. Manifestations of this are seen in:
(i) Search for one’s roots – revival of tradition, history and mythology;
(ii) Being proud of local – Celebrating both the style and substance in the
local; and
(iii) Return to Nature – A quest for a more natural and authentic way of
living.

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SOME COMMON STRATEGIES ADOPTED BY FMCG COMPANIES

• Product Innovations
• High spend on advertising
• Promotions and Offers
• Premiumization
• Smaller Package sizes
• Focus on rural market
• Third Party Manufacturing
• Green initiatives
• Distribution Focus (Weighted and Numeric Distribution)

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WEIGHTED AND NUMERIC DISTRIBUTION

Consider 2 brands – Lifebuoy soap and Dove shampoo. Lifebuoy soap

is sold from 10,000 out of the total 20,000 outlets in Hyderabad. These

10,000 outlets sell 80% of the bar soaps sold in Hyderabad. Dove

shampoo is also sold from 10,000 out of the total 20,000 outlets but these

10,000 outlets sell 20% of the premium shampoos sold in Hyderabad.

For which brand, HUL should increase the number of outlets and for

which brand they should increase the sales from the existing outlets?
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WEIGHTED AND NUMERIC DISTRIBUTION

Brand Numeric Distribution Weighted Distribution

Lifebuoy =(10,000/20,000)*100 80%

=50%
Dove =(10,000/20,000)*100 20%
=50%

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SOME COMMON STRATEGIES ADOPTED BY FMCG COMPANIES
•FMCG companies influence consumers with
Promotion and intelligent deals
Offers • For example, in the case of soaps &
cosmetics; 4 soap cases are offered at the price of 3,
selling the range of deodorants for men &
women at a discounted price
Product innovation seen as the major enabler for growth.
For Example,
• Colgate-Palmolive has launched a toothpaste for the
inflammatory gum problem of pyorrhea
Product Innovation
• ITC is coming up with new multigrain Bingo
and Customization
• Dabur has launched its sugar free variant for
Chyawanprash in India
• ITC has ventured in coffee & chocolates segment
under the Fabelle and Sunbean brands.

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SOME COMMON STRATEGIES ADOPTED BY FMCG COMPANIES
•Despite the slowdown, consumers are willing to buy
premium goods at higher prices especially in categories
Premiumization
like convenience, health, and wellness
• Companies are launching premium versions in the
categories in which they operate

•Companies are increasingly introducing smaller stock

Rising Importance of keeping unit.
Small Size Packs
•This helps them to maintain volumes from price-
conscious customers and expand their consumer base..

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SOME COMMON STRATEGIES ADOPTED BY FMCG COMPANIES

Companies are now focusing on the rural market

Focus on Rural segment which is growing at a rapid pace and
Market
focused on improving their distribution networks to
expand their reach in rural India.

•This approach has helped FMCG companies focus

on front-end marketing
Third-party
• Reservation of several items for SSI as well as
manufacturing
additional tax incentives have made 3 rd party
manufacturing a popular route for many big
players
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 Category Analysis : Bath
and Shower

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 96% of the products in bath and shower are bar soap and
Talcum Powder. The contribution of shower gel and liquid
soap are around 4%.

BATH AND SHOWER : CATEGORY BREAK-UP

% of
Total
Value (in Category
Products Rs. Mn) Value
Bar soap 197837 89%
Body wash and
Shower Gel 2632 1%
Liquid Soap 7529 3%
Talcum Powder 14318 7%
Total 223335

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 Though the overall growth is expected to slow down, body
wash, shower gel and liquid soap will still grow at impressive
rate.
BATH AND SHOWER : GROWTH

Category CAGR
2013-18 2018-23
Bar Soap 10.5% 5%
Body Wash & 17.9% 16%
Shower Gel
Liquid Soap 18%% 24%
Talcum Powder 4.5% -2%
Overall Bath 11.4% 4.5%
and Shower

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 HUL, GCPL, Reckitts and Wipro holds around 70% share

BATH AND SHOWER : COMPANY MARKET SHARES

Market Shares
•Though HUL is the market leader with
Company 2010 2018 43% share, it has lost around 11% share
Losers along with other major loser Nirma which
HUL 54.3% 43.2% also lost 5.7% share since 201.
•Reckitts, ITC and Patanjali are the major
Nirma 6.60% 0.9%
gainers.
Gainers •Reckitts share increase is due to it’s
GCPL 9.8% 10.1% leadership position in liquid handwash
Reckitts through “Proper Handwash Campaigns”
Benckiser 5.5% 7.7% launch of new dettol soap variants and
dettol body wash
Wipro 8.2% 8.5% •ITC has improved it’s share through
ITC 3% 4.2% Fiama Di Wills, Vivel brands
Patanjali 0% 2.8%
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 Top 6 brands constitute 50% of the bath and shower category.

BATH AND SHOWER : BRAND SHARES

Brand Company Market Shares

2012 2018
Lifebuoy HUL 15% 15.2%
Lux HUL 13% 13%
Santoor Wipro 8.1% 8.3%
Dettol Reckitt Benckiser 6.5% 7.7%

Godrej GCPL 7.1% 6.6%

No.1
Dove HUL 3.9% 4.7%
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 Focus of new launches has been on male targeted
products, combination products and products with new
attributes.
BATH AND SHOWER : KEY TRENDS
• NEW LAUNCHES
• Gender specific products:
•Ex: Acqua pulse men’s shower from Fiama Di Wills
•Nivea for men vitality Fresh Shower Gel
• Focus on Multi purpose products or products with New Attributes:
• Examples:
•Wipro’s soap brand variant Santoor Glycerine with Vitamins.
•Godrej consumer products launched Cinthol Confidence + as a health
soap with deodorising properties.
• Lifebuoy Lemon Fresh Body Wash, Dove Gentle Exfoliating Body Wash
and Fiama Di Wills Peach & Avocado Deep Moisturize Shower Gel
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 Nature based products are making a huge impact and yield
high margin.

Nature based Products:

• The trends towards natural, herbal and Ayurvedic continued to be strong in the
Indian market
•Companies are focussed on products with natural ingredients like rose
petals, saffron, sandalwood, mint and other herbs.
•Karnataka Soaps & Detergent has a brand based on natural
ingredients, Mysore Sandal Millennium, priced at Rs750 per unit of
150g.
•Organic and natural soaps from brands such as Fab India and
Khadi also started to become quite popular.
•Patanjali has launched a wide range of naturally-positioned bar
soaps in the market, including Kanti Almond Kesar, Kanto Aloe
Vera, Kanti Haldi Chandan, Kanti Lemon Honey and Patanjali Rose
body cleanser
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RECENT BRAND TRENDS
• There has been a high level of innovation within body wash and shower gels
recently, with brands focussing on aroma, functionality, extra moisturising and
exfoliating properties. For example,
 Godrej launched a new variant of it’s popular soap brand Godrej No 1
(Germ Protection Soap )and positioned it as a natural-based bar soap fit
for germ protection.
Palmolive Thermal Spa Mineral Massage Shower gel
• Hindustan Unilever launched a new advertisement for its bar soap brand Lux.
Traditionally, the Lux brand has been endorsed by the leading stars of
Bollywood. For the recent television advertisement for Lux, Kareena Kapoor
Khan was the brand ambassador.
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 Company Analysis L
HUL

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PARAMETERS FOR COMPANY ANALYSIS

• Business Mix

• Brand Portfolio and Brand performance

• Level of dependence on power brands

• Strategic Overview

•New Product Launches in the last 2-3 years

•Recent Marketing Campaigns

•Advertising Spend
 Personal Care products contribute 44% of HUL ‘s Sales
but 56% of it’s profits.

BUSINESS MIX: REVENUE AND PROFIT CONTRIBUTION

Note
1. In Personal Care, Soaps contribute to 30% ,Cosmetics and Toileteries contribute 18% of the total revenues
2. In Home Care, Detergents contribute to 19% of the revenues and the remaining come from products like Dish-
wash, Water Purifier etc.
 Margins of Personal Care are much higher than that of
other segments.

BUSINESS MIX : SEGMENT WISE EBIT MARGIN%

REASON FOR DIFFERENCE IN MARGINS

• Involvement
• Value Weightage
Value weightage is an important factor in making the customer
trade up.

VALUE WEIGHTAGE ILLUSTRATION

Product Monthly expenditure % of total monthly

Category (Rs.) expenditure
Rice 2000 40%

Fruits and 1000 20%

Vegetables
Personal-care 100 2%
products
Others 1900 38%
Total 5000 100%
STRATEGIC OVERVIEW

Source: Way2Wealth Brokers Ltd.

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SELECTIVE BRAND PORTFOLIO:

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 HUL had 12 brands with revenues of over INR1000 crs in 2018 (vs. seven
in 2011). Of this, the company has 6 brands with revenues in excess of
INR 2000 crs.
REVENUES FROM DIFFERENT BRANDS

2018 2018

Lakme

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 While 10 of the top 11HUL brands belong to Personal care, 5 of the top
10 FMCG brands of ITC belong to Food and Refreshments.

TOP ITC BRANDS

• Ashirwad Atta – Rs. 4000 crores

• Sunfeast biscuits – Rs. 3500 crores

• Bingo Chips and Snacks – Rs. 2000 crores

• Yippie Noodles – Rs. 1000 crores

• Candyman – Rs. 500 crores

• Mangaldeep Agarbhatti – Rs. 500 crores

• Vivel – Rs. 500 crores

Source: https://economictimes.indiatimes.com/industry/cons-products/fmcg/itcs-top-
eight-fmcg-brands-cross-the-2-billion-milestone/articleshow/64487112.cms?from=mdr
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 Some companies are over dependent on their power brands
which could impact their growth and profitability

Company Dependence on Power Brand

Player Brand Market Sales Last 3 year’s

Share Dependence CAGR

HUL Wheel 15% 9% 15%

HUL Lux 15% 7% 10%
HUL Lifebuoy 14% 6% 10%

Marico Parachute 45% 28% 9%

Jyothy labs Ujjala 72% 22% 16%

Supreme
Emami Navaratna 49% 27% 15%
Oil
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 Future categories have been delivering 2.5x time the average
company growth over the last few years.

FUTURE CATEGORIES

Source: Company, Edelweiss research

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 New Products Launches /Brand Extensions in the last 2-3 years

• E-Commerce is about 3% of overall business and growing at fast pace.

• Acquired Indulekha, a premium brand with strong credentials around
ayurveda. It has grown 4 times it’s acquisition size.
• Acquired Adityaa Milk to strengthen it’s
• Launched a new and expanded range of authentic Ayurvedic Personal Care
products under the LEVER Ayush brand name. Co-created with Arya Vaidya
Pharmacy, the world’s leading ayurveda institute.
• Entered the Baby segment with the launch of Baby Dove.
• Surf Exel Easy Wash liquid was launched nationally
• Sunlight, East India brand, achieved annual revenue of Rs. 500 crores.
• Launched Ponds Sun protect
• In oral Care, Close-up and Ayush are giving faster growth.
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 New Products Launches /Brand Extensions in the last 2-3 years

• Introduced Surf excel Matic liquid to tap into the fast growing liquid detergent
market.
• Extended appeal to ‘young adults’, Kissan launched a new range of ‘khatta
meetha’ jams in Berry, Strawberry and Orange flavours.
• Knorr launched three new flavours—Italian Mushroom, Hong Kong
Manchow Noodles and Shanghai Hot & Sour Chicken in the international
range of soups.
• Pureit expanded its play in the growing branded Reverse Osmosis (RO)
segment through its value offering of Classic RO range of water purifiers.

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 Marketing Campaigns

DOING WELL BY GOING GOOD

• Sunlight Banglar Guner Rang
Sunlight carried out a brand campaign in West Bengal - ‘Sunlight Banglar Guner
Rang’ - a search and mentorship programme in the realm of performing arts. With
Anand Bazaar Patrika as a strategic partner,
Sunlight delivered this message to millions of people in Bengal. The campaign
received close to 2400 entries on Sunlight’s website.
• RCRA
The Rin Career Ready Academy (RCRA) was launched in 2015 with an aim to inspire,
educate and equip youth from modest backgrounds with skills in English speaking,
office dressing and interview training.

• Brook Bond Kudumbam

The 3-Roses team kicked off ‘Brooke Bond Kudumbam’ programme to strengthen our
relationship with the ‘tea- masters’ of the Hot Tea Shops (HTS) in Tamil Nadu. Under
this programme, they provided benefits such as children’s scholarship, health check-ups,
and insurance to the teamasters. This enabled to enroll an additional 4000 HTS outlets
across 15 cities in Tamil Nadu.
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 Marketing Campaigns

MASS CONTACT

• Knorr reached out to 12 million consumers through the ‘World on a Plate’

contest. During the event, world-renowned Chef Gary of Masterchef

Australia fame, conducted a masterclass on cooking using Knorr Chef

Masalas.

• HUL’s ‘Adda’, a unique touchpoint created at corporate houses. Through

our 100+ ‘Adda’ properties, they now serve more than 60,000 people a

day.

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 Advertising and Promotion spend has been in the range of 12
to 14 % of Sales

ADVERTISING SPEND AS % OF SALES

Source: Company, Edelweiss research