WINNING

STRATEGIES
FOR A
Come up Trumps in

SMOOTH RIDE
India’s FMCG Landscape
INDIA’S TOP 25 FMCG COMPANIES
2012 Est
FMCG
Turnover
Rank Company (Rs. Crs) Category Major Brands/ Products
1 Hindustan Unilever 21,786 Bakery and Confectionary, Beauty and Annapurna, Brooke Bond, Clinic Plus, Fair & Lovely,
Personal Care, Home Care, Non- Kissan, Lakme, Lifebuoy, Lipton, Lux, Pepsodent,
alcoholic Beverages, Packaged Foods, Ponds, Sunsilk, Surf Excel ,Vaseline
Staples
2 Ruchi Soya 19,909 Bakery and Confectionary , Beauty and Nutrela, Nutri Gold, Ruchi Gold, Sunrich
Personal Care, Packaged Foods,
Staples
3 ITC 17,850 Bakery and Confectionary, Beauty and Aashirvaad, Bingo, Classic, Fiama Di Wills, Gold Flake,
Personal Care, Packaged Foods, Snacks Kitchens of India, Minto, Sunfeast
and Savories, Staples, Tobacco
4 Amul 11,668 Dairy Amul, Amul Ice Creams, Dahi, Ghee, Kool Café, Kool
Lassee, Masti Sagar, Stamina, Taaza
5 Adani Wilmar 9,188 Oil Avsar, Bullet, Fortune, Fryola, Ivory, Jubilee, Kings, Pilaf,
Raag
6 United Spirits 7,660 Alcoholic Beverages (Spirits) Bagpiper, Black Dog, Four Seasons, McDowells No.1,
McDowells VSOP, Royal Challenge, White Mischief,
Whyte and Mackay
7 Nestle 7,514 Bakery and Confectionary, Dairy, Bar-One, Everyday, KitKat, Lactogen, Maggi, Milkmaid,
Packaged Foods Munch, Nan, Neslac, Nescafe, Nestea, Polo
8 Gokul Refoils & Solvent 6,487 Oil Gokul, Zaika
9 P&G 5,566 Beauty and Personal Care, Home Care AmbiPur, Ariel, Duracell, Gillette, Head & Shoulders,
Olay, Oral-B, Pampers, Pantene, Tide, Vicks, Wella,
Whisper
10 Britannia 4,974 Bakery and Confectionary, Dairy, Bourbon, Daily Bread, 50-50, GoodDay, Healthy Start,
Packaged Foods Marie Gold, Nutrichoice, Treat, Tiger, Time Pass
11 Parle Products 4,640 Bakery and Confectionary, Snacks and Bite, Bourbon, Hide N Seek, Mango Kismi Bar, Melody,
Savories Monaco, Parle-G, Parle Marie
12 Rei Agro 4,225 Rice Hansraj, Hungama, Ikon, Kasuti, Mr. Miller, Rain Drop,
Real Magic
13 Shakti Bhog Foods 4,212 Bakery and Confectionary, Staples Divss, Premium Gold, Shakti Bhog Atta, Shakti Bhog
Heat and Eat
14 Dabur 3,759 Beauty and Personal Care, Home Care, Activ, Babool, Dabur Amla, Dabur Chyawanprash,
Non-alcoholic Beverages, Packaged Glucose D, Gulbari, Hajmola, Lal Dant Manjan, Nutrigo,
Foods Odopic, Real, Vatika
15 United Breweries 3,593 Alcoholic Beverages (Beer) Kalyani Black Label, Kingfisher, Kingfisher Ultra, London
Pilsner, Zingaro
16 Godrej CPL 2,980 Beauty and Personal Care, Home Care Cinthol, Ezee, Good Knight, Godrej Dish Wash, Hit,
Shikakai
17 Marico 2,970 Beauty and Personal Care, Home Care, Manjal, Mediker, Naturals, Nihar, Parachute, Revive,
Packaged Foods, Staples Saffolas
18 Cadbury (Kraft) 2,811 Bakery and Confectionary Bournville, Bournvita, Dairymilk, Gems, Oreo, Tang
19 GSK CHL 2,771 Bakery and Confectionary, Non- Boost, Crocin, Eno, Horlicks, Iodex, Maltova, Viva
alcoholic Beverages
20 Colgate-Palmolive 2,693 Beauty and Personal Care, Home Care Axion, Colgate, Colgate Sensitive, Palmolive, Palmolive
Naturals, Palmolive Charmis Cream
21 K S Oils 2,667 Oils Double Sher, Kalash, K.S. Gold
22 Kwality Dairy 2,385 Dairy Dairy Best, Kwality, Wake Up Instant Dairy Creamer
23 Nirma 2,125 Beauty and Personal Care, Home Care Nirma Clean Dishwash Bar, Nima Rose, Nirma Washing
Powder, Nirma Shudh Iodized Salt, Nirma Bartan Bar
24 Tata Global Beverages 1,994 Non-alcoholic Beverages Gluco+, Himalayan, Tata Coffee, Tata Tea, Tetley
25 Johnson & Johnson 1,900 Beauty and Personal Care Band-Aid, Carefree, Clean N Clear, Johnson Baby,
Listerine, Neutrogena, Stayfree

The study has excluded companies whose financial data was not available in the public domain or could not be sourced for analysis. The excluded companies are Coca-Cola India, PepsiCo India, Perfetti Van Melle India,
Parle Agro, Mother Dairy, Pernod Ricard and L’Oreal India.

01 An OC&C Insight Winning Strategies for a Smooth Ride

Rating of Overall Retail Proposition by Consumers Visiting or Purchasing at Retailer in Last 3 Months
(Indexed 0-100)
There are growing concerns that the How are these challenges likely to But companies will need to tailor
once sizzling Indian economy is impact FMCG companies and what their strategies to ensure a smooth
cooling off. With the rainfall playing steps can they take to sustain past ride in the Indian safari.
truant and industrial growth slowing performance? How do brands
down, both agricultural and create a lasting impression and a
manufacturing sectors are likely to place for themselves in customers’
feel the heat. In addition, the Indian minds and hearts?
buyer presents a unique challenge;
discerning in her taste but also value Despite the economic challenges, we
conscious; global in her mindset but believe India offers huge
truly Indian at heart. opportunities for growth in FMCG.

A DECADE OF INDIA SHINING

The past decade saw the Indian economy Category Wise Growth in Revenues (CAGR) 2002-11
come of age and firmly establish itself on the
global map and on the radar of every major Global 50 FMCG Firms Top 50 FMCG Firms in India
corporation in the developed world. Not only
did the Indian economy recover strongly
from the 2001 recession, but the next seven Personal &
8% 17%
years saw it scale unprecedented heights. Household Care

A comparison of the past ten years’ Food and Drinks 8% 16%

performance of the top 50 FMCG companies
globally versus the Indian top 50 shows that
India has outperformed global growth across Beer and Spirits 7% 26%
all major FMCG categories. (Side exhibit)

While FMCG companies in developed Tobacco 1% 17%

economies performed steadily at best, India
consistently delivered near double digit
Diversified 0% 11%
growth. Even the post 2008 period which was
marked by de-growth in most traditional
markets, saw only a slight blip on the Dominantly
-1% 18%
otherwise stellar run rate being delivered by Pharma
the Indian economy.

INDIA REMAINS AN IMPERATIVE...DESPITE CHALLENGES

The looming European credit crisis along with l Increasing number of Nuclear Families and l The huge regional diversity results in vastly
a policy paralysis at the center, high inflation rising Disposable Incomes giving rise to differing tastes and preferences, creating
and a failed monsoon have spewed concerns increased discretionary spends the need for localized products
about the general health of the Indian
economy. But, has the Indian FMCG growth l Low Penetration of several FMCG l India’s vast geography and a large, hard-to-
story slowed down for good? categories and lower Per Capita reach rural population combine to create a
Consumption in all categories indicating highly fragmented distribution network with
The answer is an emphatic No. The Top 10 huge headroom for growth many layers of distributors to go through
FMCG companies have seen revenue growth before the product reaches the consumer
of 18% p.a over the past three years and 24% Given the sluggish nature of the European and
in the last one year. This growth is robust and US markets, it is a market that the world’s l Cluttered and expensive media reaching
sustainable, driven by domestic consumption biggest FMCG companies can ill afford to ignore. out only to a limited audience
rather than external factors, with over half of
it being volume growth. However India is not a market without its share
of challenges as many global businesses, who
Three factors that are bound to spur tried to replicate globally successful formulae
consumer spending continue unabated in India, have learnt to their dismay.

l Increasing Urbanisation and consequently, l There are multiple consumer segments

an increase in consumerism on account of across a wide range of affluence leading to a
greater exposure and access to goods requirement for a complex brand architecture

An OC&C Insight Winning Strategies for a Smooth Ride 02

BUT IT’S THE ELEPHANTS WHO ARE DANCING
GLOBAL RANK INDIA RANK Indian companies lead the list of the top 25
FMCG companies in India – 7¹ of the top 10
CAGR of Top 5 Indian and
MNC Companies (FY 03-FY12)
are from India and over 70% of the overall HUL 9%
list consists of home-grown companies. Nestle India 16%
#1 #7 Moreover Indian companies have outpaced P&G India 21%
le le their global counterparts across categories.
Nest Nest
Cadbury India 17%
GSK 16%
While Indian players lead the global giants Ruchi Soya 22%
overall as well as in the vast majority of
ITC 18%
categories, there are exceptions, particularly
Amul 17%
in Health and Beauty where the relative
Adani Wilmar 25%
#2 #9 sophistication of the category has resulted in
United Spirits 26%
global majors squeezing out locals.
P&G P&G
In Dairy and Snacks, MNCs except PepsiCo have # of Local and Multinational
largely failed to adapt to local tastes and hence Companies by Category³
have not been able to establish themselves in Dairy 9 3 12
what remains a very local food market. Bakery &
10 5 15
#3 #3 Confectionary
iCo iCo² In Beer, while United Breweries (UB) leads Snacks &
Peps Peps Savories 5 2 7
with nearly 40% market share, global majors
Packaged
are slowly establishing their position. Foods 13 6 19
Heineken part owns UB, Carlsberg and Meat &
Poultry 2 1 3
Budweiser are creeping up. Spirits is
dominated by United Spirits and Radico Commodity
Foodstuff 19 1 20
#4 #1 Khaitan, though Pernod Ricard has grown
rapidly in recent years. Tobacco 3 3
ver ver
Unile Unile Non-Alcoholic
Beverages 12 6 18
The make up of the non-alcoholic drink Alcoholic
market in India is different from the West, Beverages 3 4 7
with carbonated drinks, tea and coffee and Home Care 6 5 11
non-carbonated drinks striking a near
Beauty &
#5 #18 balance. PepsiCo and Coca Cola rule the Personal Care 8 9 17
Foods Foods carbonated space through acquisitions and
Kraft Kraft innovations while local players lead in every Indian MNC
other segment.

The Amul Model

Sourcing
Milk is sourced directly from farmers, through Amul’s
network of cooperatives. This enables Amul to provide Consumer
best value to the producers
Amul is a fine example of a successful and
socially responsible Indian enterprise. Distribution
Amul’s wide distribution network maximises its reach State Co-op
and its policy on advance payments from dealers Milk Mktg
Founded in 1946, as a co-operative society, prevents dumping in the channel Fed
Amul, today, has revenues of Rs 117 Bn
($2.2Bn), having grown at 22% p.a in the last Product Portfolio
5 years. It is one of India’s largest food brands Amul regularly upgrades its portfolio by adding Dist Milk
and the world’s largest pouched milk and value-added items – from probiotic ice cream to Co-op Union
energy drinks to stay contemporary
vegetarian cheese brand.
Pricing
Village
Every day, Amul collects over 9 mn litres of Backed by low cost operations, Amul has been able to Dairy
milk directly from 3 mn farmers, converts the price its products optimally, appealing to the value
conscious customers Co-op
milk into branded packaged products and
delivers goods to over 700,000 retail outlets Branding
across the country. It has a network of over Amul’s umbrella branding has enabled it to create a Milk
5,000 domestic distributors and also exports strong brand name in the consumer’s mind Producer
its products to over 40 countries worldwide.
1. Excludes PepsiCo
2. Estimate – financials not available
3. Includes companies for which financials were unavailable

03 An OC&C Insight Winning Strategies for a Smooth Ride

SO WHAT DOES IT TAKE TO WIN
1 ADAPT THE PRODUCT TO SERVE SPECIFIC INDIAN CONSUMER NEEDS
Indian consumer tastes are often unique, and Food segments. From Amul’s spiced l Continuing to Focus on Health, Wellness
indeed very varied. Additionally, hectic buttermilk, Nestle’s Maggi Dumdaar noodles, and Nutrition – The consumer is
lifestyles and increasing health consciousness Danone’s Lassi to Marico’s Parachute increasingly aware that a hectic lifestyle
present FMCG companies with opportunities to Advansed Hot Oil, Maybelline’s Colossal Kajal can take its toll on her health. Hence, she is
innovate. Leading the innovation race, or at all exemplify this phenomenon. now looking for healthy options in her food
least being a fast follower is critical for survival. and drink purchases.
l Bringing Convenience to the Consumer –
We believe that the three cornerstones driving The urban consumer’s lifestyle today is PepsiCo, Nestle, HUL etc. have introduced
FMCG innovations in India will be: fast paced, with the healthy variants to their popular brands
desire to fit more into such as Baked Lays, Nestle Actiplus Dahi
l Serving up the Taste of India – Despite every day; time is at a and Horlicks Foodles. Indian players have
the fact that her tastes are now more premium and she not been far behind with introductions
global than ever seeks convenience. such as Britannia's Nutrichoice range of
before, the Indian biscuits and Agrotech’s Sundrop SlimLite
consumer seeks Food majors continue Cooking Spray.
the comfort and to address this need
familiarity of by bringing more products under this
traditional flavours umbrella. MTR’s Breakfast Mixes and
and fragrances. Britannia’s Healthy Start range of RTC
For example, while products as well as the Maggi Juicy Specialz
oats may be range of Indian curries are examples of
growing in popularity as a breakfast cereal, recent forays into this segment.
they have also been reconstituted as idlis,
upma or dosas in many Indian households. Waxing strips by Dabur (Fem) and HUL’s Dettol’s No-Touch HandWash and Good
‘Magic Water Saver’, designed to save Knight Advanced low smoke coil are
Several Indian and global firms have cashed water, time and effort to wash clothes are examples of the focus on Health extending
in on this trend; in both Food as well as Non examples in the personal care segment. into personal and household care products.

2 INTRODUCE NEW PRODUCTS, CATEGORIES AND VARIANTS

In June 2012, Audi narrowly pipped BMW to been the arguments against introduction of Models and Variants
the position of the #1 luxury car brand in new variants and products in India. #
India with long-time leader Mercedes Benz 11
being relegated to third place. The rise of Audi
While in the West, categories may have 38
Audi and decline of the Merc show a evolved in a particular manner with one stage
11
remarkably linear relationship with the following another sequentially as penetration BMW
37
number of models and variants on offer. increased, in India stages are more likely to
overlap and co-exist given the diversity in 9
Mercedes
Is there a lesson here for FMCG companies? socio-economic profiles, purchasing power 24
Does the Indian customer like companies that and tastes of consumers e.g. along with dish- Models Variants
respect his need for choice and give him a wash bars and powders, there exists a large
range of options? enough market for dish-wash liquids as well.
Ariel – Product Lines and Variants
#
While the above can be debated, what cannot As consumer preferences evolve, categories
is the fact that the Indian market is under- may bypass evolutionary stages and India 1
served, both in terms of product width as companies that recognize the opportunity in 5
well as depth across FMCG categories presently niche segments with high growth 4
UK
compared to major global markets. (See potential are likely to gain from an early start. 14
Exhibit on Ariel and Kellogg’s)
e.g. General Mills introduced their range of Kellogg’s – Product Lines and Variants
Penetration of FMCG categories varies widely in Nature Valley Granola Bars in 2006; nearly a #
India. While soap, detergents, tea etc. are highly decade after Kellogg’s first entered the Indian 8
penetrated, others like packaged fruit juices, market. Did Kellogg’s miss a trick by not India
18
cold cream and deodorants have a much lower introducing their range of granola bars,
penetration. Also several highly penetrated allowing General Mills to assume a leadership 22
UK
>100
categories have much lower per capita position in the segment and more
consumption (PCC) compared to the developed importantly letting them get a foothold onto Product Lines Variants
world. Low penetration and PCC have long the health platform?

An OC&C Insight Winning Strategies for a Smooth Ride 04

SO WHAT DOES IT TAKE TO WIN
3 APPEAL TO THE CUSTOMERS 4 GET SEEN, HEARD, FELT AND 5 EXPLORE ACQUISITION
SENSE OF ‘VALUE’ TO REMEMBERED OPPORTUNITED AND
IMPROVE REALIZATIONS STRATEGIC PARTNERSHIPS
Improving realisations remains high on the It is indeed a crowded marketplace and it is Companies, Indian and foreign alike, can
agenda of companies across FMCG categories important for companies to find innovative benefit immensely from strategic
and market segments. The demanding Indian and effective ways to ‘Get the Value partnerships, joint ventures and acquisitions as
customer is also highly value conscious and Proposition Across’ and ‘Ensure Brand Recall’. means to build scale in manufacturing,
needs to be convinced of the same and distribution or brand building.
Companies that do so are most likely to How does one successfully tap the market and
succeed. We identify three approaches create a lasting impression in the mind of a l Look for ‘Golden Eggs’ – There is no better
guaranteed to yield rich dividends: distracted customer? way for foreign players to create or
strengthen their presence in India than by
l Premiumisation – as the Indian economy l Customer Activations: While traditional acquiring a small to mid-sized Indian
grows and affluence improves, consumers ATL communication is still needed to company, while established Indian
will trade up. Premiumisation not only promote offerings, BTL promotions are companies can intelligently use this route
helps drive growth in good times but also playing a more direct and important role to fill portfolio gaps, access markets or
ensures that companies stay ‘recession than ever before in enhancing consumer acquire hitherto missing capabilities.
resistant’ in tough ones. engagement. Through these initiatives,
companies give their customers the choice l Look Beyond India – It is time for Indian
There have been several launches recently to ‘Touch’ and ‘Try’ their products and companies with sufficient scale to look
in the super-premium alcoholic beverages promote the brand through offline and web beyond Indian shores for the next wave of
segment by both Indian and global majors. based interactions. growth. Identifying and acquiring these
The trend manifests itself in Food and Dairy companies is key to getting off to a winning
as well with General Mills recently Companies are increasingly deploying this start in these markets
introducing Haagen Dazs, whereas GSK-CH medium; for Product promotions e.g. HUL’s
and HUL have taken the mass Clear shampoo kiosks or for Brand Other emerging markets are logical
premiumization route with Horlicks Gold promotions by Coke’s ‘Happiness Truck’ or destinations for Indian majors. Africa is the
and Bru Exotica. Dabur’s beauty pageant and grooming Wild West that China and India were in the
lessons in rural areas. 80s and 90s respectively and companies
l Branding and Value Addition – Staples would be well served to create a presence
have long been the poor cousins to their l Digital and Social Media Marketing: there before competition hots up.
more glamorous FMCG counterparts. Not Wide reach, lower costs, greater
anymore, as frenetic action is seen in this attention spans and potential for l Look for Strategic Partnerships – There
segment with every major player from rice targeted marketing make digital and are synergies to be leveraged within and
to oil and pulses launching and aggressively social media an attractive channel to across industries. E.g. Tata Global
marketing their brands e.g. recent launch of engage with customers in real time. Beverages and PepsiCo forming a JV to
branded Dal by the Tata group. leverage the Tata brand name and
Consumers are increasingly using the PepsiCo’s marketing and distribution
Companies are also looking at Value internet to research products and brands, muscle to launch products for specific
Addition such as functional benefits and share experiences, voice opinions and what markets and customer segments.
user convenience e.g. the healthier and they see, read and experience online has
less messy cooking spray introduced by started to strongly influence their purchase Globally FMCG and Modern Retail have a
oil companies exemplifies how staples decision. A digital presence also means that symbiotic relationship, one that we haven’t
companies are attempting to increase people can relate to the brand as a ‘friend’ yet seen in the Indian market. Identifying
realizations. who laughs, celebrates, responds and and leveraging these will be key to taking
opines on issues rather than just being an Indian FMCG majors into the next orbit.
l Don’t Ignore the Masses... YET – Sheer inanimate entity which goes a long way
volumes demonstrate that no one can towards increasing customer connect.
afford to ignore the mass segment. Mass
does not automatically translate into lower Sensing this, a number of FMCG
realisations and established approaches to companies have included ‘Digital’ as an
cast the net wider will yield rich dividends integral part of their marketing
viz. introduction of ‘Value Brands’ e.g. Lehar campaigns, noteworthy amongst them
by Pepsico to complement the mainstream being - HUL (Sunsilk Gang of Girls), Marico
Lay’s or ‘Value Packs’ e.g. HUL’s 8kg pack of (Saffola Life), PepsiCo (Change the Game),
Rin or ‘Popular Price Points’ for the aspirers Nestle (Know Your Neighbours) and Tata
e.g. Oreo cookies at Rs 5. Global Beverages (Tata Tea Jaago Re).

05 An OC&C Insight Winning Strategies for a Smooth Ride

HOW TO TIDE OVER THE IMMEDIATE CRISIS
Given the difficult economic climate in FY13, there are always questions around what should FMCG firms do
overcome the crisis. As this paper goes to print, consumption remains robust; but the situation could get worse.
What can you do to pre-empt the scenario? Here are five measures to adopt.

1. Get back to basics. Drive sales where it is happening – focus on distribution and
sales force

2. However, do not cut marketing spends; reconstitute. Good time to rejig the mix

3. Focus marketing spends on products rather than building the company brand

4. Explore niches. There are always some ‘slowdown resistant’ segments to tap

5. Focus on costs, but do not cut back on investments!

ARE YOU PREPARED TO WIN?

Five questions to ask yourself to understand your level of readiness in the Indian context

1. Is your portfolio adequately adapted to suit Indian needs and tastes?

2. Does your portfolio offer enough choice to the consumer?

3. Is there room to improve realisation?

4. Is the marketing engaging and making customers feel connected to your brand?

5. Are acquisitions and partnerships aligned to your strategic objectives?

For further information please contact:

Naimish Dave, Director Rohan Rao, Manager Bhavika Gandhi, Consultant
naimish.dave@occstrategy.in rohan.rao@occstrategy.in bhavika.gandhi@occstrategy.in

An OC&C Insight Winning Strategies for a Smooth Ride 06

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Navigating Turbulent Waters