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CHAPTER – III FAST MOVING CONSUMER GOODS – AN OVERVIEW 3.1 INTRODUCTION FMCGs is the fourth largest sector in India, creating employment opportunities for more than 3 million people in the country with a market size of over Rs.110,000 crore (around $22 billion) and is estimated to grow to over Rs 185,000 crore (around $37 billion) by 2014. FMCG Industry is characterized by a well-established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments.76 Organized manufacturing in the Indian FMCG sector started early in the 20th century. Most of the FMCG companies are multinationals which started mainly as trading companies. The growth of Indian market as an inevitable result of globalization encouraged the MNC’s to setup manufacturing facilities in India and this sector began to flourish in India. It is no longer a seller's market but a buyer's market where the consumer has a wide range of choice, which encourages FMCG companies to strike it out for their market share.77 Fast Moving Consumer Goods (FMCG) fulfil the essential and daily household needs- other than grocery, such as ranging from packaged foodstuff, dairy products, cooking oil, bread, butter, cereals, beverages like tea and coffee, pharmaceuticals, confectionery, biscuits, glassware, stationary items, watches, toiletries, detergents, shampoos, skin care products, cosmetics, toothpaste, dish washing liquid, shaving 76 Kavitha T.C. (2012) “A Comparative Study of Growth, Challenges and Opportunities in FMCG of Rural Market” 2012 Inter Science Management Review (IMR).Volume-2 issue 3. Pp. 23-25 77 C.V.Kumar FMCG spearheading portfolio organizer, The ICFAI university press , February 2007,Pp 14-17 55 cream, razor, batteries, shoe polish, energy drinks, soft drinks, clothing, furniture and household accessories to electronic goods like cell phones, laptops, computers, digital cameras and the like. Those are usually categorized as Fast Moving Consumer Electronics or FMCEs. A major portion of the monthly budget of each household is spent on FMCG products. The introduction of sachets has changed the pattern of buying from traditional products to branded products. The Fast Moving Consumer Goods sector touches every aspect of human life and the FMCG producers have realized that there is abundant opportunity for them to enter into the rural market. Today the shift towards demand for branded FMCGs in rural areas as a result of socio-economic - politico changes in the last 5 years has made rural areas more viable markets compared to urban areas for changes in the life styles of rural people influencing the purchase of branded FMCG products. According to the National Council of Applied Economic Research (NCAER), 70 Per cent of Indian populations living in villages make India as the largest potential rural market in the world. As more than half the FMCGs demand in India, comes from the rural market. FMCG and its closest companion Retail sector are likely to create most of the jobs in India in the coming years primarily in areas like marketing, sales, advertising, supply chain, logistics, human resources, product packaging and development, finance, operations, general management, supervising and so on.78 78 Nagarajan, Dr.J.Khaja Sheriff, “Emerging Challenges and Prospects of FMCG Product Development in India”. International Journal of Marketing, Finance Service and Management Research Volume No. 1, January. (2013), Pp. 43-45. 56 3.2 FAST MOVING CONSUMER GOODS Fast Moving Consumer Goods are popularly known as Consumer Packaged Goods. Which include all consumables (other than grocery/pulses) bought at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and certain electronic goods. These items are meant for daily or frequent consumption and have a high return. The FMCG sector consists of three product categories such as Household Care, Personal Care and Food and Beverages each with its own hosts of products that have relatively quick turnover and low costs. 3.2.1 Household Care The household care products under FMCG include Fabric wash (laundry soaps and synthetic detergents); Household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish). 3.2.2 Personal Care The personal care products under FMCG include Oral care, hair care, skin care, personal wash (soaps), cosmetics and toiletries, deodorants, perfumes, feminine hygiene, and paper products. 3.2.3 Foods and Beverages The Foods and Beverages care products under FMCG include Health beverages, soft drinks, Staples/cereals, Beverages bakery products (biscuits, bread, cakes), snack food, chocolates, ice cream, tea, coffee, soft drinks, processed fruits, vegetables, dairy products, bottled water, branded flour, branded rice, branded sugar and juices and the like. 57 3.3 HISTORICAL GROWTH OF THE FMCG INDUSTRY The consumer markets in India are constantly evolving. The first phase of consumer market evolution in the 1980s and the 1990s was characterized by some major structural changes such as changes in income distribution, increased product availability (in terms of both quality and quantity), increased competition, increased media penetration and improved advertising (impacting lifestyle). This raised the levels of consumer awareness and preference to consume the various products. The late 1990s witnessed a rush forward in consumer finance products owing to steady financial sector reforms in the economy and innovative marketing. The consumer markets in India have entered the second phase of evolution with the turn of the century. Hindustan Lever Limited (HLL) was probably the only MNC Company that had its manufacturing base in India. At that time, the focus of the organized players like HLL was largely cultured. There too, the consumers had limited choice. But, Nirma’s entry changed the whole Indian FMCG scene. The company focused on the ‘value for money’ that made FMCG products like detergents very affordable even to the lower strata of the society. Nirma became a great success story and laid the roadmap for others to follow. Further, the government’s relaxation of norms encouraged MNC’s to go for scale of economy to make FMCG products more affordable. Consequently, today soaps and detergents have almost 90% penetration in India. Post liberalization saw not only increased domestic choices, but also of imported products. The lowering of the trade barriers encouraged MNC’s to invest in India to cater to Indian consumers’ needs. Further, the FMCG companies such as HLL, Godrej Consumer, Marico, Henkel, Reckitt Benckiser and Colgate vie with one another to attract and sustain the 58 rural consumer first. Each of them has seen a significant expansion in the retail reach in mid-sized towns and villages. Currently 50% of all HLL sales come from rural India. One of the biggest changes to boost the FMCG industry was the introduction of ‘sachet’. In the last 3 years, almost all EMCG’s are marketed through, smaller package sizes at lower price points. This is the biggest innovative leap which increased number of users and expand market share for value added products in urban India and for general FMCG products like detergents, soaps and oral care in rural India. The FMCG industry has tripled its size over the past 10 years chiefly because of many changes in the Indian economic and industrial landscape, such as reduced levels of taxation, easier import of materials and technology, reduced barriers to entry of foreign players, growing organisational maturity of Indian players, growth of media, and, of course, the growing affluence and appetite for consumption of the Indian consumer. The industry’s potential to grow further and faster is awesome, given the low penetration of most categories and rising consumer incomes.79 There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Again the demand or prospect could be increased further if these companies can change the consumer's mindset and offer new generation products. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes. It's the quality, promotion and innovation of products, which can drive many sectors. The growth of GDP has accelerated the growth of FMCG industry in India over the years. The 79 Sant Sanganeria, “The Indian Consumer Market The Pinnacle Of The Fragrance & Flavour Industry”, Paper presented at the IFEAT International Conference in Singapore, 4 - 8 November 2012 ‘Essential Asia’ www.ifeat.org/wp-content/.../IndiaConsumer-Market-Sanganeria.pdf 59 historical growth of the FMCG industry in tune with GDP growth in India is clearly expressed in the Figure3.1. Figure3.1 Historical growth of the FMCG Industry Source: www.ifeat.org/wp-content/.../India-Consumer-Market-Sanganeria.pdf 60 3.4 TOP MOST FMCG COMPANIES OPERATING IN INDIA The following are the top most FMCGs companies operating in India. 3.4.1 Hindustan Unilever Limited (HUL) Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai, Maharashtra. It is owned by Anglo-Dutch Company Unilever which owns a 67% controlling share in HUL. The products of which include foods, beverages, cleaning agents and personal care products. HUL was established in 1933 as Lever Brothers India Limited and in 1956, became known as Hindustan Lever Limited, as a result of a merger between Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and employs over 16,500 workers, whilst also indirectly helping to facilitate the employment of over 65,000 people. The company was renamed in June 2007as “Hindustan Unilever Limited”. Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its products are available in over of 6.3 million outlets in the country. As per Nielsen market research data, two out of three Indians use HUL products. Which makes in the market leader in Indian consumer products and markets over 20 consumer categories such as soaps, tea, detergents and shampoos amongst others over 700 million Indian consumers use its products. Eighteen of HUL's brands marked in the ACNielsen Brand Equity list of 100 Most Trusted Brands according to Annual Survey (2012) carried out by Brand Equity, a supplement of The Economic Times. The ‘Most Trusted Brands’ from HUL in the top 100 list (their rankings in brackets) are among bathing soaps (1-6), among washing materials (7-10), among tooth care items (11-12) and among health and skin care (13-16)Clinic Plus (4), Lifebuoy 61 (10), Fair and Lovely (11), Rin (12), Surf Excel (13), Lux (14), Pepsodent (17), Closeup (19), Ponds (20), Sunsilk (26), Dove (37), Vim (43), Pears (79), Lakme (81), Vaseline (86), Wheel (87), Hamam (95) and Rexona (96). The company has a distribution channel of 6.3 million outlets and owns 35 major Indian brands. The company launched a multi-brand rural marketing initiative called Khushiyon Ki Doli, in 2010 in three states of Uttar Pradesh, Andhra Pradesh and Maharashtra has been extended to Karnataka to cover a total of six States in 2012 which include Maharashtra, UP, Bihar, West Bengal, Andhra Pradesh and Karnataka. The initiative aims to cover over Fifty five thousand villages in 2012. 3.4.2 Amul India Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat, India. The word Amul is derived from the Sanskrit word Amulya, meaning invaluable. The co-operative is sometimes referred to as Anand Milk Union Limited. Formed in 1946, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3 million milk producers in Gujarat. Amul spurred India's White Revolution, making country the world's largest producer of milk and milk products. In the process, Amul became the largest food brand in India and has ventured into markets overseas. Dr.Verghese Kurien, founder-chairman of the GCMMF for more than 30 years (1973–2006) is the brain behind the success of Amul. The GCMMF is the largest food products’ marketing organisation of India. It is the apex organisation of the dairy cooperatives of Gujarat. Over the last six and a and half dairy cooperatives in Gujarat have created an economic network that links more than 3.1 million village milk producers with millions of consumers in India. The cooperatives collect on an average 9.4 million litres of milk per day from their 62 mem mbers, more than 70% of whom are small, margginal farmers and landleess labourerss and include i a sizzeable popullation of tribal folk and people p the sccheduled casstes. The turn nover of GCMMF G (A AMUL) durring 2010-111 was 977.74 billionn (US$$1.5 billion)). It markets the productts of the disttrict milk unnions of 30 dairy d plants.. The farmers of Gujarat G own the largest sstate of the art a dairy plannt in Asia Mother M Dairy,, Gand dhinagar, Guujarat whichh can handlee 3.0 million litres of millk and proceess 160 MTss of milk m powder daily. d GCMMF F (AMUL) has the laargest distrribution nettwork for any a FMCG G comppany. It has nearly 50 saales offices sspread all ovver the counttry with morre than 50000 wholesale dealeers and moree than 7000000 retailers. Amul becaame the wo orld's largestt d and the laargest exporrter of dairyy vegeetarian cheesse, the largeest pouchedd-milk brand prod ducts in the country. c Thee export of a wide varietty of productts which inccludes wholee and skimmed milk powder, cottage cheeese (Paneer)), UHT milkk, clarified buutter (Ghee)) and indigenous sweets s makees it possiblee for the avaiilability of A AMUL produucts in moree than 40 countriees. The majoor markets are a USA, West W Indies, aand countriees in Africa,, the Gulf G Region n, and SAAR RC neighbouurs, Singaporre, The Philiippines, Thaailand, Japann and China, and d others such as Maurittius, Austraalia, Hong K Kong and a few Southh Africcan countriees. In Septeember 2007, Amul emeerged as the leading Inndian brandd acco ording to a survey by Syynovate to fi find out Asiaa's top 1000 Brands. In 2013, Amull was named the Most Trusteed brand in the Food and a Beveragges sector inn The Brandd Trusst Report, puublished by Trust T Researrch Advisoryy. Amul's suugar-free Proo-Biotic Ice-cream m won The Internationa I al Dairy Fedeeration Markketing Awardd in 2007. 63 3.4.3 Nestle Nestle the largest food company in the world in terms of revenue is a Swiss multinational food and beverage company head quartered in Vevey, Switzerland. Nestle's products include baby food, bottled water, breakfast cereals, coffee, confectionery, dairy products, ice cream, pet foods and snacks. About 29 of Nestle's annual turnover is 1 billion Swiss Francs (about $1.1 billion) by the sale of Nespresso, Nescafe, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi. Nestle has around 450 factories operating in 86 countries and employs around 328,000 people. It is one of the main shareholders of L’Oreal, the world's largest cosmetics company. Nestle was formed in 1905 by the merger of the Anglo-Swiss Milk Company established in 1866 by brothers George Page and Charles Page and Farine Lactee Henri Nestle founded in 1866 by Henri Nestle. The company grew significantly during the First World War and again following the Second World War, expanding its offerings beyond its early solid milk and infant formula products. The company has made a number of corporate acquisitions including Crosse and Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree Mackintosh in 1988 and Gerber in 2007. Nestle has a primary listing on the Swiss Exchange and is a constituent of the Swiss Market Index. It has a secondary listing on Euro. In 2011, Nestle was listed No. 1 in the Fortune Global 500 as the world's most profitable corporation. With a market capitalization of $233 billion, Nestle ranked No. 9 in the FT Global 500, 2013. Nestle has 8,000 brands with a wide range of products across a number of markets, including coffee, bottled water, milkshakes and other beverages, breakfast cereals, infant foods, performance and healthcare nutrition, seasonings, soups and sauces, frozen and refrigerated foods and pet food. As of year-end 2010, Nestle held 64 29.7% of the shares of L'Oreal, the world's largest company in cosmetics and beauty. Its brands include Garnier, Maybelline, and Lancome as well as the Body Shop stores. 3.4.4 ITC Limited ITC is an Indian multinational headquartered in Kolkata, West Bengal. Its diversified business includes five segments such as FMCGs, Hotels, Paperboards, Paper and Packaging and Agri Business. In 2012-13, ITC's annual turnover was over US$ 7 billion and at the end of the same year, its market capitalisation was US$ 45 billion. It employs over 25,000 people at more than 60 locations across India. ITC claims that it is the only company in the world of comparable dimensions to be carbon positive, water positive and solid waste recycling positive. In 2012-13, ITC earned revenue of Rs. 27,136 crores from the business of Cigarettes (56% of total revenue). ITC Ltd sells 80 Per cent of the cigarettes in the India where 275 million people use tobacco products. Its major cigarette brands are W.D. and H.O. Wills, Gold Flake Kings, Gold Flake Premium, Gold Flake Super Star, Navy Cut, Insignia, India Kings, Classic (Verve, Menthol, Menthol Rush, Regular, Citric Twist, Mild and Ultra Mild), 555, Benson and Hedges, Silk Cut, Scissors, Capstan, Berkeley, Bristol, Lucky Strike, Players, Flake and Duke and Royal. ITC is India's largest seller of branded foods with a sale of over Rs. 4,600 crore in 2012-13. It is present in 4 categories in Food business such as Staples, Snack Foods, Ready to Eat Foods and Confectionery. Its major food brands are Kitchens of India; Aashirvaad, Mint-o, Sunfeast biscuits, Candyman, Bingo chips, Yippee and Sunfeast Pasta. The various brands of Lifestyle Apparel includes Wills Lifestyle and John Players brands. Wills Lifestyle was accorded the ‘Super brand’ status and John Players was included in the top 10 ‘Most Trusted Apparel Brands 2012’ by The Economic 65 Times. Further the various brands of personal care includes (Fiama Di Wills, Vivel, Essenza Di Wills, and Superia). The various brands of Stationery includes Classmate, PaperKraft and Colour Crew brands launched in 2003 of which Classmate became the largest notebook brand in India in 2007. ITC's hotels under brands including WelcomHotel have evolved into being India's second largest hotel chain with over 90 hotels throughout India. ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the India's biggest foreign exchange earners (US $5.4 billion in the last decade). The Company's 'e-Choupal' initiative is enables Indian agriculture to significantly enhance its competitiveness by empowering Indian farmers through Internet. This transformational strategy has created ITC as a huge rural distribution infrastructure to significantly enhance the Company's marketing reach. As of July 2010, services through 6500 E-Choupal across 10 states, reach more than 4 million farmers in about 40,000 villages. Free access to Internet also opens windows of rural India to the world. 3.4.5 Britannia Industry Britannia Industry was established in 1892 with an investment of Rs.295. Initially, biscuits were manufactured in a small house in central Kolkata. Later, the enterprise was acquired by the Gupta brothers mainly Nalin Chandra Gupta, a renowned attorney and operated under the name of "V.S. Brothers. In 1918, C.H. Holmes, an English businessman in Kolkata, was taken on as a partner and the Britannia Biscuit Company Limited (BBCo) was launched. The Mumbai factory was set up in 1924 and Peek Freans UK acquired a controlling interest in BBCo. Biscuits were in big demand during World War II, which gave a boost to the company’s sales. The company’s name finally was changed to the current "Britannia Industries Limited" 66 in 1979. In 1982 the American company Nabisco Brands, Inc. became a major foreign shareholder. Britannia is well known for its cheese, cakes, rusks, bread and the popular Britannia biscuits. Some of its popular branded biscuits are Milk Bikis, Good Day, Pure Magic, Maska Chaska, Treat and Marie Gold. Britannia is one of India's 100 most trusted brands listed in the Brand Trust Report. Dairy products contribute close to 10 Per cent of Britannia's revenue. Britannia holds an equity stake in Dynamix Dairy and outsources the bulk of its dairy products from its associate. Its main competitors are Nestle India, the National Dairy Development Board (NDDB), and Amul (GCMMF). The company's factories have an annual capacity of 433,000 tonnes. Tiger, the mass market brand, realized $150.75 million in sales including exports to countries including the U.S. and Australia. 3.4.6 Dabur India Ltd Dabur India Ltd which derived its name from Daktar Burman, is India's largest Ayurvedic medicine manufacturer. Dabur was founded by Dr SK Burman, a physician in West Bengal 1884 to produce and dispense Ayurvedic medicines for diseases such as cholera and malaria. Soon the success of his medicines so wide spread that he came to be known as the trusted Doctor who came up with effective cures. Dabur India deals is personal and health care products such as Dabur Lal Dant Manjan, Dabur Chyawanprash, Dabur Amla, Hajmola, Anmol, Vatika oils and shampoos and Dabur red toothpaste. Dabur's Ayurvedic Specialties Division has over 260 medicines for treating a range of ailments and body conditions from common cold to chronic paralysis. Dabur International, a fully owned subsidiary of Dabur India formerly held shares in the UAE based Weikfield International. 67 Dabur was recognized as the 45th most trusted brand in India by The Brand Trust Report, India study 2011. Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status which includes the following: 1. Leading consumer goods Company in India with a turnover of Rs. 5,283 Crores (FY12) 2. Two major strategic business units (SBU) - Consumer Care Business and International Business Division (IBD) 3. Two Subsidiary Group companies - Dabur International and NewU and several step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria), Naturelle LLC (Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc. (USA) 4. Seventeen ultra-modern manufacturing units spread around the globe 5. Products marketed in over 60 countries 6. Wide and deep market penetration with 50 agents, more than 5000 distributors and over 3.4 million retail outlets all over India 7. Strategic positioning of Honey as food product, leading to market leadership (over 75%) in branded honey market 8. Leader in herbal digestives with 90% market share 9. More than 300 products sold through prescriptions as well as over the counter. Consumer Care Business addresses consumer needs across the FMCG spectrum through four distinct business portfolios of Personal Care, Health Care, Home Care and Foods Master brands: 68 1. Dabur - Ayurvedic healthcare products 2. Vatika - Premium hair care 3. Hajmola - Tasty digestives 4. Real - Fruit juices and beverages 5. Fem - Fairness bleaches and skin care products International Business Division (IBD) caters to the health and personal care needs of customers of international markets across Nepal, Bangladesh, the Middle East, North and West Africa, EU and the US with its brands Dabur and Vatika. It contributes to about 30% of total sales. 3.4.7 Cadbury India Cadbury, officially Cadbury Enterprises Private Limited is a British confectionery company owned by Mondelez International. Cadbury was established in Birmingham by John Cadbury in 1824, who sold tea, coffee and drinking chocolate. Cadbury developed the business with his brother Benjamin, followed by his sons Richard and George. George developed the Bournville estate, a model village designed to give the company's workers good living conditions. Having come into India in 1948 by importing chocolates, Cadbury, now has manufacturing units across India. Cadbury is headquartered in Uxbridge, London, and operates in more than fifty countries worldwide. Its popular brands include Dairy Milk, Celebrations, Eclairs, Perk and 5Star apart from the popular milk drink Bournvita. The company is best known for its confectionery products including the Dairy Milk chocolate which was introduced in 1905, with a higher proportion of milk as its ingredient. By 1914, it became the company's bestselling product. Crème Eggs which are available for sale in the United Kingdom are the bestselling confectionary product in the country. 69 Cadbury India had a position of 29% in sale at Rs 2,652 crore for the year ended December 2010. In 2010, Cadbury spent Rs. 511 crores on selling and distribution and it is about 38% higher than the previous year. The company is aggressively reaching out to more consumers. In 2011 alone, it increased its direct reach by 25%. Cadbury India's sales grew 40%, thanks to the successful launch of world's largest selling cookie Oreo as well as double digit growth of most existing Cadbury brands. 3.4.8 Colgate-Palmolive Company The Colgate-Palmolive Company is an American multinational consumer products company engaged in the production, distribution and provision of household, health care and personal products, such as soaps, detergents, and oral hygiene products (including toothpaste and toothbrushes). The company's corporate offices are in New York City. In 1806, William Colgate, an English soap and candle maker, opened up a starch, soap and candle factory on Dutch Street in New York City under the name of William Colgate and Company. In 1833, he suffered a severe heart attack, which forced him to his business. But after a couple of years on recovery he resumed his business. In the 1840s, the firm began selling individual cakes of soap in uniform weights. In 1857, on his death the company was reorganized as ‘Colgate and Company’ under the management of Samuel Colgate, his son, who though reluctant to continue the business was forced to continue as it would be the right thing to do. In 1872, Colgate introduced Cashmere Bouquet, a perfumed soap. In 1873, the firm introduced its first toothpaste, aromatic toothpaste sold in jars. His company sold the first toothpaste in a tube, Colgate Ribbon Dental Cream (invented by the dentist Washington Sheffield), in 1896. In the 70 same year Colgate hired Martin Ittner under whose direction founded one of the first applied research laboratories. By 1908 they initiated mass selling of toothpaste in tubes. In 2006, Colgate-Palmolive announced the intended acquisition of Tom's of Maine, a leading maker of natural toothpaste, for US $100 million. Today, Colgate has numerous subsidiary organizations across 200 countries, but it is publically listed in only two, the United States and India. On October 25, 2012, the company announced it that is will reference more than 2,310 workers, or 6 Per cent of its workforce, by the end of 2016 in a push to make the consumer products company more efficient. Colgate now markets a broadly diversified mix of products in the United States and other countries. Major product areas include household and personal care products, food products, health care and industrial supplies and sports and leisure time equipment. Colgate has been ranked as Most Trusted Brand by Brand Equity’s Annual Survey. Colgate was voted the Most Trusted Brand of the year. Colgate Palmolive India today posted a net profit at Rs 109.52 crore for the second quarter ended September 30, 2013. Net sales of the company, however, rose to Rs. 895.69 crore for the same period. Colgate-Palmolive is present in the segments of oral care, personal care, home care and professional oral care. 3.4.9 Procter and Gamble The Procter and Gamble Company, better known as P and G, is an American multinational consumer goods company headquartered in downtown Cincinnati, Ohio, United States. Its products include pet foods, cleaning agents, and personal care products. Prior to the sale of Pringles to the Kellogg Company, its product line included foods and beverages. Some of its popular health care products are Vicks inhaler, Vicks Formula 44 cough syrup, Vicks cough drops, Vicks Vapo Rub and Vicks Action 500+. 71 On October 31, 1837, Procter and Gamble came into being. In 1858–1859, sales reached $1 million. By this point, approximately 80 employees worked for that company. During the American Civil War, the company won contracts to supply soap and candles. In addition to the increased profit during the war, the military contracts introduced soldiers from all over the country to Procter and Gamble's products. In the 1880s, Procter and Gamble began to market a new product, an inexpensive soap that floats in water. The company called the soap Ivory. The company moved into other countries, both in terms of manufacturing and product sales, with its 1930 acquisition of the Thomas Hedley Co., based in Newcastle upon Tyne, England it became an international corporation. Procter and Gamble has dramatically expanded throughout its history, but its headquarters still remains in Cincinnati. In January 2005 P and G announced an acquisition of Gillette, forming the largest consumer goods company and purchasing Unilever to the second place. The added brands include Gillette razors, Duracell, Braun, and Oral-B to their stable. The acquisition was approved by the European Union and the Federal Trade Commission, with conditions to a spinoff of certain overlapping brands. In 2012, P and G earned $83.68 billion in sales. Fortune magazine awarded P and G a top spot on its list of ‘Global Top Companies for Leaders’, and ranked the company fifteenth of the ‘World's Most Admired Companies’ list. P and G India is committed to sustainable growth in India, and is currently invested in the country through its five plants and over nine contract manufacturing sites, as well as through 26,000 jobs it creates directly and indirectly. The sustainability efforts focus on environmental protection as well as social responsibility to help develop the communities. P and G operates under three entities in India - two listed 72 entities “Procter and Gamble Hygiene and Health Care Limited” and ‘Gillette India Limited’, as well as one 100% subsidiary of the parent company in the U.S. called ‘Procter and Gamble Home Products’. Healthcare business at 414 crores posted a growth of 9% in 2010 across Vicks Vapo Rub, Vicks Cough Drops, Vicks Action 500 and Vicks Inhaler thereby consolidating the market leadership in its respective categories. Feminine Hygiene business recorded yet another year of high growth with sales at 623 crores translating to a growth of over 17%. Whisper has increased its market share with growth across all major brand forms. Whisper Choice reached its all-time high share overtaking competition to become the largest mid-tier brand form. 3.4.10 Godrej Group The Godrej Group, an Indian multinational headquartered in Mumbai, Maharashtra, is managed and largely owned by the Godrej family. It was founded by Ardeshir Godrej and Pirojsha Godrej in 1897 and operates in sectors as diverse as real estate, consumer products, industrial engineering, appliances, furniture, security and agricultural products. Subsidiaries and affiliated companies include Godrej Industries and its subsidiaries, Godrej Consumer Products, Godrej Agrovet, and Godrej Properties, as well as the private holding company Godrej and Boyce Traditionally, Vikhroli, a suburb to the Northeast of Mumbai has been Godrej's manufacturing base but increasingly the group has moved significant production facilities away from Mumbai. The Godrej group also owns vast land in Vikhroli occupying 3500 acres (14 km2) of land which makes the Godrej group the biggest private land owner in Mumbai. The Animal Feed business recorded a growth of 33% in revenues and 30% in profitability. The strong performance in sales revenue and profitability was on account 73 of increased volumes, innovative products backed by R and D efforts and efficiency in buying. Godrej Properties Limited (GPL) launched 13 new projects and phases across the country. While volumes in the real estate sector have declined for the second consecutive year, GPL has delivered 58% growth in booking volume and 78% growth in booking value driven by successful new launches in Gurgaon, Bangalore, Kolkata, Pune, Ahmadabad and Mumbai. The highlight of the year was the successful launch of Godrej Summit in Gurgaon where GPL sold 695 apartments aggregating to 1 million sq. ft. of saleable area in 1 day. Godrej Consumer Products Limited (GCPL) reported Income from operations of Rs.6, 407 crore and Net Profit of Rs. 796 crore as against Rs.4, 866 crore of Income from Operations and Net Profit of Rs.727 crore for the year 2013. 3.4.11 Marico Industries Marico Industries is a leading Indian company that manufactures and exports consumer products to different SAARC countries, Egypt, Middle East and the US.80 The Company was incorporated on 13th October 1988, under the name of Marico Foods Ltd. The Company is engaged in manufacture and marketing of branded personal care products, edible oils, fabric care products and processed foods. The Company's products are sold under the brand names Parachute, Saffola, Sweekar, Marico's Hair and Care, Revive and Sil. The company has 3 divisions the Consumer Products Group (CPG), The International Business Group and Kaya Skin Clinic. During 2009–10, the company generated a turnover of Rs.26.6 billion (USD 600 Million), in respect of its food, hair care and skin care related products. Marico's own manufacturing facilities are located at Goa, Kanjikode, Jalgaon, Pondicherry, 80 Selvakumar M Dr.., Maria Jansi Rani, Jegatheesan K., “FMCGs: A Bright Future in India, Facts for you, February 2013. PP. 10-13 74 Dehradun, Baddi, Paonta Sahib and Daman. In Bangladesh, Marico operates through Marico Bangladesh Limited, a wholly owned subsidiary. Its Manufacturing facility is located at Shirirchala, near Gazipur. Marico's brands and their extensions occupy leadership positions with significant market shares in a number of health and beauty areas. In addition to being a producer of consumer products the organisation also operates Kaya Skin Clinic of which as of 2010, 81 exist in India, 13 in UAE and 2 in Bangladesh. Marico recently acquired the aesthetics business, of the Singapore based Derma Rx Asia Pacific Pt Ltd. (Derma Rx), under the Kaya portfolio. Marico decided to try to sell products in that market after liberalisation, but found that Arab customers did not like the scent of coconut, wanted a less sticky hair product, and needed a product to counteract the high level of chlorination in their water. When Marico reformulated its product, its market share in the Arab Mideast grew from 2% in 2002 to more than 20% by 2008. The company in recent years has been known for its foreign acquisitions in countries such as South Africa, Egypt and Singapore. Marico Ltd has reported 27.36% increase in net profit at Rs 157.72 crore for the first quarter ended June 30, 2013. 3.4.12 GlaxoSmithKline Glaxo SmithKline (GSK) is a British multinational pharmaceutical, biologics, vaccines and consumer healthcare company headquartered in Brentford, London. It is the world's fourth-largest pharmaceutical company. The company was established in 2000 by the merger of Glaxo Wellcome plc and SmithKline Beecham plc. GSK has a portfolio of products for major disease areas such as asthma, cancer, virus control, infections, mental health, diabetes and digestive conditions. It also has a large consumer healthcare division that produces oral healthcare and nutritional products, 75 drinks and over-the-counter medicines, including Sensodyne, Boost and Horlicks. The company has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. GSK produces and sells a wide range of prescription-only and over-the-counter products, including drinks and toothpastes. According to its website, it manufactures and distributes over four billion packets of products to over 150 countries every year, and nearly 900 million doses of its vaccines were distributed to 170 countries in 2012. Its top-selling prescription drugs include the anti-depressant Paxil, which by 2012 had attracted $11.6 billion in sales, the diabetes drug Avandia at $10.4 billion, the antidepressant Wellbutrin at $5.9 billion, the asthma drugs Advair, Flovent and Ventolin, and an H2 antagonist, Zantac. It also sells several drinks, including Horlicks, a malted milk drink and Boost, a chocolate-flavoured drink and formerly sold Lucozade, marketed as an energy drink and Ribena, a fruit drink. In June 2010 the company acquired Laboratories Phoenix, an Argentine pharmaceutical company and focuses on the development, marketing and sale of branded generic products, for a cash consideration of approximately $253m. In December that year GSK announced its acquisition of the UK-based sports nutrition company Maxi nutrition for £162 million (US$256 million). In March 2012 the company announced that it planned to invest around £500 million in manufacturing facilities in Ulverston, northern England, designating it as the site for a previously announced biotech plant. GSK made a US$2.6 billion (£1.6 billion) offer for the United States-based biopharmaceutical company Human Genome Sciences in April 2012. In 2013 the company said it would seek marketing approval for the world's first malaria vaccine in 2014, after trial data showed the vaccine had significant effects in cutting cases of the disease in African children. 76 3.5 FMCG SECTOR - INDIAN SCENARIO The FMCG Sector in India has witnessed a range of recent developments largely because of tax deduction on various items, rise in the penetration levels and per capita consumption. But these exists a strict competition between the organized and unorganized sectors of consumer durables. India offers an abundance of raw materials, low-priced labor costs, and also has a presence across the entire value chain. The major activities of the food-processing sector are permitted 100% foreign equity or 100% NRI and Overseas Corporate Bodies (OCB) investment to meet the rising demand of the consumers. It is assumed that the consumption of the FMCG products will have a steady growth with the rising income level in both the rural and urban areas. The Indian government’s tax sops for the FMCG sector and focus on the infrastructural developments expedite development of this sector. The consumption of health and personal care products in FMCG sector have increased in the recent past with rise in disposable income especially among the early younger generation. With this back ground information, the researcher has presented the detail of top most FMCG companies operating in India with various types of products marketed in India in table 3.1. 77 TABLE 3.1 Top Most FMCG Companies Operating In India S.No. 1 Company HUL Segments Personal Care, Food Products, Household Care, Baby Care, Fabric Care 2 Amul India Food Beverage Products 3 Nestle India Food Beverage Products 4 ITC Personal Care, Food Products, 5 Britannia Food Products, 6 Dabur Personal Care, Food Products, Household Care 7 Marico industries Personal Care, Household Care, Food Products 9 CSK Consumer Food Products, Personal Care 10 Cadbury India Food Products 11 Colgate Palmolive Personal Care, Oral Care 12 Procter and Gamble Personal Care, Household Care, Baby Care, Fabric Care 13 Godrej Personal Care, Fabric Care Source: Relevant company websites, IBEF Report, “Yearly sales as of March 2010” Further the researcher has analysed the trend and growth of performance and sales of FMCG by leading FMCG companies in India for the period 2009 to 2012.The results of which are presented in Table 3.2. TABLE 3.2 78 Performance and Sales of FMCGs by Leading FMCGs Companies in India (Million in US$) Sl. FMCG Company No. Amount 1 Hindustan Uni Per cent of Lever 2 3 4 5 6 7 8 Britannia Nestle India Dabur India Godrej Consumer Products Colgate Palmolive Marico CSK Consumer Health Care Change Amount Per cent of Change Amount Per cent of Change Amount Per cent of Change Amount Per cent of Change Amount Per cent of Change Amount Per cent of Change Amount Per cent of Change Year CAGR 2009 2010 2011 2012 % 12,019 17,764 19,691 22,116 2.56 47.80 10.85 12.32 3,421 3,773 4,605 5,485 10.29 22.05 19.11 4,324 5,129 6,255 7,491 2,805 18.62 3,390 21.95 4,077 19.76 5,305 1,393 20.86 2,041 20.27 3,643 30.12 4,866 1,695 46.52 1,962 78.49 2,221 33.57 2,693 2,388 15.75 2,661 13.20 3,128 21.25 4,008 1,542 11.43 1,922 17.55 2,306 28.13 2,686 17.04 20.10 23.66 51.73 16.69 18.84 20.32 24.64 19.98 16.48 Source: Report “India FMCG Industry” India Food Guide, Edelweiss, Dinodia Capital Advisors, September 2012 It is understood from table 3.2 that HUL tops the list followed by Nestle India and Britannia. The Per centage of sale of HUL, Britannia, Nestle India, and Godrej shows a decreasing trend whereas the Per centage of sale of Dabur India, Colgate Palmolive and Marico shows an increasing trend. The performance of sales of FMCGs by leading FMCG companies in India is illustrated in the following figure 3.2. Figure 3.2 79 Perfformance off Sales of FM MCGs by Leading L FMC CGs Compa anies in India 2,686 2,306 1 1,922 1,,542 CSK Consum mer Health Carre 4,008 3,128 2,661 2,388 Marrico 2,693 2,221 1,962 1 1,695 Top Most FMCG Company C Colgate Palmollive 4,866 6 3,643 2,041 1,3 393 Godrej G Consum mer Products 2012 2011 05 5,30 4,077 3,390 2,805 Dabur Ind dia 2010 2009 7,491 6 6,255 29 5,12 4,324 Nestle India 485 5,4 4,605 3,773 3,421 Britannia Hindustan Uni U Lever 12,019 0 5,000 10,000 15,000 0 Milllion in US$ 19,691 17,764 4 20,0 000 22,116 25 5,000 3.5.1 1 Growth of Market Share S of FM MCG Sectorr in India The Connsumer Marrket, especiaally Fast Moving M Conssumer Goodds (FMCG),, sectoor in rural an nd semi-urbaan India is eestimated to cross $20 biillion by 2018 and $1000 billioon by 2025, according to t AC Nielseen survey. Some S of the most populaar consumerr good ds like fruit drinks, d sham mpoos and biiscuits are am mong the moost bought ittems in rurall and semi-urban India and will continue to be so. Th he survey alsso reveals thhat growth inn 80 the FMCG sector in rural India increased 3.5 times from 2000 to 2010, as compared to 3.2 times in urban India.81 Market share movements indicate that companies such as Marico Ltd., and Nestle India Ltd., with domination in their key categories, have improved their market shares and outperformed peers in the FMCG sector. This has been also aided by the lack of competition in the respective categories. Single product leaders such as Colgate Palmolive India Ltd., and Britannia Industries Ltd., have also witnessed strength in their respective categories, aided by innovations and strong distribution. Strong players in the economy segment like Godrej Consumer Products Ltd., in soaps and Dabur in toothpastes have also posted market share improvement, with revived growth in semiurban and rural areas. Rural India offers tremendous growth prospects for the FMCG industry. Facilities of better rural infrastructure like roads, telecommunication, electricity, supply chain, and transportation would propel the growth of Rural FMCG Market of India. The FMCG sector, which is sure to enjoy tremendous growth prospects are food and beverage sector, health care and personal care. At Present, rural India accounts for 34% of total FMCG consumption, but it accounts for more than 40% consumption in major FMCG categories like personal care, hot beverages, and fabric care. The FMCG sector in India generated revenue worth US$ 34.8 billion in 2011, a growth of 15.2 Per cent as compared to the previous year. During 2006-11, the sector's revenue posted a compound annual growth rate (CAGR) of 17.3 Per cent. Food products are the leading segment, accounting for 43 Per cent of the overall market. Personal care (22 Per cent) and fabric care (12 Per cent) are the other leading segments. Growing awareness, easier access, and changing lifestyles have been the key growth 81 Ibid 81 drivers for the sector. Rural demand is set to rise with rising income and greater awareness of brands. FMCGs have seen over 20 Per cent demand in rural markets ahead of the 17-18 Per cent growth in urban India. According to AC Nielsen, mainstay categories like hair oils, toothpastes, shampoos, skin creams and lotions, and even candies witness more growth in rural markets than urban. With this back ground information, the researcher has presented the details of category wise market share of FMCGs sector in India in table 3.3. S.No TABLE 3.3 Category wise Share of FMCG Sector in India Per centage Market Product Category Share 1. Food and Beverages 43 2. Personal Care 22 3. Fabric Care 13 4. Hair Care 9 5. Baby Care 4 6. Home Care 4 7. OTC Products 5 100 Source: www.abhinavjournal.com Volume No: 1, Issue No: 11, ISSN: 2277.1166 From the table 3.3 it is inferred that the market share of food and beverages is the highest with 43 Per cent followed by the personal care products which account for 22 Per cent, fabric care (13%), hair care (9%), baby care (4%), homecare (4%) and OTC products (5%). The following chart 3.3 shows the position of category-wise market share of FMCG sector in India. Figure 3.3 82 Catego ory -wise Market Sharee of FMCG Sector in In ndia 45 43 40 35 In percetage 30 25 22 20 15 13 9 10 4 5 4 5 0 Food and a Personal Fabric C Care Hair Care C Baby Care C Beveraages Caree Product Ca ategory Percentage Markeet Share Home Care OTC C Produ ucts 3.5.2 2 FMCG Market M in Tamil T Nadu The FMC CG Market in Tamil N Nadu is grow wing and it has tremenddous growthh oppo ortunity owiing to rapid d industrializzation. The FMCG induustry of Tam mil Nadu iss dividded into fouur major secctors. The Inndian state of Tamil N Nadu is one of the mostt vibraant and happening place in terms of o business activities. F FMCG Mark ket in Tamill Nadu u has huge scope with the t rise in thhe income of o the generaal people. The T state hass made major proggress in the Informationn Technology y sector alonng with Auto omobile andd Teleecommunicattion sectorss. Tamil Nadu houses big companies like TCS, IBM,, Cogn nizant, Wiprro, Nokia inn the IT and Telecommuunication secctor. Tamil Nadu N is alsoo the home for several s autoomobile mannufacturing units. Furtthermore, thhe state hass 83 become one of the major destinations for quality technical education in India. All these factors along with the fact that its capital - Chennai is also a metro city have propelled the growth of the city. The state is one of the largest producers of agro-products like tea, coffee, sandalwood, cashew, coconut and spices, rice, which have facilitated the growth of food industry in the state. Important cities like Chennai, Coimbatore, Sivakasi, Trichy, Erode, Kodaikanal, Ooty help the growth of FMCG sector. Industrialization has led to the further development of consumerism in the state. This increased consumerism results in the speedy growth of the FMCG market in Tamil Nadu. The FMCG industry in Tamil Nadu is shaping up under the umbrella of organized sector and it is distinctly classified into four different segments like Food and Beverage industry, Cleaning, Disinfectants and Home Care, Personal care and Electronics. 3.6 BRANDING STRATEGIES OF MNCs ON FMCGs IN INDIAN MARKET Good brand management brings about clear differentiation between products, ensures consumer loyalty and preferences and may lead to a greater market share. Brands are highly regarded as an important source of capital for business. The term brand has different meanings attached to it. A brand can be defined as a name, logo, symbol and identity or a trademark. A powerful brand will enhance a customer’s attitude, strength of the product association of a brand. A brand is a promise. With a brand, customer expectations are set. When someone buys a product or service, they count on those expectations to be fulfilled. The function and art of branding is a major contributor to the success of a product or service sold by the company that markets it. Brand management aims to build into customers’ minds a set of perceptions and attitudes relating to an offering, leading to positive 84 buying behaviour. The power of a brand is measured by its effect on buyers. A powerful brand will cause its customer base to either defer or refuse to purchase if the brand is not available. The first is Corporate Strategy, of which branding strategy is in fact the symbol. The strategy lies in the art of being different. The single brand is an advantage if one is already a single brand like Philips. In today’s fragmented markets, with their aggressive distribution networks and consumer segments, it is far better to exploit the targeted reputation (in terms of product and values) of the brands that people have bought precisely. The second parameter is the Business Model. In this respect it is interesting to compare companies within the same sector, since their brand policy is often a reflection of their business model, the driving force of their competitive edge and their profitability. In fact, the business models of these companies are not the same, hence the different brand strategies. As the inventor of modernity, it must therefore create brands, with their own particular shapes and characteristics that can subsequently be offered in a variety of forms to capitalize on the investment in promotion. The third parameter for choosing branding strategy is Cultural. The United States has developed the culture of the product brand that produces a single product. Ivory, the founder brand of Procter and Gamble, is and continues to remain a soap, which explains the company’s reluctance to extend the brand and even the ideological opposition of such authors as Trout and Rise who have berated it in their work for the past 20 years. But the US domestic market favoured this product-brand policy. On the other hand, it also explains why Europe and Japan have been the main exponents of the umbrella-brand policy. In Japan, apart from the size of the domestic market, the concept of the company has also counted for a lot in the sense that, the more products 85 and sectors a company covers, the greater its reputation. It would simply not occur to the director of a Japanese company not to use the corporate name to promote all kinds of brand extensions. Yamaha is a typical example, putting its name to such widely diverse products as motorcycles and pianos. The fourth parameter is the Pace of Innovation. In this instance, a single-brand policy covering the entire range is preferable, as in the case of Nokia, Sony-Ericsson, Alcatel, Samsung and even Whirlpool and GE. A fifth parameter is the Added-Value Lever on which a product is based. When the added value in a particular market is linked to reassurance, reputation and scale, a single brand umbrella strategy is recommended (in the world of industry, this is often the corporate brand), although a source-branding strategy with two levels one is a real ‘branded house’ like Garnier or L’Oreal Paris can work equally well. However, the more segmented the market, with top-quality, personalized products, the more one has to favour either a portfolio of L’Oreal product brands or an endorsing brand strategy that sanctions the sub brands. Finally the brand vision impacts the Choice of Architecture. In the cosmetic market there are thousands of products and many scientific terms, and innovations are essential. This is what leads to an opacity in the market. Brands serve as milestones and a question that is frequently asked is which naming strategy should be used? There is no single answer to such a general question and it depends a lot on the brand’s conception of itself.82 82 Sunildro L.S. Akoijam1 and Dr Ch. Ibohal Meitei “Branding Strategies of MNCs: A Study of Selected FMCG Products in Indian”, Market International Journal of Research in Management & Social Science Volume 1, Issue 1 (July – September, 2013), Pp. 50-60. 86 3.7 CONSUMER BEHAVIOUR TOWARDS NEW PACKAGING OF FMCG Packaging is the container for a product encompassing the physical appearance of the container and including the design, colour, shape, labeling and materials used. Packaging has a huge role to play in the positioning of products. Package design shapes consumer perceptions and can be the determining factor in point-of-purchase decisions which characterize the majority of shopping occasions. In recent years the marketing environment has grown increasingly complex and competitive. A product’s packaging is something which has strong potential to engage the majority of the target market. This makes it an extremely powerful and unique tool in the modern marketing environment. In addition to its benefits in terms of reach, some marketers believe that packaging is actually more influential than advertising in attracting consumers, as it has a direct impact on how they perceive and experience the product. In most cases, pack designs are more likely to influence the consumer perception of the brand. For products with low advertising support, packaging takes on an even more significant role as the key vehicle for communicating the brand positioning. Packaging is an important aspect of product planning. From the company's point of view, besides protecting, package must give mandatory derails like price, ingredients, and manufacturing details while retailers' needs, it to be easy to stock/display, not tear or get damaged easily. as no one will buy a product wit. Besides these, consumers may look for extra features like freezer-safe packaging for food products. 87 Packaging must reflect everything that the brand represents, attract consumer attention immediately and inform how it adds value to consumer’s life. In the era of supermarkets and malls packaging must bear all information that a person may want to know, as staff may not be around. It may be immediately discarded for some products (like soaps) or remain in use till the product is completely used (toothpaste, ketchup). For the latter group, packaging must be sufficiently sturdy to last this duration and help in product consumption as well. Thus the package will continue to reflect brand attributes in that part of the home. Bru coffee is now available with an aroma lock device. Kissan Jam available in non-breakable tubes and does not need spoons. Hadrian’s ready-to-eat nankeens are now available in convenient self-sealing packets and Act II Pop-corn in microwave packs. Consumers are attracted to packaging features such as easy to hold or dispense, those with airtight or leak proof caps, measured pouring while others may value ecofriendly or biodegradable packaging. Some prefer to bring home less plastic wrappings. Higher package features can mean a costlier product. Companies transport ready products through their distribution chains in cartons/boxes to upkeep the good condition for a long time. They may 'test' the intended packaging prior to the market launch to check its suitability for different pack sizes, power to comber transportation stress, facility of storage and visibility in a store shelf/aisle. The packaging must protect the product within from breakage/contamination. Above all, companies must use packaging materials that do not have substances, which are harmful to health of consumers. 88 3.8 CONSUMER’S BUYING BEHAVIOUR TOWARDS FMCG SECTOR Nowadays world purchases are made by a customer to satisfy his or her needs. All the behavioral activities of a customer during and after the purchase of a product are termed as “buyer behavior”. A consumer is faced with purchase decision daily but not all decisions are equal in importance. Some decisions are more complex which require more effort while other decisions are almost a routine which require only little effort. In general, consumers face the following four types of problems in making purchase decisions. Minor New Purchase: These purchases represent something new to a consumer but in the customer’s mind it is not a very important purchase in terms of need, money or other reason Minor Re-Purchase: These are the most routine of all purchases and often the consumer returns to purchase the same product without giving much thought to other product options that is consumer’s brand loyalty. Major New Purchase: These purchases are the most difficult of all purchases because the product being purchased is important to the consumer who has little or no previous experience of purchasing the product. The consumer’s lack of confidence in making this type of decision often (but not always) requires the consumer to engage in an extensive decision-making process. Major Re-Purchase: These purchase decisions are also important to the consumer but the consumer Whofeels confident in making these decisions because of previous experience. For marketers it is important to understand how consumers treat the purchase decisions. If a company is targeting customers who feel a purchase decision is difficult (i.e., Major New Purchase), their marketing strategy may vary greatly from a company targeting customers who view the purchase decision as routine. 89 In fact, the same company may face both situations at the same time for some the product is new, while for others it is routine. The implication of buying behaviour for marketers is that different buying situations require different marketing efforts. 3.8.1 Factors Affecting the Buyer Behavior towards FMCGs Disposable Personal Income: The economists make attempts to establish a relationship between income and spending. Disposable personal income represents potential purchasing power that a buyer has. The change in income impacts buying habits. Size of Family Income: The size of family and size of family income influence the spending and saving patterns. Generally large families spend more and short families spend less, in comparison. Income Expectations: The expected future income has a direct relation with the buying behavior. The spending plans are drafted in accordance with the expectation of higher or lower income. Propensity to consume and to save: This goes to the habit of spending or saving with the disposable income of buyers. If given importance to present needs, they dispose of their income. And they spend less if they give importance to future needs. Liquidity of Fund: The present buying plans are influenced greatly by liquidity of assets namely cash and assets readily convertible into cash, like. Bonds, bank balances. Consumer Credit: “Buy now and pay later” plays a key role in the rapid growth of markets of car, scooter, radio, furniture and the like. Internal Influences of Buyers: Psychographics (Lifestyle), Personality, Motivation, Knowledge, Attitudes, Beliefs, Feelings, Demographics and Consumer 90 behavior concern with consumer need consumer actions and the internal factors influencing the buying habits of consumers. External Influences of Buyers: Culture, Sub-Culture, Locality, Royalty, Ethnicity, Family, Social Class, Reference Groups, Lifestyle, and Market Mix Factors. One the external influences that shape the buying habits of consumers. 3.9 ORGANIZED RETAIL SECTOR FOR FMCGs 3.9.1 Supermarkets A supermarket, also called a grocery store is a self- service store offering a wide variety of food and household merchandise, organized into departments. It is larger in size and has a wider selection than a traditional grocery store and it is smaller than a hypermarket or superstore. 3.9.2 Hypermarkets A hypermarket is a superstore which is a combination of a supermarket and department stores and hence a very large retail facility of purchased of a wide range of products under one roof, including full lines of groceries and general merchandise. In theory, hypermarkets help customers satisfy all their weekly shopping needs in a day. 3.9.3 Departmental Stores A department store is a retail establishment which specializes in satisfying a wide range of consumer’s personal and residential needs; and at the same time offering the consumer a choice multiple merchandise lines, at variable price points, in all product categories. Department stores usually sell products including apparel, furniture, appliances, electronics, and select other lines of products such as paint, hardware, toileteries, cosmetics, photographic equipment, jewellery, toys, and sporting goods. Certain department stores are further classified as discount department stores. Discount department stores commonly have central customer checkout areas, generally in the 91 front area of the store. Department stores are usually part of a retail chain of many stores situated around a country or several countries. 3.9.4 Shopping Malls A shopping mall or shopping centre is a building or set of buildings which contain retail units, with interconnecting walkways enabling consumers to reach all units. 3.9.5 Specialty Chains A Specialty Chains is numbers stores which are specialized in a specific range of merchandise and related items. Most stores have an extensive width and depth of stock in the item that they specify in and provide high level of service and expertise. They differ from department stores and supermarkets which carry a wide range of merchandise. 3.10 EMERGING CHALLENGES OF FMCG SECTOR IN INDIA 3.10.1 Consumer Class in FMCG Sector in India Consumers play a crucial role in the Indian FMCG sector as the price band of each FMCG product is fixed depending largely on the consumer class which the particular company is targeting. A number of variants are offered by each brand in the FMCG sector. Some of the FMCG companies like Nestle India, Cadbury, Procter and Gamble and Smith Kline Beecham offer high-priced branded products as these companies target the elite and upper middle class consumers. These high-priced branded products do not have as much sales in the rural regions as in the urban section. Processed food manufacturers gain more profit in the urban areas as the urban population opt more for ready-to-eat meals. The consumption of personal care items is high in the rural regions. High literacy rates and increased per capita income led to a rise in the consumption of the FMCG products. 92 3.10.2 Indian Market Conditions of FMCG product GDP The Gross Domestic Product, known as GDP of economy requires contribution from major industries to be healthy. India depends largely on agriculture to make the major contribution to the GDP. Role of major industries in India’s GDP is equal important as based on this only the total GDP is calculated. In terms of US Dollar exchange rate India's economy is the twelfth largest. Despite a slowdown, because of the global recession, India's economy has huge potential of expansion. 3.10.3 The Challenge - New Product Development (FMCG) In this age of accelerating commoditization, companies are increasingly gambling on the success of innovative new products, yet companies continue to release new products the same way they always have. As far as the economic scenario is concerned, India is surely on a roll. The last twenty years have really proved extremely beneficial for India. India is expected to cross the 8 Per cent mark and move to 9 Per cent GDP growth rate. India is the second largest populated country in the world with over one billion people. Although India has not had a striking 10 Per cent year over year economic growth as its neighbors China has still managed to grow at a nominal rate. India's GDP growth has been slow but steady. According to trade pundits India will take the third position as far as GDP growth in concerned by 2020 replacing Germany, the UK, and Japan. Only United States and China will be ahead of it. All the important sectors in India have shown positive signs of growth in the last five years. India’s exports increased by 26.8 Per cent and touched US$ 18.9 billion in November 2010 and imports increased to US$ 222 billion. This rapid growth in the exports from India urged the Indian Government to estimate that the total shipments in 2010-11 might go up to US$ 215 billion. 93 3.10.4 Inconveniences of FMCG Products Launch The inconveniences of FMCG products launch include fast growth, unfulfilment of customer expectations; new item exists in product mix, unknown/new category and consumer education and revolutionary product with no market. SUMMARY This chapter has discussed various theoretical details relating to production and marketing of FMCGs such as evolution of Indian FMCG Market, major FMCGs companies in India, FMCG consumer goods in Asia, Growth of FMCG Sector in India, exports of FMCGs in India, challenges faced by FMCG sectors for rural marketing, factors accountable for upcoming paradigms of rural marketing of FMCGs, impact of modern retail on FMCG sector, branding strategies of MNCs on FMCG in Indian market, emerging challenges and prospects of FMCG in India, consumer behavior towards new packaging of FMCG, consumer buying behavior in FMCG sector, economic factors affecting the buyer behavior towards FMCGs and formats in Indian organized retail sector for FMCGs. As such, this chapter contains in capsule form all information on FMCGs relating to the present study. 94