Log Process 1
Brand – Wills Lifestyle (ITC)
Industry – FMCG, Personal Care
-By,
FMG-1, Group 5:
Jigyasa Gauba
Gargi Gupta
Jaspreet Kaur
Sourabh Das
TABLE OF CONTENTS
1. Overview of ITC
2. Overview of the FMCG sector
3. Growth history
4. Personal care sector
5. Supply and demand scenario
6. Export and import overview
7. Factors effecting cost
8. SWOT analysis of the FMCG sector
9. Recent trends in the industry
 Technology
 Price
 Product differentiation
10. Trends and problem faced by the industry in the near future
Overview of the company:
•
ITC is one of India's foremost private sectors.
•
Market capitalization of nearly US $ 19 billion and a turnover of over US $ 5.1
Billion.
•
Rated among the World's Best Big Companies, Asia's 'Fab 50‘.
•
ITC ranks among India's `10 Most Valuable (Company) ‘.
ITC India Limited
Type
Public (BSE:ITC)
Founded
24 August 1910,
Radha Bazar Lane, Kolkata, India
Headquarters Kolkata, India
Key people
Yogesh Chander Deveshwar, Chairman,
Revenue
K. Vaidyanath, Director, Partho Chatterjee, CFO
Tobacco, foods, hotels, stationery, greeting cards
,Products Cigarettes, packaged food, hotels, apparel
▲ $4.75 billion USD (2006)
Employees
21,000 (2007)
Website
www.itcportal.com
Industry
In line with ITC's aspiration to be India's premier FMCG company, recognised for its
world-class quality and enduring consumer trust, ITC forayed into the Personal Care
business in July 2005. In the short period since its entry, ITC has already launched an
array of brands, each of which offers a unique and superior value proposition to
discerning consumers. Anchored on extensive consumer research and product
development, ITC's personal care portfolio brings world-class products with clearly
differentiated benefits to quality-seeking consumers.
ITC's Personal Care portfolio under the 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel Di
Wills' 'Vivel UltraPro', 'Vivel' and 'Superia' brands has received encouraging consumer
response and is being progressively extended nationally.
ITC's state-of-the-art manufacturing facility meets stringent requirements of hygiene
and benchmarked manufacturing practices. Contemporary technology and the latest
manufacturing processes have combined to produce distinctly superior products which
rank high on quality and consumer appeal.
Extensive insights gained by ITC through its numerous consumer engagements have
provided the platform for its R&D and Product Development teams to develop superior,
differentiated products that meet the consumer's stated and innate needs. The product
formulations use internationally recognised safe ingredients, subjected to the highest
standards of safety and performance.
Competition:
ITC Ltd. faces competition from various other companies producing a varied line of
FMCGs. In relation to Personal Care products ITC or Fiama Di Wills line of products (and
the likes) faces competition from companies like HUL, P&G, L’Oreal, Marico etc.
HUL Ltd. – Hindustan Uni Lever Ltd. with its large amount of brands under soaps and
hair care products is the biggest competitor to ITC Ltd.
 Soaps market – HUL presently owns around 60% market share with JUST its soaps.
With Dove directly competing with the Fiama Di Wills line of products as both of
them do not cater to the mass market but the higher middle class or high income
class of the consumers in India.
 Hair Care market – Sunsilk &Clinic all clear are the major market capturing hair care
products under HUL. They are proving to be a competition with ITC for the hair care
products under Fiama Di Wills brand.
P&G – P&G also owns a relatively modest share of market with its hair care products.
Pantene and Head & Shoulders have been in the market for a longer time than Fiama Di
Wills and thus have more popularity amongst consumers. Like Fiama Di Wills, Pantene &
Head & Shoulders have variants suiting the different needs of different consumers.
L’Oreal – L’Oreal is a leading international company which entered Indian market a few
years back. L’Oreal has the Garnier Fructis line of shampoos and conditioners which like
Fiama Di Wills have used technology to increase the quality and also come up with a
number of variants.
Marico – Marico, as can be seen, is a major competitor to ITC. Marico also has hair care
products. Though these products are targeted to the mass market and low priced, it
steals away a large market from ITC.
Overview of industry: FMCG:
•
Fast Moving Consumer Goods (FMCG), are the products that are sold quickly at
relatively low cost. Though the absolute profit made on FMCG products is
relatively small, they generally sell in large quantities, so the cumulative profit on
such products can be large.
•
Examples of FMCG generally include a wide range of frequently purchased
consumer products such as toiletries, soap, cosmetics, teeth cleaning products,
shaving products and detergents.
•
Leading FMCG companies - Some of the well known FMCG companies are Sara
Lee, Nestlé, Reckitt Benckiser, Unilever, Procter & Gamble, ITC Ltd., Coca-Cola,
Carlsberg, Kleenex, General Mills, Pepsi and Mars etc.
INDIAN FMCG OVERVIEW
•
•
•
•
The FMCG sector seems to have finally joined India Inc's growth party by posting
surprising double-digit growth in sales in the past couple of years.
Annual revenues of Rs 72,000 crore.
It is the one of the largest sectors in the Indian economy.
Considering the average spending by the urban markets all over India (as given
below), the future of the sector looks bright and promising.
Source India Today - R K Swamy BBDO Guide to Urban Markets Average 1 Chandigarh Chandigarh
Monthly Spending on FMCG Products* in Rs.
2 Greater Mumbai
Maharashtra
3 Chennai Tamil Nadu
4 Ahmedabad Gujarat
5 Vadodara Gujarat
6 Pune Maharashtra
7 Coimbatore Tamil Nadu
8 Ludhiana Punjab
9 Faridabad Haryana
THE TOP 10 COMPANIES IN FMCG SECTOR
S.
NO.
Top companies of India
1.
Hindustan Unilever Ltd.
2.
ITC (Indian Tobacco Company)
3.
Nestlé India
4.
GCMMF (AMUL)
5.
Dabur India
6.
Asian Paints (India)
7.
Cadbury India
8.
Britannia Industries
9.
Procter & Gamble Hygiene and
Health Care
10.
Marico Industries
Industry Segments:
The main segments of the FMCG sector are:

Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and
toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care.
Major companies active in this segment include Hindustan Lever; ITC Ltd., Godrej Soaps,
Colgate- Palmolive, Marico, Dabur and Procter & Gamble.

Household Care: Fabric wash (laundry soaps and synthetic detergents); household
cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides
and mosquito repellants, metal polish and furniture polish).
Major companies active in this segment include Hindustan Lever, Nirma and Reckitt &
Colman.

Branded and Packaged Food and Beverages: Health beverages; soft drinks;
staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice
cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water;
branded flour; branded rice; branded sugar; juices etc.
Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and
Dabur.

Spirits and Tobacco: Major companies active in this segment include ITC, Godfrey
Philips, UB and Shaw Wallace.
History Of The FMCG Industry Growth:
Main Drivers for Growth in FMCG:1. Higher Consumer spending –
The per capita disposable income of people in both urban as well as rural areas has seen
a good rise in the past few years. Differential pricing has helped consumers from all
economic demographics experiment with new products based on their needs and
abilities. A prominent shift has been seen from consumer electronics to other consumer
goods such as cosmetics, soaps & detergents, etc. Most FMCG players have been
targeting the consumer’s needs and converting these into strategies and final products.
2. Benefits of Organization in Retail FMCG –
Organised retail has been a boon for both the consumers as well as suppliers. This is
evident from the success of recent retail players that have entered the market such as
Reliance Fresh, Big Bazaar, More, etc. For suppliers, especially farmers, organised retail
allows them to receive better prices for their produce. For consumers, the benefits
include ease of shopping, better comparison of products, good ambience, etc. But the
most important factor is that consumers spend more on a product’s value and less is
wasted in services such as distribution.
3. Penetration –
FMCG majors have been looking to penetrate the mostly untapped rural as well as semiurban areas of India. To achieve this, they have planned to implement better
distribution networks. According to Asschom, FMCG will witness more than 50% of its
growth in the rural and semi-urban segments by 2010. In the urban regions, due to cut
throat competition FMCG players have gone in for other promotional strategies such as
branding, product differentiation, package innovation, highlighting the functional aspect
of foods, etc. The development of better and faster means of transport will increase
FMCG penetration in the long term.
4. Indian competitiveness and global market –
India has an advantage over other nations in FMCG due to certain reasons, such as
a) Easy and cheap availability of various raw materials
b) Cheap labour
c) Spread of Indian companies across the complete value chain
5. Shift of demand from unbranded to branded goods –
Consumers have become more aware of the benefits of branded commodities in foods.
• 12 percent in 2006-07
• 14.5 percent in 2007-08
• India FMCG sector is all set for 16% growth during 2008-09
Personal Care:
Personal care category in India is valued at Rs 54.6 billion. An average Indian spends 8%
of his income on personal care products. Personal care mainly consists of Hair Care, Skin
Care, Oral Care, Personal Wash (Soaps), Cosmetic and Toiletries, Feminine Hygiene. Till
2002-2003, Personal care products, except those in oral care category, were regarded as
luxury items, and attracted a high excise duty of 120%. But the taxation reforms in India
after 1991 have lowered the excise duty rates that make these products more
affordable. It is divided into two segments:


The premium segment
The popular segment
The premium segment caters mainly to urban high class and upper middle class, and is
more brand conscious and less price sensitive. The popular segment caters to mass
segments in urban and rural markets; prices here are around 40% of the premium
segment prices.
Shampoos
The shampoo market is valued at Rs 4.5 billions and has the penetration level of only
13% in India. The market is expected to increase due to increased marketing by players,
lower duties, and availability of shampoos in affordable sachets. Sachet makes up to
40% of the total shampoo sale. The Indian shampoo market is divided in two parts
 Cosmetic
 Anti-dandruff
This is primarily a middle class product because more than 50% of the population uses
toilet soaps to wash hair. The penetration level is only 30% in metros. The major players
are HLL, and Procter & Gamble.
Growth
With the increase in rural income and improvement in distribution network (i.e. road
development projects), the penetration levels are set to increase. Since the
consumption level in urban areas is already high in most of the categories, the growth
can come only from deeper penetration and higher consumption in rural areas. In the
year 2005-06, the sector witnessed growth because of the increase in consumer
demand from urban and rural areas. In addition to demand, prices also went up. Also,
with the increase in disposable income, some consumers have moved up in the value
chain. The growth for FMCG products in February 2006 was the highest in 5 years, on
YoY (year over year) basis.
Prospects
The proportion of the consuming class to total households will touch 46% by FY07 from
17.4% in FY95, estimated by National Council for Applied Economic Research (NCAER).
As the native companies are expanding in international market, the MNC subsidiaries
are looking for greater leverage of the parent strengths. Also, big MNCs cannot afford to
avoid India because of its potential market. The market size and the major players are:
Source:CII
Category
Market share (In billions) Major Players
Skin Care
13
HLL
Personal Wash
46
HLL
Hair care
28
Marico
Oral care
23
Colgate
In India, the per capita consumption of almost all the products is amongst the lowest in
the world. For example, the average consumption of toothpastes is around 320 gms in
the world but in India it is 107 gms. In Thailand, Mexico, and USA it is 262 gms, 376 gms,
and 518 gms respectively.
History Of The FMCG Industry Growth:
•
•
•
12 percent in 2006-07
14.5 percent in 2007-08
India FMCG sector is all set for 16% growth during 2008-09
An increase in disposable income, across rural and urban consumers, has led many
rural consumers to shift from traditional unorganized unbranded products to branded
FMCG products and urban fraternity to splurge on value added and lifestyle products.
This is supported by improving reach to remote markets, organized retailing and
favorable Indian economy & demographics.
Supply and demand scenario:
The FMCG Industry is on a high growth trajectory with the overall demand expected to
rise manifolds such as changing customer preferences, emergence of modern retail
formats, and growing rural spend propensity.
As discussed before, the various factors that affect demand of personal care products
are:

Increasing awareness about brands – Consumers are more aware about the benefits
of branded products and thus demand quality products. FMCG products are so
closely connected to each other that their buying decisions depend on the
information a consumer has on each brand and the perception of each product.
Therefore, an increasing awareness makes a consumer more prompt and effective in
his decision which results in more buying.

Increased disposable income – As shown above, the disposable income of both rural
and urban markets has considerably increased thus increasing the purchase power
of the consumers. More purchasing power means more demand.

New brands coming up – With new brands being launched, customers have a wide
range of choice and thus can choose products which best suit their needs. The
companies also, launch brands which fulfill the needs of the customers which
weren’t identified previously thus making the needs tangible and allowing them to
be satisfied.

Competition – With so much competition and companies participating in the
industry, there is always a neck-to-neck competition that the companies face. Any
unfavourable change in their strategy, the consumer has a wide range of choices and
thus can change his preferences easily and quickly.

Fear of losing out on market share – Due to inflation and such close competition, the
industry players are in a constant fear of losing out on their customers as nowadays
consumers are not loyal to any brand.

Down trading – Down trading means shifting to less expensive products. Consumers,
also affected by inflation and thus low purchasing power, can shift their preferences
to cheaper products. This would lead to an increase in demand for mass market affordable products and an opposite effect on expensive goods.
Supply of FMCG products depends on the following factors:

Increased number of suppliers – As the number of companies getting into FMCG
products has multiplied; the number of suppliers increased proportionately and thus
increased the supply.

Technological advancements – In this time of advanced technological advancements,
production has become easier, faster and cheaper. Thus, producers are at an
advantage and thus supply more.

Input costs – Any change in the costs of inputs leads to a change in the supply of the
FMCG products. An increase in the input costs would make production more
expensive thus the producers would have to cut down on the production and thus
decrease supply. The vice-versa holds true as well.
Export and Import Overview:
Exports
India is one of the world’s largest producers for a number of FMCG products but its
FMCG exports are languishing at around Rs 1,000 crore only. There is significant
potential for increasing exports but there are certain factors inhibiting this. Small-scale
sector reservations limit ability to invest in technology and quality upgradation to
achieve economies of scale. Moreover, lower volume of higher value added products
reduce scope for export to developing countries.
Import
Besides intense competition amongst various producers, Government has removed the
quantitative restrictions on more than 700 items under the EXIM Policy-2000 and on the
balance 720 odd items, restrictions were lifted from April 2001, since India is a signatory
to WTO on QR (quantitative restrictions). Though the grey market always existed, the
liberalisation of imports has resulted in increase in organised imports. Importers and
large distributors are now focusing on having arrangements with overseas
manufacturers and currently they are making efforts to increase their distribution
network. From our interaction with couple of traders, we learn importers are offering
higher trade margins and incentives to promote their products vis-à-vis local producers.
The imported products are available in metros and the penetration is being made into
towns and rural areas. Though there are no official statistics available on the extent of
consumer products being imported into India, the amount is likely to be small compared
with the overall size of the market. However, these imports only can increase the
competition amongst the existing domestic companies, consequently dampening the
earnings growth momentum. The threat from imports can have more negative impact
on the household and personal care categories and it will be less severe on food and
beverage products. Generally consumers have reservations to try out newer range of
products, which could help the Indian multi-nationals.
Factors Effecting Cost:
The FMCG industry has been majorly affected by inflation due to recession in the
economy. This inflation has brought up other considerations and factors that affect cost
n price of FMCG products.

Market leader leads the group – The market leader, in this case HUL Ltd., leads the
way other players in the industry would move. Even with inflation HUL did not
increase the prices and thus, none of the other players did.

Input cost pressures – HUL Ltd. is a big enough company to absorb the raised cost of
inputs and keep their prices constant but other companies may not be so lucky.
Therefore, they would have to increase the prices of their products to absorb the
increased input prices.

Location of producing unit - FMCG companies have found another way to reduce
costs — shift the manufacturing base to tax-free locations such as Baddi in Himachal
and Jammu for tax and excise duty savings. Therefore, location of the production
place affects the cost to a large extent. Location would also mean transportation
costs. Carrying goods from the place of production to the place of distribution
involves costs. If the distance is relatively longer it would mean more costs and viceversa. Also, if the location or city of production unit has cheap and easy
transportation available or not would also play a factor.

Government regulations – The government regulations and laws has a major bearing
on the cost setting on the FMCG products. Duties and taxes have to be duly paid to
the Government otherwise it would invite more costs in form of fines and legal fees
and expenses.
Recent trends in the industry regarding product
differentiation:
Product differentiation (also known simply as "differentiation") is the process of
distinguishing the differences of a product or offering from others, to make it more
attractive to a particular target market. This involves differentiating it from competitors'
products as well as one's own product offerings.
Most of the FMCG products differentiate each other through either there target market
or if they are targeting the same market they differentiate each other through their ads
which convinces the unique of the their products for example
L’Oreal: “Because you’re worth it.”
Pantene: “ You can shine”
Dove: “ With one quarter cleansing cream”
Fiama Di Wills: “ Beautiful you Today, Tomorrow”
SWOT analysis of FMCG industry:
Strengths:
1. Low operational costs
2. Presence of established distribution networks in both urban and rural areas
3. Presence of well-known brands in FMCG sector
Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale, especially in
small sectors
2. Low exports levels
3. "Me-too" products, which illegally mimic the labels of the established brands. These
products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
1. Untapped rural market
2. Rising income levels i.e. increase in purchasing power of consumers
3. Large domestic market- a population of over one billion.
4. Export potential
5. High consumer goods spending
Threats:
1. Removal of import restrictions resulting in replacing of domestic brands
2. Slowdown in rural demand
3. Tax and regulatory structure
Trends that may be expected in FMCG over next few
years:
1. Inclination towards environment-friendly goods –
Consumers are expected to appreciate socially responsible trade. This shall lead to a
move towards products with ingredients that can be replenished and more
natural/herbal cosmetics and skin care products.
2. Use of more technology –
The coming years will see a greater amount of e-marketing and blogging for promotion
of goods. IT is expected to help in consumer-tracking as well as Supply Chain
Management.
3. More goods catering to the youth –
With the increase in youth population in India, the FMCG sector is trying to come up
with more products which appeal to this class of consumers. This will include more
branding of commodities such as clothing, cosmetics and other accessories.
4. Health food categories –
This mainly targets the health-conscious, rich urban Indian. Some goods already existent
in this segment are skimmed milk, diet soft drinks, multigrain bread, sugar-free, etc.
5. Inflation impacts –
FMCG majors are coming up with various measures to combat the double digit inflation.
These measures include repositioning of product lines, variant packaging, strengthening
distribution and logistics, etc.
Problems that this Industry may face in the near future:
i. Stiff competition among domestic and foreign entrantsPlayers from the organised as well as unorganised sector continue to grab at each
other’s market shares. The entry of existing players in new segments has resulted in
high pressure on margins. This has been tackled by more expenses on promotion and
advertising.
ii. Poor transport facilities –
The highly scattered market basket is difficult to cater to with inadequate infrastructure.
Rural and semi-urban penetration in such conditions becomes a great challenge.
iii. Low Brand-Awareness –
The lack of knowledge of branded, genuine commodities among people in small towns
allows local dealers to sell spurious products.
iv. Increase in factor prices –
The sustained inflationary market has put a major dent in the FMCG industry. It has led
to higher costs of raw materials as well as packaging and distribution. Most companies
try to transfer the burden to consumers to some extent by price hikes and smaller SKUs.
REFERENCES
 Marketing management by Philip Kotler
 Google
 Scribe.com
 ITC annual report.
 Wikipedia
 Indiatimes.com
 Economictimes.com
 Fundoodata.com
Provide Intext citations (Its compulsory, follow Harvard referencing style.
The document is given in the course website). Also provide Bibliography
Add Introduction
Provide evidences in the SWOT analysis ( Back up with the data )
Also give diagrams (Supply and demand curves)
Work on the aspects of technology, price, product differentiation
Do Proper Formatting
Provide Introduction
Do more indepth analysis of cost factors