FMCG

Sector Report and Analysis

NOVEMBER 21, 2020

PLACEMENT PREPARATION COMMITTEE
IIM INDORE
 Sector Report | Placement Preparation Committee

Table of Contents

Executive Summary ............................................................................................................................... 2

Sector Overview .................................................................................................................................... 3
Sector Snapshot ................................................................................................................................. 3
Some Key Figures .............................................................................................................................. 4
The Indian Advantage for FMCG sector............................................................................................... 5
Impact of Covid-19 | Industry Perils ..................................................................................................... 6
Key Figures (Covid Impact) | Growth prospects.................................................................................. 7
Key Growth Drivers ............................................................................................................................... 9
Technological Trends & Innovations ..................................................................................................10
Key players............................................................................................................................................ 11
Key Strategies: Product Launches | Expansion Schemes | M&As in the sector ................................. 15
Product Launches: ............................................................................................................................ 15
Relevant Mergers & Acquisitions ..................................................................................................... 15
Favorable policies aiding this sector (with relevant inputs from Union Budget 2020) .................... 17
Government Initiatives .................................................................................................................... 17
GST Framework ................................................................................................................................ 17
Investments/ Developments ............................................................................................................18
Other Policy Changes .......................................................................................................................18
Blockbuster News .................................................................................................................................19
References............................................................................................................................................. 21

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Executive Summary
FMCG or Fast-Moving Consumer Goods sector is the 4th largest sector of the Indian
Economy. It is characterized by high turnover consumer packaged goods, i.e. goods that are
produced, distributed, marketed and consumed within a short span of time. The three major
segments are this sector are Food & Beverages, Household & Personal care, Healthcare products.
The household and personal care products account for 50% of FMCG sales in India. Since the sector
encompasses a diverse range of products, different companies dominate the market in various sub-
sectors. Some major names dominant in India are brands from Hindustan Unilever Ltd., P&G, ITC,
Britannia Industries, Nestle, Colgate-Palmolive, Marico, Patanjali, Dabur, etc.

The FMCG industry in India is divided into the demographics of rural and urban India. The
urban segment (accounts for a revenue share of around 55 per cent) is the largest contributor to the
overall revenue generated by the FMCG sector in India However, rural sector has higher growth
prospects compared to urban India.

Higher disposable income, growth of e-commerce, shift to organized market, growing

awareness, demand for convenience and changing lifestyles are the key growth drivers for the
sector. The India of 2030 will have 370 m Gen-Z consumers, with changed priorities when it comes
to purchasing goods. With the growth of the traditional FMCG sector- and the emergence of sub-
sectors that were non-existent until a few years ago- the future of this industry looks good. Omni-
channel ecommerce, augmented reality, voice assisted shopping, precision marketing, IoT trends,
rand community development, companies engaging in D2C models (in FMCG) & omni-channel
fulfillment in retail, will further lead the development of the FMCG industry profile.

Government Initiatives like approval of 100% FDI in single-brand retail and 51% in multi-
brand retail would bolster employment and supply chains providing higher visibility for FMCG
brands in organized retail markets, bolstering consumer spending and encouraging more product
launches. The drafting a new Consumer Protection Bill, the GST regime which is expected to
transform logistics in the FMCG sector into a modern and efficient model, healthy FDI inflows are
some initiatives that would help this sector.

We are witnessing a paradigm shift in consumer behaviour, businesses and business

models. Macroeconomic dynamics, consumer behaviour and supply-side disruptions form a
complex network that drives industry trends in the economy. Besides, the pandemic of this nature
has also opened our eyes to how vulnerable the FMCG sector can be. Organizations which can adapt
quickly to the changing demand patterns and show agility in thought and execution will be the
ones who gain market advantage. The FMCG giants in India are optimistic about growth picking
up soon as India is a growth market and there is enormous headroom for consumption to expand,
especially in categories that have lower levels of penetration. Firms who have the scale and
capabilities along with the ability to be agile, responsive and nimble will sustain.

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Sector Overview
Sector Snapshot
• FMCG is the fourth largest sector in the Indian economy.
• The three major segments under FMCG are:-
i. Food and Beverages:- This segment includes health beverages, staples/cereals,
bakery products, snacks, chocolates, ice-cream, tea/coffee/soft drinks, processed
fruits/vegetables, dairy products, & branded flour.
ii. Household and Personal care:- This includes oral care, hair care, skin care,
cosmetics/deodorants, perfumes, feminine hygiene and paper products, Fabric
wash, household cleaners.
iii. Healthcare Products:- This segment includes OTC products and ethicals.
• Growing awareness, favourable demographics, easier access and changing lifestyles have
been traditionally the key growth drivers for the sector. Some new factors include new
purchase patterns, switch to health & wellness driven choices, influencers in growing social
networks, evolving desire for service in every sphere: these too impact the sector.
• FMCG market in India is expected to grow at a CAGR of 23.15% to reach US$ 103.70 billion
by FY21 (from US$ 68.38 billion in FY18). The rural FMCG market in India is expected to
grow to US$ 220.00 billion by 2025 (from US$ 23.63 billion in FY18).
• India’s household and personal care is the leading segment, accounting for 50 per cent of
the overall market, healthcare (31 per cent) and food and beverages (19 per cent) comes next
in terms of market share.
• Rural India contributes around 36 to 37 per cent of the total FMCG sales, bulk of which is
contributed by food items.
• Nielsen had in January, projected a 9-10% growth for the FMCG industry with a "stable"
outlook on the back of favourable macroeconomic factors.
• The fast-moving consumer goods (FMCG) sector, considered relatively immune to
economic recessions, in India was impacted by the Covid-19 lockdown as it crimped demand
and severely disrupted trade channels. Nielsen thus, revised its outlook and is expecting the
year to be in the flat growth range (-) 1% to 1% for branded FMCG industry in India, as
against a 5-6% growth projected earlier this year (Link).
• Metros, bigger cities were impacted more due to Covid; While all-India growth in June was
pegged at 4.5%, rural markets saw value growth of 12.5%.
• FMCG industry has shown some sign of improvements in June, but in the first half of the
year the industry growth slipped to negative with 6% decline. An expectation of some
improvement in demand will also hinge on how India tackles the surge in Covid-19 cases.
• FMCG companies are looking to invest in energy efficient plants to benefit the society and
lower cost in the long term. Dabur had plans to invest Rs 250-300 crore (US$ 38.79-46.55
million) in FY19 for capacity expansion and possible acquisitions in the domestic market.
• The sector witnessed healthy FDI inflow of US$ 16.28 billion during April 2000-March
2020.

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Some Key Figures

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The Indian Advantage for FMCG sector

- Increasing demand for goods | Importance to convenience
- Opportunities in form of higher disposable income
- Investment boost to the sector
- Favorable policies

•Rural India is witnessing increased •Prospective growth in rural markets

demand for quality goods and •Exports is a growing segment.
services driven by upgraded •Reducing the compliance burden on
distribution channels of FMCG small retailers, traders, etc
companies. (comprise the MSME sector)
• Brand consciousness has also aided •Liberalizing incentives for start-ups.
demand | Sustainability mindset | • E-commerce segment is forecasted to
Convenience is important contribute 11 per cent of the overall
• Rising incomes and growing youth FMCG sales by 2030.
population have been key growth
drivers of the sector.
Growing Attaractive
Demand opportunites

Higher Policy
investment support

• Dabur had plans to invest Rs 250-300

crore (US$ 38.79-46.55 million) for • The increased outlay of INR 1.70 lakh
capacity expansion and is also crore for transport infrastructure in
planning to make acquisitions in the 2020-21 (critical to improve logistics
domestic market. infrastructure in the country).
• RP-Sanjiv Goenka Group to invest • Reiterated commitment to
capital fund of US$ 14.74 mn in rationalize GST through
FMCG startups. simplification & rate rationalization.
• Supa Star Foods Pvt Ltd, a packaged • Investment approval of up to 100%
food and beverage maker, has foreign equity in single brand retail
received its second investment from and 51% in multi-brand retail.
Roots Ventures which will help the •Food Security Bill & direct cash
company grow its distribution transfer subsidies reach about 40
network and add more products. per cent of households in India.

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Impact of Covid-19 | Industry Perils

Business performance

The demand for some products increased sharply while rest experienced substantial drop. In
essence, for most companies with highly diverse portfolio, a few product categories experienced
tremendous growth while most others took a plunge. However, the growth of those few brands was,
in most cases, sufficient for balancing out the loss incurred from the rest. Also, the crisis paved the
way for the cleansing products. So, businesses are using this opportunity to develop and leverage
from more products like these, too. Consequently, as a whole, the companies are performing just
as well as before, if not better.

Supply chain

Supply chain is the sector where these companies have been affected the most. The supply chains
of FMCG companies are pretty vast and intricate. And this complicated structure is being affected
due to increase of lead time, volatility of price, and inaccuracy of forecasts. Consequently, this is
causing ripple effect in every subsequent function of the supply chain. Ultimately, productivity is
being lessened severely. In addition, some vendors are out of supply themselves. On top of that,
supply for certain materials have become highly uncertain. As a consequence, prices have also been
inconsistent. And this high volatility has made accurate forecasting a big challenge.

Finances

The budget for every brand is typically fixed beforehand. But the budget made before this crisis has
failed to predict the subsequent high uncertainty in demand. Consequently, the budget for the
high-demand brands is insufficient while that for the low-demand ones is in surplus. As a result,
this has hindered the over-performing brands from reaching their potential.

Marketing

Marketing expenses are being severely cut everywhere. Most marketing jobs are now being done
from home. However, activation campaigns, production of films etc. have stopped completely. They
have been replaced by extremely low budget films produced using the low-quality equipment of
the artists themselves. In addition, research works have shifted online, too. This has affected some
companies badly-- specially the ones which typically require data from rural and less
technologically literate regions.

Nevertheless, powerful data analytics has been implemented as substitute and it is a much more
efficient and promising tool than the traditional process.

Covid-19 has altered the traditional business practices and customer demands. Getting used to this
new normal is not easy, but the only way forward. Only then can the negative effects be overcome.

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Key Figures (Covid Impact) | Growth prospects

• Nielsen India had earlier estimated the FMCG industry to grow at 5-6 per cent in 2020.
• India's fast-moving consumer goods (FMCG)sector is expected to witness flat growth in
2020 following severe and extended lockdowns, restrictions on manufacturing units, social
distancing norms and store closures, according to data analytics firm Nielsen.
• The growth range (-) 1 per cent to 1 per cent for branded FMCG industry in India.
• Earlier in April’2020, in the middle of the lockdown, Nielsen had slashed the growth
forecast for the FMCG sector by almost half to 5-6 per cent for 2020 citing adverse impact
of the coronavirus pandemic.
• Though the FMCG industry has shown some sign of improvements in June, but in the first
half of the year (January-June) the industry growth slipped to negative with 6 per cent
decline.
• Nielsen expects an uptick in demand in October-December quarter during the festive
seasons as food categories are expected to see a higher growth.
• The Trends | The Road Ahead | Revival:
o Tie-ups with last mile delivery partners (Figure shown below for ensuring ease of
product distribution during/ post lockdown)
Given the heightened need of healthy food and immunity-boosting products among
consumers, the scope for the companies in the product segments has increased.
o Observed surge in demand for products that enhance personal hygiene in and
around homes and workplaces. Products such as soaps, handwashes, sanitizers,
disinfectants, wipes, masks, home cleaning products such as floor cleaners, kitchen
cleaners, toilet cleaners are seeing a surge in demand and this trend is expected to
continue into the future as cleanliness and hygiene are going to be the new mantras.
o Companies should focus on providing a value proposition to consumers in existing
categories, launching new products in the food and health categories, enhancing
the direct distribution reach in the rural market, door to door services, etc. which
will help them to achieve the growth in the medium term. This in turn helps to
broaden the product portfolio and reduces dependence on seasonal offerings.
o More products and variants are being launched in the health food segment.
o The lockdown and social distancing requirement have forced consumer behaviour
to shift from eating outdoors to home-cooked food or ready to eat items.
o Emergence of e-commerce: people will prefer to order online than going to the
retailers. Companies need to restructure their strategies to tune in with ecommerce
channels or go for D2C channels.
o Adoption of digital sales model with a mobile application or on digital devices.
o The Covid-19 scenarios will hasten the adoption and smart companies will
incorporate geo-tagging data related to Covid-19 impacted zones into their sales
force route optimization algorithms, demand forecasting models, enhanced use of
geo tracking of vans used for rural markets.
o Automation especially for packaging, loading, unloading.

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o Need for quality immunity building products like Chawanprash and immunity-
boosting health drinks.

Growth Rate of FMCG Sector

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Key Growth Drivers

-Organized sector growth is expected to grow as the share of unorganised

market in the FMCG sector fall with increased level of brand consciousness.
Shift to organized
-Growth in modern retail will augment the growth of organized FMCG sector.
market
-Post GST and demonetization, modern trade share grew to 10 per cent of the
overall FMCG revenue, as of August 2018.

-E-commerce is growing four-times faster than offline sales, with global online
sales predicted to double within the next five years.
Growth of e-
-As e-commerce penetrates FMCG, competition intensifies, and the
commerce importance of clicks and bricks means that FMCG businesses will need to
adopt an omnichannel approach.

-The trend is for consumers to do smaller, more frequent purchases with a

growing demand for fresh convenience foods to fit this lifestyle dynamic.
Increased demand
-A greater appetite for convenience food and drinks that are ready-to-
for product consume will drive growth in this sector.
convenience -Consumers are demanding flexibility in how, when and where to no-
compromise approach to convenience.
-The existing trend for ‘clean’ foods continues, inspired by greater awareness,
Focus of healthier interest and understanding of wellbeing.
products -There will be a greater emphasis on health and wellness products, many of
which combine research on nutrition and longevity with traditional, ancient
therapies.

-Millennial consumers are seeking out new brands that they perceive as
Millenials innovative product lines and have their own distinct FMCG demands.
becoming -They prefer to research products by sharing information with their peers
influencers online and are much more influenced by peers than a mass-brand channel
approach.

-Sustainability is set to take a more central role within FMCG in 2020 and
beyond.
Sustainability
-Consumers are becoming more aware and interested in how sustainability
mindset relates to products across the whole supply chain, from the sourcing of
ingredients to the packaging.
-D2C is a popular business model which allows buyers to get goods directly
from the seller/manufacturers without the help of any middlemen.
D2C Models |
-People are more interested in the social links that come from brand
Brand Community affiliations than in the brands themselves. Hence efforts to build a group of
ardent consumers organized around the lifestyle, activities, and ethos of the
brand are becoming popular.

Better standard of
life and Greater
disposable income

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Technological Trends & Innovations

• E-commerce platforms and Mobile apps
• Retail-tainment is transforming retail marketing to entertainment. It involves effective use of the
environment and facilities available to get customers excited while buying products and derive
pleasure in the process.
• Retailers need to use analytics to generate in-depth insights across the value chain of their
operations, including procurement, supply chain, sales and marketing, store operations and
customer management (framework shown below).
• Omnichannel Ecommerce which is all about serving your customer by prioritizing their
convenience has a role for future of FMCG. Powerful influencers, stronger social media presence,
use of modern digital solutions to offer 24*7 assistance, omnichannel brand presence, and
personalization will surely level up the strategy of FMCG growth.
• Augmented reality – Cosmetic companies like Loreal and HUL are leveraging the power of
augmented reality to give a virtual product trail.
• Voice shopping and digital assistants like Amazon’s Alexa will have an impact on the future of
ecommerce and hence the sales of FMCG products.
• Machine learning and Smart Data Analytics in FMCG and Retail—role of technology as an
enhancer and facilitator of consumer connection
• As IoT advancements keep on developing & consumer engagement and participation are gaining
importance, new in-store gadgets offering better experience are popularized. A portion of these
gadgets incorporate advanced signage screens showing focused on messages, intuitive terminals,
and savvy robots as deals aides, virtual or enlarged reality instruments.
• Precision Marketing - Precision marketing is directed at existing customers to encourage brand
loyalty and spur buying behaviour. Precision marketing relies less on creating persuasive ads, and
more on creating deals, offers, and gimmicks that will appeal to existing customers. In order to do
this, precision marketing relies heavily on market segmentation; a technique for breaking the
market down into smaller, more specific blocks of customers with unique needs
• Use of ERP- Use of Enterprise Resource Planning Software helps manage inventory system, keep
track of stock records, manage multiple orders, accounting transactions and distribution.

Analytics Framework for FMCG Sector

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Key players
Procter and Gamble are one of the most reputed and flourishing
consumer goods companies in the country. P&G operates under three
entities in India – Procter & Gamble Hygiene and Health Care Limited,
Gillette India Limited and as one 100% subsidiary of the parent company
in the U.S. called ‘Procter & Gamble Home Products’ One of the best
FMCGs, Procter and Gamble India serve 650 million consumers.
The products are of grooming, personal hygiene, child care, health and
wellbeing and household use. Vicks, Ariel, Tide, Whisper, Olay, Gillette,
Ambipur, Pampers, Pantene, Oral-B, Head & Shoulders, Wella and
Duracell are famous Procter and Gamble labels.

Housing some of the most recognisable everyday brands, Hindustan

Unilever’s aggressive acquisition strategy and strong brand presence has
seen it become a household name across 190 countries worldwide. Its
R&D centres have sought to fully bolster its manufacturing operations
and vast distribution network, where the business has maintained its
zero non-hazardous waste-to- landfill agenda since 2017.
Additionally, a number of its initiatives have provided employment
opportunities to those in rural areas. Unilever’s Sustainable Living Plan
(USLP) has enabled half of the company’s agricultural raw materials,
such as palm oil to become sustainably sourced. Not only that, 26
sustainable living brands are now situated under the company’s
umbrella.

Amul is an integral part of India’s economic heritage. Amul traces its

journey to 1946 as a response to the exploitation suffered by the villagers
due to the involvement of the middlemen. To combat the disruptive
presence of the cartels, villagers of Gujarat formed the Kaira District Co-
operative Milk Producers Union Ltd under the guidance of Vallabhai
Patel, Morarji Desai, and Tribhuvandas Patel.
This cooperative began with just two village dairy co-operative societies
and is now called Amul Dairy. Dr Verghese Kurien was entrusted the
task of running the dairy from 1950.
Popular Amul products include milk (Deshi A2 Cow Milk, Amul Gold),
bread spreads (butter, buttery chocolate, Amul Lite), cheese (processed
cheese, Amul Gouda, Emmental Cheese, Mozzarella), beverage (Amul
Kool, Amul Kool Café) paneer, curd, milk powder (Amulya, Amul
Spray), chocolates, lactose free milk etc

Britannia is an Indian Company. And the company has won the heart of
millions for its delicious and nutritious bakery products. We all know
the popular tagline of the company “Eat Healthy, Think Better”.
For the excellent work in the industry, the company has won Golden
Peacock National Quality Award and the Ramakrishna Bajaj National
Quality Award. Britannia is recognized as one of the most trusted,
valuable and popular brands among Indian consumers in various
reputed surveys.
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From its humble beginnings in 1910 Calcutta, ITC Limited has flourished
into a premium brand which with a multi-business portfolio that includes
FMCG, hospitality, paperboards and speciality papers, agri-business and
information technology.
The Fast Moving Consumer Goods supplied by ITC Limited includes
soaps, incense sticks, apparel, cigarettes and cigars, safety matches and
food. ITC Limited has a deep understanding of the Indian consumer
psyche.
Their products boast of high quality in manufacture and packaging. Some
of their labels include old Flake, Classic, Navy Cut, Bingo, Sunfeast,
Aashirvaad, Fiama, Vivel, Wills Lifestyle, Paperkraft and Classmate.

Emami Limited is one of the leading and fastest growing personal and
healthcare businesses in India, with an enviable portfolio of household
brand names such as BoroPlus, Navratna, Fair and Handsome, Zandu
Balm, Mentho Plus Balm, Fast Relief and Kesh King.
Established in 1974, they have a portfolio of over 300 products based on
ayurvedic formulations. Its current operations comprise more than 60
countries including GCC, Europe, Africa, CIS countries and the SAARC.
Over 121 Emami products are sold every second somewhere around the
world.
Emami Limited, the flagship company of the Group, recorded a turnover
of Rs 2541.01 crore (US$ 363.58 million), FY18. It employs nearly 3,300
people, reach out to 4.0 million plus retails outlets through a network of
3,150 distributors and have invested in eight plants, four regional offices,
one overseas unit, nine overseas subsidiaries and 31 distribution centres
and one associate across India.

Dabur India Ltd. is one of India’s leading FMCG Companies with

revenues of over Rs 8,533 crore (US$ 1.22 billion) in FY19. Building on a
legacy of quality and experience of over 132 years, Dabur is today India’s
most trusted name and the world’s largest Ayurvedic and Natural Health
Care Company.
Dabur India is also a world leader in Ayurveda with a portfolio of over 250
Herbal/Ayurvedic products. Dabur's FMCG portfolio today includes five
flagship brands with distinct brand identities -- Dabur as the master
brand for natural healthcare products, Vatika for premium personal care,
Hajmola for digestives, Real for fruit juices and beverages and Fem for
fairness bleaches and skin care products.
Dabur today operates in key consumer product categories like Hair Care,
Oral Care, Health Care, Skin Care, Home Care and Foods. The ayurvedic
company has a wide distribution network, covering 6 million retail
outlets with a high penetration in both urban and rural markets.

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Parle Agro has been in the food and beverage industry since 1985. It is
India’s largest beverage company and valued at Rs. 3000 crores According
to the Annual Report of 2017-2018. Parle Agro employs about 5000 people
and successfully operates 76 highly developed manufacturing units.
The most well-known labels include Frooti, Frooti Fizz, Appy Fizz, Appy,
Bailey, Bailey Soda, Dhishoom, and Frio. Parle Agro has a strong presence
in 50 countries and multiple business verticals like beverages, packaged
drinking water, and PET Preforms.

Nestlé is a transnational food and beverage company, headquartered in

Switzerland. Nestle India is a subsidiary of NESTLE S.A. of Switzerland.
Nestle India dates back to 1912 when it began operating as the Nestle
Anglo-Swiss Condensed Milk Company. Post independence, Nestle has
worked closely with indigenous manufacturing and today has eight
manufacturing facilities in the country for their products. The India
offices are in Kolkata, Mumbai, Chennai, and Delhi.
They cater to the nutritional and wellness requirements of Indian
consumers and the popular labels include Nescafe, Maggi, Milky Bar, Kit
Kat, Bar One, Milkmaid, Nestea, Nestlé Milk, Nestlé Slim Milk, Nestle
Dahi and Nestle Jeera Raita.

Marico is currently operating in 25 countries, in the emerging markets of

Asia and Africa. Determined to make a difference to FMCG (in line with
their slogan, Make a Difference), Marico has multiple brands in men’s
grooming, fabric care, edible oils, skin care, hair care and health foods.
Marico’s household brands include Parachute, Parachute Advanced,
Saffola, Hair & Care, Nihar, Nihar Naturals, Livon, Set Wet, Mediker and
the global business offers brands such as Parachute, HairCode, Fiancée,
Caivil, Hercules, Black Chic, Isoplus, Code 10, Ingwe, X-Men and Thuan
Phat.

Started in 1897, the Godrej Group has business dealings in consumer goods,
real estate, appliances and agriculture. Godrej has a substantial standing in
Indian, Indonesian, Sub Saharan, and Latin American markets where their
goods especially household items, personal wash, and hair care products are
in high demand.
Some of their biggest brands are Good Night, Godrej Expert, Cinthol, B-
Blunt, Hit, Protekt, Godrej Aer, Frika, Soft and Gentle, Ilicit Colour,
Cuticura, and Ezee. Godrej is also a leading player in the United Kingdom as
on one the prime manufacturers of hand sanitizers and female deodorants.
The Godrej Group has cemented its position as one of the best FMCGs in the
Indian market, with a legacy dating back to 120 years now.

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After Patanjali Ayurved Limited was registered in January 2006, it was

prominently known for its Ayurvedic Medicines. PAL operated via Divya
Chikitsalaya outlets and Divya Pharmacy outlets.
In the year 2012, Baba Ramdev & Acharya Balkrishna extended Patanjali
Ayurved Limited into Indian Mainstream Retail Sector.
Patanjali Ayurved disrupted the Indian fast-moving consumer goods
(FMCG) sector with nature-based products in various categories-
Natural Health care(ghee, health supplements, diet food and beverages)
Natural food products(biscuits, oil, rice, jams, noodles, spices, pulses,
candies, juices), Hearbal Home care(Agarbattis, Hawan Samagri,
Camphor, cotton wicks & even air fresheners). Ever since its
establishment, Patanjali has been known for its astonishing growth rate.
The company has established itself as a major company with a 10,000 cr
+ annual turnover in around a decade presently giving a tough
competition to the giants of the industry including Hindustan Unilever
Limited (HUL) .

Colgate-Palmolive (India) Ltd was incorporated in the year 1937. Colgate-

Palmolive (India) Limited is India's leading provider of scientifically
proven oral care products.
The range includes several variants of toothpastes, toothpowder,
toothbrushes and mouthwashes under the 'Colgate' brand, as well as a
specialized range of dental therapies under the banner of Colgate Oral
Pharmaceuticals.
The company also provides a range of personal care products like shower
gel, body wash, hand wash, men's care products under the Palmolive
brand name. Colgate-Palmolive Company, U.S.A. is the company's
ultimate holding company.

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Key Strategies: Product Launches | Expansion Schemes |

M&As in the sector
Product Launches:
• In July 2020, Mother Dairy forayed into bread segment as part of its strategy to diversify
business and announced its target to more than double its revenue to Rs 25,000 crore (US$
3.55 million) in the next five years.
• In June 2020, ITC launched Salvon Germ Protection wipes.
• In June 2020, Emami launched organic aloe vera gel under BoroPlus brand.
• In June 2020, Amul launched ginger and tulsi milk variants to boost immunity.
Relevant Mergers & Acquisitions
• ITC Ltd completed the acquisition of spice-manufacturer Sunrise Foods Private Ltd at an
upfront cash deal price of Rs 2,150 crore (US$ 305.01 million) (Jul’20)
Shares of Sunrise Foods were acquired on a “cash-free, debt-free” basis. In addition, the sellers
are entitled to contingent consideration of an amount not exceeding ₹150 crore, which is
payable upon Sunrise achieving mutually agreed operational and financial milestones over a
period of two years.
• Tata Consumer Products Limited (TCPL) acquired PepsiCo’s stake in NourishCo Beverages
Limited (May’20)
It is a 50:50 joint venture between the two companies as it moves to build a strong play in the
packaged beverages market. This move is consistent with Tata Consumer’s focus on widening
its portfolio in the food and beverages space.
• HUL completes merger with GSK Consumer Healthcare; buys Horlicks brand (Apr’20)
Hindustan Unilever (HUL) said on Wednesday that it had acquired the Horlicks brand from
GlaxoSmithKline Consumer Healthcare (GSK CH) for Rs 3,045 crore, exercising the option
available in the original agreement made between its parent company Unilever and GSK.
HUL would have had to pay royalty to its parent for the brand’s usage in India.
• Hindustan Unilever Limited (HUL) signed an agreement with Glenmark Pharmaceuticals Ltd
to acquire its intimate hygiene brand VWash. (Mar’20)
VWash acquisition is strategic and gives HUL an entry into rapidly growing female intimate
hygiene segment. It enables them to serve consumer needs through scientific solutions. With
this acquisition, HUL can unlock significant synergies and scale up the brand by building
awareness, driving penetration, leveraging distribution and enhance the offering for the
chemist channel.
• Haldiram Bhujiawala acquires 2 brands from Everstone capital (Aug’19)
The transaction is worth Rs 100 crore and includes brands “the coffee bean & tea leaf” and
“Gelato Italiano” ice cream.As part of the deal the company acquired 89 outlets in order to
expand the coffee chain and ice cream business in India.
• Patanjali’s merger with Ruchi soya Industries (Aug’19)

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Patanjali will invest Rs 4350 crore in debt ridden Ruchi soya that owns brands like
Mahakosh, Nutrela and Sunrich in order to write off some part of Rs 9345 crore debt which
Ruchi Soya owes to its creditors.
• Acquisition of Pepsico franchise rights by Varun beverages in south and west India (Feb’19)
VBL has signed an agreement with Pepsico India for a national bottling, sales & distribution
rights which will increase its outreach to 27 states and 7 union territories of India. The
estimated worth of the deal is around Rs 1850 crore.
• Acquisition of Kraft Heinz India business by Zydus Wellness (Jan’19)
The deal is worth Rs 4595 crore which includes the acquisition of Heinz India’s consumer
business that comprised of brands like Complan, Glucon D, Nycil and Sampriti Ghee which
enjoys a legacy of over 50 years.
• Earlier acquisitions: -
Name of Target Name of Acquirer Merger/ Acquisition in
year
GlaxoSmithKline Consumer Hindustan Unilever Limited Acquisition in 2018
Healthcare (GSKCH) India (HUL)
Bombay Shaving Company Colgate Palmolive Acquisition (14 per cent
stake) in 2018
Beardo Marico Acquisition (26 per cent
stake) in 2018
Brillare Science Emami Acquisition (45 per cent) in
2018
D&A Cosmetics Proprietary Ltd and Dabur India Acquisition in 2017
Atlanta Body & Health Products
Proprietary Ltd
Helios Lifestyle Pvt Ltd Emami Ltd Acquisition (30 per cent
stake) in 2017
HyperCity Future Retail (Future Group) Acquisition in 2017

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Favorable policies aiding this sector (with relevant inputs

from Union Budget 2020)
Government Initiatives
Owing to impact of Covid-19, the government seems to have been proactive in terms of the
measures adopted to contain the adversity of the crisis – enhancing liquidity in the hands of
consumers, focusing on social schemes such as MGNREGA, providing food to the vulnerable
sections of society, enabling timely harvesting of crops by farmers, ensuring that the food-grain
procurement programs of the government are completed on time, announcing measures to
protect MSMEs, and taking key decisions related to agricultural reforms are some of the positive
steps taken by the government-these will benefit the business as well as the consumers.
• The rationalization of individual tax rates and abolition of DDT are likely to have a positive impact
in terms of increasing disposable income and consequently, provide impetus to the sector.
• Introducing National Logistics Policy, aimed to clarify the roles of the union government, state
governments, and key regulators and create a single window e-logistics market are a few strategic
steps in making MSMEs competitive.
• The increased outlay of INR 1.70 lakh crore for transport infrastructure in 2020-21 is an important
move to improve logistics infrastructure in the country. This in turn will ensure higher efficiencies
across the whole supply chain right from farm to fork.
• Enabling NBFCs to extend invoice financing to MSMEs through TReDS; schemes to provide
subordinate debt for entrepreneurs of MSMEs.
• Reducing the compliance burden on small retailers, traders, and shopkeepers who comprise the
MSME sector, by raising the turnover threshold for audit from the existing INR 10 million to INR
50 million, provided that these businesses carry out less than 5 percent of their business
transactions in cash.
• Liberalizing the incentives for start-ups, by increase in the turnover threshold for tax holiday to
INR 1000 million and extension in the period of eligibility for claim of deduction from the existing
7 years to 10 years.
• Some of other earlier initiatives to promote the FMCG sector in India are as follows:
• The Government of India has approved 100 per cent Foreign Direct Investment (FDI) in the
cash and carry segment and in single-brand retail along with 51 per cent FDI in multi-brand
retail.
• The Government of India has drafted a new Consumer Protection Bill with special emphasis
on setting up an extensive mechanism to ensure simple, speedy, accessible, affordable and
timely delivery of justice to consumers.
• The Government of India has provided a full tax rebate for an income up to Rs 5 lakh (US$
6,930), which is expected to boost disposable income in the hands of the common people.

GST Framework
• The rate of GST on services lies between 0-18 per cent and on goods lies between 0-28 per cent.
• The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG
products such as Soap, Toothpaste and Hair oil now come under 18 per cent tax bracket against
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the previous 23-24 per cent rate. Also rates on food products and hygiene products have been
reduced to 0-5 per cent and 12-18 per cent, respectively.
• Major consumer product manufacturing companies like PepsiCo, Dabur, Hindustan Unilever
etc. have aligned their supply chains, IT infrastructure and warehousing systems ahead of
unified GST regime, to facilitate seamless interstate movement of goods.
• Warehousing cost for FMCG companies is estimated to fall by 25-30 per cent backed by the
implementation of the GST. The number of warehouses will decrease from 45-50 to 25-30 and
the size of warehouses will become larger.
• The Government has reiterated its commitment to rationalize GST through simplification and
rate rationalization. The Finance Minister highlighted the need for electronic invoice, as a leap
towards digitization of GST, and to curb fake invoices and fraudulent input tax credits.
• In view of fake invoices detected in GST input tax credit matters, penalty provisions are
proposed to be introduced in income-tax law and a deterrent to false entries or omission of
entries.

Investments/ Developments
The government had already allowed 100 per cent Foreign Direct Investment (FDI) in food
processing and single-brand retail and 51 per cent in multi-brand retail. This would bolster
employment and supply chains, and also provide high visibility for FMCG brands in organised retail
markets, bolstering consumer spending and encouraging more product launches. The sector
witnessed healthy FDI inflows of US$ 14.67 billion, during April 2000 to March 2019.

Other Policy Changes

• FSSAI sticks to its stance on labelling norms
• The Food Safety and Standards Authority of India (FSSAI) has decided to stick to its
proposal for making it mandatory for food products that are high on fat, sugar and
salt content levels to display red-colour coding on their labels. In its draft labelling
regulations, released after two years of consultations with the packaged food
industry, the FSSAI maintained its stance. However, it proposes to implement this
norm in a phased manner over a period of three years.
• Relaxation of license rules
• Industrial license is not required for most of the food and agro-processing
industries, except certain items such as beer, potable alcohol and wines, cane sugar
and hydrogenated animal fats and oils as well as items reserved for exclusive
manufacture in the small-scale sector.

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Blockbuster News

Marico enters ayurvedic segment with immunity boosting products

“There has been a marked change in consumption habits with consumers looking for preventive
solutions in the healthy and immunity-boosting space.” said Sanjay Mishra, chief operating officer
– India Sales at Marico Limited.

We’ll focus on nine power brands to strengthen healthcare: Dabur chairman Amit Burman

“Demand dynamics have undergone a sea change with consumers increasingly seeking ayurvedic
products that build immunity, besides products to meet their personal and household hygiene
needs,” he said.

Sanjiv Puri reshaping ITC for the new normal

After value addition, for instance, ITC’s noodles brand, Yippee grew over 50% during the
lockdown, its Savlon portfolio grew five times that of last year and staples convenience foods and
health & hygiene products, representing around 75% of the FMCG portfolio recorded a growth of
34% in the first quarter.

Post-Diwali demand critical; consumers in small markets 'true heroes' of pandemic: Nestle India

While the tier II, III and IV towns are still counted as part of the urban market for the company,
these smaller places are witnessing twice the growth rate seen in larger metros, even as the
company has seen its rural markets outpacing urban counterparts this year.

Amway to invest Rs 150 crore on 'digital transformation’

Amway chief executive Anshu Budhraja said: “The ongoing global pandemic has proved to be a
catalyst for smooth transition of our business from hi-touch to hi-tech. It has also given rise to
new behaviour and consumption habits like online shopping, social campaigns and engagement
through social communities."

FMCG companies to divert marketing spends to influencers, not celebrities: Duff & Phelps

Close to half of fast-moving consumer goods (FMCG) companies will spend up to 50% of their
marketing budgets on social media influencers post-Covid-19 and not on celebrities, a new report
by governance, risk and transparency solutions provider Duff & Phelps said.

Relief for FMCG after Centre relaxes packaging norms, lets companies use existing inventory

Manufacturers will have to stamp or paste stickers declaring details of the correct month and year
of manufacturing and packing, according to an order issued by the Consumer Affairs Ministry.
Without this relaxation, packaging material would have been wasted because they are not allowed
to put stickers to change the details.

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Procter & Gamble to invest Rs 400 crore to build local vendor partnerships

The maker of Pantene shampoo and Ariel detergent said this is part of its ‘vGROW’ program that
focuses on identifying and collaborating with start-ups, small businesses, individuals or large
organizations that can offer innovative solutions.

RB's toilet cleaning brand Harpic reaches 2 cr households, Durex gains market share

Besides, the company has also seen an increase in sales of its sexual wellbeing brand, Durex,
during the July-September quarter in emerging markets such as India and China.

Optimistic about future; revival signs by strong rural demand, in-home consumption: PepsiCo
India

As the festive season peaks, the company expects enhanced demand in categories like snacks,
juices and other carbonated beverages led by the sentiment of celebration.

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References
i) https://www.ibef.org/industry/fmcg.aspx
ii) https://www.equitymaster.com/research-it/sector-info/consprds/Consumer-Products-
Sector-Analysis-Report.asp
iii) https://dare2compete.com/i/fmcg-5772
iv) https://www.ibef.org/download/FMCG-August-2020.pdf
v) https://blog.smallcase.com/impact-of-covid-19-on-the-fmcg-sector-in-india/
vi) https://www.livemint.com/industry/retail/covid-19-hul-s-mehta-sees-demand-revival-by-
2020-end-or-early-2021-says-report-11590744521740.html
vii) https://walnutfolks.com/patanjali-case-study/
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Palmolive-(India)-Ltd/118
ix) https://www.pwc.in/assets/pdfs/publications/2016/shaping-consumer-trends.pdf
x) https://www2.deloitte.com/content/dam/Deloitte/in/Documents/tax/in-tax-consumer-
union-budget-industry-impact-noexp.pdf
xi) https://hbr.org/2009/04/getting-brand-communities-right
xii) http://www.mergersindiainfo.com/sector/FMCG
xiii) https://www.thehindubusinessline.com/companies/itc-completes-acquisition-of-spice-
maker-sunrise-in-2150-cr-all-cash-deal/article32210580.ece
xiv) https://www.livemint.com/companies/news/tata-consumer-to-acquire-pepsico-s-stake-in-
nourishco-beverages-11589809600548.html
xv) https://www.financialexpress.com/industry/hul-completes-merger-with-gsk-consumer-
healthcare-buys-horlicks-brand-for-rs-3045-
crore/1916520/#:~:text=Hindustan%20Unilever%20(HUL)%20said%20that,latter%20at%20
Rs%2031%2C700%20crore.
xvi) https://www.business-standard.com/article/companies/hul-completes-acquisition-of-
hygiene-brand-vwash-from-glenmark-pharma-120062600531_1.html
xvii) https://www.financialexpress.com/economy/coverting-risk-into-opportunity-these-4-
sectors-may-see-massive-growth-in-post-covid-era-economic-revival/2048753/
xviii) https://cio.economictimes.indiatimes.com/news/corporate-news/fast-moving-consumer-
goods-to-move-faster-post-covid-19/76436983
xix) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3603028
xx) https://www.thefinancialexpress.com.bd/education/impacts-of-covid-19-on-fmcg-
industry-1593628831

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