FMCG

FMCG Industry

Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG). Items in this category include all consumables (other than groceries/pulses) people buy 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 extends to certain electronic goods. These items are meant for daily of

frequent consumption and have a high return.

FMCG main segments

1. Household Care: Fabric wash, Household cleaners 2. Personal Care: Oral care, hair care, skin care, cosmetics/deodorants, perfumes, feminine hygiene and paper products 3. Food & Beverages: Health beverages, staples/cereals, bakery products, snacks, chocolates, ice cream, tea/coffee/soft drinks, processed fruits and vegetables, dairy products, and branded flour 4. Health Care: OTC products and ethicals

1. Household Care: Fabric wash, Household cleaners 2. Personal Care: Oral care, hair care, skin care, cosmetics/deodorants, perfumes, feminine hygiene and

paper products 3. Food & Beverages: Health beverages, staples/cereals, bakery products, snacks, chocolates, ice cream,

tea/coffee/soft drinks, processed fruits and vegetables, dairy products, and branded flour 4. Health Care: OTC products and ethicals

2006 2007 2008 2009 2010 2011 2012 2015F 2020F0

27.5

55

82.5

110Trends in FMCG revenues over the years (USD billion)

•Fourth Largest sector in the Indian Economy.•Has grown at an annual average of 11% over the last decade.

43%

22%

12%

8%

4%

4%2% 5%

Food Products Personal Care Fabric Care Hair Care Households OTC products Baby Care Others

Market break-up by revenue (2009)

Urban66%

Rural34%

Urban/Rural Industry break-up (2013)

Future Expectations:

• Penetration of many product categories is still low. Even among those where the penetration is higher, per capita consumption is comparatively low, thereby offering scope for high growth in future.

• India offers huge opportunity for the FMCG market compared to its regional counterparts. Per capita consumption of skincare products (USD0.3), shampoos (USD0.3) and toothpastes (USD0.4) indicates high potential for FMCG companies to expand their reach.

Modern6%

Traditional 94%

Modern30%

Traditional 70%

2012 2020E

Growth Drivers of Indian FMCG Sector

Porters Five Forces Analysis

Competitive Rivalry Private label brands by retailers are priced at a discount to mainframe brands limits competition for the weak brands Highly fragmented industry as more MNCs are entering

Threat of New Entrants Huge investments in setting up distribution network and promoting brands Spending on advertisements is aggressive

Substitute Products Presence of multiple brands Narrow product differentiation under many brands

Bargaining Power of Suppliers

Big FMCG companies are able to dictate the prices through local sourcing from a fragmented group of key commodity suppliers

Bargaining Power of Customers

Low switching cost induces the customers’ product shift Influence of marketing strategies

Colgate Palmolive (India)

11

IntroductionColgate Palmolive (India) is the subsidiary of American multinational , Colgate Palmolive

consumer products company focused on the production, distribution and provision of household, health care and personal products.

It is India’s 4th largest personal care product manufacturer, with market cap. of Rs 26,534 crore.

For the third consecutive year, ‘Colgate’ has been ranked as the “#1 Most Trusted Brand” by Brand Equity’s Annual Survey.

It is noteworthy that Colgate is the only Brand to be ranked in the top 3 from the inception of the survey in the year 2001.

Colgate has market share of 57.1% in toothpaste category and 42.3% in toothbrush category.

Products

56%21%

13%9%

Toothpaste Market share

CPIL HUL DABUR Others

Major Competitors:1. Hindustan Unilever

2. Dabur India3. Godrej Consumer

4. Marico5. P and G

Product Name Sales Value(Rs. Million) % of Total Sales

Soaps, Cosmetics and Toilet Preparation 31323.76 82.62

Toothbrushes and Shave Brushes 5044.96 13.31

Soaps, Cosmetics and Toilet Preparation 1180.75 3.11

Other Operating Revenue 363.6 0.96

Main Revenue Sources (2014)

51%27%

22%

Major Shareholders

Promoter and promoter GroupInstitutions Non-Institution

Category of Shareholder %of total shares

Total shareholding of Promoter and Promoter Group

51

Mutual Funds / UTI 1.68

Financial Institutions / Banks 0.27

Central Government / State Government(s)

0.11

Insurance Companies 4.14

Foreign Institutional Investors 19.16

Foreign Portolio Investor ( Corporate)

1.37

Bodies Corporate 1.33

Individual shareholders holding nominal share capital up to Rs. 1

lakh20.14

Individual shareholders holding nominal share capital in excess of

Rs. 1 lakh0.17

Others( NRIs, Trusts, Foreign Nationals)

0.63

Share holding pattern is more or less same. The promoter holding is constant at 51%

2009 2010 2011 2012 2013 20140

5.5

11

16.5

22

27.5

FII’s shareholding pattern

2010 2011 2012 2013 20140

0.275

0.55

0.825

1.1

Quick RatioPeer Average CP

2010 2011 2012 2013 20140

0.4

0.8

1.2

1.6

2

Current RatioPeer Average CP

2010 2011 2012 2013 20140

40

80

120

160

200

Retrun On EquityPeer Average CP

2010 2011 2012 2013 20140

5.25

10.5

15.75

21

26.25

Net Profit MarginPeer Average CP

2010 2011 2012 2013 20140

45

90

135

180

225

Retrun on Capital Employed Peer Average CP

2010 2011 2012 2013 20140

12.5

25

37.5

50

Return on AssetPeer Average CP

2010 2011 2012 2013 20140

25

50

75

100

125

Dividend Payout RatioPeer Average CP

SWOT ANALYSIS

Strength1. It is one of the biggest brands in the personal care consumer products industry.

2. It has over 38000 employees globally.3. One of the market leaders globally with excellent R&D.

4. Colgate focuses on two core businesses: Oral Care, Personal Care .5. Colgate has excellent reach and distribution.

6. Excellent advertising and brand visibility of products with a strong customer loyalty for brands.

7.Diversified product mix

Weakness1. Market share is limited due to presence of other strong FMCG brands.

2. Fake brands are supplied under their brand names.3, Revenues mainly dependent on one brand i.e Colgate Toothpaste.

Opportunity 1. Tap rural markets and increase penetration in urban areas

2.Mergers and acquisitions to strengthen the brand3. Rural consumption has increased, led by a combination of increasing incomes and higher

aspiration levels there is an increased demand for branded products in rural India. 4. Low penetration levels in rural market offers room for growth.

5. The FMCG industry is expected to grow at the rate of 12-17% in next decade.

Threats1. Intense and increasing competition amongst other FMCG companies

2.FDI in retail thereby allowing international brands3. Competition from unbranded and local products

Future Plans &

News

New Projects1. Toothpaste manufacturing facility at Sanand in Gujarat to cater the increasing demand.

2. Toothbrush manufacturing facility at Sricity in Chittoor District in Andhra Pradesh.

New Products 1. Colgate® Maximum Cavity Protection plus Sugar Acid NeutralizerTM, its first and only family

toothpaste that directly fights sugar acids, the leading cause of cavities. 2. Colgate Active Salt Healthy White toothpaste which offers the benefit of ‘Yellowness removal’ from teeth. This product has the combination of salt and lemon that delivers

yellowness removal. 3. Colgate Maxfresh Fresh Tea toothpaste which offers consumers a unique and exciting Tea

flavor experience.4. Colgate® Slim Soft, a toothbrush with super slim and ultra-soft tapered bristles - 17X slimmer

than ordinary end-rounded bristles; 5. Colgate Wave Gum Comfort Toothbrush

6. Colgate Super Flexi Toothbrush

News1. GST will be implemented from next fiscal year, it will help the FMCG industry.

2. The policy changes announced in Union Budget of 2015-16, will help the sector to grow, like reduction in corporate tax.

3. Indian economy is expected to grow as much at the rate of 8.3% in the fiscal year 2015-16.

The Verdict

The company is fundamentally strong with strong financials and a good business model.