Environmental Analysis of FMCG Industry

Macro Environmental Analysis

1. Demographic Environment – Population growth has a positive impact on FMCG industry as it creates more and more demand for FMCG industry products.

As India is the one of the largest economy in the world in terms of population there are many opportunities for FMCG products.

2. Population Age Mix – The population age mix has impact on the variety of products that FMCG companies can provide. FMCG companies can diversify their products according to the population of

age mix of market. In India more than 40% of population comprises of young people with

diversified income groups hence there are more opportunities for Personal Care and packaged Food Environment Expansion.

Hindustan Unilever Limited has so much diversification in its personal care products.

3. Economic Environment – Increase in purchasing power of people has a positive impact on FMCG Industry, India is one of the largest economies in the world in terms of purchasing power with a strong middle class base. In India, there is no problem regarding the choice of appropriate market segment because of rapid urbanisation increase in demand, presence of large number of urban population as a result of which large number of opportunities are available.But as the purchasing power of people increases the company has to create more and more innovative products.For example, Detergent Segment of HUL has about 36% market share in that segment. This segment accounts for at least 40% of the total revenue. HUL’s market share in detergent segment has declined in the last 2years due to heavy competition and increase in spending pattern.

4. Technological Environment – Basic Technology for manufacturing is easily available. Also technology for most products has been fairly stable. Modifications and improvement rarely change the basic process but use of new and better chemicals can improve the quality if the products.HUL has research centers in Bangalore and Mumbai which has more than 200scientists and technologists. Addressing the washing needs of consumers is a key challenge for laundry research group. How to minimize water usage while washing? How to impact stain repellent treatment to garments? There are the questions which have been answered by HUL R&D team.

5. Political And Legal – Government policies and legal laws has a affect on FMCG sector.Indian Government’s policies of lifting of the quantitative restrictions reductions in excise duties and automatic foreign investment has fostered HUL’s growth.Removal of the regulatory framework has allowed HUL to explore every product and segment without constraints on production capacity.

Micro Environment

Competitors - Most products categories in FMCG require minor investment in plant and machinery and other fixed assets. Also, the business has low working capital intensity as bulk of sales from manufacturing takes place on cash basis as there are large number of competitors. There is a major threat from small scale industries in rural sector.

Competitors of HUL – ITC, Nestle India, Amul, Marico, Dabur, Procter & Gamble

Suppliers – The bargaining power of suppliers of raw materials and intermediate goods is not very high. There is ample number of substitute suppliers available and raw materials are easily available in the marketed and most of the raw materials are homogeneous. There is no monopoly situation in the supplier side because the suppliers are also competing themselves.

HUL has very strong supplier base. Supplier’s power is considerable in case of soaps and detergent regent of HUL as there is act of costing involved upon switching to suppliers.

Consumers – As there is increase in purchasing power and knowledge of consumers demand for more wide variety of products.

Consumers want more variety in personal care, packaged foods. They wants different packaging prices. As a result HUL has introduced wide variety of products range.

Distribution Channels –For an FMCG company distribution network should be very wide. FMCG companies should provide their products in each and every big retail store to local grocery shop. Then only it can create more consumers and can maintain current consumers.

Demand & Supply – Currently, only a small percentage of the raw materials in India are processed into value added products even as the demand for processed and convenience food is on the rise. In the personal care segment, the low penetration rate in both the rural and urban areas indicates a market potential.

Government policies towards FMCG sector – In India has enacted policies aimed at attaining international competitiveness through lifting of the quantative restrictions, reduced excise duties, automatic foreign investment and food laws resulting in an environment that foster growth. 100% export oriented units can be set up by government approval and use of foreign brand names is now freely permitted. The Indian government has abolished licensing for almost all food and agro processing industries.

SBU’s of HUL

There are only three SBU’s of HUL –

1. SBU – FoodsBrands:-

Brooke Bond \Annapurna Red Label Brooke Bond Taj Mahal Brooke Bond Taaza Bru Kissan Kwality Walls Lipton, etc.

2. SBU - Home CareBrands :-

Active Wheel Comfort (Fabric Condition) CIF (Utensil Cleaner) Rin Domex Surf Excel Vim, etc.

3. SBU - Personal CareBrands :-

AXE Breeze Clinic Plus Fair & Lovely Lux Pepsodent Sunsilk, etc

1. Personal Care –

Market Growth Rate – 14% Integrated Market Share – 40%

2. Processed Food –Market Growth Rate – 13.5%Integrated Market Share – 25%

3. Water Purifier –Market Growth Rate – 22%Integrated Market Share – 20%

4. Home Care –Market Growth Rate – 4.5% Integrated Market Growth – 20%

The Boston Consulting Group’s Growth-Share Matrix

20%-18%-16%-14%-12%-10%- 8%- 6%- 4%- 2%- 0M

arke

t G

row

th R

ate

?Question marks?3Cash cow4Dogs10x 4x 2x 1.5x 1x Relative Market Share.5x .4x .3x .2x .1x Stars21

Acknowledgement

We take this opportunity to convey our sincere thanks & gratitude to all those who have directly & indirectly helped & contributed towards the completion of this project.

First & foremost we would like to thank Dr. S.N.Tripati for her constant guidance & support throughout this project. During the project, we realized that the degree of relevance of the learning being imparted in the class is very high. The learning enabled us to get a better understanding of the subject which we studied.

Contents

Contents

Acknowledgement Introduction SBU’s BCG Matrix Micro Environment Macro Environment Segmentation Targeting Positioning

Segmentation of Personal Care

Demographic Segmentation – Hindustan Unilever has adopted demographic

segmentation for its Personal Care unit to a large extent. All the brands in its Personal Care Unit have been launched out of demographic segmentation.Various demographic variables used by Hindustan Unilever to segment markets are-

A) Age & Life Cycle Stage –Hindustan Unilever has been launched its products under its personal care unit based on age and life cycle of people.

For Ex – Ponds age miracle is targeted to35+ age group people. For preventing ageing lines in the skin.AXE deodorants are focussed on youth generation. The deodorants and body sprays launched by company under its brand AXE are targeted towards young people.

B) Gender – Hindustan Unilever has launched many products under its personal care unit based on gender differences.

For Ex – Products launched under brand “AXE” are only for males.Brands like Dove, Breeze, Lux, Lakme, Ponds are focussed towards female segment.Under its brand “Clear”, “Clinic Plus” HUL has launched different for men & women.Earlier, Fair & Lovely has a product range only for women but now it has launched a separate facial cream for men also.

C) Income – HUL’s personal care unit has done market segmentation based on income level of people and has launched products for different income groups.

For Ex – “Rin” & “Surf Excel” for high class people & “Wheel” is for low class people.Facial creams and other skin care products launched under brand “Fair & Lovely” are priced lower than products under brands like “ Lakme” & “ Ponds”.In shampoos, “Sunsilk” is priced lower than “dove” shampoos.

D) Generation – Hindustan Unilever has launched products like AXE deodorants sprays, Rexona deodorants which are totally focussed on young generation.

Geographic Segmentation – Hindustan Unilever has done geographic segmentation launching personal care products based on climate of different regions in the country.

A) World Region – Asia

B) Countries & Cities – Developing countries like India & Pakistan

C) Targeted Area – Sub-Urban & Semi Urban & Rural Areas

D) Weather – HUL launched cold cream for people living in such areas where dryness in the skin during winters. It has various winter care cream and lotions under its brand “Ponds” & ‘LAKME” like ponds cold cream, lakme Fruit Moisturiser. Company also launched Vasline for dryness in lips during winters for people in such areas.

Psychographic Segmentation – Hindustan Unilever has segmented its personal care market on the basis of lifestyle and values of people.

For Ex – People who are more concerned for hygiene. It has launched lifebuoy soap which is promoted as a soap which is very effective in hygiene.For women who have lifestyles in which they require cosmetics and makeup. Company has launched various cosmetics under its brand “Lakme”. Lakme is promoted as a lifestyle brand.

Behavioural Segmentation – A) Decision Rules – There is no relevance of segmentation the market on the

basis of decision roles -for personal care unit.

B) Behavioural Variable – Occasions – Occasions cannot be relevant for segmenting personal care market.

Benefit – HUL has classified its personal care market on the basis of benefits which people seek from different products.

For Ex – It has launched anti dandruff shampoos “Clinic All Clear”, “Dove Dandruff Therapy” for people who have dandruff problem.

For people having hair fall it has launched shampoos like “Dove Hairfall Defence”.Ponds Age Miracle for women seeking some solution for their ageing lines.For conditioning of hairs company launched conditioners with “Dove” &”Sunsilk” shampoos.Lifeboy offers benefit of killing germs from body and hygiene.Rexona deodorants offer benefit of escape from body odour.

User Status – Every product at personal care unit has its non-users, ex-users, potential users, first time users and regular users.

For Ex – People in the old age are non users for AXE deodorants.

Young Girls who are about to reach their teenage would be potential users for cosmetics range offered by lakme.Women crossing the age of 30 would be first users for products like “Ponds Age Miracle”.Some people have very stable choice in shampoos & soaps, so they are regular users of Sunsilk, Pears, Dove.

Usage rate – HUL has segmented its market into light, medium & heavy product users.For products such as cosmetics offered by Lakme, some women who are very fond of doing makeup are heavy user of Lakme products.Women who only do makeup in parties or specific occasions are medium users of Lakme cosmetics.Women who did not like much use of cosmetics on their skin and avoid use of cosmetics to a very large extent are light users of lakme cosmetics.

Loyal StatusA) Hard Core Loyal –Customers who are core loyal to their band can buy only

that product.For Ex –If consumer uses “pears” than he cannot use any other soap.

B) Spilt Loyal – In HUL there are Customer who can change their choices to two or three products.For Ex – If consumer uses pears and “pears” are not available in the soap than he can buy “dove”.

C) Shifting Loyal – In HUL there are customer who change their brands time to time.

For Ex – If consumers now buy a “Lux”, after sometime he may shift to another brand like “Dove”, “Pears”.

D) Switchers – In HUL also consumers always change their flavour of product.

For Ex – If today consumer buys “Lux Beauty” after sometime he starts buying other flavour like “Lux International”.

Market Targeting

Evaluating the selecting the Market Segments –

Hindustan Unilever comes under the Market Specialisation as it concentrates on serving many needs of particular customer group through its personal care unit.

Hindustan Unilever serves many needs of its target segment by providing all types of personal care products like soaps, shampoos, hair oils, deodorants, cosmetics, hair conditioners, etc.

Effective Segmentation Criteria

Measurable – The size, purchasing power and characteristics of the segment that HUL has targeted for its personal care unit is easily measurable.The size of segment is very large as generally every person uses a personal care product. Purchasing power of people in the target segment at HUL is different and company has launched its products accordingly.For Ex –Sachets of shampoos and even conditioners are also available.

Substantial – The target segment of HUL is very large and is profitable enough to serve. The demand for personal care products does not full at any time hence the segment always proves to be profitable.

Accessible – The personal Care products are available at each & every corner of the country. Its accessibility is easy.

HUL was more focussed on T.V. commercial advertisement & print media advertisement because there target audience was mostly house wives.

Wall printing, radio, newspaper were more focussed on rural area.

The advertisement should come between 7 to 10p.m. on “Star Plus” & that advertisement should be repeat itself on alternative breaks this is to be done because HUL target audience. Women are in front of the television at this time.

87%of the premium class population of India read “Times Of India”, the advertisement should come on week days should basically be on the 2pages of the paper.