Marketing of Fast Moving Consumer Goods (FMCG).

• Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG).

• FMCG products are those that get replaced within a year.

• FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars.

• The factors that made the FMCG industry a highly competitive one are low operational cost, solid distribution networks, and emergence of new FMCG companies.

• In addition, the growth of the world’s population is another responsible factor for the huge success of this particular industry.

• Some of the leading FMCG companies all over the world are Sara Lee, Nestlé, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, etc.

• A subset of FMCGs are Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops.

• These are replaced more frequently than other electronic products.

• White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc.

• The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products.

• Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge.

THE TOP 10 COMPANIES IN FMCG SECTOR

Sr. Company1. Hindustan Unilever Ltd.2. ITC (Indian Tobacco Company)3. Nestlé India4. GCMMF (AMUL)5. Dabur India6. Asian Paints (India)7. Cadbury India8. Britannia Industries9. Procter & Gamble Hygiene and Health Care10. Marico Industries

FMCG Product Categories

• There are mainly 4 product categories in FMCG:

• Home and Personal Care (Home Care and Personal Care)

• Foods and Beverages • Cigarettes • Alcohol

• Household Care: It can be divided into the following categories

• 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

• Personal Care: It can be divided into the following categories• Oral Care - Toothpaste • Skin Care - Creams, Lotions, Gel• Hair Care - Hair Oil, Shampoos • Personal Wash - Soaps • Cosmetic & Toiletries • Talcums • Deodorants • Perfumes • Paper Products - (tissues, diapers, sanitary) • Shoe care

Foods

• Confectionary • Staples/ Cereals • Bakery products - Biscuits, bread, cakes • Snack food • Chocolates • Ice cream • Processed fruits • Vegetables • Meat • Dairy products • Branded flour, rice, sugar

Beverages

• Tea • Coffee • Juices • Bottled water • Health beverages • Soft drinks

Innovations in FMCG sphere

• There are two types of innovations – • Evolutionary and • Revolutionary

• Evolutionary: Its just an addition to some innovation/ launch etc done in past. Just take the example of Colgate Maxfresh. Its just an addition of a new attribute to the existing portfolio.

• Revolutionary: It is something out of box - altogether new where nobody has entered so far. Lets take an example of Lays Kurkure where they did some innovation with Snack Foods category in FMCG.

• Other example is Salt Toothpaste - its exactly not revolutionary, but its really a different value propositions which consumers never thought of. This was possible after lot of R&D done in area of dental

• Now think of weird innovations - some liquid which when applied on hands will remove all the germs and make your hand absolutely clean without even using water.

• It has an awesome utility - its is revolutionary. But here the important point is whether this is launched in right time to the right markets for set of consumers.

Trade Schemes for different FMCG Categories

• Different FMCG categories should have different trade schemes.

• Atta: Quantity Purchase Scheme(QPS) will work here. This will have different slabs and will have higher incentive for higher slabs.

• Eg. On buy of 10 tonnes of Atta for a period of 2 months, 5 % additional discount will be given and a washing machine will be given

• Salt: Its more of a wholesale driven category, where price is a crucial dimension. Just by cutting 30 paisa on a Kg of Salt, respective companies can increase their sales.

• Biscuits: Here trade schemes are in form of some discount if they clear the bill on time. Its called CD - Cash Discount - normally companies give 1% CD. but its very important to understand that its more of a consumer pull category and trade push doesn't work here.

• Soft Drinnks: QPS works here as well.

Growth Drivers: FMCG Sector

• Disposable Income: • Organized Retail: • Distribution Depth - Rural Penetration: • Buying Pattern Shift: • Favorable Indian Economy & Demographics

Disposable Income

• There is increase in disposable income, observed in both rural and urban consumers, which is giving opportunity to 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.

• The increasing salaries, along with rising trend of perks in the corporate sector at regular intervals, have increased people’s spending power. As per some research, there is a high correlation between Disposable per capita and HPC per capita.

Organized Retail

• The emergence of organized retail have lead to more variety with ease in browsing, opportunity to compare with different products in a category, one stop destination (entertainment, food and shopping) etc, which is playing an important role in bringing boom in the Indian FMCG market.

• Currently the modern trade is capturing 5% of the total retail space, which will increase to 10% and 25% in 2010 and 2025 respectively. Also, as the credit card and organized retail trend picks up, people won’t think much while buying and buy more.

Distribution Depth - Rural Penetration:

• There are 5500 towns and 6.38 Lacs villages with 2.5Mln and 5Mln outlets respectively. Due to saturation and cut throat competition in urban India, many FMCG companies are devising strategies for targeting rural consumers in a big way. Many FMCG companies are focusing on increasing their distribution network to penetrate with a step by step plan.

• This is the reason that FMCG urban market size has dropped from 50% to 29% in last 5 years. The FMCG market size for semi-urban and rural segment was 19% and 52% respectively for the year 2006-07. As per FICCI, the FMCG market size for urban, semi-urban and rural for year 2007-08 was expected to be 57%, 21% and 22%, which clearly shows that rural market is the growth engine for FMCG growth.

• Though the urban markets are growing too, the incremental addition in consumer’s households is much more in rural space as compared to urban markets.

• The planned development of roads, ports, railways and airports, will increase FMCG penetration in the long term. 180 million rural and semi-urban people’s attention has already been diverted towards FMCG products, according to latest estimates released by industry chamber, Assocham in 2008.

• Over 70% sale of FMCG products is made to middle class households and over 50% of middle class is in rural India.

Buying Pattern Shift

• The crisis of declining FMCG markets during 2001-04 was driven by new avenues of expenditure for growing consumer income such as consumer durables, entertainment, mobiles, motorbikes etc.

• Now, as many consumers have already upgraded, their income is being directed towards pampering themselves.

Favorable Indian Economy & Demographics

• 45% people in India are under 20 years of age. Per capita disposable income has increased by9%.

• GDP is growing between 8 to 9%.In the next five years, affluent and aspirers as a total will supersede strivers and will be dominated by aspirers, as per National Council for Applied Economic Research (NCAER).

• Most FMCG companies are responding to the new demand by concentrating on developing a big theme and building a portfolio around it. Nestle, for example, has identified 'health and wellness' as its focus area, while Dabur is positioning itself around ayurvedic (a traditional Indian system of healthcare), natural and herbal products.

• FMCG majors are widening their health food portfolio to cash in on the rich, urban, health conscious Indian.

• Sugar free Chywanprash, organic spices and multi grain pastas and biscuits are few examples.

• Urban India is high on health and FMCG majors are cashing in on the opportunity.

• Processed foods particularly juices that are based on the health platform would see stronger growth.

• Also, with the Indian consumer becoming increasingly health conscious, the demand for juices has witnessed rapid growth.

Growth Strategies for FMCG

• The success of the FMCG depends on the marketing strategy.

• A marketer pursues a wide range of strategies. When the prices are competitive the company would use the extensive distribution network, design suitable advertising& sales promotion schemes.

• What makes an FMCG brand sell more than a competitor?• What makes some brands outstanding/?• How does a marketer convert a customer from buying a

generic washing powder to buying a particular brand?

Multi brand Strategy

• A company nurtures a number of brands in the same category. The main rational behind this strategy is to capture as much of market as possible by trying to cover as many segments as possible. This will enable the company to lock up the more distributor shelf space.

• Example : HUL, CADBURY. • Another reason to adopt multiple brand strategy is

to protect its major brands by setting up flanked brands.

• Sometimes the company inherits different brand names in the process of accquiring other companies &each brand name has a loyal following.

• Example: COCA COLA acquired THUMS UP prior to its entry in the market.

Product Flanking

• This refers to the introduction of different combinations of products at different prices, to cover as many market segments as possible. It is basically offering the same product in different sizes & prices to tap diverse market opportunities. The introduction of shampoos in small sachets has made them affordable to the lower segments of consumers who previously could not afford spend for a bottle of shampoo.

• The idea behind this is to flank the core product by offering different variations of size & price so that the consumer fids some brand to choose from.

• Example; Vicks is available in smaller container , cough drops, & cough syrup.

Brand Extensions

• Marketers like to have loyal consumer base so that the particular brand enjoys high brand equity . In such cases the companies make the brand extensions in the hope that the extensions will be able to ride on the equity of the successful brand, & that the new brand will stand in its own right in the course of time.

• Example : LIFEBOY, AMUL

Building Product Line

• Some companies add related new product lines to give the customer all the products he/she would like to buy under one umbrella.

• Example: REVLON, BRITANNIA • BRITANNIA has introduced different kinds of

biscuits & baked foods in the past few years. By adding a number of flavours in each product line the company grew in the industry.

New Product Development

• A company can add new product through the acquisition of other companies or by developing new products. New products could also mean offering improved performance .

• Example ; DOVE , DABUR VATYIKA HAIR OIL ,consumer research revealed that Indian ladies mixed a variety of herbs with hair oil before application.

Innovation in Core Product

• The life of the FMCG product is short therefore marketer continually try to introduce new brands to offer some thing new & meet the changing requirements of the customer.

Long Term Outlook

• Many companies adopt the long term outlook towards growth in the FMCG market. The concept of cornflakes for breakfast promoted by Kellogg's is entirely American in nature.

Extending the PLC

• FMCG company may have to reformulate its marketing strategy because economic conditions change, competitors launch new assaults & the product encounters new types of buyers &new requirements.

Expanding markets by usage

• This is achieved by either increasing the number of customers or by encouraging more consumption per intake.

• The usage rate of the consumers can be increased in a number of ways –

• By persuading customer to use the product more frequently,• Company can try to induce users to consume more of the

product on each occasion.• Company can try to discover new product use & convince

customers to use the product in more varied way. –example FEVICOL , M Seal.

Wide Distribution Network

• A simple way of increasing an FMCG company's market share is by developing a strong distribution network , preferably in terms of more locations.

• An extensive distribution system can be developed over a time, or the company may acquire another company which has extensive distribution network.

• Example: ASIAN PAINTS , HUL,

MONITORING THE PULSE OF PEOPLE

• Organization spend considerable effort to find out the whats, hows & when of their consumers.

Advertising & Media Coverage

• Advertising is required to build the awareness about a FMCG or brand which is available in the market.

• Persuasive advertising becomes important in the competitive stage.

• Reminder advertising is quite common with mature products.

• The basic idea about growth through advertising is to increase market share through more share of mind as more information about the company & its products will induce the customer at the time of actual demand .

Sales Promotions

• Sales promotions offer a direct incentive to buy more in the short term.