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ECONOMICS PROJECT : ANALYSIS OF a COMPANY
IN THE FMCG SECTOR
GROUP 7 PRESENTS
FMCG is an acronym for Fast Moving Consumer Goods, which refer to things that we buy from local shops & supermarkets on daily basis.
These products have a high turnover and are relatively cheaper.
The most common items are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuffs, beverages and extends to certain household accessories.
FMCG SECTOR OVERVIEW
The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector in the economy.
FMCG Sector has grown by 60% over a 5-year period from FY05 to FY10 which translates into an annual growth rate of 10%.
It generates 5% of total factory employment and is creating employment for three million people, especially in small towns and rural India.
The FMCG market is set to reach US$ 33.4 billion in 2015.
This growth is largely fuelled by burgeoning population, rise in income of middle class consumers, change in the mindset & boosting purchasing power of rural consumers and continued high demand in urban areas.
DID YOU KNOW….?
Formed in 1933 as Lever Brothers India Limited.
Named as Hindustan Lever Limited in 1956 through a merger of Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd.
The company was renamed in June 2007 to “Hindustan Unilever Limited”.
India's largest FMCG company, touching the lives of every 2 out of 3 Indians.
The Anglo-Dutch company Unilever owns a majority stake (52%) in HUL.
INTRODUCTION TO HUL
Rated as the most respected company in India for the past 25 years by Businessworld magazine.
HUL is the market leader in consumer products with presence in over 20 categories with over 700 million Indian consumers using its products.
One of the eight Indian companies to be featured on the Forbes list of World’s Most Reputed companies in 2007.
HUL is one of the country's largest exporters; it has been recognised as a Golden Super Star Trading House by the Government of India
It has a distribution channel of 6.3 million outlets and owns 35 major Indian brands
MAJOR BRANDS OF HUL
1. ITC 2. Nestle3. Amul4. Dabur5. Asian Paints (India)6. Cadbury India7. Britannia Industries8. Procter & Gamble 9. Marico
MAJOR COMPETITORS
HUL’S FINANCIAL PERFORMANCE OVER
THE YEARS
A Comparative Study
1%
4%
12%
28%
47%
6% 2%
Segmental Revenue in 2009-2010 (%)
ICE CREAMS
FOOD
BEVERAGES
PERSONAL PRODUCTS
SOAPS & DE-TERGENTS
EXPORTS
OTHERS
BRAND CATEGORY SALES GROWTH OVER
PREVIOUS YEAR
CAUSES & CORRECTIVE ACTIONS TAKEN
1. Home & Personal Care
6.6 % While underlying volume growth was higher, aggressive price reductions effected due to heightened competitive intensity
2. Soaps & Detergents
1.5 % Prices of products reduced taking into account the reduction in commodity prices; Re-launch of premium brands- Wheel, Vim, Lifebuoy & Lux
3. Personal Products (Hair, Skin & Oral Care)
16.2 % Innovation, high quality and compelling advertising & field activation
4. Foods
Strong Double Digit Growth
High competitive intensity from national & local players; Food inflation; Down trading Increased brand investments; Judicious pricing; Supply Chain cost savings; Launch of innovative products—’Knorr Soupy Noodles'
PERFORMANCE OF THE MAIN BRAND SEGMENTS AT A GLANCE
11
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
18,000.00
20,000.00
22,000.00
11,193.8812,244.02
13,880.56
20,504.28
17,769.12
Net Sales (Cr)
Net Sales (Cr)
12
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,800.00
2,000.00
2,200.00
2,400.00
2,600.00
1,408.10
1,855.37 1,769.06
2,500.71
2,202.03
Net Profit (Cr)
Net Profit (Cr)
13
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
67.66 65.89
138.72
118.59106.78
Return on Capital employed (ROCE)
Return on Capital employed (ROCE)
14
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
61.0968.14
122.97121.34
85.25
Return on Net Worth (RONW)
Return on Net Worth (RONW)
15
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.700.73
0.68
0.92
0.84
Current Ratio
Current Ratio
16
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.02 0.030.06
0.20
Debt-equity Ratio
Debt-equity Ratio
17
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
5.00
6.00
9.00
7.50
6.50
Dividend per share
Dividend per share
18
Sales
Dec/05 Dec/06 Dec/07 Mar/09 Mar/100.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
6.40
8.41 8.12
11.4710.09
Earning per share
Earning per share
STOCK PRICE MOVEMENT
In October 2006, the Company divested its 51% controlling stake in Capgemini Business Services (India) Limited (CGSL) to Cap Gemini SA
Cap Gemini SA had a call option for the balance 49% stake in CGSL
Consequent to the exercise of the call option by Cap Gemini SA in March 2010, the balance stake of 49% in the business held by the Company has been sold to Cap Gemini SA for a consideration of Rs. 91.1 crores
The Company believed that the business would benefit from the systems and processes brought in by a leading player in the BPO space
MERGERS, ACQUISITIONS & DIVESTMENTS
Strong growth potential has attracted many new competitors; Decisive actions by HUL combining innovation, right pricing and competitive levels of
advertising investment
HUL registered overall growth rate of 6.4% in 2009-10; Over the last 5 years, HUL has performed well with a CAGR of 10% for total sales and 11.5% of FMCG sales
Strengthening their go-to-market capability; continue leveraging Unilever’s brands, technologies, business processes, global scale
KEY DEVELOPMENTS - HIGHLIGHTS
Some major innovations: Pure-it Compact-in-home water purifier –for low-income consumers priced at Rs. 1000/-; Knorr Soupy noodles, Brooke Bond Sehatmand Tea; Cif multi-purpose cleaner
Fast & flexible supply chain management system, resulting in significant reduction of working capital
Running of ‘twin track’ on single production lines in some detergent factories; End-to-end technology solution which helps reduce inventory cycles while enabling optimum service levels
Rural markets were brought under direct coverage, enabling better servicing and control. Rural salesmen being equipped with handheld terminals to facilitate order taking process and billing
KEY STRATEGIES FOR CONTINUOUS IMPROVEMENT & INNOVATION
With strong linkages with the Global R&D and the brand development capabilities, HUL well placed to meet the challenges from the increased competition intensity.
Continuous improvement in Return on Marketing Investments (ROMI); For eg, HUL has identified the media elasticity of each of its brand which helps to optimise its advertising spends.
Energy conservation activities and use of sustainable alternative bio-fuels have helped reduce fuel costs and carbon emissions.
Talent strategy to first attract top talent from the market through putting significant impetus behind improving the HUL Employer Brand in top business schools.
Managing growth and inflation at the same time will be a key challenge
Lot of competitors in FMCG market As inflation rises, consumers tend to move towards cheaper product This will reduce HUL product acceptance in market So a challenge for HUL to maintain the steady profit rate
CHALLENGES AHEAD
The FMCG categories in which the Company operates have significant low per capita consumption levels relative to many other Asian economies Opportunity to tap these and thereby increase penetration levels
Agricultural growth expected to pick up on account of good monsoons and thereby a good Rabi crop
Over 1/3rd of India’s manufacturing output is exported and export growth has been positive since November 2009 An encouraging sign for the manufacturing sector
GROWTH PROSPECTS
HUL is a company which the customers in rural as well as urban India relate to ‘Right from the morning tea to brushing of teeth at night’!
This explains the deep penetration of HUL in Indian market
The future for HUL is demanding newer and high level innovations so as to cope up with increasing competition
However, HUL is well equipped with all that is needed of this Indian Giant.
THANK YOU !PRESENTED BY: GROUP 7
SUBODH GHOSALKAR 91SUDHINDRA GADAG 92
SUJEET SALIAN 93VARSHA BHAT 94VIDHI TARKAS 95
