BEACON Nov. 2013_ Volume : 2, Issue : 1

1. Issue : 1
Volume:2
November 2013
B E A C O N
A Newsletter by SIMCON– SIMSREE Consulting Club

2. Volume: 2
Issue : 1
INDUSTRY ANALYSIS : FMCG
Introduction
FMCG is the fourth largest sector in the Indian
economy with an estimated market size of Rs. 2 trillion and
represents 2.5% of the country’s GDP. It has grown at
CAGR of 17.3% in the last 5 years.
.
Food products and personal care together make up
two-third of the sector’s revenues. Other segments include
household care, fabric care, hair care, baby care, health care
including OTC products. Rural and urban markets account for
50%-50% of the FMCG market. While online sales channels are
available, grocers still are the most preferred sales channel for
FMCG.
BEACON : Page 1
Nov. 2013
Bargaining Power of Consumers
On account of large number of buyers and limited suppliers, the bargaining power of consumer is low in Indian
FMCG.
Intensity of Rivalry
Competitiveness among the Indian FMCG players is
high. With more MNCs entering the country, the industry has
become highly fragmented.
Leaders in some FMCG categories
Note: The percentages don’t add up to 100 due to large number
of branded, unbranded competitors in the market.
Other market leaders in FMCG include ITC, Nestle, Godrej
Consumer, GlaxoSmithKline, GCMMF (Amul).
Porter’s 5 Forces Model
Barriers to Entry
The Indian FMCG Industry is characterized with modest entry and exit barriers.
Threat of Substitutes
Several brands are positioned with narrow product
differentiation. Companies entering a category trying to gain
market share compete on pricing which increases products substitution. Hence, threat of substitute is high in the FMCG industry.
Bargaining Power of Suppliers
Prices are generally governed by international commodity markets, making most of the FMCG companies a price
takers. Due to the long term relationships with suppliers etc.,
the FMCG companies negotiate better rates during times of
high input cost inflation.
Business Today’s “India’s Most Valuable Companies”
Impact Analysis
Goods and Service Tax (GST)
GST, which will replace the multiple indirect taxes
levied on FMCG sector with a uniform, simplified and singlepint taxation system, is likely to be implemented soon (the
benefits are likely to come in by the end of FY’14). The rate of
GST on services is likely to be 16% and on goods is proposed
to be 20%. A swift move to the proposed GST may reduce
prices, bolstering consumption for FMCG products.
Food Security Bill (FSB)
According to Crisil, FSB could generate additional
savings of around Rs 4,400 this year for each BPL household
that begins to purchase subsidized food which equals around
8% and 5% of the annual expenditure of a rural and urban
household, respectively. For rural households the savings
amount exceeds their current annual medical and educational
spends.
FDI in retail
The decision to allow 51% FDI in multi brand retail
and 100% FDI in single brand retail augers well for the outlook
for the FMCG sector. The move is expected to bolster employment, and supply chains, apart from providing high visibility for
FMCG brands in organized retail markets, bolstering consumer
spending, and encouraging more product launches.
For detailed report and all industry analysis from previous Beacons together, please visit our blog :
http://simconblog.wordpress.com

3. Volume: 2
Issue : 1
INDUSTRY ANALYSIS : FMCG
FDI of 100% under the automatic route is allowed in
the food processing sector, which is considered as a priority
sector. The FMCG sector has witnessed healthy FDI inflow, as
the sector accounted for 2.0 % of the country’s total FDI inflow
over April 2000 to March 2013.
Trends
Focus on Rural Market
FMCG growth will be driven by new segments such as
urban India’s poorest households and low-income value seekers
visiting modern trade outlets for the first time. In order to tap
the growing potential of rural markets, the companies are now
focused on improving their distribution networks to expand
their reach in rural India.
Rising Importance of Smaller-sized packs
Companies are increasingly introducing smaller stock
keeping units (SKUs) at reduced prices. This helps them sustain
margins, maintain volumes from price conscious costumers and
increase their consumer base.
Expanding Horizons
A number of companies are exploring the business
potential of overseas markets and several regional markets.
Target Name
L.D. Waxson,
Singapore
Wyann
Acquirer
Acquisition
Name
Wipro
MonthYear
Acquisition
Dec 2012
Consumer
VLCC
Acquisition
Nov 2012
International
Lifestyle Products
Increasing urbanization and higher disposable incomes
are encouraging many consumers to move from unbranded to
branded products, bolstering growth in the FMCG market. Despite the current slowdown, the demand for premium products
in the health and wellness space, is rising, encouraging companies to launch more premium products.
Entry of New Brands (Brand/ Line Extension)
Innovation is a driving factor in Indian FMCG. Several
companies have started innovating or customizing their existing
product portfolios for new consumer segments. Brand extensions are 5 times more successful than launching brands, increasing sales by 30% and contributing to 30% to brand sales.
BEACON : Page 2
Nov. 2013
Company Name
New Launches
New Variants
Dabur India Ltd.
Babool Salt toothpaste, Gulabari Saffron & Turmeric Cold
Cream and Lotion,
Air-freshening gels
under
the
brand
Odonil
HIT Anti Roach Gel,
Cinthol shower gel,
Godrej Expert Rich
Crème
TRESemmé range of
shampoos and conditioners, Elixir range
of oils, Lux deodorant, Lakmé Eyeconic
Kajal.
Turmeric and Saffron-based bleaches
under Fem, Packaged juices under
the brands Réal and
Activ and Anardana
variant in Hajmola.
Godrej No. 1 Rosewater and
Almonds.
Godrej Consumer products
Ltd.
Hindustan Unilever Ltd.
Close-up Eucalyptus Mint. Axe
Apollo, Pureit Advanced and Pureit
Marvella UV.
Conclusion
Sales of FMCG products plummeted in September
2013 as per latest Nielson data released on 12 November. The
industry grew at 5.3% against 7.3% in August 2013 and against
20.2% in the same month last year. The fall is attributed to increasing inflation and negative market sentiment forcing customers to rethink unnecessary purchases.
A Barclays report in October has suggested that companies like HUL, which are exposed to urban and discretionary segments, will suffer due to the slowdown. Due to the slowdown in the economy, sales of premium brands have dropped
by 10-12%.
Though the short term prospects for FMCG seem
bleak, the favourable demographics and the rise in income level
is expected to grow FMCG market by CAGR of 14.7%, by
2020. The rise of working population, rural per capita disposable income, and middle class are expected to fuel consumption.
FMCG growth will increase by first time modern trade shopper
or FTMTS, the customers who for the very first time are exposed to organized retail, to brands, to the proliferation of
choice and to the profusion of categories they’ve never had before. FTMTS spends 35% on FMCG at modern trade and is
growing by 15% each year.
SOURCES:
http://www.iseindia.com/ResearchPDF/FMCG_Update1.pdf
https://www.pwc.in/en_IN/in/assets/pdfs/rc-publications/innovation-infmcg.pdf
http://www.cii.in/Sectors.aspx?
http://www.slideshare.net/IBEFIndia/fmcg-august-2013
http://reports.dionglobal.in/Actionfinadmin/Reports/
FDR0108201343.pdf
For detailed report and all industry analysis from previous Beacons together, please visit our blog :
http://simconblog.wordpress.com

4. Volume: 2
Issue : 1
COMPANY ANALYSIS : ITC India
Introduction:-
BEACON : Page 3
Nov. 2013
BCG Matrix:
ITC, headquartered at Kolkata, is one of India's foremost private sector companies with a market capitalization of
US $ 45 billion and a turnover of US $ 7 billion. It is currently
headed by Mr. Y C Deveshwar.
ITC was incorporated on August 24, 1910 under the
name Imperial Tobacco Company of India Limited. The name
of the Company was changed to India Tobacco
Company
Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a
wide range of businesses - Fast Moving Consumer
Goods, Hotels, Paperboards & Specialty Papers, Packaging,
Agri-Business and Information Technology - the full stops in
the Company's name were removed effective September 18,
2001. The Company now stands rechristened 'ITC Limited,'where ‘ITC’ is today no longer an acronym or an initialized form.
ITC is rated among the World's Best Big Companies, Asia's
'Fab 50' and the World's Most Reputable Companies by Forbes
magazine and among India's Most Valuable Companies by
Business Today.
ITC has grown around 300% during last ten years.
Introduction of brands like Sunfeast, Mangaldeep, and Classmate has been a great success. Entry in the personal care products market after 2005 boosted the company income and
growth. Company’s focus on quality, innovation and differentiation backed by deep consumer insights, world-class R&D and
an efficient and responsive supply chain will further strengthen
its leadership position in the Indian FMCG industry.
Corporate Strategy
Competitors:
HUL, P&G, Marico, Colgate-Polmolive, Dabur, L’oreal, Godfrey Phillip, VST, Golden Tobacco, etc.
SWOT Analysis:
Business Strategy
ITC Group’s corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The
Group is currently focused on four business groups: FMCG,
Hotels, Paperboards, Paper and Packaging and Agri Business.
Empowering Value Chain
A conscious strategy to drive the competitiveness of
value chains linked to its businesses enables ITC to make a
more enduring contribution to national economic development.
ITC's winning brands drive synergies to make these value
chains sustainable and inclusive. At the same time, by nurturing
and strengthening these value chains, ITC adds a unique source
of competitive strength to its brands. A very successful example
of value chain augmentation is the ITC e-Choupal initiative
that empowers over 4 million farmers, while at the same time
providing significant competitive advantage in procuring raw
material for ITC’s Foods business – be it for Aashirvaad atta
produced from handpicked whole wheat, quality-assured
Aashirvaad spices or superior chip stock potatoes for Bingo!
snack foods.
Sources:
http://www.itcportal.com
http://moneycontrol.com
For detailed report and all company analysis from previous Beacons together, please visit our blog:
http://simconblog.wordpress.com

5. Volume: 2
Issue : 1
Concept of the Month
BEACON : Page 4
Nov. 2013
McKinsey 7S model
How do you go about analyzing how well an organization is positioned to achieve its intended objective?
Some approaches look at internal factors, others look at external ones, some combine these perspectives, and others
look for congruence between various aspects of the organization being
studied.
Developed in the early 1980s by Tom Peters and Robert Waterman, two
consultants working at the McKinsey & Company consulting firm, the
basic premise of the McKinsey 7S model is that there are seven internal
aspects of an organization that need to be aligned if it is to be successful.
The 7S model can be used in a wide variety of situations where an alignment perspective is useful to help one:
 Improve the performance of a company.
 Examine the likely effects of future changes within a company.
 Align departments and processes during a merger or acquisition.
Determine how best to implement a proposed strategy.
The way the model is presented in Figure 1 below depicts the interdependency of the elements and indicates how a change in one affects all the
others.
The McKinsey 7Ss model is one that can be applied to almost any
organizational or team effectiveness issue. If something within your organization or team isn't working, chances are there is inconsistency between some of the elements identified by this
classic model. Once these inconsistencies are revealed, you can work to align the internal elements to make sure they
are all contributing to the shared goals and values.
Consulting Jokes
There was a glass of water on the table...
One man says, "It's half full". He is an optimist.
Second man says, "It's half empty". He is a pessimist.
Third man says, "It's twice too big". He is a management consultant.
Source : http://dilbert.com/
BEACON

6. QUIZ OF NOVEMBER
Volume: 2
Issue : 1
BEACON : Page 5
Nov. 2013
1.
_____ is a company in the Scotts valley which is renowned dot com company founded in 1997,
by ______ who was motivated to start it after he was charged fine for late submission of CD of
Apollo13.
2.
He founded one of the most successful online ventures in association with his partner, both of
whom graduated from IIT-Delhi in 2008 ,by some other name. Today the venture is valued at
Rs.900 Cr. He also happened to work at Bain & Co. for sometime before
starting the venture. Identify the person and the venture.
3.
Connect the images and identify the person and his latest venture.
4.
A national Dairy Development Board’s project ,______ was headed by
_________, who led it with the efficacy that it resulted in India getting
transformed from a milk deficient nation to world’s largest milk producer in
1998 surpassing _____.
5.
Which firm was awarded second time in a row the Market Policy and Advisory award by Commodity business Award?
Answer To: simcon.simsree@simsree.net with Subject= simcon_quiz_nov_2013
Winner will be recognized.
All Correct Answers will be published in next month’s Edition.
ANSWERS : OCTOBER ISSUE
Answers of last beacon October (Issue 12) Quiz :
1.
Johan C. Aurik, A.T. Kearney
2.
Boston Matrix (BCG Matrix)
3.
X – Point B, Y- Loft9
4.
The Dhoni Effect: Rise of Small Town India
5.
X - Simone Tata, Y- Lakmé
 Arthur D. Little, Inc., for many years one of the largest and most diversified consultancies in the world, was founded in 1886
 The first management consultancy to serve both industry and government
clients Booz Allen Hamilton founded in 1914
 The first modern, pure management and strategy consulting company
McKinsey and Company founded in 1926
Contributions invited:
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that is YOU. We invite articles and trivia on themes related to consulting. Be it industry news, consulting trends, a
joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts
and mail your entries to simcon.simsree@gmail.com.
Best Regards,
SIMCON –SIMSREE CONSULTING CLUB
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