Wednesday, July 30, 2008

Indian FMCG Sector Growth Drivers and Category Trends: 2008-09

The fourth largest sector in the Indian economy is all set for 16% growth during 2008-09, from a base of Rs. 85470 crores, as predicted by FICCI. Going forward, as anticipated by CRISIL, FMCG sector will touch around Rs. 140000 crores by 2015 (33.4B$).

This post will through some pointers for growth in FMCG Sector and update with the contemporary category trends.

Growth Drivers: FMCG Sector

1. 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.
2. 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.
3. 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. The estimated number of households using FMCG products in rural India has grown from 131 million in 2004 to 140 million in 2007, according to market research company IMRB. Over 70% sale of FMCG products is made to middle class households and over 50% of middle class is in rural India.
4. 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.
5. Favorable Indian Economy & Demographics: 45% people in India are under 20 years of age. Per capita disposable income has increased from $550 to $600 in 2007 (9% increase). GDP is growing at a CAGR 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 NCAER.

FMCG Category Trends

1. Underpenetrated Growth Categories: Within the Indian FMCG industry, there are few categories that will grow more than 20% during 2008-2009, like shaving cream, skin/fairness cream, shampoos, skin care & cosmetics, tooth powder. Some other growth categories will be hair colour, skin care, anti-aging solution, deodorants and men’s products. Most of these categories are under penetrated and there is a huge scope for growth.
2. Penetrated Growth Categories: Even mainstream categories with high penetration levels such as washing detergents, soaps and hair oils have shown strong underlying volume growth, despite sharp inflation led price increases in FY08. This is partly related to the growth in organised retail (3-5% of turnover for most FMCG players) that gives more visibility to national brands with strong brand equity.
3. Anand Shah, an FMCG research analyst at Angel Broking, says 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. At the higher price end, companies are leveraging health and wellness trends by focusing on providing 'experiential' and 'higher order' benefits rather than purely functional ones.
4. Health Food Categories: 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.
5. Impact of inflation in 2008: Even if consumers don't switch to cheaper substitutes during inflation, they normally switch from higher SKUs to lower SKUs of the same product. This is the reason the companies have come up with smaller SKUs. In line with this trend, Henkel has withdrawn its 500gm pack washing powder which was priced at Rs.46 and has replaced it with a new 400gm pack that costs INR40. A couple of months back, Amul introduced 25gm packs of butter. Not surprisingly, this pack is fetching more sales than 100gm and 500gm packs.

In the first 10 months of 2007, there were 251 product launches, including 28 new brands, compared with 191 for the same period of 2006. Snacks and foodstuffs remain the category leaders, with recent launches of several health and beauty products, particularly in urban markets.

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Tuesday, July 08, 2008

Household Cleaner Market in India

Household cleaner market in India is mainly split into:

  1. Toilet Cleaners: Toilet Cleaner are further split into Liquid Cleaners, Drain Cleaner and In - Cisterns.
  2. Surface Cleaners: Surface Cleaners are split into Floor Cleaner, Multi purpose and specialized Cleaners. The specialized cleaners are further split, based on their application areas

Market Statistics

  • The cleaning solutions market (both surface and toilet cleaner segments) is estimated at Rs 373 crore (2008 Data)
  • The total surface cleaning market in India is estimated to be around Rs 350 crores (including toilet cleaners and floor cleaners) (2006-07 Data)
  • The household cleaner market is estimated to be around 400 crore and the phenyl market is around 200 crore (2005-06 Data)
  • The toilet cleaners segment, which is divided into liquid cleaners and in-cistern blocks, is a Rs 150-crore category. This segment is registering a overall growth of 35 per cent. Liquid cleaners is the dominant category in the segment with 93 per cent share. However, in-cistern blocks is growing at a faster pace (2008 Data). Liquid segment is dominated by Harpic which has a market share of more than 70%, which makes it more than a 100 crore brand.
  • Toilet cleaning market is traditionally dominated by the unbranded Phenols
  • Only 3% of the households use floor cleaners. 97 % use proxy products which are the combination of phenyl, detergents , acids and bleaching powders
  • Liquid toilet cleaners are essentially an urban phenomenon with the top 23 metros accounting for 52 per cent and the top six metros accounting for 37 per cent. The segment is growing at 35 per cent annually in value (2005 – 06 Data)
  • Studies show that the penetration of toilet cleaners is about nine per cent among urban households and a large number of customers use low-grade alternatives such as acids, bleaches and phenyls (2005 – 06 Data)
  • In the last four years, the industry has shown a CAGR of 24%. Market penetration of toilet cleaners is under 10% in the country, but is growing fast (2008 Data)
  • Colin, the glass-cleaning brand, was acquired way back in the '90s have 93 per cent of the market
  • Market leader Lizol from Reckitt is estimated at Rs 35 crore while HUL’s Domex is roughly a Rs 25-crore brand (2008 Data)
  • Surface cleaner segment is growing at 18 per cent in the country (2007-08)

Companies & Brands

  • HUL - Domex
  • Reckitt Benckiser - Lizol, Harpic, Easy Off Bang
  • Dabur Balsara - Sanifresh, Dazzl
  • Cavinkare - Tex
  • Henkel - Pril, Bref
  • Sara Lee - Kiwi Kleen
  • S C Johnson - Mr. Muscle

Brands in Toiler Cleaner Segment

  • Harpic
  • Kiwi
  • Bref
  • Sanifresh
  • DeepClean (Local Brand in Kolkata)
  • Domex

Brands in Toilet In-Cistern

  • Harpic
  • Bref
  • Kiwi Kleen

Brands in Toilet In-Cistern: Kiwi Kleen

Brands in Floor Cleaning
  • Lysol
  • Domex Phenolic Cleaner

Brands in Specialized Cleaners

  • Glass & Household Cleaner: Collin, Pril
  • Only Glass Cleaner: Mr. Muscle
  • Power Cleaner: Easy Off Bang
  • Kitchen Cleaner: Mr. Muscle
  • Degreaser: Pril Multi Degreaser

Marketing Activities

  • Domex launched a direct to customer initiative named "phenyl Khallas" to educate the consumers about the virtue of using Domex comparing it with local phenyl
  • Harpic also initiated a co branding initiative with Parryware to get into consumer mindset early even when he is completing his house
  • Harpic has done about 65 million household knocks (to promote the brand house-to-house)
  • After domex launched the white toilet cleaner, Harpic was forced to come with Harpic Plus Bleach Toilet Cleaner, which is white in color

Consumer Trends

  • During 1990's the Harpic product came out with a unique nozzle which ensured better reach
  • Harpic also introduced a Flushomatic variant in line with the changing preference of consumers towards European closets and Flushes
  • Harpic bottle design has been adapted to the relatively smaller hands of Indian women
  • There are phenols, detergents, acids and so on but thanks to property prices going where they are, a person who's buying a Rs 50-lakh house is not going to allow the bathroom to be looking yucky. That's the evolution of what you might call upgrading of consumer life

Market Trends

  • Only 3% of the households use floor cleaners. 97 % use proxy products which are the combination of phenyl, detergents ,acids and bleaching powders
  • While the local floor cleaners such as phenyl form 50 per cent of the market, speciality cleaners has been driving the growth for the category over the last few years

Product Innovation

  • Domex launched a Domex + phenyl variant to capture this segment
  • During 1990's the Harpic product came out with a unique nozzle which ensured better reach
  • Harpic also introduced a Flushomatic variant in line with the changing preference of consumers towards European closets and Flushes
  • The advantage of the Bref power cleaner is that it is available in foam form and can even be applied on vertical surfaces
  • Dazzl disinfectant floor cleaner, on the other hand, has unique ‘Dirt Trap Technology’. It also ensures that the muddy solution settles down in the bucket, offering a clear solution every time for mopping
  • Dazzl’s well-researched and unique formulation with ‘SQL Activ’ removes grease, oil and food stains across all kitchen surfaces like Gas Stoves, Kitchen Platform

Some Positioning Platforms

  • Domex: 100% Germ Protection
  • Harpic: Triple benefit: Stain removing, freshness and germfree (Celebrity like Aman varma entering a house and cleaning the toilet)
  • Easy Off Bang - Cleans the tough stains, rust, hardwater build up (tough stain remover)

Punch Lines

  • Easy Off Bang: Bang... And Dirt is Gone
  • Harpic: Ready for the Challenge?

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