Tuesday, September 23, 2008

FMCG Business Expansion - Stage by Stage Approach

Have written this post specifically for regional FMCG companies and FMCG manufacturers who are planning to extend their footprints in different geographies in different markets.

Let me explain this stage by stage:
1. Category Feasibility: Before you decide on the markets to expand, it is critical to analyze the category construct and trends. Let me start with some examples. In dish wash category, there are 3 key segments - Powder, Bar and Liquid, dominated by Bar sub-category. Now here the first step is to see the trends in each sub-category. In this case, Powder is a dying category, Liquid is an upcoming & fastest growing category and Bar is already established. Bar
is dominated by Vim with a market share of 70%. Liquid was dominated by Pril, but Vim Liquid is also catching up. Post this contribution analysis is required, where i will compare all three sub-categories and may conclude that Liquid is more profitable. Also as the urban lifestyles are changing and are moving towards evolved products. With this you will also do an exhaustive competition analysis. At the end, you may decide to expand with Liquid Dish Wash Category.

2. Differentiation/ Innovation: Once you freeze on the category to enter, the next step is to do a positioning mapping of all brands in the category (What do they all stand for in the consumers mind? What are their key proposition?) Rather than making a me-too product, it is also advisable to provide differentiation in the product. The differention may be in form of product improvements/ benefits etc or may be packaging innovation, which comes from some
consumer insights. At the end, the consumer should find some value addition in the product. Last year, Dabur enterted into floor cleaning category with Dazzl, which has a unique ‘Dirt Trap Technology’, which ensures that the muddy solution settles down in the bucket, offering a clear solution every time for mopping. This is something, which consumers may find different from other products. The differentiation may be marginal or exponential. But its paramount.
Otherwise the brand will die its natural death.

3. Distribution: Once you are confident of your Offer, the next step is to increase the increase your distribution depth. There can be multiple approaches to it. First is to roll-out pan India in all markets. But here you should have strong distribution network, which is possible for big FMCG companies like HUL, ITC etc. Second is to identify the right markets for the category. The right markets can be the top markets for the category. Lets take an example of aerated
drinks. The biggest selling market is North, especially the prosperous towns like Ludhiana etc. Here even if you capture a market share of 5%, you can have big volumes, as compared to 20% market share in Kolkata. I think the best indicator to look at is the sale per outlet per month. The volumes in a town may be high because of the geographical spread (No. of target outlets), which is not the right indicator. The sales per outlet per month in Ludhiana is much higher than Kolkata. So logically, i should enter into Ludhiana. But thats not all. You also need to look at other things like competition, consumer experimentativeness etc. So the point i want to make here is that, before increasing your footprint, you need to assess the right markets to enter.



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June 07, 2009 6:03 PM  
Blogger nitharia said...


The FMCG sector has been registering double-digit growth in sales since the last couple of years. Currently estimated at US$ 17.42 billion, it is the one of the most promising sectors in India.

Source: http://www.ibef.org

Despite the economic recession, the industry is expected to register a value growth of 14 per cent in the fourth quarter of 2008-09 as compared to the corresponding period last year.

Amway, the US-based direct selling FMCG major, plans to make India its sourcing hub as its Asian business has surpassed the total turnover that it witnessed in other parts of the world. Of Amway's global business, India clocked a turnover of US$ 227.32 million in 2008, registering a year-on-year growth of 40 per cent.

July 21, 2009 11:09 AM  
Blogger Fmcg said...

we are to a venture of manufacturing shopping /fancy bags and paper carry bags,grocery bags,food bags.we are looking at setting up our distribution network across chennai,bangalore and tirupathi.
Could anyone give us ideas,how to go about cost effective distribution?

June 11, 2010 12:23 PM  
Blogger FMCG said...

There is a Mikson Group - Market Service Expansion Company focused on Central and Eastern European Markets.

They implement the products/businesses into the biggest local and international retail chains in Europe.


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December 02, 2016 5:30 PM  
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