1. Fast Moving Consumer Goods Supply Abundant supply in metros. Distribution networks are being beefed up to penetrate the rural areas. Demand HLL expects the FMCG market to triple in market size by FY10, which highlights the potential. Barriers to Entry Huge investments in promoting brands, setting up distribution networks and intense competition, but the sector is not capital intensive. Bargaining Power of Suppliers Some of the companies are integrated backwards, which reduces the supplier's clout. Manufacturing is largely outsourced. Bargaining Power of Customers In case of branded products, there is little that the consumer can influence, but intense competition within the FMCG companies results in value for money deals for consumers (e.g. buy one, get one free concept). Competition Competition is faced from both domestic, MNCs and also from cheaper imports, which are increasingly visible in urban markets. Price wars are a common phenomenon.

2. FMCG – Evolution 1950’s-80’s – Low Investment in the sector –Low purchasing power –Govt’s emphasis on small scale sector –HLL and other company’s urbane focus Post liberalization –Entry of MNCs –Focus shifted to getting to rural consumer first –Others, like Nestle, remained with the urban population –Latest fad to hit the market is the ‘sachet’ bug. Mushrooming of regional brands –Nirma enters and changes the focus to ‘Value for Money’ in the 70’s –Post liberalization, Jyothi Laboratories, ‘Ghari’ Detergent and ‘Anchor’ toothpaste giving the nation-wide brands a run for their money.

3. Financial Analysis – Key Players Company Name Revenue (Rs. Cr.) 3- Year CAGR PAT (Rs. Cr.) 3-Year CAGRPBDIT3-Year Hind. Lever11193.884.61408.1-10.851722.71-15.22 Dabur India1345.511.28188.5736.54242.0133.41 Colgate Palm.1127.559.65137.612.87224.712.76 Marico Ltd.1045.1611.0598.8830.57140.7934.3 Reckitt Benckiser757.3518.1795.19138.8135.7163.26 Procter and Gamble567.59-0.63139.5123.03201.3716.43

4. Forecast 2010 Rural and semi-urban –128 million population thrice the urban –Market size growth from 48k to 100k Crores (Growth of 50% at 10%CAGR) –Increase penetration from the current less than 1% –Problems in the rural sector Low per capita disposable incomes Large number of daily wage earners Acute dependence on vagaries of monsoon Seasonal consumption Poor infrastructure – roads and power supply Urban –Market 16.5k to 35k Crores (Growth of 100% at 20%CAGR) –Intense competition – severe pressure on margins – Focus on newer products, such as fruit juices Source: Assocham Report ‘Future Prospects of FMCG’