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PGDM 2018 - 20
Industry Analysis
FMCG
With Rеfеrеncе tо Proctor & Gamble
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ACKNОWLЕDGЕMЕNT
Thе satisfactiоn that accоmpaniеs thе succеssful cоmplеtiоn оf any task wоuld bе incоmplеtе
withоut thе mеntiоn оf thе pеоplе whо madе it pоssiblе and whоsе cоnstant guidancе and
еncоuragеmеnt crоwn all thе еffоrts with succеss. This acknоwlеdgеmеnt transcеnds thе
rеality оf fоrmality whеn wе wоuld likе tо еxprеss dееp gratitudе and rеspеct tо all thоsе
pеоplе bеhind thе scrееn whо guidеd, inspirеd and hеlpеd us fоr thе cоmplеtiоn оf оur
prоjеct wоrk.
2
PREFACE
All students learn theoretical subjects in their classroom, but as we are
the management students, apart from theoretical studies we need to get a deeper insight
into the practical a s p e c t s o f t h o s e t h e o r i e s b y w o r k i n g a s a p a r t o f
o r g a n i z a t i o n d u r i n g o u r s u m m e r training. Training is a period in which a
student can apply his theoretical knowledge in practical field. Basically,
practical knowledge and theoretical knowledge have a very broad difference. So
this training has high importance as to know how both the aspects are applied
together. The study of management acquires most crucial position in the business
administration. I n o r d e r t o b e s u c c e s s f u l , i t i s n e c e s s a r y t o g i v e p r i o r i t y t o
the management in an organization. But it can’t be denied that the
s t u d y o f m a n a g e m e n t w o u l d b e m o r e educational, materialistic and even more
interesting, if it is to be paired with the work in organization as an employee. The training
session helps to get details about the working process in the organization. It has helped
me to know about the organizational management and discipline, which has its
own importance. The training is going to be a lifelong experience. M a n a g e m e n t i n
India is heading towards a better profession as compared to
o t h e r professions. The demand for professional managers is increasing day by day. To
achieve profession competence, manager ought to be fully occupied with theory
and practical exposure of management. A comprehensive understanding of the
principle will increases their decision-making ability and sharpens their tools for
this purpose. During the curriculum of management p r o g r a m m e r s a s t u d e n t h a s t o
a t t a i n a p r a c t i c a l e x p o s u r e o f a n o r g a n i z a t i o n o n l i v e project in addition to
theory he/she studies.
This Project Report has been completed in Partial fulfillment of my ma
n a g e m e n t Program, Post Graduate Diploma in Management (PGDM) in the
company Procter & Gamble; which is a leading FMCG Organization. The objective of
my project was to meet with the retailers and to supply them the FMCG
products of P&G.P&G are a name which has its name in organized FMCG products in the
world.
EXECUTIVE SUMMARY
Proctor and Gamble (P&G) over its journey of about 175 years has become one of the world’s
largest consumer goods Company with sales of nearly $80 billion and a net profit of about
$10 billion. P&G has a presence in more than 180 countries with brands that accumulate to
in excess of $25 billion.
The company has achieved success by creating high quality brand recognized products that
are sold on multinational level. It enjoys one of the largest brand names in household
products like Pampers, Gillette, Tide, Ariel, Downy, Pantene, Head & Shoulders, Olay, Oral-B,
Crest, Dawn, Fairy and Always and segments like household care, beauty, grooming, and
personal health care.
Although, P&G has world renowned brands, P&G needs to adopt strategies that enable it to
maintain its competitive advantage over its rival. Consumer Goods industry where P&G
operates has matured reaching the consolidation stage and competition amongst rivals is
intense.
P&G has many strategic options create competitive advantage over its rivals such as further
market penetrations by rebranding its current line of products and selling them at a lower
price. Another option for P&G is to expand in the emerging markets by collaboration or
alliances with local businesses in various geographical regions. Lastly, P&G can specialize in
skin care/beauty segment of consumer industry. P&G can provide consumers with products
that are made with natural ingredients as trend in health and wellness is growing along with
providing specialized products for men.
Contents
1. The Scope of the Industry
1.2 The Stakeholders of the Industry
1.2.1 Customer Base
1.2.1.1 Geographic segmentation
1.2.1.2 Demographic segmentation
1.2.2 Regulations
1.2.2.1 Labeling with respect to Personal Care Products
1.2.2.2 Safety Guidelines
1.2.3 Competitors and Peers
1.3 Market Structure
1.3.1 Size of domestic market
1.3.2 Global market
1.3.3 Imports and Exports
1.4.6 Trend Analysis
The worldwide market for individual care is required to see considerable development over
the coming years inferable from the developing extra cash of purchasers, hence empowering
them to spend on extravagance individual care items. While the individual nurture women is
an unmistakable class, the presentation of the men's product offering for prepping has
reinforced the development of the market broadly. Additionally, the the development of
improvised and innovative products in the women’s, for example, cosmeceutical and
multifunctional items is relied upon to trigger the offers of individual care items in the coming
years. Keeping in mind the end goal to take into account particular client needs, makers have
overwhelmed the market with particular hair and skin items. The market is additionally
anticipated that would be profited by the limited time offers, promoting, and media entrance.
In rising economies, aspects, for example, developing spending intensity of purchasers,
plenitude of global brands, and quick urbanization is probably going to help in the
development of the market sooner rather than later.
The Personal care industry in India is blasting, with a gigantic potential for development in
2018. Truth be told, it is said to develop twice as quick as business sectors in the United States
and Europe. India is additionally the second biggest shopper showcase on the planet. As per
a KPMG report, the extent of India's magnificence and health showcase is expected to touch
Rs. 80,370 crores by 2017-2018. This incorporates the magnificence items, excellence salon
and spa organizations.
The Spa Association of India gauges that the spa business is right now esteemed at around Rs.
11,000 crores and will keep on growing at a quick pace. It is evaluated that the salon and spa
business together record for 31 for each penny of the aggregate size of the excellence and
wellbeing market. The exacerbated yearly development rate of the excellence and health
business in India has been around 18 for every per cent.
One of the key industry stakeholders are the customers. As can be seen in the above graph,
the market penetration for most personal care products is relatively low. To understand why
that is the case, we need to understand what all markets the companies target and the
customer base for these products. One of the best ways to understand the customer base is
to use market segmentation. Here, geographic and demographic segmentation are discussed
in detail as they are most frequently used by the FMCG companies.
This study focuses on the population. Factors such as age, gender and income are
considered here. This is the most extensively used technique via FMCG corporations
for segmenting the market as it offers most broadly coverage of the vicinity with high
degree of delight for each segment. FMCGs groups provide exclusive products for one-
of-a-kind age groups. HUL has Pears and Dove to offer to teens and younger people.
While, Lux is promoted for young people only, whereas, Lifebuoy is promoted for a
rational household person. Similarly, Johnsons and Johnsons offer merchandise for
infants and small child. ITC’s Fiama di Wills is promoted for young women. Similarly,
Colgate has Colgate Gel to provide for a younger audience, Colgate Total is being
promoted for all age groups. Similar divisions can be made on the basis of earnings -
HUL has Breeze and Lifebuoy for the decrease profits level, Lux for the center class and
Dove and Pears for the higher classification in the bathing soaps. It has Wheel
detergent for decrease profits group, Rin for middle classification and Surf Excel for
greater Income group. ITC has Essenza di Wills for greater Income, Fiama Di Wills for
middle level humans and Superia for lower income group.
1.2.2 Regulations
With respect to the personal care sector, The Drugs and Cosmetic Act, 1940 details about the
regulations imposed on the products. This act described it as any article for pouring, sprinkled,
rubbing or introduced into or applied to body for beautifying, cleansing to promote physical
attractiveness. The Drugs and Cosmetics Act, 1940, explains that no should sell of his own or
on his behalf any drugs or cosmetics which is not of standard quality or adulterated, or
misbranded or spurious. The act similarly prohibits the advertisements of traditional drugs
from Ayurveda, Sidha and Unani.
As per the Drug and Cosmetics Act in India, the labeling requirements for cosmetics are
discussed as follows:
● The labels in both the inside and out sides should contain the name of the cosmetics
with
● The name of manufacturer and address.
● If the container is small in size, the place of manufacture with pin code serves as label.
● The outer label should contain amount of net quantities and contents used for
production while inner label direction for use and any warning about the hazardous
or poisonous nature of contents if any.
● The label should also contain clearly the batch number indicating by letter "B" in a case
of soap manufacturing month and year to be mentioned in place of "B".
● Where a package of a cosmetic has only one label, such label shall contain all the
information required to be shown on both the inner and the outer labels, under these
Rules.
Recently some amendments to the rule of labeling clauses have been modified and whish are
as under:
● The ingredients used in the cosmetics to be declared in descending order of their
concentration.
● To mention use before specific date instead of best use before xx date which was
earlier disclosed as month and year of manufacturing and packaging.
Cosmetics products in India are regulated as per the Drugs and cosmetics Act 1940 and
Inherent rules of 1945 and rule of Bureau of Indian Standards (BIS) for declaration on the lab
labels. BIS has sets the standards for cosmetics for the products listed under Schedule 'S' of
the Drugs and cosmetics Rules 1945.
Bureau of Indian Standards (BIS) has fixed the specification for Skin Creams and
Lipstick in the Indian Standards (IS) as 6608:2004 and 9875:1990 respectively where IS
6608:2004 states that if the producer already tested all the requiring ingredients for the
presence of heavy metals as per compliance rule, manufacturer may not test any more the
finished products for heavy metal and arsenic presence.
If the manufacturer use the Dyes colors (pigments lakes) in skin creams and lipsticks
shall comply with IS 4707 (Part I) in relation to the provision of Schedule Q of Drugs and
Cosmetics Act and Rules passed and issued by the Government of India, and as amended from
time to time. Other ingredients shall comply with the provisions of IS 4707-Part 2.
The 134 of Drugs and Cosmetics Rules has restricted the use of cosmetics having dyes,
colors and pigments other than the ingredients those specified by the Bureau of Indian
Standards IS: 4707 Part 1 as amended and Schedule Q. The permitted synthetic organic colors
and natural organic colors used in the cosmetic shall also not contain more than the specified
norms.
The rule 145 of the Drugs and Cosmetics Rules prohibits also imports of cosmetic items
having lead and arsenic compounds for the purpose of coloring. Rule 145 D and 135 A further
prohibits the manufacture and import of cosmetics containing mercury compounds.
The following pie-chart shows the distribution of personal care sector in India:
Currently, India accounts for a share of simply over 1 per cent of total world care and
cosmetic market. This share is anticipated to grow considerably over successive five
years. It'll be primarily be led by increasing income, comparatively young urban elite
population and rising bourgeois population. Thus, a growing range of
international corporations have entered the Indian care & cosmetics market, the market
competition for domestic brands is increasing. However, larger players like Dabur and
Marico still dominate the market.
1.3.2 GLOBAL MARKET
The global market for personal care is extremely diversified and can be bifurcated into
personal care products and personal care appliances. Personal care appliances have become
popular across the globe in the last few years owing to the penetration of new and innovative
appliances in the market every year. The global market for personal care is expected to
witness substantial growth over the coming years owing to the growing disposable income of
consumers, thus enabling them to spend on luxury personal care products. The global market
for personal care can be segmented into North America, Asia Pacific, Europe, and the Rest of
the World. Asia Pacific is likely to emerge as a prominent region in the market with the
changing lifestyle of consumers and incessantly growing population. North America and
Europe are also likely to provide lucrative growth opportunities.
The above image shows the distribution of personal care companies at a global level.
The personal care and cosmetics sector in India has had continued growth, with increasing
shelf house in retail stores and boutiques in India progressively stocking foreign product.
Several foreign brands with a robust support structure and an India specific valuation strategy
have created a platform for their brands within the Indian market. One among the
explanations that foreign cosmetics have had a serious impact within the Indian market is
because of the perception of most shoppers that foreign brands are of superior quality.
Demands for premium product are growing in India as Indian shoppers are moving from useful
product to a lot of advanced and specialized product.
India’s import of personal care and cosmetic products is around $778 million. France,
Germany, U.K., China and the United States have been the traditional suppliers with imports
gradually increasing from Japan, Hong Kong, Malaysia, Thailand and even South Africa and
Israel in recent years. The US accounts for around 7% of India’s imports of personal care
products at approximately %53 millions in 2015.
As per the requirement for the completion of the report, six companies were chosen for
thorough analysis. In this report, DuPont analysis, commonsize analysis as well as comparative
analysis has been performed to find out the industry trend.
1.4.1 HINDUSTAN UNILIVER LIMITED
Table denoting various ratios that were calculated (Left) as well as the ROE (Right)
As can be seen in the table given, the value of current ratio has gone down from 1.31:1 to
1.29:1 over the span of one financial year. From this we can say that HUL could be facing
problems with inventory management, lax standards for collecting receivables or excessive
burn rate.
Quick ratio has increased from 0.98 to 1.091 which means that they were sufficiently able to
meet their short term liabilities. In 2017, the ratio was lower than 1 which usually means that
it was relying heavily on its inventory and assets but it is slowly improving its position.
The Asset Turnover Ratio has dropped significantly from 2.33 to 2.05. This means that the
inventory of the company is not being used efficiently to generate sales.
Net Profit Margin has increased from 13.01 to 14.8 indicating that HUL is buying materials at
a low cost so there is no issue with its supplier relationships.
Inventory Turnover Ratio has improved as well, going up from 5.9 to 6.9. A high inventory
turnover ratio indicates large discounts or high sales.
ROE was going down for a few years but has gone up in the last financial year. This indicates
that the company is generating a steady profit.
Overall, we can say that HUL has some problems with respect to its inventory management
and is overcoming its impact by getting low cost goods to generate a profit.
1.4.2 ITC
Table denoting various ratios that were calculated (Left) as well as the ROE (Right)
As can be seen in the table given, the value of current ratio has gone down from 1.94:1 to
1.68:1 over the span of one financial year. From this we can say that ITC could be facing
problems with inventory management, lax standards for collecting receivables or excessive
burn rate.
Quick ratio has decreased from 1.06 to 1.02 which means that they were not sufficiently able
to meet their short term liabilities. In 2017 and 2018, the ratio was higher than 1 which usually
means that the company was not relying heavily on its inventory and assets but it is slowly
losing its position.
The Asset Turnover Ratio has increased significantly from 0.84 to 1.02. This means that the
inventory of the company is being used efficiently to generate sales.
Net Profit Margin has decreased from 27.62 to 25.54 indicating that ITC is buying materials at
a higher cost so there is an issue with its supplier relationships.
Inventory Turnover Ratio has improved as well, going up from 6.13 to 7.05. A high inventory
turnover ratio indicates large discounts or high sales.
ROE has gone up every financial year for the last 5 years. This indicates that the company is
generating a steady profit.
Overall, we can say that ITC has some problems with respect to its cost of raw materials and
relationship with its suppliers or excessive cash burn and is overcoming its impact with great
inventory management.
1.4.3 GODREJ
Table denoting various ratios that were calculated (Left) as well as the ROE (Right)
As can be seen in the table given, the value of current ratio has gone up from 1.17 to 1.26
over the span of one financial year. From this we can say that Godrej is employing proper
inventory management, strict standards for collecting receivables or low burn rate.
Quick ratio has increased from 0.79 to 0.91 which means that they were sufficiently able to
meet their short term liabilities. In 2017 and 2018, the ratio was lower than 1 which usually
means that the company was also relying heavily on its inventory and assets but it is slowly
regaining its position.
The Asset Turnover Ratio has increased significantly from 77.09 to 79.42. This means that the
inventory of the company is being used efficiently to generate sales.
Net Profit Margin has increased from 17.85 to 19 indicating that Godrej is buying materials at
a low cost so there is no issue with its supplier relationships.
Inventory Turnover Ratio has improved as well, going up from 8.45 to 9.13. A high inventory
turnover ratio indicates large discounts or high sales.
ROE has gone up every financial year for the last 5 years. This indicates that the company is
generating a steady profit.
Overall, we can say that Godrej has some problems with respect to its relying heavily on its
inventory and assets.
1.4.4 DABUR
Table denoting various ratios that were calculated (Left) as well as the ROE (Right)
As can be seen in the table given, the value of current ratio has gone up from 0.83 to 0.95
over the span of one financial year. From this we can say that Dabur is employing proper
inventory management, strict standards for collecting receivables or low burn rate.
Quick ratio has increased from 0.42 to 0.48 which means that they were sufficiently able to
meet their short term liabilities. In 2017 and 2018, the ratio was lower than 1 which usually
means that the company was also relying heavily on its inventory and assets but it is slowly
regaining its position.
The Asset Turnover Ratio has decreased significantly from 1.53 to 1.32. This means that the
inventory of the company is not being used efficiently to generate sales.
Net Profit Margin has increased from 18.86 to 19.17 indicating that Dabur is buying materials
at a low cost so there is no issue with its supplier relationships.
Inventory Turnover Ratio has improved as well, going down from 8.96 to 7.96. A high
inventory turnover ratio indicates large discounts or high sales.
ROE has gone down every financial year for the last 5 years. This indicates that the company
is incurring a steady loss.
Overall, we can say that Dabur has some problems with respect to its relying heavily on its
inventory and assets. The inventory is not being used properly.
1.4.5 MARICO
Table denoting various ratios that were calculated (Left) as well as the ROE (Right)
As can be seen in the table given, the value of current ratio has gone up from 1.68 to 1.8 over
the span of one financial year. From this we can say that Marico is employing proper inventory
management, strict standards for collecting receivables or low burn rate.
Quick ratio has increased from 0.65 to 0.78 which means that they were sufficiently able to
meet their short term liabilities. In 2017 and 2018, the ratio was lower than 1 which usually
means that the company was also relying heavily on its inventory and assets but it is slowly
regaining its position.
The Asset Turnover Ratio has decreased significantly from 1.73 to 1.67. This means that the
inventory of the company is not being used efficiently to generate sales.
Net Profit Margin has decreased from 17.37 to 13.89 indicating that Marico is buying materials
at a low cost so there is no issue with its supplier relationships.
Inventory Turnover Ratio has improved as well, going down from 4.5 to 3.95. A high inventory
turnover ratio indicates large discounts or high sales.
ROE has gone up and down every financial year for the last 5 years. This indicates that the
company is incurring losses as well as profits year on year.
Overall, we can say that Marico has some problems with respect to its relying heavily on its
inventory and assets. The inventory is not being used properly.
1.4.6 TREND ANALYSIS
So far, the ratios have been used to analyze 5 companies in the FMCG personal care sector.
Now, using these ratios, we can find the industry trend.
Out of the companies that were analyzed, only ITC showed significant increase in ROE over
the past 5 years. This means that the industry as a whole is not generating steady profits. This
could be due to the recent demonetization or GST implementation.
Current ratios were also decreasing as for a majority of companies. This means that most
companies are suffering from the same problems. It could be that the industry as a whole is
facing higher cash burn for supplies.
Quick ratio has gone up for the majority of companies. It means that the industry is not facing
inventory problems as a whole and the problem with the profitability lies somewhere else.
Net Profit Margin has also increased for the majority of companies. This means that the
industry overall has a good balance between the cost of raw materials purchased and the
revenue generated from said goods.
P&G is a part of a competitive industry, and as such faces very stiff and fierce competition from
its rivals. The competition faced by the company is virtually on every front like, market share,
product line up, innovation of new products, R&D for new and existing products. It has witnessed
a drop in market share and revenue from the developed market and but sustained appreciable
performance in the developing markets.
This report provides a thorough internal as well as external analysis of P&G, identifies its
mandate, along with certain strategies that would help it increase its profitability, profit growth
and sustain its competitive advantage in both developed and developing markets. The
limitations of this report are due to the fact that it primarily relies on the information and facts
as presented in Case 27, Proctor & Gamble: The Beauty/Feminine Care Segment of the Consumer
Goods Industry. External references were also used and information was sought from the
Proctor & Gamble Company 2012 Annual Report and the Proctor & Gamble website.
Procter & Gamble was founded in 1837, by William Procter and James Gamble, who laid the
foundation of P&G by initially making and selling soap and candles. By 1879, founders of P&G
developed Ivory soap and established their own laboratory, and by 1935 the company
established another factory in the Philippines after its acquisition of the British soap
manufacturer, Thomas Hedley & Sons. In January 2005, P&G announced an acquisition of
Gillette, forming the largest consumer goods company and placing Unilever into second place.
At present, Procter & Gamble sells more than 300 leading brands, such as Pampers, Tide,
Pringles, Ariel, Downy, Pantene, Head & Shoulders, Olay, Cover Girl, Pantene, Crest, Duracell,
Secret, Folgers, Hugo Boss, Mr. Clean, Oral-B, Old Spice, Clairol and Zest. The company markets
its products through mass merchandisers, grocery stores, membership club stores, drug stores,
high-frequency stores, department stores, perfumeries, pharmacies, salons, and e-commerce.
It markets its products to over 160 countries, and operates a total of 115 plants in more than
80 countries all over the world. Procter & Gamble’s headquarters are located in Cincinnati,
Ohio and it employs more than 98,000 employees worldwide.
Off late, the company’s performance has dwindled as the company has been shuffling its
strategy and has not been able to keep competitors at bay (Chung, 2012). Recently the
company’s Board has unanimously accepted CEO McDonald, who had joined in July 2009, as the
one who would plan and head the company’s turnaround of performance (Chung, Jul 2012). As
such the company has adopted a multi-fold strategy to cut costs by a big chunk and bring up new
and innovative products to shore up sales and profits. Example being the fact that “the company
will launch at least nine new products in the next four months, many of them priced at a
premium to generate higher profit margins” (Monk, 2012).
4.1.2 MANDATE
The mission of the company is to “provide branded products and services of superior quality and
value that improve the lives of the world’s consumers, now and for generations to come”. And
this would automatically generate value for all its stakeholders in form of higher sales and
returns.
The vision of the company is to be recognized as “the best consumer products and services
company in the world”. P&G has kept is vision powerful and yet pretty clear. This vision of the
company is simple enough be easily comprehended by all its stakeholders.
The core values of the company rotate around the consumers, its brands and its employees.
These values are leadership, ownership, integrity, passion for winning and trust. The company,
through all its core values, has tried to address the fact that they seek to work and deliver a trust
to their consumers with the help of their employees, who are expected to work with leadership
and ownership and must have a passion for winning so that they can together work to strive to
achieve the vision of the company. Just like the vision of the company, the core values also are
very clear and straight forward that define the reason for the existence of the company.
P&G’s stakeholders are its customers, shareholders, employees, suppliers and communities in
which it operates. P&G’s customers are the ones who ultimately use the products and given the
fact that the industry is highly customer oriented and demand driven. The shareholders invest
in P&G’s shares providing the company with capital and the company rewards them by
consistently creating and increasing the shareholder value.
Proctor and gamble employees worldwide are considered its most important asset who are the
back bone of this giant corporation, they expect ethical treatment along with fair wages and
good working conditions. Another important stakeholder of P&G is its suppliers whose
organizations heavily rely on the business agreements with P&G, and the businesses who sell
and distribute P&G products. Also, different communities all over the world from Cincinnati,
Ohio to the many communities around the world who are provided with jobs, employee
education, stability and who pay taxes because of Procter & Gamble.
5. FINANCIAL ANALYSIS
1.Competitive Rivalry:
The industry that P&G operates in is highly competitive and it has emerged as one of the
leaders in the industry. This industry has five major competitors and has reached the stage of
consolidation. Due to industry consolidation, changes made by one company forces other
competitors to react and follow suit. This increases rivalry and might lead to price wars. The
demand for beauty and personal hygiene products is on the rise due to many factors such as;
the growth in the economies of developing world has improved the standard of living of people
in those regions; men are becoming more interested in beauty and skin care; and also due to
the growing demand for products made with natural ingredients and raw materials. This
increase in demand and potential for growth has provided stability in the industry.
Threat of Substitutes:
There are no known substitutes for this industry which places the threat of
substitutes at a very low level.
4) Ambipur
2. Gillette
3. Ariel
• Revenue RS 1200 crores
• Ariel can be placed in star quadrant whear the the market growth is high and market share is
also high. Ariel market share is increasing at 20-30% every year as compared to its competitors.
Again market opportunity still exists for increase in the revenue
4.Ambipur
• General Customers
• Products targeted to babies of 4to 5 months to
16 yrs age children and the adults
• Targeted to Upper, Middle and Lower class people
Targeting
Demonetisation and GST implementation disrupted trade channels, particularly the wholesale
channel, which is the backbone of the rural distribution channel
The FMCG sector as a whole witnessed various headwinds in H1FY18, namely, tough macro
demonetisation, and various difficulties pertaining to the implementation of the Goods and
profiteering measures restricted any major benefits to companies so far as the full be nefits
GST rates were to be passed on to consumers. However, this has improved the affordability
The FMCG space reported better performance, owing to weak base and partial normalcy in
the wholesale and CSD trade channels. Further, GST rates were cut in November 2017 across
various daily use product categories such as detergents, skincare, shampoo, noodles, etc.
Moreover, companies started signalling some green shoots for the recovery of the rural
quarter.
Benign raw material price: Key commodity prices for packaged foods like wheat, milk, and
cooking oil have been benign. Packaging input costs were also benign, down 4% yoy for
9MFY18. However, copra prices continued to be firm (up 90% yoy in Q3FY18). Tea prices were
flat for 9MFY18. In addition to the chaos related to GST, the benign commodity prices
Sector to be back on track soon: After witnessing a challenging time so far in the year, we
expect demand revival in the overall sector driven by (a) expected rural recovery, (b)
improving consumer sentiment, (c) supportive base (demonetisation impact and
anniversarisation in case of international currency movement), (d) improved affordability
post-GST rate revision, and (e) normalcy in trade channels. Further, the focus of FMCG
companies on improving direct reach and gradual increase in ad spend would be a major
supporter of their recovery.
P&G derive most of its revenues from matured market of North America and Europe where
market has reached the saturation point and revenue growth is stagnant. Unlike the mature
markets, emerging or growth markets have a lot of potential for growth and there is a lot of
market share up for grabs.
As P&G looks to gain greater share in the developing countries, it needs to adjust its planning
according to the demographics of such country i.e. ethnic groups with different skins, hair
types etc. As P&G already has a strong set of products, it must be relatively easier for P&G to
penetrate into emerging markets especially in terms of brand recognition, mass market
presence, and brand loyalty. P&G can avail this opportunity by introducing quality products
based on the specific needs of the local population or by acquisition of businesses who
produce such products. This strategy would help P&G in the long run as it would allow P&G in
keep its revenues up during the economic downturns in mature markets as sales in emerging
markets will offset the recessions in the mature markets. Rules and regulations vary country to
country so some countries can have stringent rules for Multi-national Corporation to protect
its local businesses. Global Strategic Alliance or collaborations with local businesses will enable
P&G to expand in to the local market in are as such as China, India or South America. The
extensive knowledge of consumers, market trends, laws and regulations that Partner Company
brings to the table can be considered an excellent distinctive competency
Pros
Great long term potential, Diversification through operations in various regions which provides
an opportunity to keep revenues up during recession in one region.
Cons
High risk involved in collaboration/acquisitions along with the instability of economic growth in
emerging markets. Company can lag behind in innovation. P&G should select it partner
carefully in emerging markets keeping in mind the risks associated such as rules, regulations
etc. P&G must form a structure where the share, responsibilities of each party is clearly
defined along with contingency plans to mitigate various risks involved. P&G should protect its
trade secrets and product formulas so manufacturing facilities must have separate units, and
PG should also get all its patents recognized in the region where it will operate. Some of the
cons of this strategy are embedded with the collaborations with local businesses and the
instability in the emerging markets. Also, P&G will essentially be rebranding most of the
products it sells in mature markets along with selling some products of its partners which
means there will be less spending on R&D and company might lag behind in innovation of new
revolutionary products.
11. Product Lifecycle of P&G
INTRODUCTION
1947, PANTENE HAIR TONIC
GROWTH
2003. VICKS & since 2005, PANTENE
MATURITY
In most of its brands
P&G is recognised and verified as a strong sustainability player and has received several
certifications by independent organisations in the field of corporate sustainability.
Furthermore, the company is working towards its long-term 2020 vision and pursuing
significant initiatives in addressing social and environmental issues while successfully fulfilling
1. Shelf-Level Out of Stocks: The percentage of products that are out of stock on retailers'
shelves at any given time. P&G has cut this to 5%, from 10%.
2. Total Supply Chain Response Time: The time from when a cash register records the sale of
a product to the purchase of raw materials to produce its replacement. P&G wants to chop
this in half, from 100 days.
3. Total Supply Chain Inventory: The hard count of all products flowing through the supply
chain at any given moment, whether on store shelves, in back of the store, at warehouses, in
trucks or wherever. P&G wants a daily count, rather than weekly or monthly.
5. Pricing-Design From the Shelf Back: Determining an acceptable price point for an item and
then working it back through manufacturing and distribution to see if that product can be
delivered at a price acceptable to consumers and a profit acceptable to P&G.
14. Summary & Recommendations – Analysis on Procter & Gamble Company
Procter & Gamble’s market position helps ensure resilience in spite of organizational
weaknesses, and despite threats in the external environment. For example, this SWOT analysis
highlights the strengths in economies of scale and strong brands. Such strengths make it
difficult for other firms to directly compete against Procter & Gamble. The company also has
high competitiveness based on the global scale of its operations. These conditions lead to
capabilities in exploiting the opportunities available for Procter & Gamble in the consumer
goods industry.
Despite its profitable and strong market position, the Procter & Gamble Company must
develop measures to overcome its weaknesses and address external threats. Competitive
rivalry is the most significant of these threats. On the other hand, limited online presence and
limited business diversification are the most significant weaknesses of Procter & Gamble. Given
these factors, the company must strengthen its competitive advantage and business
capabilities in the consumer goods market. Based on the results of this SWOT analysis, the
following are recommendations to address such issues facing Procter & Gamble: