You are on page 1of 10

Conceptual Paper On Compensation Tends in FMCG Sector

Submitted To :Dr. Sanyukta Jolly

Submitted By :Monika Aggarwal PGP2010-2199

About the Fast Moving Consumers Goods Sector :-

The India FMCG( Fast moving consumers goods) sector is the fourth largest sector in the economy and has a market size of US$13.1 billion. FMCG sector is well-established distribution networks, as well as intense market competition in this sector. FMCG in India has a strong and competitive advantage, MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle segment and the rural segments of the Indian population are the most promising sector in Indian market for FMCG sector and also give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge. The big firms are growing higher and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands.

THE TOP 10 COMPANIES IN FMCG SECTOR S. NO. 1. 2. 3. 4. 5. 6. 7. Companies Hindustan Unilever Ltd. ITC (Indian Company) Nestl India GCMMF (AMUL) Dabur India Asian Paints (India) Cadbury India Tobacco

8. 9. 10.

Britannia Industries Procter & Gamble Hygiene and Health Care Marico Industries

The foods category in FMCG is gaining popularity now a days by launching HLL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat items like dal makhani, shahi paneer, etc by HLL and both GCMMF(Amul) and Godrej Pillsbury. This category seems to have faster development rather than the personal care category. Amul, India's largest foods company, has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a series of products at various prices. Dabur is among the top five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Cadbury India is the market leader in the chocolate confectionery market with a 70% market share and is ranked number two in the total food drinks market. Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380 Million). There is a huge potential growth for all the FMCG companies as per capita consumption of almost all products in the country is amongst the lowest in the world. The demand could be increased if these companies can change the consumer's mindset and offer new generation products.

Vision :In India FMCG Sector as the Respected and Trustworthy leading food, nutrition, health and wellness ensuring long term sustainable and profitable growth. Mission :- FMCG Sector strives to be a leader in nutrition, health and wellness, with the belief that good food is central to healthy and hygiene.

Values :- The core values are the principle to characterize our culture.

People - People from all different backgrounds or different region are the most important asset and the source of our competitive advantage. Brands The strong brands ensure the continuity of growth and profitability Consumers The reason for being is to understand, anticipate and best wat to fulfill our consumers' needs.

Goal :The goal is to earn profits as well as consumer satisfaction and market the company's product in such a way to create value that can be sustained over the long term for shareholders, employees, consumers and business partners.

About their Services/ Products :Common FMCG products :- Some common FMCG product categories include food and dairy products, pharmaceuticals, consumer electronics, packaged food products, plastic goods, printing and stationery, household products, photography, drinks, glassware, paper products, etc. and some of the examples of FMCG products are coffee, tea, dry cells, greeting cards, gifts, detergents, tobacco and cigarettes, watches, soaps etc. These are the various products which can use in day to day activities and it is very important for household sector as well. Electronics items can also provide various servi ces like after sales service, free servicing etc.

Details about their Compensation Policy and Trends in FMCG sector :Brief introduction about Compensation :Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized technique that involves balancing the work lifecycle and employee relation by providing monetary and non-monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. Compensation is an essential part of

every sector which helps to attract, motivate, and retain a workforce of top performers. Our philosophy is to provide and maintain disciplined compensation programs which value long-term relationships with employees while recognizing individual performance. They also offering compensation packages, including base pay, short and long-term incentives and benefits, that are competitive in todays market

Types of Compensation :-

Compensation provided to employees can be in direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Compensation does not include only salary but it is the sum of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity. Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. The monetary benefits include basic salary, house rent allowance, conveyance, medical reimbursements, special allowances, bonus, PF/Gratuity, etc. They are given at a regular interval at a definite time.

1. Basic Salary :- Basic Salary is the amount received by the employee in lieu of the work done by him/her for a certain period a day, a week, a month, etc. It is the money an employee receives from his/her employer by rendering his/her services. 2. House Rent Allowance :- Every organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees. This is done to provide them social security and motivate them to work. 3. Conveyance Allowance :- Every organizations provide cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them. 4. Medical Reimbursement :- Every organizations also provide medical facilities to

their employees. The employees also provided with medi-claims for them and their family members. These medi-claims include health-insurances and treatment bills reimbursements. 5. Bonus :- Bonus is paid to the employees during festive seasons like diwali or dusherra time to motivate their empolyees and provide them social security. The bonus amount usually amounts to one months salary of the employee and it also depends upon designation of every employees as well. 6. Special Allowance :- Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club memberships, etc are provided to employees to provide them social security and motivate them which improve the organizational productivity.

Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. They include Leave Policy, Overtime Policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes.

1. Leave Policy :- It is the right of employee to get adequate number of leave while working within the organization. The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, etc. 2. Overtime Policy :- Employees also provide with the adequate allowances and facilities during their overtime, such as transport facilities, night duties, overtime pay, etc. 3. Hospitalization :- The employees should also be provided allowances to get their regular check-ups, once in year. Even their dependents should be eligible for the mediclaims that provide them emotional and social security. 4. Insurance :- Every organization also provide for accidental insurance and life insurance for employees. This gives them the emotional security and they feel themselves valued in the organization. 5. Leave Travel :- The employees are also provided with leaves and travel allowances to go for holiday with their families which covers parents as well as children expenses also. 6. Retirement Benefits :- Every organization also provide pension plans and other benefits for their employees which benefits them after they retirement and their future should be secured which is very important for every employees after retirement.

Compensation Trends in FMCG Sector :The FMCG sector is start booming in the past recent year, and they can also build the relationship between rural market as well and market share is also increasing which is good for FMCG sector. The FMCG industry have begun hiring, especially on campus recruitment this can also increases competition. Competitive Strategy plays an important role in every sector and it consists of move of companies in order to attract customers. With stand competitive pressures and strengthen an organization's market position. The main objective of Competitive Strategy is to generate a competitive advantage, increase the loyalty of customers and to beat competitors. The compensation trends in the FMCG industry in India reflects to a large extent the overall salary trends of India. The parameters while deciding on the compensation of the employees in the FMCG industry are the following: Cost-Competitiveness, Innovation and Mass- Market nature of the products. This is a positive sign for the industry and the economy as a whole and the significance of this industry for India. The FMCG industry is the fourth largest sector in India.

Analysis of Compensation Practices in FMCG Sector :In the current scenario, it is very important to look beyond compensation as the sole motivation and retention factor for employees. With changing times, monetary and non- monetary benefits like medical/ health benefits also very important which gives emotional support as well as social security. Hence these benefits are not lucrative enough to retain employees in current times. The most successful companies have realized that they must take a much broader look at factors such as attraction, motivation and retention and most of the companies also provide benefits programmes which helps in career as well as knowledge sharing. And they must deploy of all factors including rewards, benefits, work-life, recognition, development and career opportunities to their strategic advantage. In todays scenario most of the companies following the Total Rewards Strategy which comprises a combination of market relevant rewards that draw from individual, team and business performance as well. Companies in India are looking at

differentiated rewards systems and adopting total rewards practices that cover not only cash component, but also pay for performance, benefits, work- life balance programmes, competency/skill based pay packages, career opportunities such as onsite, overseas assignments, job rotation etc. The key to employees retention today is to look beyond just fixed pay and variable pay. The concept of compensation is focused on enabling an emotional concept between the employees and the organization by providing work-life benefits, health care, education, assistance programmes, recognition, mentoring etc.

Comments :1. Every company should conduct a survey from time to time according to which changes can be introduced in the organization to stay updated in the market position. 2. Employees should be given compensation in order to keep them loyal. 3. They should introduce innovation products and creativity in packaging styles, so that the employees can do their work actively. 4. Employees should be more involved in decision making to become more differentiated. 5. Company should provide incentives to shop keepers and retail sector as well.