Fundamental Analysis
ANALYSIS OF BENCHMARKING SUPPLY CHAIN PRACTICES IN FMCG INDUSTRY
INTRODUCTION
FMCG sector in India is one of the largest sector in the Indian economy with annual revenues of Rs. 72000 crores. There is still a huge scope for companies to cut down their costs. The penetration level of companies is still relatively low and several categories are fairly unbranded. We can say that companies can still bring up more brands to cover up this several categories. As India is a developing country the prices would hike in the short run and most companies pass this cost inflation to the consumers through price hikes, package size reduction and change in product mix due to this sometimes the customer stops using the brands but if the price hike is moderate they continue using the product. The FMCG companies usually add value through differentiation, package innovation, and differential pricing, and highlighting the functional aspect of foods. The top five FMCG companies constitute nearly 70% of the total revenues generated by the sector. These big firms tend to spend 10% of their revenues on an average on advertising and promoting their products. These are huge costs spent by the company to recall the brands in the consumer minds as there is intense competition. The second tier companies usually spend less on their advertising and promotion. The third tier companies are small and are strong regional players and they tend to eat out the share of national players. FMCG sector is one of the defensive sectors on the BSE and so people do not have huge losses in FMCG stocks and also the profits are limited in the short period. FMCG market in India is opening up and there is an increase in competition in the FMCG sector and hence the companies are not able to pass the cost inflation to the consumers without affecting the consumer demand. Due to increasing competition, the consumers have more choices and easy availability of products and hence the consumers have started buying in
INTRODUCTION
FMCG sector in India is one of the largest sector in the Indian economy with annual revenues of Rs. 72000 crores. There is still a huge scope for companies to cut down their costs. The penetration level of companies is still relatively low and several categories are fairly unbranded. We can say that companies can still bring up more brands to cover up this several categories. As India is a developing country the prices would hike in the short run and most companies pass this cost inflation to the consumers through price hikes, package size reduction and change in product mix due to this sometimes the customer stops using the brands but if the price hike is moderate they continue using the product. The FMCG companies usually add value through differentiation, package innovation, and differential pricing, and highlighting the functional aspect of foods. The top five FMCG companies constitute nearly 70% of the total revenues generated by the sector. These big firms tend to spend 10% of their revenues on an average on advertising and promoting their products. These are huge costs spent by the company to recall the brands in the consumer minds as there is intense competition. The second tier companies usually spend less on their advertising and promotion. The third tier companies are small and are strong regional players and they tend to eat out the share of national players. FMCG sector is one of the defensive sectors on the BSE and so people do not have huge losses in FMCG stocks and also the profits are limited in the short period. FMCG market in India is opening up and there is an increase in competition in the FMCG sector and hence the companies are not able to pass the cost inflation to the consumers without affecting the consumer demand. Due to increasing competition, the consumers have more choices and easy availability of products and hence the consumers have started buying in