ACKNOWLEDGEMENT
We sincere attempt has been made to include everything regarding the subject that was within reach. We will consider our effort rewarded if this shot piece of work being better under standing of the subject.
We are highly thankful to our Prof. Japan Shah Sir (Lecturer in OSB, Ahmedabad) for guided us in understanding different of their organization as a part of our study required at MBA level. The detailed information of various functional and operation department has helped us a lot in submitting the export.
This report is fruit of many people’s effort and thoughts, directors indirect each has contributed inside facts, experience and personal support during its preparation.
PURPOSE OF MAKING REPORT
The student of MBA have to make a group report for the purpose of our live-project so our group has selected to make a report on the
This has helped the students to enrich their theoretical knowledge about the working and functioning of all departments in the particular area of the management and we have achieved the opportunities to do a work group report.
In this report we are very thankful to our professor Japan Shah Sir who gave us important guidance to fulfill the need of the report.
Indian FMCG industry
INTRODUCTION TO FMCG SECTOR FMCG refers to Fast Moving Consumer Goods it constitutes all the non-durable goods required for daily or frequently uses. Typically a consumer buys FMCG goods at least ones in a month.
FMCG sector is the fourth largest sector in the economy with a total market size in excess of Rs 60,000 crore. This industry essentially comprises Consumer Non Durable (CND) products and caters to the everyday need of the population.
Broadly, FMCG industry can be divided in to following categories.
Household products Tobacco products
Household care Tobacco/ Pan Products
Healthcare Cigarette
Personal care products
Branded Foods FMCG INDUSTRY Agro products
Health beverages Dairy
Soft drinks Poultry
Bottled water Sugar
Edible oils Tea
EVOLUTION OF FMCG INDUSTRY IN INDIA The Ice Ages Dabur was one of the first players in the Indian FMCG scene. That was about 115 years ago when the term FMCG had not yet gained currency. The focus then was on providing consumer goods on a large scale. Since then the industry has come a long way what with catchphrases, buzzwords, marketing strategies, advertising all thrown in for good measure.
The Middle Ages (The 50's)
At the time of India's independence there were many multinationals like Godrej , Colgate and Nestle. Out of these companies only GODREJ had a domestic production base. For other MNCs, the domestic market was too small and the purchasing power of people was too low to entail any serious investment decisions.
The Swinging Sixties (60's)
The sixties were not too exciting in the Indian context particularly the FMCG sector Inspite of the fact that many more MNC's set up shop in India with a local manufacturing base the scene wasn’t too bright. This was due to the fact that the government accorded a misplaced emphasis on the concept of self-sufficiency and due to the heavy influence of socialist philosophy the natural inclination of the government was to frown upon the capitalist multinationals.
The Dark Ages (70's)
With a socialist government at the helm and the exploits of a rabble-rousing firebrand by the name of George Fernandes the MNC's didn't stand a chance. A statute was promoted to restrict the equity stake of foreign investment to 40%. That was the straw that broke the camel's back. Coke and IBM decided that they had enough and they left India .The only major FMCG MNC (that's quite a mouthful) that stayed put was Unilever .It somehow managed to retain a 51% stake by complying with certain government regulations. There weren't too many players in the FMCG scene which was dominated by a few big players. Which meant that there wasn’t enough choice for the consumers? With a socialist government at the helm which still thought that privatisation was a dirty word, and a fundamentalist opposition which opposed anything videshi on the grounds that it was videshi, things never looked more bleak for this segment.
Liberalization (The 90's)
After the introduction of reforms by the Narasimha Rao - Manmohan Singh duo the MNC's returned in droves. This period was marked by the creation of new categories and also new sub categories within existing categories. Demand was created where there was none by innovative sales and marketing strategies. With a burgeoning middle class that had the required purchasing power the MNC's were faced with the enviable prospect of a growing market that was not yet completely explored. There was a renewed emphasis on the distribution network.
More than anything else the nineties will be remembered for the acquisitions of brands. The acquirers were usually multinationals or those with huge resources. The following were the more publicized cases:
· The acquisition by GODREJ of Tomco, Kwality and Kissan and Lakme
· Colgate- Palmolive acquired Cibaca Flouride toothpaste brand, and Supreme, Standard Angular and Deluxe Transparent toothbrush brands.
· Coke acquired thums- up thus having a substantial market share even before setting up a domestic production capability.
Even though by conventional financial wisdom these acquisitions did not make much sense, the main reasons for these costly acquisitions were
· Market share- In this industry the profit margins are not very large so profits are determined by sales volume. These acquisitions did certainly push up sales volume. Pre-emptive move - Many companies were acquired simply to prevent rivals from taking over the company.
Product Characteristics
Products belonging to the FMCG segment generally have the following characteristics:
They are used at least once a month
They are used directly by the end-consumer
They are non-durable
They are sold in packaged form
They are branded
INDUSTRY CHARACTERISTICS
1 Branding:
Creating strong brands is important for FMCG companies and they devote considerable money and effort in developing bands. With differentiation on functional attributes being difficult to achieve in this competitive market, branding results in consumer loyalty and sales growth.
2 Distribution Network:
Given the fragmented nature of the Indian retailing industry and the problems of infrastructure, FMCG companies need to develop extensive distribution networks to achieve a high level of penetration in both the urban and rural markets. Once they are able to create a strong distribution network, it gives them significant advantages over their competitors.
3 Capital Intensity: Most product categories in FMCG require relatively minor investment in plant and machinery and other fixed assets. Therefore shortage of product for want of capacity would be a rare phenomenon. The turnover is typically five to eight times the investment made in a green field plant at full capacity. This is also due to the fact that the business being marketing driven, players do not integrate backward. Also, the business has low working capital intensity as bulk of sales from manufacturers takes place on a cash basis.
4 High Initial Launch Cost:
Nonetheless, there is a large front-ended investment made in new products including cost of product development, market research, test marketing and most importantly its launch. To create awareness and develop franchise for a new brand requires enormous initial expenditure is required on launch advertisements, free samples and product promotions. Launch costs are as high as 50-100% of revenue in the first year and these costs progressively reduce as the brand matures, gains consumer acceptance and turnover rises. For established brands, advertisement expenditure varies from 5 - 12% depending on the categories. It is common to give occasional push by re-launches, which involves repositioning of brands with sizable marketing support.
5 Technology:
Basic technology for manufacturing is easily available. Also, technology for most products has been fairly stable. Modifications/ improvement rarely change the basic process. Nonetheless, major global players spend enormous sums on R&D due to their ability to spread cost over the wider base of their global operations. Their R&D efforts are towards
Cost effective manufacturing process without compromising on quality and functional performance.
Research driven formulations which give cutting edge.
High standards of hygiene/ purity for personal care and food products.
Standardized formulation, which can be used across countries.
6 Marketing Drive:
In relative terms, marketing function has greater importance in FMCG companies. The players have to reach out to mass population and compete with several other brands which essentially offer similar products. The perceived differences are greater than the real differences in the product.
7 Market Research:
Consumers' purchase decisions are based on perceptions about brands. They also keep on changing with fashion, income and changes in lifestyle. Unlike industrial products, it is difficult to differentiate products on technical or functional grounds. With increasing competition, companies spend enormous sums on product launches. Market research and test marketing become inevitable.
9 Third-party Manufacturing
Manufacturing of products by third party vendors is quite common. Third party manufacturing used to give fiscal advantages particularly of excise duties. These have been considerably diluted in the past 7 years of reforms. In the 1997-98 budget the government proposed to change the basis of excise levy to MRP basis. A total of 43 product categories have been brought under the MRP net in the subsequent budgets.
Besides excise benefit, third party manufacturing also provides other benefits viz.
1. Flexibility in production and inventory planning as the marketing company's decision-making is liberated to a large extent from taking manufacturing overheads into account.
2. Flexibility in controlling labor costs. Most small-scale third-party manufacturers have benefits of direct control of the owner and greater ability to manage local environment. The large organization also runs the risk of unionization.
3. It is beneficial (in terms of logistics) and sometimes essential to get certain products manufactured near the market. A company can tie up with several 3P manufacturers in separate locations, rather than set up own manufacturing facilities.
4. The marketing company gives technology, lays down quality standards and typically exercises supervision on manufacturing, cost and quality standards. The marketing company may also co-ordinate raw material procurement to optimize on bulk discounts. While in most cases, manufacturing process is fairly simple, certain products require supply of some critical ingredients by the marketing company (which in turn may be imported from the parent company). It is common to find support in working capital finance also.
10 Significant Presence of Unorganized Sector
There is a significant presence of unorganized sector in India. In the past, several factors led to mushrooming of small unorganized players with local presence viz.
Basic technology for most products is fairly simple and easily available.
· Fiscal advantages:
In India, small-scale sector enjoys (the concessions however have been diluted considerably in the past few years) exemption/ lower rates of excise duty, sales tax etc. This makes them more price competitive vis-à-vis the organized sector.
· Remote rural markets:
Due to highly scattered market and poor transport infrastructure, very few MNC companies/ organized players have been able to reach out to remote rural areas and even small towns.
· Low brand awareness:
Low brand awareness enables local players to market their spurious look-alike brands.
· Cost advantage:
Lower overheads due to limited geography, family management, focused product lines and minimal expenditure on marketing.
Industry Segments
The main segments of the FMCG sector are:
Ø Personal Care:
Oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care.
Ø Household Care:
Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish).
Ø Branded and Packaged Food and Beverages:
Health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.
MAJOR PLAYERS
There is a strong MNC presence in the Indian FMCG market and out of the top 10 FMCG companies; four are multinationals while two others have significant MNC shareholdings. Unlike several other sectors where multinationals have entered after 1991, MNCs have been active in India for a long time. The top 10 listed FMCG companies on the basis of their sales turnover are:
Company Name
1. HUL
2. ITC
3. NESTLE
4. GCMMF AMUL
5. DABUR
6. ASIAN PAINTS
7. CADBURY INDUSTRIES
8. BRITANNIA
9. PROCTER AND GAMBLE
10. MARICO INDUSTRIES
Among the major companies, Hindustan Unilever has a strong presence in the food, personal care and household care (detergents) sectors; ITC is the market leader in cigarettes; Nestle, Cadbury and Britannia are active in the food sector. P&G and Marico Indus are active in personal care.
Exports
India is one of the world’s largest producers for a number of FMCG products but its FMCG exports are languishing at around Rs 1,000 crore only. There is significant potential for increasing exports but there are certain factors inhibiting this. Small-scale sector reservations limit ability to invest in technology and quality up gradation to achieve economies of scale. Moreover, lower volume of higher value added products reduce scope for export to developing countries.
SALIENT FEATURES OF FMCG INDUSTRY:
The FMCG sector is a key component of India’s GDP and is a significant direct and indirect employer. It is the fourth largest sector in the economy and is responsible for five per cent of total factory employment in the country. The sector also creates employment for three million people in downstream activities, much of which is disbursed in small towns and rural India.
Unlike the perception that the FMCG sector is a producer of luxury items targeted at the elite, in reality the sector meets the every day needs of the masses, across the country. Low-priced products contribute the majority of the sales volume and lower income and lower middle income groups account for over 60 per cent of the sector’s sales. Moreover, rural markets account for 56 per cent of total domestic FMCG demand and FMCG outlets reach more villages than any other basic facility such as primary schools or bus facilities.
The FMCG sector has several other salient features. It has strong links with agriculture and 71 per cent of sales come from agro-based products; it is a significant value creator with a market capitalization second only to the IT sector and it is a key contributor to the exchequer. In 1998-99, it accounted for eight per cent of total corporate tax; six per cent of central excise revenue and seven per cent of state tax revenues.
The FMCG sector has traditionally grown at a very fast rate and has generally out performed the rest of the industry. Over the last one year, however the rate of growth has slowed down and the sector has recorded sales growth of just five per cent in the last four quarters.
The outlook in the short term does not appear to be very positive for the sector. Rural demand is on the decline and the Centre for Monitoring Indian Economy (CMIE) has already downscaled its projection for agriculture growth in the current fiscal. Poor monsoon in some states, too, is unlikely to help matters. Moreover, the general slowdown in the economy is also likely to have an adverse impact on disposable income and purchasing power as a whole. The growth of imports constitutes another problem area and while so far imports in this sector have been confined to the premium segment, FMCG companies estimate they have already cornered a four to six per cent market share. The high burden of local taxes is another reason attributed for the slowdown in the industry
At the same time, the long term outlook for revenue growth is positive. Give the large market and the requirement for continuous repurchase of these products, FMCG companies should continue to do well in the long run. Moreover, most of the companies are concentrating on cost reduction and supply chain management. This should yield positive results for them.
PEST ANALYSIS OF INDIAN FMCG INDUSTRY:
POLITICAL / LEGAL FACTORS
Tax reforms
The government has gradually removed the restriction on imports of consumer goods in the country and also significantly reduced excise duties. The domestic tax structure of these products, however, has not been rationalized to provide level playing field for competition this is adversely affecting the FMCG industry and could have far reaching adverse impact. The following taxation issues need urgent attention of the government:
1. Irrational domestic tax structure encouraging imports
Significant reduction in custom duty rates of the consumer goods has made imported products cheaper as compared to indigenously manufactured products, due to irrational domestic tax structure. For instant, goods manufacturing in India suffered for cascading effects of taxes on inputs as additional cost compared to imports.
The cascading effects of sales tax and local levies on inputs used in domestic manufactured should be eliminated by providing national VALUE ADDED TAX. Covering both central and state taxes on an urgent basis.
Moreover, maximum retail price – based excise duties levies on a large number of FMCG products. Countervailing duty in the same product when imported is charged on CIF value. The MRP base assessable for excise does not allow abatement for cost manufacturing costs such as advertising and selling expenses whereas CIF value considered for the purpose of import duty does not include costs of these elements incurred subsequently by imports.
2. Inverted duty structured for selected inputs
Duty on certain raw material higher or the same as compared to finished products in which these materials are used. In addition custom duty, raw materials are also subject to sales tax and octroi and therefore total tax incidence and cost of indigenous goes up. The import duty on raw materials needs to be rationale so that it does not exceed 60 to 70 percent of the duty on finished goods.
3. Contract manufacturing:
As FMCG companies concentrate on brand building, product development and creating distribution networks, they are at the same time outsourcing their production requirements to third party manufacturers. Moreover, with several items reserve for the small-scale industries and with these SSI units enjoying tax incentives, the contract manufacturing route has grown in importance and popularity.
ECONOMIC FACTORS:
FMCG growth is directly linked to growth of Indian economy. The sector will be the biggest beneficiary when the economy turns around and rural demand picks up. This indicates immense potential for FMCG in India over the long term. Duty stagnant market in Urban India, rural market can be developed. This depends on the monsoon, as rural economy is heavily dependent on agriculture.
SOCIOCULTURAL FACTORS:
1. Life style:
A considered part of rural population now has access to television and cable television and aspiration about life style are changing fast. Rural India accounts for over 70 percent of the country’s population.
2. Income level:
Income levels are low and consumers are highly price sensitive. Lower income and lower middle groups accounts for over 60 percent of the sector’s sales. Local / unorganized players operating at low overheads will continue to give stiff competition.
TECHNOLOGICAL:
Basic technology for manufacturing is easily available. Also, technology for most products has been fairly stable. Modification / improvements rarely change the basic process. Nonetheless, major global players enormous sums on R&D due their ability to spread cost over the wider base of their global operations. Their R&D efforts are towards
· Cost effective manufacturing process without compromising on quality and functional performance.
· Research driven formulations, which give cutting edge.
· Standardize formulation, which can be used across countries.
SWOT ANALYSIS OF FMCG INDUSTRY
STRENGTHS
Well-established distribution network extending to rural areas.
Strong brands in the FMCG sector.
Low cost operations
2. WEAKNESSES
Low export levels.
Small scale sector reservations limit ability to invest in technology and achieve economies of scale.
Several "me-too’’ products.
3. OPPORTUNITIES
Large domestic market.
Export potential
Increasing income levels will result in faster revenue growth.
4. THREATS
Imports
Tax and regulatory structure
Slowdown in rural demand
Rural marketing has become the latest marketing mantra of most FMCG majors
AN INTRODUCTON Rural marketing has become the latest marketing mantra of most FMCG majors. True, rural India is vast with unlimited opportunities. All waiting to be tapped by FMCGs. Not surprising that the Indian FMCG sector is busy putting in places a parallel rural marketing strategy. Among the FMCG majors, Hindustan Lever, Marico Industries, Colgate-Palmolive and Britannia Industries are only a few of the FMCG majors who have been gung-ho about rural marketing.
Sure, there is a lot of money in rural India. But, there are obstacles. The biggest obstacle is that the rural consumer is still evolving. Only FMCGs with deeper pockets, unflinching rural commitment and staying power can play this rural game. CHALLENGES IN RURAL MARKETING
1. Literacy:
There are not enough opportunities for education and literacy level is low (36%) compared to all India average of 52%.
2. Seasonal demand:
Demand for goods in rural markets depends upon agricultural situation, as agriculture is main source of income.
3. Transportation:
Many rural areas not connected by rail transport. Kacha road become unserviceable during monsoon and interior villages gets isolated.
4. Distribution: High cost of distribution.
5. Communication problems:
Facilities such as telephone, Fax, telegramis rather poor in rural areas.
6. Buying decisions:
Rural consumers are cautious in buying and decisions are slow and delayed. They like to give a trial and only after getting personal satisfaction, they adapt the practice.
7. Sales promotion media and methods:
Television has made a great impact and large audience has been exposed to this medium. Radio reaches large population in rural areas at a relatively low cost. However reach of formal media e.g. Print, TV, Cinema and Radio is low in rural households therefore the marketer has to undertake rural specific sales promotion activities such as participation in melas/fairs, haats conducting group meeting of potential users of products, van publicity, village film shows and demonstration.
FEATURES OF RURAL MARKETING
1. Large and Scattered market:
The rural market of India is large and scattered in the sense that it consists of over 63 crore consumer from 5, 70,000 villages spread throughout the country.
2. Major income from agriculture:
Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity.
3. Low standard of living:
The consumer in the village area do have a low standard of living because of low literacy, low per capita income, social backwardness, low savings, etc.
4. Traditional Outlook:
The rural consumer values old customs and tradition. They do not prefer changes.
5. Diverse socio-economic backwardness:
Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country.
6. Infrastructure Facilities:
The Infrastructure Facilities like roads, warehouses, communication system, financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure Facilities.
RURAL MARKETING-CHALLENGES AND OPPORTUNITIES
The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.
The success of a brand in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern.
One major problem for rural market is a huge urban-rural consumption mismatch. According to estimates, penetration of toothpaste is a healthy 75-80% in urban India, whereas it is only 15-20% in rural India. As a result, urban India contributes 65% to the total volumes in the oral care business. The per capita consumption of toothpaste in urban India is 153 grams per annum, almost 4 times of rural India. With urban India already highly penetrated incremental growth becomes difficult.
In order to reduce this mismatch, both Colgate and GODREJ have taken to the rural market with gusto. GODREJ already is the trendsetter in recognising rural potential. Colgate too has initiated operation ‘Jagruti’ to improve its rural penetration. The aim is to educate the masses about oral care and its benefits vis-à-vis traditional teeth cleaning methods like ‘datoon’ (neem plant).
The focus has also shifted to children. Corporates realise that oral care is a lifelong habit and once developed in a child, generates lifelong customers. So, oral care companies are tying up with schools to educate children on oral care. The focus of advertising in print and television has also shifted to children. Also, the focus is on brushing twice a day, in a bid to expand per capita volume growth.
Though market expansion has hit a roadblock in recent times, with improvement in rural economy and the measures taken by the industry to improve usage of products, the oral care market is likely to show an improvement in the long term.
While the rural market certainly offers a big attraction to marketers, it would be naive to think that any company can easily enter the market and walk away with sizable share. Actually the market bristles with variety of problems. The main problems in rural marketing are:
· Physical Distribution
· Channel Management
PROMOTION AND MARKETING COMMUNICATION
The problems of physical distribution and channel management adversely affect the service as well as the cost aspect. The existent market structure consists of primary rural market and retail sales outlet. The structure involves stock points in feeder towns to service these retail outlets at the village levels. But it becomes difficult maintaining the required service level in the delivery of the product at retail level.
One of the ways could be using company delivery vans, which can serve two purposes- it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. However, only the bigwigs can adopt this channel. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between non-competitive marketers can be established to facilitate distribution.
As a general rule, rural marketing involves more intensive personal selling efforts compared to urban marketing. Marketers need to understand the psyche of the rural consumers and then act accordingly. To effectively tap the rural market a brand must associate it with the same things the rural folks do. Utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals, melas and other activities where they assemble, can do this.
Effective Communication Media and Methods for Rural Audience
There are three major factors to be kept in mind while selecting the media:
· The market to be reached
· The pros and cons of a particular medium
· The most appropriate media to reach the particular market.
Any medium chosen must be able to attain at least two aims:
· It is to reach the maximum number of prospects
· It must attract the attention of such prospects
The promotion media and methods could be broadly classified into formal media and informal/rural specific media.
1. Formal media
Formal media includes Press and Print, TV, Cinema, Radio , and Point of Purchase and Outdoor advertisement. Reach of formal media is low in rural households (Print: 18%, TV: 27% , Cinema: 30% and Radio: 37%) and therefore the marketer has to consider the following points:
2. Newspapers and Magazines
English newspapers and magazines have negligible circulation in rural areas. However, local language newspapers and magazines are becoming popular among educated families in rural areas. Eg. Of newspapers such as Eenadu in A.P., Dina Thanthi in Tamil Nadu , Punjab Kesari in the north, Loksatta in Maharashtra and Tamil Magazine Kumudam. They are very popular in rural areas.
3. Television
Television has made a great impact and large audience has been exposed to this medium. GODREJ has been using television to communicate with the rural masses. Lifebuoy, Lux , Nihar oil,etc. are some of the products advertised via television. Regional TV channels have become very popular especially in southern states. Eg. Like Sun TV is very popular even in rural areas in Tamil Nadu and Asianet is a preferred regional channel in Kerala. Many consumer goods companies and fertilizer companies are using these TV channels to reach the rural consumer.
4. Radio
Radio reaches large population in rural areas at a relatively low cost. Colgate, Jyoti Labs, Zandu Balm, Zuari Industries are some of the companies using Radio communication programme. There are specific programmes for farmers like Farm and Home / Krisha Darshan in Regional languages. The farmers have a habit of listening to regional news / agricultural news in the morning and late evening. The advertisement has to be released during this time to get maximum coverage in rural areas. Another advantage is that the radio commercial can be prepared at short notice to meet the changing needs of the rural folk . Consider the effectiveness of releasing a pesticide ad at the time of outbreak of a pest or disease in crops.
5. Cinema
About 65% of the earnings from cinema are from rural markets. Film viewing habit is high in certain states like Tamil Nadu, Karnataka and Andhra Pradesh. Village theatres do roaring business during festivals by having four shows per day. The monthly charge for showing an ad Film is within Rs. 500. Local distributor or dealer who has good contacts with cimema houses in villages can easily monitor this activity. Films on products like Vicks, Lifebuoy, and SPIC fertilizers are shown in rural cinema halls. Apart from films, Ad slides can also be screened in village theatres.
6. Outdoor Advertisements
This form of media, which includes signboards, wall painting , hoarding , tree boards , bus boards , dealer boards , product display boards, etc is cost effective in rural areas. Symbols. Pictures and colours should be used in POPs meant for rural markets so that they can easily identify the products. Generally rural people prefer bright colours and the marketer should utilize such cues.
7. Point of Purchase
Display of hangings, festoons and product packs in the shops will catch the attention of prospective buyers. However, a clutter of such POP materials of competing companies will not have the desired effect and is to be avoided.
8. Wall painting
Wall painting is an effective and economical medium for communication in rural areas, since it stays there for a longtime depending upon the weather conditions. The cost of painting one square foot area is just Rs. 10. Retailers welcome painting of their shops so that the shop will look better. Walls of farm houses, shops and schools are ideal places for painting and the company need not have to pay any rent for the same. The walls have to be painted at least one or two feet from ground level. It is better to take permission of the owner. Very often the owner takes responsibility for taking care of the wall painting. Painting to be avoided during election time rainy season. The matter should be in the form of pictures , slogan for catching the attention of people. A wall painting of 100 square feet is quite adequate to convey the message about a product or service. The local distributor / dealer who knows the market and people could be involved in selection of spots and for arranging wall painting. Companies marketing TV, Fans, branded coffee / tea, toothpaste , pesticides, fertilizers, etc use wall painting as a promotion medium in rural areas.
Tree boards are painted boards of about two square feet in dimension having the picture or name or slogan of the product painted on it. The cost of such a painted board is about Rs. 80. These boards are fixed to the trees on both sides of the village road at a height of about 10 feet from ground level. These boards attract the attention of slow moving vehicles like cycles, bullock carts and tractors and people walking on the road. Considering the poor condition of roads , even the buses move at slow speed through village road. Tree boards are extensively used by fertilizer and pesticide companies in rural areas. Tree boards are low priced promotion items and can be used by consumer goods companies also.
9. Informal / Rural Specific media
Informal / Rural Specific media with effective reach and personalized communication will help in realizing the promotional objectives. A variety are used by companies , some of them are as below.
a. Farm-to-Farm / House-to-House visit
This approach has been found to be very effective for agricultural machinery, animal health products and agricultural inputs. Rural people prefer face-to-face communication and farm visits facilitate two-way communication. The advantage is that the sales person can understand the needs and wants of the rural customer by directly discussing with him and answer his queries on products and services. Potential customers in the village are identified and the company’s / distributor’s representative makes farm-to-farm visits and highlight the benefits of the products. The person carries with him literature in local language and also the samples of products. The person does not sell the product but only promotes the use of the product. Very often the local dealer also joins the representative in making farm-to-farm visits. The dealer clarifies the terms and conditions of sale and also makes independent follow up visits for securing orders. Many LIC agents and companies dealing with high value consumer durables have tried this approach with success in rich rural areas.
b. Opinion leaders
Villagers place more emphasis on the experience of others who have used a product / brand to make purchase decision. Opinion leader is a person who is considered to be knowledge and is consulted by others and his advice is normally followed. Such opinion leaders could be big landlords , bank official , panchayat president , teachers , extension workers,etc. Asian paints promoted its Utsav brand of paint by painting the Village Sarpanch’s house a few months prior to the launch to demonstrate that the paint does not peel off. Mahindra tractors use bankers as opinion leaders for their product.
c. The Melas
Melas are of different types i.e. commodity fairs , cattle fairs and religious fairs and may be held only for a day or may extend over a week. Many companies have come out with creative ideas for participating in such melas.
Paint companies supporting Pola fair in Maharashtra by paninting the horns of bulls, screening of popular films along with ad films by fertilizer / pesticides companies in south. A few points to be considered are: Preparation of a list of Melas where the company wants to participate based on the prospects for the company’s products , involve local distributor for local help and guidance , arrange for generators since electricity supply is erratic , give through training for the sales person to answer queries , decorate the stall with posters, cut outs, banners, arrange for display of the products and organize luck draws / scratch cards to attract the people to the stall. It is better to plan for a follow up the visits to see the impact of such an activity.
d. The Haats\
Traditionally on certain days of the week , both the sellers and buyers meet in the village to buy and sell goods and services. These are the Haats that are being held regularly in all rural areas. The sellers arrive in the morning in the haat and remain till late in the evening. Next day they move to another haat. The reason being that in villages the wages are paid on weekly basis and haat is conducted on the day when the villagers get their wages. For the marketer, the haat can be an ideal platform for advertising and selling of goods. Display of posters, banners and products, conducting film shows and mike publicity could be carried out in the haats. By participating in the haats and melas, the company can not only promote their products but also understand the shared values, beliefs and perceptions of rural customers that influence his buying behaviour.
Folk dances are well appreciated form of entertainment available to the village people. The folk dance “Kuravan Kurathi” is popular in Tamil Nadu. The troupe consists dancers, drummers and musicians and they move in a well decorated van from one village to another village singing and dancing. In a day the troupe covers about 8-10 villages. As soon as the van reaches a village, film songs are played to attract the attention of the villages. This is followed by folk dances.
Mike announcement is made about the company’s products and leaflets are distributed. After the dance programme, queries, if any , about the products are answered by the sales person. Folk dance programme costs about Rs. 5000 per day and therefore these programmes are conducted during the peak season in selected markets. Thums Up has sponsored Lavnis , the folk dance programme of Maharashtra and over 30 programmes have been arranged in selected rural markets.
e. Audio Visual Publicity Vans
Audio Video unit is one of the effective tools for rural communication. The van is a mobile promotion station having facilities for screening films slides and mike publicity. Portable exhibition kit can be carried in the van and an exhibition of the products could be put up as and when required. Agricultural input companies regularly use AVP vans for promoting their products. Companies such as GODREJ , Colgate, Phillips have made effective use of AVP vans for popularizing their products in rural areas.
A few points to be considered for effective AVP unit operations are : Preparation of a route plan covering key villages / markets, giving advance information regarding film shows in the selected villages, involvement of local distributors / dealers in publicity campaign , through training to the mechanic to take care of the instruments, availability of generator in the van, experienced sales person who is fluent in the local language and can answer queries of customers. During day time , the unit is used for mike publicity , pasting of posters and distribution of literature. In the evening , with the help of local dealer / distributor and opinion leaders, film shows are organized in two / three different villages. As per the plan , the van reaches the first village in the evening. A suitable place such as village ground , school , and panchayat hall is selected for the meeting as well as film screening. A few film songs are played to attract the attention to the villagers. The sales person makes a brief talk about situation in the village, the products and the benefits. The ad film is screened along with some popular film shots and this continues for about 30 minutes. At the end of the film show, he distributes handbills and answers queries of the customers. The whole operation takes about 1-2 hours depending upon the products under promotion , number of participants in the meeting and time taken for question and answers. The van moves to next village for the second film show. The company representative visits the villages at random meeting dealers and key customers to know the impact of the AVP operation. The cost of running a fully equipped AVP unit is about Rs. 4000 per day and AVP van operation has to be considered as an investment for business development in rural areas.
f. Product display contests
Package is an integral part of the product. Its main purpose is to protect the product during transit , to preserve the quality and to avoid any loss in quality and quantity. Now-a-days, companies are making lot of efforts to produce good quality packages as the package is the face of the brand and carry advertising value. The introduction of sachet packing ,created a revolution in the shampoo industry. Velvette and Chik shampoo by beauty cosmetics , now known as Cavinkare in south. Sachets eater to the first time shampoo users who are price conscious. Similarly, Mediker (anti-lice product) is being made available in 5ml sachet to school going children and young women in rural areas.
The main purpose of display contest is to remind the customer to buy the product as soon as he enters the shop. Another objective is to influence the dealer to stock the product and support the company in increasing the sales. The display contest has to be announced well as in advance and promotional materials to be distributed to all selected dealers in a geographical area. Prizes for best displays are announced to motivate the dealers. The contest lasts for about a month. Dealer incentives based on the counter sales of the products to be announced to increase counters sales. A well planned Product display contest not only increases the involvement of dealers in the company’s products but also increases the sales during the contest period. Product display contests could be organized successfully in prosperous rural markets for promoting consumer goods such as shampoos, soaps and toothpaste.
g. Field demonstration
Field demonstration is based on the extension principle “seeing believes” and is one of the most effective methods to show the superiority of the company’s products to the customers. Spraying a particular brand of insecticide against insect pests and showing the farmer how effectively the insects are controlled , application of Urea fertilizer in Paddy fields to show the luxurious growth of the crop and demonstrating the use of tractor / implements for different agricultural operations. A progressive farmer who is an opinion leader is selected and the demonstration is conducted in his field in the presence of a group of farmers in the village. The farmers observe the results in the field and local dealer calls on them in their farms and persuades them to buy the particular brand of pesticide or fertilizer. Similarly effectiveness of detergents , vacuum cleaners, mosquito coils could be promoted by demonstrations in selected markets.
Field days are extension of field demonstrations. One of the main objectives of following modern agricultural practices is to increase the yield. The company organizes demonstrations in a piece of land belonging to progressive farmers. All the fertilizers, pesticides, Nutrients, etc are applied after making field observations. Just before harvest. All important farmers are invited to see demonstration plot and see for themselves how the yields are better in the plot compared to other fields. Field demonstrations / field days consume lot of time and efforts and therefore have to be planned well.
Buying rural media
More often than not , sometimes even in case of brands getting significant volumes from rural markets , the resources allocated for rural advertising are ad hoc or residual remnants of the overall budget.
Step 1
Familiarity with the markets one is buying media for is imperative.
It is imperative that one should have visited rural markets, spent time living with the rural families and perhaps, ploughing the fields before one attempts to buy any media.
Step 2
Gather data about rural areas, not only data like media habits or readership, etc. but also data about the market. How many villages are there in the district one is covering ; How many of these have primary schools or primary health centers; do they have roads ,electricity ,post offices, telephone facility , weekly markets,etc; What is the male/female split by village, literacy levels by sex,etc.
Step 3
You never buy media, you either tailor-make media or create media.
Options: Tile the village well and brand it.
Wall paintings may be effective or perhaps primary health centre or panchayat office is the best place to catch the residents’ attention.
Step 4
Choosing the media partner is important and should be done with care.
Step 5
Monitoring is the single most important factor for the success or failure of a rural media buying operation.
Strategy for distribution
Housewife – they need to be approached through ladies selling accessories on a day-to-day basis.
Salary earner & Professionals – Direct through Distributor or through traditional retail channel on a twice a week basis for the former case.
Cultivator & Wage Earner – they need to be approached through Local Traders on a daily evening basis.
Family – they can be approached through participation in Melas and Haats on a weekly basis. Stalls can be maintained either by the distributor or the company representative.
Thus, the strategy is to target the middle, upper middle and high class in the rural areas which around 10% of the total rural population zone wise. Targeting this segment can also be used at the same time for selling to lower and lower middle class in the urban areas which forms around 70% of the total urban population zone wise. The aim is to obtain synergies among income groups and education levels apart from their lifestyles and standard of living.
HISTORY- GODREJ
A young man gave up law and took up lock making. Events in the Godrej Story are only the small visible pieces of a larger continuously emerging picture - a picture alive and palpable in the mind of one man: the young lawyer-turned-lock maker - Ardeshir Godrej. He was the first Indian manufacturer to displace well entrenched foreign brands from the market.
The word Godrej, etched into the metal of his locks, became a symbol of self reliance for the generations that followed. With each new product Ardeshir changed perceptions about industry in India. He produced the finest security equipment, and then stunned the world by creating soap from vegetable oils. What started as a dream had become a movement .But it was left to another man to carry it forward, Ardeshir's brother, Pirojsha Godrej.
Pirojsha Godrej laid the foundations for a throbbing enterprise at a sprawling industrial garden township outside Mumbai.
It was here that the Godrej vision took concrete shape. In later years, its extent and scope was expanded greatly by his sons - Burjorji and Naoroji, Sohrabji. To this day, products that compete with the best in the world continue to come from the gates of Pirojshanagar. Godrej touches the lives of millions of Indians everyday. To them, it is a symbol of enduring ideals in a changing world. Every product, every new concept gives shape to their visions of tomorrow.
VISION: Godrej in every home and work place.
MISSION: Enriching quality of life everyday everywhere.We will provide branded products and services of superior quality and value that improve the lives of the world's consumers. As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.
Board of Directors Qualifications
Ø Adi Godrej- Chairman & Managing Director M.S. (MIT)
Ø Jamshyd Godrej- B.S. (Illinois Institute of Technology)
Ø Nadir Godrej- B.S. (MIT), M.S.(Stanford), M.B.A. (Harvard)
Ø Bala Balachandran- Distinguished Professor at Kellogg
Ø Rama Bijapurkar- Faculty at IIMA, Marketing Strategist
Ø Bharat Doshi- FCA, FCS, LLM, PMD (Harvard)
Ø Anupam Puri- Ex-partner, McKinsey
Ø Hoshedar Press -Exec.Director & President B.Tech (IIT), PGDBM (IIM)
VALUES: Integrity, Trust, To serve respect, Environment.
Company Overview
Godrej Industries Limited, formally Godrej Soaps, is India's large manufacturer of oleochemicals. As well as the chemicals industry, Godrej also operates in the food and medical diagnostics markets. The company is part of the Godrej Group conglomerate. Godrej Industries is headquartered in Mumbai, India
Godrej Soaps Ltd. GCPL has emerged as a focused FMCG company. Its main product lines now consist of toilet soaps, liquid detergent, cosmetics such as hair care, fairness creams, etc and men’s toiletries. The company also undertakes contract manufacturing of toilet soap for third parties. All interests of the erstwhile Godrej Soaps in other businesses such as industrial chemicals, medical diagnostics and financial investments continued to remain in the existing entity, post demerger and the company has been renamed Godrej Industries Ltd (GIL)`
Godrej has the distinction of being the first company in the world to develop technology to make soap with vegetable oils, way back in 1930. In the early 90’s Godrej had created strong brand equities for its leading brands Cinthol, Ganga, Marvel, Evita etc. In 1994, Godrej entered into a strategic alliance with P&G for inter alia toilet soap business, under which Godrej used to manufacture soaps, which were marketed by a joint venture company. However post marketing alliance with P&G, the company lost significant part of its market share and subsequently the arrangement was discontinued. Godrej’s entire distribution network was then taken over by P&G. Godrej reestablished a distribution network by utilizing the network of group company Godrej Hicare for marketing of its brands and took over the entire distribution network from them.
Toilet soaps – Godrej brands
The company has been very aggressive during the year in the toilet soap business and has launched a number of new products in the market in the last two years. It pioneered the concept of a fairness soap through launch of Fairglow soap. New variants like Sandal and Natural in the Godrej No.1 brand also aided high growth. The company also launched new brands like Godrej Nikhar during the year.. The company’s oldest and well know brand Cinthol is proposed to be repositioned and relaunched
Segment
Brands
Toilet Soap
Cinthol, Fair Glow, Nikhar, Ganga, Goderj No 1
Cinthol
Cinthol is the flagship brand of Godrej Consumer Products Limited. The brand was launched in 1952 as the first Deodorant Soap in the country.
In 1960 Cinthol Deodorant Talc was launched. It continued to sell as a freshness talc thereafter. The brand, over the first three decades of its existence, took the platform of protection from body odor.
In 1986 , in an attempt to modernize the image "New Cinthol " soap was launched with new look packaging , shape and advertising using celebrities like Vinod Khanna and Imran Khan . This communication campaign developed strong "confident" , "active" associations with Cinthol which became a part of the essence of the brand
Godrej FairGlow
The Godrej FairGlow fairness soap contains a powerful fairness ingredient ' Natural Oxy-G ', which makes you fairer by reducing the dark melanin without changing the skin's natural balance. In addition, it also removes blemishes to give you a clear, glowing complexion.
Godrej FairGlow Soap was India's first and is the largest selling fairness soap. It helps you become fairer in a convenient way, simply through a daily bath. It is a quality Grade 1 fairness product having 76% TFM (Total Fatty Matter). It has a pleasant fragrance and is white in colour.
Godrej no1
Godrej no.1 is another popular soap from godrej product line , it is proved popular in the rural market due to the affordable price and the quality offered.it comes in three colours and flavour, it is giving good fight to the leading brands too.
Godrej Shikakai soap
This is also one of the popular soap of the godrej product line. This soap is used to wash hairs. Many people believes shikakai as a best thing to wash the hair . black ,long and silki hairs are result of utilization of the soap. This soap is giving fight to all the shampoo for washing the hairs. It is proved very popular among women.
All of these soaps can be further classify in to three basic segments
Price Segments of Bath Soaps
Segment
Price
Weight
Premium
> Rs.15
75 gm.
Popular
Rs.8-15
75 gm.
Economy
< Rs.8
75 gm.
Godrej refreshes itself
Godrej Consumer Products has beaten the stagnation in the FMCG segment through a host of initiatives that saw it introducing new price points, enter new territory and strengthen its brands.
FORTIFYING its soap brands, introducing new price points, entering new categories such as babycare and hand sanitisers ... it has been a busy year at Godrej Consumer Products Ltd (GCPL). While FMCG categories such as toiletries, hair care and soaps have been under pressure, the company has outperformed the still sluggish FMCG industry primarily because it has been operating on a relatively smaller base compared to the biggies, and also because of the urban-centric nature of its brands.
Focusing on its stronger and faster growing brands, the Rs 550-crore Godrej Consumer Products began the year by extending Godrej No.1 ayurvedic soap to more markets and at an attractive price. At the same time it also decided to capitalise on the success of its FairGlow soap, instead of trying to push the languishing cream, to take on Hindustan Lever Ltd (HLL) in the fairness segment.
In fact, Godrej is almost consciously targeting the fairness cream users through its newly relaunched fairness soap. `The cool way to fairness and freedom from oily skin' is the message the company wants to convey to all its prospective users. Launching the All New FairGlow soap, Hoshedar K. Press, Executive Director & President, Godrej Consumer Products, said, "There is an increasing demand among Indian women for convenient and inexpensive solutions to skincare and a need to look good naturally. The soap keeps this need in mind."FairGlow soap, a pioneer in its category which managed to find a niche in the fairness market in spite of the looming presence of HLL's mega brand Fair & Lovely, has intentions of doubling its turnover from Rs 60 crore to Rs 120 crore within the first year of the relaunch. The brand was relaunched last month.
According to industry observers, HLL is not in a position to push its Fair & Lovely soap for fear of losing its share in the fairness cream market.
This situation gives Godrej an opportunity to strengthen its position in the fairness soaps category while phasing out its cream, which in any case did not manage to register any significant volumes.
In fact, the company suffered a loss in sales for its toiletries division primarily due to the failure of its FairGlow cream. Admits Press, "FairGlow cream did badly, leading us to withdraw the product. Our toiletries margins have been affected by its failure." Besides, Godrej Shave Gel for men has also failed to register any significant volumes.
The relaunch of FairGlow soap is expected to add weight to Godrej's soap portfolio. Says Anand Shah, FMCG Analyst at ICICI Securities, "FairGlow has been registering declining sales over the past two years. The All New Godrej FairGlow is aimed at female teenage college students instead of the previous positioning of that for women in their early 20s. This move could help GCPL build a younger clientele and broaden its target base."
Besides, the largest soap brand in Godrej's kitty, Godrej No. 1, managed to maintain robust growth and today accounts for nearly 60 per cent of GCPL's toilet soap volumes. Its low pricing and value-for-money proposition has worked for the company and it has been steadily increasing its variants with an ayurvedic offering.
Observes Shah, "Toilet soaps are likely to maintain robust growth of 15-20 per cent on the back of FairGlow's relaunch and the continuing growth of Godrej No.1." The new unit for toilet soaps in Himachal Pradesh would also lead to an improvement in profitability, as it is located in a tax-free zone. The unit would provide income-tax relief and exemption from excise duty, which is likely to improve the company's soap margins.
Meanwhile, its Cinthol soap franchise has taken a backseat, primarily due to lack of proper positioning. "Cinthol as a brand has been over-extended and we are in the process of redefining the positioning," says Press. This is being done through a new campaign and positioning statement which is likely to be unveiled soon through its advertising agency, Orchard. Last year, Godrej decided to stretch the Cinthol brand to a hand sanitiser. "There is heightened hygiene consciousness emerging among consumers and we realised it would be ideal to introduce the hand sanitiser, a revolutionary concept for germ-free hands," says Press. Godrej already supplies hand sanitisers under the Cinthol brand to West Asia. The SARS epidemic did help in gaining sales for the product.
Beefing up its rural initiatives to accelerate sales growth, Godrej also decided to increase its rural penetration by introducing small unit packs of its soap brands in the Bimaru States of Bihar, Madhya Pradesh and Uttar Pradesh. By introducing its three power soap brands - Cinthol, FairGlow and Godrej No.1 - in 50gm SKUs (stock keeping units), the prices of these respective brands have been pegged between Rs 4 and Rs 5.
"We have decided to target these States with low per capita incomes through our small unit packs. This will be a great opportunity to grow since consumption levels of soap are still low in these parts. These small pack sizes will not be made available nationally and are meant specifically for these three States," says Press.
Conclusion....
It is estimated that one in three Indians uses a Godrej product every day. And it is very likely that Godrej Properties will be among the top three retailers in the country over the next few years considering its awesome land bank. this is the reason why Godrej is becoming famous today and used extensively in India. There are several products of Godrej and thus cover good market of India.
: BIBLIOGRAPHY
Reports and Magazines
Saket Industrial Digest
CMIE year book
RBI yearly report
Economic Survey
Online data
www.indiainfoline.com
www.worlddentalfoundation.com
www.euqitymaster.com
www.Godrej .com
www.colgate-palmolive.com
www.p&g.com
Search Engine
www.google.com
www.khoj.com
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