drivers for any FMCG business would
- their existing advantaged brands
- new products
- new business
- as well as improved/enhanced presence
Initiatives/activities in each of the
above area would form the basic plan
for any FMCG business.
For Driving Efficiency, any FMCG would
need to look at are:
- manufacturing costs, working capital,
costs across the supply chain as well
as people and indirect costs.
Looking at ways to maintain efficiency
while minimising costs would obviously
be the objective of any FMCG business.
Which forces (macro as well as firm
level initiatives) are likely play a
major role in shaping the future evolution
of the FMCG industry, say, with regard
to growth in demand or introduction
of new value propositions ?
At the macro level, the evolution of
the FMCG industry would continue to
be driven by a number of factors. These
include economic growth, which would
impact large proportions of the population
thus leading to more money in the hands
of the consumer. Changes in demographic
composition of the population and thus
the market would also continue to impact
the FMCG industry.
For example: In a recent survey conducted
by a leading business weekly, approximately
47 per cent of India's one billion people
were under the age of 20, and teenagers
among them numbered about 160 million.
Together, they wielded INR 14000 Cr
worth of discretionary income, and their
families spent an additional INR 18500
Cr on them every year. By 2015, Indians
under 20 are estimated to make up 55%
of the population - and wield proportionately
higher spending power. Obviously, companies
that are able to influence and excite
such consumers would be those that win
in the market place.
At the firm level, companies that are
able to spot trends early and those
that are committed to continuous innovation
and those that endeavour to delight
the consumer by meeting her changing
needs will lead and prosper in the future.
Product superiority married with a favourable
price-value equation will form the basis
of winning initiatives in the coming
As the retail environment changes and
organised retail takes shape, the second
potential opportunity for value creation
is in the area of distribution &
availability. Exemplar companies that
have used distribution and availability
differentially will achieve sustainable
business growths. With an eye on the
future, firms would need to take a leadership
stance and invest in upgraded in-store
infrastructure; in-shop and market level
presence and thereby improve presence
with strong advantaged brands
would continue to be more profitable"
In what way might competitive dynamics
of a FMCG industry alter over time leading
to boosting of profitability of some
players at the expense of others?
The Indian FMCG market has been divided
for a long time between the organised
sector and the unorganised sector. While
the latter has been crowded by a large
number of local players, competing on
margins, the former has varied between
a two-player-scenario to a multi-player
Over the last few years, competition
amongst the branded players has been
intense due to the emergence of new
players as well as free imports. While
this has afforded the consumer much
greater choice, it has also led to a
struggle for survival for some of the
existing players. This trend is likely
to continue and result in consolidation
happening within the industry.
Profitability would continue to be boosed
by players being able to offer and use
new technology resulting in a competitive
advantage and thus price premium to
the customer. However, this is not likely
to be a long term proposition, given
the fact that access to technology has
substantially eased and the time required
to catch up new technology has decreased.
Companies with strong advantaged brands
would continue to be more profitable.
Against the backdrop of slackening of
demand in many FMCG categories in recent
times, how are companies in the industry
redeploying their resources, be it with
regard to ad spend, sales promotion,
distribution channel or sales organisation
- especially with a view to maintaining
a threshold level of growth in both
top and bottom line?
To maintain a threshold level of growth
in both top and bottom line, companies
will have to adopt the following strategies:
* Power brand strategy - Concentrating
spends on a smaller number of brands
that are critical to the business and
which enjoy considerable consumer advantage.
* Consistently supporting those brands
facing highest competitive pressure
with above the line spends while sustaining
momentum on stable brands with tactical
activities in key markets to get incremental
* Stimulating repeat purchase/pseudo
brand loyalty through collectibles and
multi-layering of promotions - in scenarios
where consumers perceive little or no
difference between brands.
* Reducing supply chain costs by reducing
intermediaries. Organised retail chains
have set up systems for inventory management
and quick servicing, thereby offering
the opportunity for a company/supplier
to reduce distribution cost by reducing
intermediaries such as wholesalers/distributors
and supplying directly to the warehouse
of retail chain.
* Increasing sales by driving channel
width- The relative share of grocers
to FMCG sales has dropped from over
50% in the early 90's to 35% in the
late 90's. On the other hand the contribution
of chemist outlets and paan outlets
has been increasing. This has been a
result of both sku's (sachets) and hardware
(mini dispensers) being specifically
designed to facilitate entry to these
outlets and increase consumer interface.
Companies would need to improve the
productivity of the sales force as well
as look at consolidation via out-sourcing.
In what way the brand management function
of an FMCG company will need to alter
and reinvent its custodian role when
faced with difficult market conditions
such as the one faced in recent times?
Tough market situations and a more aware
and savvier demanding consumer have
necessitated that yesterday's Brand
Managers be transformed into Business
Managers who understand consumers and
can innovate and be flexible to move
with the consumer.
Gone are the days when brands could
be made to gallop with a big budget
media plan, a generous dose of below-the-line
and above-the-line activities and constant
promotions and schemes in the market.
Consumers who have become demanding
yet inscrutable in terms of attitudes,
outlook, moods and behaviour have rendered
conventional Brand Management tools
This makes it all the more important
for Brand Managers to develop strong
consumer insights and constantly innovate.
This requires immersing oneself in the
consumer's life space and understanding
her to open up new opportunities. These
opportunities are hidden in seemingly
insignificant behavioural patterns,
which open up wide new opportunities
for the brand.
Developing strong consumer insight
basically requires one to
a) Align oneself to the challenge, in
terms of correctly identifying the key
issues and objectives
b) Leverage all that one knows and understands
from available sources
c) Immerse oneself in the consumers
d) Connect this insight to a usable
e) Executing it in a format that solves
the challenge he started with.
A spate of brand launches, brand extensions,
and brand-related activities across
successful companies indicate that only
the fittest ideas survive in these troubled
times and these ideas are driven by
strong consumer insight and activities.
What broad changes (in major thrust
areas) were effected by Cadbury world
wide as well as in India in order to
exploit any opportunity that the current
market situation provides and also hedge
against any underlying risk?
Cadbury's world-wide vision is "Working
together to create brands that people
love." Cadbury has successfully
done this for over 200 years. This success
has been built upon understanding the
needs of our consumers, customers and
colleagues and by operating to a clearly
defined set of values.
But around us, the world changes. We
want to recognise this as well as ensure
the continuation of our own heritage.
strategy is to:
- Create robust and sustainable regional
positions in our core categories of
confectionery and beverages through
organic growth, acquisition and disposal.
We will achieve this by Managing for
Value. Our Managing for Value process
- setting stretching financial objectives
- adopting value-based management for
major strategic and operational decisions
and business systems
- creating an outstanding leadership
capability within our management
- sharpening our company culture to
reflect accountability, aggressiveness
- aligning our management rewards structure
with the interests of our shareowners.
In India, Cadbury India has defined
its vision as "Life full of Cadbury,
Cadbury full of life"
- Broadening our consumer appeal and
extending our reach to newer markets
- Sustained growth of our market share
through aggressive product development
- Striving for international quality
in our products and processes
- Focussing on cost competitiveness,
productivity and innovative utilization
- Energising and developing our people.
Puri spoke to Dr. Ranjan Das, Consulting
Editor, Strategic Marketing