ASSIGNEMENT ON

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FMCC- Fast Moving Consumer Coods

MCG covers a wide range oI products under its name:

rom Chocolates to SoIt Drinks
rom Soaps to Shampoos

Crowth

India`s Iast moving consumer goods (MCG) sector is the Iourth largest
sector in the economy with a total market size in excess oI US$ 13.1 billion.
Set to treble Irom US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015, the
top 15 MCG companies clocked sales and proIit growth oI 23 per cent and
12 per cent respectively Ior the quarter ended December 2006.
The industry's volume growth is expected at 15 per cent in Y07 versus 10
per cent in Y06.
There has been a little bit oI cost-push, which is leading to price pushes &
price hike is basically due to a combination oI high demand and raw material
prices.

%op FMCC companies in India are:

W industan Lever Ltd.
W Indian Tobacco Company
W Dabur India Ltd
W Cadbury India Ltd
W Britannia
W !arle
W Marico Industries
W !&G
W Nestle India Ltd
W Coca-Cola India Ltd
W !epsiCo



The MCG sector continued on its impressive growth track Ior the quarter ended
December (Q3) Y06. The combined net sales oI leading players rose 24,
compared to 19 in the corresponding quarter oI previous year.

Tata Tea, Marico and Britannia were the top perIormers with
consolidated net sales growth rates oI 37, 36 and 31
respectively.
Dabur India reported top line growth oII 15, with its Iood division
and international business growing at 30 and 23 respectively.
Britannia kept reeling under increase in cost oI key commodities like
wheat, sugar and milk and its inability to transIer cost to the consumer
in the highly sensitive consumer segment.
Marico kept its strong growth perIormance by Iranchise expansion
across key categories.
Colgate posted a double digit growth with its tooth paste and tooth
brush categories growing at 13 and 15 respectively.
Godrej Consumer posted robust 29 growth, aided by 25 and 34
growth in its soap and personal care businesses, respectively.
ITC is another stock with strong perIormance. Its Aashirwaad
maintained its 55 market shares in the branded atta category.
Financials of FMCC Companies



Company

M-Cap

Sales
Sales
Growth
Dec 06
Operating
Margin
()
ITC 65,339 3,166 24 34
!&G ygiene 2,845 161 8 33
Gillette India 2,774 131 13 31
Godrej Consumer 3,332 238 29 22
Emami 1,413 129 23 20
Tata Tea 3,956 1,113 37 18
Nirma 2,768 558 21 18
Colgate !almolive 4,478 322 13 17
Dabur India 8,710 618 15 16
Marico 3,440 409 36 14
Britannia 3,002 567 31 5































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Frito-Lay: land to cultivate oats for its new band

rito-Lay, a division oI !epsiCo India oldings !vt Ltd, is scouting Ior land to
cultivate oats Ior its breakIast cereal brand Quaker Oats. The company sees it to be
a big opportunity Ior exports and will be the Iirst time that oats will be cultivated in
India.

abur sues school over Banyan tree trademark

Dabur India Ltd has sued a Delhi school Ior allegedly inIringing the company`s
registered trademark-the banyan tree. The company has been using this tree as its
logo Ior last 100years. Two years ago they re-designed it to identiIy Dabur as an
'evolving, contemporary, vibrant and active brand symbolizing growth. In a
petition beIore the Delhi igh Court, Dabur has claimed that Mother`s !ride, a
chain oI pre-nursery schools in Delhi, has copied company`s logo which is likely
to create conIusion about the trade connection between the company and the
school.

Rising cigarette profit gives elbow room to I%C

ITC`s third quarter perIormance shows the cigarette major is doing well in all its
key businesses. The cigarettes business continues to be the mainstay, growing by
13.8 and contributing to 66 oI revenues, BeneIiting Irom robust economic
growth. A double digit growth Irom the cigarettes is a very healthy sign Ior ITC.
That gives it that much leeway to put money in its non-cigarettes MCG business
which is growing rapidly but so are losses. Even as sales grew 67.5 its losses
expanded to Rs 46.5cr Irom Rs 39.5cr Irom the previous corresponding period. The
plus point is that the increase in loss is much lower than the growth in turnover.

A new launc by Britannia

Britannia launched new treat ruit Rollz- soIt rolls containing real Iruit paste in
Iour Ilavours- strawberry, orange, apple and dates.

abur eyes RS75 cr revenues from Pak operations

Dabur will establish a plant in !akistan by March 2008 as part oI economic
cooperation among SAARC countries and its expecting revenues oI RS 75 cr in the
Iirst year oI operation in the neighboring country.
Pepsi counters Coke on orange battlefield

!epsi will launch Mirinda Sorbet, a new oIIering, this month, thus adding more
Ilavour to its oIIerings this summer. With rival Coca-Cola launching a new,
stronger anta this year, Indian consumers can look Iorward to have a lot oI new
options this summer.

I%C reported a 33.3 " growth in net profit

ITC reported a 33.63 growth in net proIit at Rs717.40crore Ior the third quarter
ended Dec 31, 2006, compared to Rs536.83crore net in the corresponding period
last year.

HLL has posted a 13.7" increase in net profit

LL has posted a 13.7 increase in net proIit Ior the year ended Dec2006 to
Rs2539.7 cr. net sales during the year including export increase 9.4 while
domestic sales increase12.8. ood business grew by 10.9 during the quarter.

Britannia to expand in West Asia

!lans to acquiring a majority stake in two bakery product companies in west Asia.
The west Asia company whose name is not disclose is a mass market player in
biscuit s & cookies. The CO. recorded a turnover oI Rs 1818 crore in the year
ended 31
st
march 2006 and has growing 26 in the Iirst two quarters.




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What is retailing?

It is the essence oI the distribution network to provide place, time, Iorm and
possession utilities to consumers. It is the retailing that actually delivers these
utilities to the consumers.

How Retailing differs from whole selling?

Two main characteristics that distinguishes retailing Irom whole selling:
(i) Retailing is aimed at actual consumers, while whole seller doesn`t
involve selling to the consumers.
(ii) Retailing involves to selling Ior personnel use, while whole selling
doesn`t, buy Ior personnel consumption. They are either retailers or
institutional buyers.

%wo key parameters of retailing: margin and turnover
Ronald gist has provided an easy to-Iollow Iramework oI retail structure.

Margin is deIined as the mark up at which the inventory in the store us sold.

Turnover is deIined as the number oI times the average inventory is sold in a
year.

The position oI any retailing operation will Iall in one or other oI the Iour
quadrants.
The margin turnover Iramework:

L-
Low margin turnover
e.g. A discount store
-
igh margin high turnover
e.g. !antaloon , subhiksha chain
L-L
Low margin low turnover
A store oI this type is a 'disaster.
-L
igh margin - low turnover
e.g. a up-market specialty store

COJ% PU%S RE%AIL FI POLICIES OA HOL

1. The Govt has stalled policy Iormulation aimed at Iurther opening up retail
to DI.
2. To go-slow would also have an impact on the India plans oI retail giants
like Wal-Mart , Tesco and Metro.
3. The commerce and industry ministry has agreed to set up a committee to
study the impact oI DI on rural economy.
4. Commerce and industry minister Kamal Nath said the !MO has sought
detail on the DI policy on retail.
5. The U!A chairperson`s letter to the !MO advising caution in opening up
the Indian retail segment to Ioreign players.
6. The commerce and industry wants to be extra-cautious now.
The Wal-Mart Bharti tie up will not be aIIected by the anticipated changes
in regulations.
8 !lans oI CareIour and Tesco also get the go-ahead iI they meet all DI
rules.











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Reliance to source produce from Punjab, Haryana

Reliance Retail, which Iorayed into the National Capital Region with nine stores in
Ghaziabad, aridabad, and Gurgaon & Noida on 29
th
January, 2007, plans to
source its products primarily Irom !unjab & aryana. Reliance resh, the only
Indian ortune 500 company, plans to invest around Rs 8,000 crore in the region in
the next three years. The stores will be stocked with vegetables, Iruits, groceries
and dairy products.

After Ambitious Expansion, Subhiksha Faces Stockouts

Aggressive expansion in Mumbai has put discount retailer Subhiksha in a spot.
AIter setting up 80 stores in the city and outskirts in less than three months the
retailer is Iacing scalability issues in term oI severe Stockouts or non-availability
oI products in a lot oI MCG category. Subhiksha have no more than 750-800
stock keeping units (SKUs) when it should have around 1500SKUs.They are
Iacing the problem because oI their distribution system.

Currently, they supply their stores in Mumbai Irom their distribution hub at
Bhiwandi, a town in Thane. Their consolidated buying process directly Irom
manuIacturers ensures that they get distributor margins upto 5 Irom companies in
addition to retailer margins. But this is hardly a huge cost-saver since Mumbai
attracts an octroi duty oI 4 Ior all goods entering the city. Their aggressive
pricing on average 8-10 lower than MR!, in addition to nearly 16-17 oI
overheads and operating costs, means that they are perhaps making no more 1-2
margins on most goods. Rather than going to centralized distribution they would
have preIer distribution backbone oI the MCG companies.

Fortis makes Retail Health Foray

ortis ealthWorld, a joint venture oI Ranbaxy Laboratories and ortis ealth-
care, is planning its retail health store chain with 1,000 shops in 400 towns oI the
country by 2012. The stores will run round the clock and would give customers
value-added services like prescription reminder service, loyalty programmes, O!D
appointments in their hospitals & Iree home delivery.



Retail's Industry Status will have to wait

The retail sector`s demand Ior an industry status looks unlikely to be IulIilled in
the near Iuture, with the government still considering the implications oI such a
move. There are a host oI issues involved including labour laws, absence oI a retail
policy delineating the country`s stand on retail and other legal implications.
Government is moving towards it gradually with steps like allowing 51 DI in
single-brand retail. An industry status would not only make it eligible Ior Iiscal
beneIits and concessions but also get it easier organized Iinancing

Carrefour in talks with Indian Companies

rench retail giant CarreIour is in talks with Indian Companies Anil Dhirubhai
Ambani Group (ADAG), Wadias oI Bombay Dyeing and Godrej and a Iinal
decision on the Indian partner is expected shortly. CarreIour was earlier in talks
with Bharti too, but the Indian company has tied up with Wal-Mart. ADAG`s entry
in the retail sector will be one instance oI the brothers Iighting in the same space.

Retail boom makes farmers join e-club

Many Iarmers in Gujarat opened their Iirst e-mail accounts and many more are
learning to operate the !C. These Iarmers want to communicate with corporates
Ioraying into Iarm products retail just the way a company executive would. The
impending retail boom has brought these Iar-sighted peasants together. Soon,
names like Reliance and Bharti Wal-Mart, who are going to produce Agri produce
in a big way Ior their retail ventures, would come Ior business.

Retailers, manufacturers tie up for co-creation

ManuIacturers and retailers, usually Iound sitting on opposite sides oI the Ience are
increasingly looking at ways to partner and create brands oI tomorrow. So long
with working together on promotions, packaging and margins, manuIacturers and
retailers are exploring the possibility oI creating co-branded labels. Retailers such
as uture Group`s ood bazaar and Magnet have initiated talks with Iast moving
consumer goods (MCG) companies and other retail players believe it`s just a
matter oI time when co-branded labels becomes a reality. Both manuIacturer and
retailers are realizing that modern trade is enabling segmentation oI target
audience. Thus the dedicated catchment provides the window oI opportunity to
introduce new labels, in which both manuIacturers and retailers stand to beneIit.

%anishq plans retail chain expansion

A year beIore it opens a store in the US, Tanishq, the jewellery brand Irom Titan
Industries, has launched a campaign in the US, Canada and UK to tap the vast pool
oI Non-Resident Indians. The company has started campaign in select liIestyle
magazines and community portals. It has also tied up with some travel agents to
reach out to NRIs in these countries.

%esco chief to come calling on %atas, Landmark for retail ties

The global chieI oI UK retail giant Tesco, Sir Terry Leahy, is Ilying down to India
this month to meet potential partners Ior its retail Ioray in India. The meetings are
scheduled with Mr. Ratan Tata and the Bangalore based Landmark Group. Industry
experts say there is certain logic to such high-proIile visits. It seems a section oI
the government is keen that Indian companies quickly enter into partnerships with
global retailers, on the line oI the Bharti-Wal-Mart alliance, in quick succession.

French Auchan eyes Indian Retail sector

The government may be a Ience-sitter on DI in retail but has not dampened the
enthusiasm oI global retailers to be a part oI India`s growth story. Auchan, the
$50billion grocery and consumer goods retailer Irom rance and the Ninth largest
Iood retailer in the world, is shaping up its India plans. The retailer is believed to
have held talks with Bombay Dyeing, a Wadia Group company which is currently
Iinalizing its retail venture.

Retail chain building basket of labels

Retail biggies including pantaloons, ebony and shoppers stop, believe beeIing up
the merchandise mix Ior private labels will improve margins and increase the
average billing size.Indian retail chains had been positioning their private labels
nearly 20-40 cheaper than the established brands and the targets is the
youth.Retail chains are trying to understood unIulIilled demand exiting in Indian
market through extensive need gap analysis.

Wadias care for anone patch up

Wadia group eyes a tie up with rench retail giant care Iore its next big joint-
venture.Care Iore and Danone are two oI the best known rench enterprise
globally.II the wadia care Iore talks IructiIy it is possible that Danone- Wadia JV
will also continue. There is a possibility oI two mutually re-working the
operational ties.

Reliance retail hires honchos from Bentonville

Wall-Mart-Bharti retailing venture is setting up base in India, Reliance retail is
busy picking up talent across the retail behemoth`s global operations. It has hired
around 30 senior executives with expertise in retail store operations to loss
prevention Irom Wal-Mart World-Wide operations. 27 senior Wal-Mart an
executive comes aIter reliance retail scouted the global retail major`s operations
across various countries. Three senior level proIessionals directly hired Irom Wal-
Mart headquarters at Bentonville, USA.

Retail Rejig: Mom&Pop Happy Having a Rich %enant

Kirana owners have begun collectively sourcing a substantial range oI Iast moving
consumer goods Irom modern retailers through their B2B outlets. The growing
popularity oI the modern Iormats among discount-happy consumers has sharply hit
the bottomlines oI kirana owners, Iorcing them to compete with modern Iormats by
oIIering similar discount.

Covernment plans regulation on pharmacy

Government is planning to tighten the norms Ior transporting, storing and selling
medicines in the country. The proposed goods distributed practices would make iI
mandatory Ior every retail pharmacy to issue computerized receipts, employ a Iull
time pharmacist which will guide the customer to cheaper drugs in case prescribed
drugs is not available. Medical practitioners who dispense medicines at their clinic
will have to get retail pharmacy licenses. or this schedule K oI the drugs and
cosmetic Act would be amended. Medicine Shoppe, Subhiksha Retail, Apollo
!harmacy and Guardian !harmacy are some oI existing chains whole Reliance
retail has big plans in this segment.











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Wal-Mart. Who are they?
Wal-Mart Stores Inc operates Wal-Mart discount stores, Supercenters,
Neighborhood Markets and Sam's Club locations in the US. It has more than 6,600
stores worldwide and sales Ior 2006 are estimated to be $1 billion per day. The
company operates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador,
Guatemala, onduras, Japan, Mexico, Nicaragua, !uerto Rico and the UK. The
company's securities are listed on the New York Stock Exchange and NYSE Arca,
Iormerly the !aciIic Stock Exchange, under the symbol WMT.
What is the motivation to expand to global markets?
The three modes by which the company can expand are:
Organic growth: Organic growth represents the true growth oI the company. It is
a good indicator oI how well the management has used its internal resources to
expand proIits. Organic growth also identiIies whether managers have used their
skills to improve the business. Wal-Mart has been growing organically by the
introduction oI new products and services on a regular basis. It is also constantly
improving its service management to reduce the cost oI logistics and thereby
generate more proIits..
Acquisitions: Acquisitions can be either Iriendly or unIriendly. riendly
acquisitions occur when the target Iirm agrees to be acquired; unIriendly
acquisitions don't have the same agreement Irom the target Iirm. Over the years,
Wal-Mart has acquired many companies in the US as well in other countries to
expand their business.
Market expansion: Expanding the target market to cater to the needs oI more
customers is called market expansion. The retail industry was growing at a rapid
pace when Wal-Mart realised the scope Ior expansion in the global market. Same
store sales Ior Wal-Mart have not increased at a decent pace in recent years and
thereIore the need Ior market expansion has evolved.
Why did it fail in Cermany and Korea?
Wal-Mart Iailed in Germany because oI several reasons. Wal-Mart's biggest
strength is competing on price, but because local German stores Aldi and Lidl were
able to deliver good quality grocery at very aIIordable prices, Wal-Mart could
never compete. Aldi and Lidl promoted weekly sales and heavily discounted
merchandise, which drew the customers back to it. Wal-Mart opened all the stores
in the suburbs and customers were very reluctant to drive that Iar Ior grocery. With
the local shops providing better rates, customers had no need to drive to the
suburbs. !eople were not even comIortable with the idea oI the hypermarket.
What is Wal-Mart's typical business model?
It has a highly eIIicient service channel management, which make it possible to
buy directly Irom producers. Also, the company's innovative inIormation
technology (like use oI satellite communication to link corporate headquarters with
stores nationwide) has given Wal-Mart an edge over its competitors. It tries to
compete on price with local merchants and is always located in a neighbourhood
that is convenient to the customers.
Why does it want to enter India?
India is witnessing an unprecedented consumption boom. The economy is growing
at the rapid rate oI 7-8 per cent and has resulted in greater income dynamics,
driven by Iactors such as Iavourable demographics and growth in aspirational
consumption.
Retailing in India is currently estimated to be $200 billion, oI which organised
retailing (i.e. modern trade) makes up 3 per cent or $6.4 billion. Organised retail is
expected to grow at 25-30 per cent every year, and is projected to attain $23 billion
by 2010.
The Iactors driving Indian retail growth are:
Sixty per cent oI the total population below 30 years oI age is expected to have
high purchasing power. or instance, this demographic group accounted Ior 50 per
cent oI cellular phones bought in the last year. Increasing double income Iamilies
in cities have resulted in a higher disposable income Ior consumers.
Salary hike is another reason Ior extra spending power, which may result in more
consumption.
Indian consumers' selI-esteem needs are satisIied by purchasing things Irom big
multinationals like Wal-Mart. The new concept oI shopping under one rooI (super
centre) is also what the Indian consumers have always wanted to experiment with.
Why a joint venture with Bharti Enterprises?
Bharti Group and Wal-Mart have joined hands to tap the retailing opportunities in
India. Bharti, with its deep knowledge oI India's Iast growing consumer market,
and Wal-Mart, with its extensive global retail experience, share the same
commitment to building relationships with producers to provide great quality at
reasonable prices to consumers everyday. .
Wal-Mart's alliance with Bharti Enterprises appears to be prompted by a need to
get around restrictions on Ioreign companies, which are currently barred Irom
operating multi-product retail chains in India. Under the deal, Wal-Mart and Bharti
Enterprises will set up a joint venture to manage procurement, inventories and
logistics, while stores will be set up under a Iranchise agreement.
Bharti will manage the Iront-end oI the business, while Wal-Mart will take care oI
the supply chain, logistics and other back-end operations. The joint venture helps
Wal-Mart easily understand the Indian market. This is possible because Bharti has
a strong grip over the needs and wants oI customers while Wal-Mart provides cost-
eIIective logistics, helping Bharti sustain the price competition. Bharti Enterprises
already has a retail network and is a household name in telecom, and this deal will
prove its capabilities as a company with strong execution capability.
Who is the competitor of this alliance?
Reliance Industries has entered the retailing industry and will operate
hypermarkets, convenience and specialty stores as well as business-to-business
operations, sell Iood, clothing, electrical consumer durables, luxury goods and
Iinancial and travel services. It is setting up distribution inIrastructure to enjoy the
beneIits oI competitive pricing.
InIiniti Retail Ltd (a Tata Group company) has also entered the market to make
most oI the growing retail sector in India. The Tata Group has partnered with
Woolworths Ltd, Australia's biggest retailer, Ior sourcing and technical support. It
opened the Iirst store in Mumbai in October 2006.
!antaloon Retail India, which has stores like Big Bazaar spread all over India, is
also ready to expand the business and is planning to open 100 stores by December
2007.
:7/08

While the communists, who provide crucial outside support to the minority U!A
government, allege that Wal-Mart has been allowed to make a "backdoor" entry by
exploiting loopholes in the law, the BJ! is anxious to protect the interests oI small
traders who have been its staunchest supporters.

The largest leIt party, the Communist !arty oI India-Marxist (C!I-M), expressed
the view that the government was gradually paving the way Ior DI in retail trade.
In a statement the party said: Expansion oI the Wal-Mart chains has caused
massive closure oI small stores and pauperization oI poor communities.

Not everybody is opposed to Ioreign investment in retail. Vivek Bharti, advisor on
national policy to the ederation oI Indian Chambers oI Commerce and Industry
(ICCI) said that companies like Wal-Mart possess expertise that India needs to
eIIiciently manage Iood supply chains. e added that the Indian retail market was
expanding rapidly and given the locational advantages oI small stores, it was
unlikely that mom-and-pop shops would have to close down. India is not America
where shoppers are willing to travel distances to supermarkets and malls -- people
here won't reduce their dependence on local grocery stores.

Wal-Mart Bharti deal meets FI norms

aving re-examined the tie-up between Bharti and Wal-Mart Iro retail business
Iollowing political opposition, the government has Iound that big-ticket venture
conIorms to all DI policy norms

Bharti to invest $2.5b for retail openings by 215

Bharti retail plans to invest $2-2.5billion by 2015 Ior opening multi-Iormat retail
outlets across the country (estimated revenue generation in this time Irame is $5b).
Ior its small store Iormat, its looking at local existing Kirana stores through a
Iranchise model. Bharti retail will be present in all the cities with population above
10lakh and its Iirst store will be coming up in Iirst quarter 08. The company will
have a presence in all Iood and grocery categories, Iresh Iruits and vegetables,
meat and poultry, dairy products, MCG and processed Iood, electronic and
appliances, clothing and Iootwear, Iurniture and Iurnishing and other house hold
articles.

Bharti Retail may offer telecom, insurance services too

Bharti could be stocking its shelves with everything Irom groceries to insurance
products. There is deIinitely a thinking to synergise activities oI group companies,
which relates to direct interaction with customers. Not only the telecom services
but group has also interest with insurance services and there is possibility that
insurance will be provided to customer through their retail channel. The company
is looking at hypermarkets and supermarkets to be owned by it while the smaller
convenience stores are planned to be run on Iranchise model.


Will Wal-Mart succeed?
Wal-Mart has been a global company Ior many years. Apart Irom a couple oI
Iailures, it has been a huge success because oI its understanding oI the local
markets. In India, it will be able to succeed because it has the best know-how to
provide the right set oI products to the right set oI customers.
Customers are also hungry Ior new ways oI shopping. The joint venture with
Bharti Enterprises will prove a smart move as Bharti is one oI the biggest
consumer players in the market and has adequate knowledge about the Indian
market. This will make the cultural transition easy Ior Wal-Mart.