Management Discussion and Analysis
Total Page：16
File Type：pdf, Size：1020Kb
urban income mix is favorable for the FMCG industry. more companies focusing on products with a management discussion and analysis Apart from the better value growth in the urban strong health and wellness quotient, the consumer market, it provides an opportunity to launch awareness about healthier options of food innovative premium products. consumption will increase. This discussion covers the financial results and The Indian FMCG market size is in excess of other developments during the period April 2011 - USD 33.4 billion and has grown at ~17% in the Women in urban India are also changing in their Another significant emerging segment of the March 2012 with respect to Marico Consolidated, last 5 years. It is poised to grow 3.6 times between quest to break from their traditional image in society. market is the rural sector, which currently accounts comprising its domestic Consumer Products 2010 and 2020 1, faster than most other emerging They are increasingly assertive and feeling more for 70% of India’s population. The rural market is Business (CPB) under Marico Limited (Marico) in markets. Rising household income, urbanization, secure to venture out to the stores and buy things on being driven by growth in non-agriculture income, India, its International Business Group (IBG) increasing literacy, decline in the traditional their own. A growing number of high-profile women better MSP (Minimum Support Prices) rates, higher comprising consumer products exports from Marico joint-family structure and changing demographics desire the best and are creating a niche market for education, wealth effect coming from increasing and the operations of its overseas subsidiaries are key contributors to growth. The most notable themselves. A widespread feeling of self-indulgence, land values, better infrastructure, increasing media and the Kaya skin care solutions business in India force is average household income, which is set which is leading to self-pampering in the form of penetration and the Government’s emphasis on and overseas. The Consolidated entity has been to rise nearly 3 times between 2010 and 2020 1. An beauty services and vacations, is emerging. These rural development programmes. With a huge referred to as ‘Marico’ or ‘Group’ or ‘Your Group’ in indication of this is the per capita income which women are often the biggest potential buyers of population base, improvement in rural income has this discussion. grew by 14% in FY12 to cross the sixty thousand niche high-quality, high-end products. opened several gates for the industry. mark. India’s income pyramid has typically had Some statements in this discussion describing a wide base and increasingly smaller layers as Modernization has led to changing aspirations In the last 5 years, rural India has outperformed projections, estimates, expectations or outlook may income rises. This pyramid is quickly becoming where the need to be good looking, well-groomed the overall FMCG growth. About 50% of the rural be forward looking. Actual results may however differ a diamond, as per capita income grows. and stylish has taken on a newfound importance. population will come under the INR 90k-200k annual materially from those stated on account of various Indian men are also becoming conscious about their income range by 2015, as against ~35% in 20052 . factors such as changes in government regulations, In an increasingly globalized economy, India’s appearance, creating a market for male grooming This rise in annual income is expected to favorably tax regimes, economic developments within India lion’s share comes from services. This requires products. Today’s men are less inhibited when it improve the lower middle class and middle class and the countries within which the Group conducts skilled labour, which is driving the educated comes to looking good and do indulge in image mix in future. This brings new consumers within its business, exchange rate and interest rate population from small towns and villages into the enhancing products and treatments. The categories the fold, while existing consumers move up the movements, impact of competing products and their top towns and cities of the country. This is leading witnessing significant growth include men’s face value chain. Also, penetration levels across pricing, product demand and supply constraints. to rapid urbanization and expansion of the large creams, hair gels and deodorants. categories are lower in rural areas compared to cities (primarily because of poor infrastructure in urban, which provide strong headroom for growth. INDUSTRY STRUCTURE, OPPORTUNITIES the small towns), which will potentially lead to an A part of the trend to look fitter and well This will help the industry maintain volume growth AND THREATS inflection in a decade or two, at which point the groomed is the increasing emphasis on a healthy for a long period. The year 2011-12 has been a year of urban population will become a sizeable portion lifestyle. With increasing income, Indians are consumption, with both the Central government- of the total. becoming health conscious leading to a change Rising consumption and increasing proportion sponsored schemes and the impact of the Sixth Pay in lifestyle. Food is the largest consumption of younger population where 70% of Indians will Revision pumping in large amounts of money in By 2020, 35% of India’s population will category, accounting for 31% of what India spends be of working age in 2025, increasing media the hands of the consumers. Asset price inflation live in cities1 . As people move from rural areas to on today1 . With growing awareness, product penetration and rising aspiration will further drive (largely land and gold), drove an increased sense cities, they tend to both increase their purchases acceptance among the masses has also increased. FMCG growth. India’s organized retail is estimated of affluence amongst the masses. Hike in Minimum as well as spend on different items. Urban dwellers The market for products that reduce stress, prevent at USD 28 billion with around 7% penetration Support Price for food grains and continued have better access to goods and are exposed to aging, help the heart and fight diabetes are all on but is expected to grow to 21% and become support under NREGS, among other factors, have greater consumerism. Apart from the change in the a growth curve. The health food market stood at a USD 260 billion business over the next decade 1. driven rural incomes and demand. Despite several population mix, the urban income distribution has INR 9,000 crore in 2010, and is expected to grow Modern retail offers opportunities to experiment domestic headwinds including high inflation and also favorably changed over a period of time. The at a CAGR of 20% to INR 22,500 crore by 20153 . with new categories. It also gives customers a interest rates, trade deficit and delay in policy upper class in the urban income group has increased The health food contribution in packaged food, chance to educate themselves about new products implementation, Fast Moving Consumer Goods by about 36% as compared to 7% in 19962 . The rise i.e. 10% in India, is on the lower side when which is not the case with a general trade store. (FMCG) continued to show robust growth. in urban population coupled with improvement in the compared to the global average of 25-30%3 . With Category creation and market development starts 14 15 urban income mix is favorable for the FMCG industry. more companies focusing on products with a management discussion and analysis Apart from the better value growth in the urban strong health and wellness quotient, the consumer market, it provides an opportunity to launch awareness about healthier options of food innovative premium products. consumption will increase. This discussion covers the financial results and The Indian FMCG market size is in excess of other developments during the period April 2011 - USD 33.4 billion and has grown at ~17% in the Women in urban India are also changing in their Another significant emerging segment of the March 2012 with respect to Marico Consolidated, last 5 years. It is poised to grow 3.6 times between quest to break from their traditional image in society. market is the rural sector, which currently accounts comprising its domestic Consumer Products 2010 and 2020 1, faster than most other emerging They are increasingly assertive and feeling more for 70% of India’s population. The rural market is Business (CPB) under Marico Limited (Marico) in markets. Rising household income, urbanization, secure to venture out to the stores and buy things on being driven by growth in non-agriculture income, India, its International Business Group (IBG) increasing literacy, decline in the traditional their own. A growing number of high-profile women better MSP (Minimum Support Prices) rates, higher comprising consumer products exports from Marico joint-family structure and changing demographics desire the best and are creating a niche market for education, wealth effect coming from increasing and the operations of its overseas subsidiaries are key contributors to growth. The most notable themselves. A widespread feeling of self-indulgence, land values, better infrastructure, increasing media and the Kaya skin care solutions business in India force is average household income, which is set which is leading to self-pampering in the form of penetration and the Government’s emphasis on and overseas. The Consolidated entity has been to rise nearly 3 times between 2010 and 2020 1. An beauty services and vacations, is emerging. These rural development programmes. With a huge referred to as ‘Marico’ or ‘Group’ or ‘Your Group’ in indication of this is the per capita income which women are often the biggest potential buyers of population base, improvement in rural income has this discussion. grew by 14% in FY12 to cross the sixty thousand niche high-quality, high-end products.