INDUSTRY OVERVIEW

Overview of Fast-Moving Consumer Goods (FMCG)

Being the fourth-largest industry in the Indian economy, the fast-moving consumer goods (FMCG)
sector is important. Products for the home and personal care sector make up almost 50% of all FMCG
revenue, which is a significant contribution to overall sales. The sector's growth is primarily being
propelled by the changing consumer landscape, which is marked by increased awareness and changes
in lifestyle.
With 55% of the overall income generated by the FMCG sector occurring in urban areas, these places
are a prominent force in revenue generation. Nonetheless, compared to their urban equivalents, rural
markets have grown more quickly in recent years, suggesting that FMCG products are becoming more
common in rural consumer families.
Monthly home expenses are mostly composed of FMCG products. The dynamic environment created
by the vast volume of consumers and the multiple competitors in the market makes it difficult for
businesses to make excessive profits.
In order for FMCG companies to reach every corner of the nation or perhaps the world, distribution
networks are essential. The difficulty for new competitors is getting into an already crowded market
by making significant investments in brand promotion and distribution channels.
Future projections of the Indian FMCG industry
In the upcoming years, a strong growth rate is anticipated in the FMCG sector in India. The market is
expected to develop at a 14.9% compound annual growth rate (CAGR) to reach $220 billion by 2025,
according to the Indian Brand Equity Foundation (IBEF). A expanding middle class, rising disposable
incomes, and more urbanization are some of the causes driving this expansion.
Indian FMCG industry

The FMCG business is predicted to grow significantly in a number of segments. By 2025, the
processed food market is predicted to reach $470 billion, while the packaged food sector is predicted
to quadruple to $70 billion. It is anticipated that by 2026, sales of online groceries will have increased
to $17.12 billion. The microeconomics concepts can be applied to the FMCG sector in various ways,
1. Consumer Demand and Preferences:
FMCG businesses need to keep an eye on changing consumer preferences and demands and adjust
accordingly. This entails being aware of demographic trends, changing tastes for particular product
categories or features, and consumer behavior. FMCG firms may effectively acquire market share and
improve consumer satisfaction by matching their marketing strategy and product offers with these
insights.
2. Supply Chain Management:
For FMCG companies to keep costs down and guarantee product availability, supply chain efficiency
optimization is essential. Building trusting connections with suppliers, streamlining the logistics and
transportation system, and putting in place efficient inventory management systems are all necessary
to achieve this. Improved product availability, shorter lead times, and cost reductions are all possible
outcomes of effective supply chain management, which raises overall profitability and customer
satisfaction.
3. Competition Analysis:
Due to intense competition, businesses in the FMCG industry must constantly assess their competitive
environment. This entails figuring out who the main rivals are, assessing their advantages and
disadvantages, and comprehending their marketing and price approaches. FMCG companies can get a
competitive advantage and cultivate a devoted consumer base by skilfully distinguishing their brands,
goods, and customer experiences.
4. Regulatory Compliance:
FMCG companies have to go by a complicated web of rules that cover environmental norms, product
safety, labelling, and advertising. Respecting these rules helps the business keep the confidence of its
customers, stay out of trouble with the law, and preserve its reputation. FMCG businesses need to
build strong compliance systems and keep abreast of legislative developments.
5. Government Policies and Taxation:
Taxation and government policies have a big influence on the FMCG industry. While taxes or tariffs
can raise manufacturing costs and squeeze profit margins, subsidies for particular goods or industries
can open doors for expansion. FMCG businesses should keep a close eye on governmental policies
and communicate with decision-makers to support advantageous laws and tax arrangements.
MAJOR COMPANIES
1.Britannia Industries Ltd
Britannia Industries Ltd (BIL) is a leading manufacturer and marketer of bakery and dairy products in
India. Founded in 1892, the company has a rich legacy of over 100 years. BIL is one of the most
trusted brands in the Indian food industry, with a wide portfolio of products that cater to the diverse
tastes of Indian consumers.

Financial Highlights
 48.97% is the gross profit margin. This suggests that the business can turn a healthy profit from
sales and operates with efficiency.
 There is a 24.34% operating profit margin. This shows that, even after deducting all of its running
costs, the business is able to turn a profit.
 17.53% is the net profit margin. This shows that even after deducting all of its costs—including
taxes and interest—the business is still able to turn a profit.
 There is a 22.32% RoE. This suggests that the business can provide a substantial return on the
capital invested by its owners.
 There is a 95.32% RoCE. This suggests that the business can produce a very high return on

investment.

2.Nestlé India Ltd

Nestlé India Ltd is a subsidiary of Nestlé, the world's
largest food and beverage company. Nestlé India has been
operating in India for over 150 years and has a strong
presence in the Indian food and beverage market.
Financial Highlights

 56.43% is the gross profit margin. This suggests that the business can turn a sizable profit
from sales and operates with a high degree of efficiency.
 There is a 24.07% operating profit margin. This shows that, even after deducting all of its
running costs, the business is able to turn a profit.
 There is a 20.68% net profit margin. This shows that even after deducting all of its costs—
including taxes and interest—the business is still able to turn a profit.
 There is a 27.35% RoE. This suggests that the business can provide a substantial return on the
capital invested by its owners.
  There is 57.82% RoCE. This suggests that the business can produce a respectable return.

3.Marico Ltd
Marico Ltd is a leading Indian consumer products company with a strong presence in the global
beauty and wellness market. The company was founded in 1990 and has a presence in 25 countries
across emerging markets of Asia and Africa.
Financial Highlights

 17.73% is the operating profit margin. This suggests that even after deducting all of its running
costs, the business is able to turn a respectable profit. It does, however, fall short of the industry
average of 18.5%.


 13.52% is the net profit margin. This shows that even after accounting for all of its costs, such as
interest and taxes, the business is able to turn a respectable profit. It is, nevertheless, less than the
14.1% industry average.
 There is a 28.46% RoE. This suggests that the business can provide a substantial return on the
capital invested by its owners. It surpasses the 25.8% industry average.
 The RoCE is 41.16%. This indicates that the company is able to generate a very high return on the
capital that it has invested in its business. It is significantly higher than the industry average of
22.4%.

4.The Indian Tobacco Company (ITC) Limited

ITC Ltd (Indian Tobacco Company) is a diversified
conglomerate with a strong presence in the Indian FMCG sector.
The company was founded in 1910 and is one of India's largest
companies by market capitalization.
Financial Highlights

 Out of the five firms, ITC Ltd has the greatest gross profit
margin. This suggests that the business can turn a sizable profit from sales and operates with great
efficiency.
 Of the five enterprises, the operational profit margin that is second largest. This shows that, after
deducting all of its running costs, the business is able to turn a profit.
 ITC Ltd has the highest net profit margin among the five companies. This indicates that the
company is able to generate a very healthy profit after taking into account all of its expenses,
including interest and taxes.

 Among the five businesses, ITC Ltd. has the best return on equity. This suggests that the business
can provide a substantial return on the capital invested by its owners.
 Out of all the five corporations, ITC Ltd has the second-highest ROCE. This suggests that the
business can provide a substantial return on the capital that it has spent in its operations.

5.Hindustan Unilever Ltd

Hindustan Unilever Ltd (HUL), also known as Hindustani Lever, is a
multinational consumer goods company headquartered in India. It is a
subsidiary of Unilever, a British multinational consumer goods
company. HUL is India's largest fast-moving consumer goods (FMCG)
company, with a wide portfolio of products including soaps, detergents,
personal care products, foods, and beverages.
Financial Highlights
 55.46% is the gross profit margin. This suggests that the business can turn a healthy profit from
sales and operates profitably.
 The operating profit margin of 18.31%. This indicates that the company is able to generate a

decent profit after taking into account all of its operating expenses.
 17.25% is the net profit margin. This shows that even after accounting for all of its costs, such as
interest and taxes, the business is able to turn a respectable profit.
 The 21.42% RoE. This suggests that the business can provide a substantial return on the capital
invested by its owners.
 The 22.04% RoCE. This suggests that the corporation may make a respectable profit on the
money it has put into the company.
Analysis-
Britannia Industries Ltd., Nestlé India Ltd., Marico Ltd., ITC Ltd., and Hindustan Unilever Ltd. all
have excellent profit margins, strong RoEs, and healthy RoCEs, according to a review of their
profitability statistics. Nonetheless, there are a few significant variations across the businesses.
The highest ROCE and gross profit margin are held by Britannia Industries Ltd, while the lowest
operational and net profit margins are recorded by the company. This shows that the business is
profitable and can make a decent return on its capital. However, by reducing operational costs and
raising sales of its current items, the business might increase profitability even more.
Nestlé India Ltd has the lowest operating profit margin but the second-highest gross profit margin and
RoCE. This shows that the business is operating profitably and can provide a strong return on
investment, but it may increase profitability even more by reducing operational costs.
With the second-highest operating profit margin, Marico Ltd. has the lowest ROCE and gross profit
margin. This shows that the business can turn a profit even after accounting for all of its operating
costs. However, by increasing operational efficiency, the business may be able to turn a profit even
more quickly.
Although ITC Ltd has the lowest gross profit margin, it has the best operational profit margin and net
profit margin. This shows that, after accounting for all costs, the business may turn a healthy profit.
However, by increasing operational efficiency, the business may be able to increase its profitability
even further.
With the lowest operational profit margin, Hindustan Unilever Ltd. has the second-highest gross profit
margin and second-highest return on equity. This shows that the business is operating profitably and
can provide a strong return on investment, but it may increase profitability even more by reducing
operational costs.
Conclusion-
Strong RoE, robust RoCE, and robust profit margins characterize each of the five businesses. This
implies that the businesses are capable of producing a strong return for their investors and are well-
managed.
Nonetheless, there are a few significant variations across the businesses. The highest ROCE and gross
profit margin are held by Britannia Industries Ltd, while the lowest operational and net profit margins
are recorded by the company. Nestlé India Ltd has the lowest operating profit margin but the second-
highest gross profit margin and RoCE. With the second-highest operating profit margin, Marico Ltd.
has the lowest ROCE and gross profit margin. ITC Ltd. exhibits the highest net and operational profit
margins, but the lowest gross profit margin. With the lowest operational profit margin, Hindustan
Unilever Ltd. has the second-highest gross profit margin and second-highest return on equity.
While making investing selections, investors should take into account the unique strengths and
limitations of each company. Britannia Industries Ltd., for instance, can be a wise choice for investors
seeking a business with a high ROCE and gross profit margin. If you're seeking for a firm with a great
brand reputation and a wide product range, Nestlé India Ltd. can be an excellent investment. Marico
Ltd. can be a worthwhile investment for those seeking a business with a high operating profit margin.
Investors searching for a business with a strong market position in a developing sector may find that
ITC Ltd. is a worthwhile investment. Investors searching for a business with a robust track record of
profitability and a varied product range might find Hindustan Unilever Ltd. to be a worthwhile
investment.