Competitive Strategies of Fmcg Companies

Topics: Detergent, Fast moving consumer goods, Tax Pages: 8 (3068 words) Published: March 12, 2011
swot analysis of fmcg industry - Document Transcript
1. 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 five listed FMCG companies on the basis of their sales turnover in the last financial year (either year ended December 31, 1999 or March 31, 2000) are: Company Name ym(finance_year) sales Profit After Tax Rs. Crores Rs. Crores Hindustan Lever Ltd. 199912 10978.31 1073.73 I T C Ltd. 200003 7971.94 792.44 Nirma Ltd. 200003 1717.88 234.1 Nestle India Ltd. 199912 1546.43 98.47 Britannia Industries Ltd. 200003 1169.84 51.02 Colgate-Palmolive (India) Ltd. 200003 1123.53 51.79 Godfrey Phillips India Ltd. 200003 1082.63 42.1 Dabur India Ltd. 200003 1046.28 77.67 Smithkline Beecham Consumer 199912 743.38 97.61 Healthcare Ltd. Godrej Soaps Ltd. 200003 714.74 61.89 Marico Industries Ltd. 200003 649.05 35.73 Cadbury India Ltd. 199912 511.08 36.7 Procter & Gamble Hygiene & Health 200006 492.85 75.03 Care Ltd. Reckitt & Colman Of India Ltd. 199812 435.33 31.47 I S P L Industries Ltd. 199903 21.57 0.04 Among the major companies, Hindustan Lever has a strong presence in the food, personal care and household care (detergents) sectors; ITC is the market leader in cigarettes; Nirma has a strong presence in the detergent market; Nestle and Britannia are active in the food sector and Colgate has a strong presence in the oral care segment. Exports India is one of the world’s largest producer 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 upgradation to achieve economies of scale. Moreover, lower volume of higher value added products reduce scope for export to developing countries. 2. FMCG >> SWOT Analysis >> Strengths: • Well-established distribution network extending to rural areas. • Strong brands in the FMCG sector. • Low cost operations Weaknesses: • Low export levels. • Small scale sector reservations limit ability to invest in technology and achieve economies of scale. • Several quot;me-too’’ products. Opportunities: • Large domestic market. • Export potential • Increasing income levels will result in faster revenue growth. Threats : • Imports • Tax and regulatory structure • Slowdown in rural demand Policy issues Tax reforms The government has gradually removed the restrictions on imports of consumer goods in the country and also significantly reduced custom duties. The domestic tax structure of these products, however, has not been rationalised to provide level playing field for competition. This is adversely affecting the growth of the FMCG industry and could have far reaching adverse impact. The following taxation issues need urgent attention of the government: 3. 1) Extremely high incidence of tax on certain product categories Some FMCG products such as shampoos, processed food, soft drinks and toiletries containing alcohol attract high rates of excise duty and sales tax. The total tax incidence in some cases is more than 60 per cent of the cost or more than 30 per cent of MRP. Such high tax incidence hampers growth of these product categories besides encouraging manufacture of spurious products and smuggling. It is recommended that the total excise incidence of FMCG products should not exceed 16 per cent in the case of non food items and eight per cent in the case of processed foods. Similarly, the marginal rates of sales tax, which is currently in the range of 10 to 25 per cent, should not exceed 12 per cent. 2) Irrational domestic tax structure encouraging imports Significant reduction in custom duty rates of consumer goods has...
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