Fmcg Companies Current Startegies

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New strategies for FMCG companies

Author Source References

sreekanth reddy, MBA II Mktg Forthright 1. Marketing Management, Phillip Kotler 2. site.securities.com 3. FT.com 4. The Economist 5. www.wikipedia.org

Document Type Secondary Analysis Subject Date Abstract The FMCG sector is undergoing a slow but definite change towards higher productivity gains in spite of decreasing retail prices. In this scenario it is important for the companies to innovate, use economies of scale and find new markets and segments which are profitable. The article explores the various strategies implemented by major FMCG companies to keep the top line and the bottom line brimming with cash. Marketing April 1, 2006

Symbiosis Institute of Business Management, Pune

Exposition:
The industry has already extracted much of the benefit to be had from improving productivity and concentrating on core brands. Meanwhile, its dynamics are changing. What comes next?

At first glance, the leading consumer goods companies' strategy for handling the fierce competition of the past ten years looks robust enough to carry them through the next ten. Indeed, with the industry still caught between price-sensitive consumers, poor infrastructure and powerful retailers, some of the challenges facing it remain the same.

In the 1990s the industry's executives developed strikingly similar strategies to address these issues: focusing rigorously on the strongest brands and pursuing productivity gains. The results confounded those who forecast the demise of brands and the industry's rapid

consolidation. Remember the day in 2004 when P&G and HLL slashed the price of their core detergent brands by almost 40 percent? A business weekly wrote, "Many brands will perish or never be so profitable again." But such pessimists were wrong. Anyone who invested every year since 2004 in the top 10 consumer goods companies (minus HLL which has under gone a massive restructuring) received a 12 percent annual return over two years results that outperformed those of most industry sectors. Eight of the top fifty companies of 2000 (ranked by sales) were still in the list of leaders in 2005, and roughly in the same order.

But the strategy that worked so well might have run its course. A string of recent profit warnings at big consumer goods companies hints that the industry's dynamics may be

shifting in important ways. The surge of discount retailing, emergence of local & regional brands, entering of more global players and the spread of private-label products are putting ever greater pressure on the price of branded goods. Companies have extracted much of the financial benefit from restructuring their portfolios and concentrating on core brands. And though doggedly pursue further improvements in productivity; most of the obvious gains have already been achieved.

Symbiosis Institute of Business Management, Pune

The glory days In confronting the challenges of the past five years, big consumer goods companies all chose much the same strategy. They began by reshaping their product portfolios through mergers and acquisitions, with the aim of becoming national leaders in a few core categories. Marico went on to buy its closest competitor Nihar from HLL to prevent Dabur from moving to a position of strength. Dabur itself bought the ailing

Balsara brands to give meat to its ailing oral care products. Even globally companies made acquisitions to fill geographic gaps (L'Oreal in Asia) or to strengthen a specific category (Procter & Gamble's hair-care business).

Then, most companies focused on their core brands, where they concentrated marketing and other resources, and eliminated weaker ones. Strengthened brands made it more difficult for retailers to insist on price cuts. Even the cross- category heavyweights HLL, Nestle,

Procter & Gamble, and Dabur concentrated on fewer brands.

Next, to reduce costs and finance growth, most companies in the...
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