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OC&C FMCG India Index FY 09 Summary

Report Overview

This report analyzes the Indian FMCG industry's performance and strategies focusing on FY 2009, titled "BIG PIE BIGGER BITE: Seizing growth on the rebound." It highlights the challenges and opportunities during a year marked by initial growth followed by economic slowdown, and provides forward-looking advice for companies to capitalize on expected demand increases.

Key Insights

• Company Introduction: OC&C Strategy Consultants is a global firm specializing in FMCG strategy, advising on business unit strategy, profit improvement, and M&A. The FMCG Index is compiled using data from annual reports and paid databases, tracking sales, EBIT, and capital employed for FMCG operations in personal care, home care, foods, and beverages.

• FY 09 Performance: The year started strong with FMCG sales and EBIT growth due to premiumization and innovation in H1 2009, but H2 was affected by the slowdown. Companies responded with measures like pricing adjustments, cost reductions, and rural-focused strategies to sustain demand and margins.

• Strategic Themes: Key strategies include a focus on health and naturals (e.g., new launches like Amul's Slim & Trim), IT-driven supply chain optimization, mass premiumization, and acquisitions for portfolio enhancement. The top 40 companies were ranked based on combined sales, EBIT, and capital employed; leaders included Hindustan Unilever and Nestle India.

• Slowdown Response: Companies implemented affordability initiatives (e.g., lower prices and smaller packs), rural market emphasis (e.g., innovative distribution and localized promotions), and operational cost cuts (e.g., reduced overheads and streamlined supply chains).

Future Outlook

• The economy is recovering, with FMCG growth expected in FY10, driven by volume increases and strong rural demand despite potential margin pressures from input costs and inflation.
• Companies should set ambitious long-term goals, avoiding incremental planning and instead focusing on "Endgame" for substantial growth, including increasing market share, achieving higher relative market share, and outpacing competitors.

Recommendations

• Immediate Actions: Widen market reach, strengthen consumer relationships, and outsource non-core functions to improve efficiency.
• Strategic Shift: Move from volume-led to value-led growth and pursue decommoditization through innovative offerings.
• Overall, the report advises companies to prepare for rapid growth by setting endgame targets and capitalizing on post-recession opportunities.

Note: This summary covers the main points from the report, which includes detailed financial data and rankings for 40 companies contributing to 80% of the Indian FMCG market.