FMCG In India FMCG market is ruled by

FMCG word
stands for fast moving Consumer Goods. As India is 1st largest
democracy of the world and 2nd most populated country of the world
hence FMCG industry has its own importance due to the changing needs, wants and
demands of the consumer. In India FMCG market is ruled by organized as well as
unorganized players. In category of organized players there are giant players
like HUL, ITC, Parle, P & G and now a day’s Patanjali where in case of
unorganized sector there is a bunch of local stores having products in their
own name. Success is a greedy word which comes after the failure. Number of
companies born and die in every fiscal year, few of them die naturally and few
among them killed prematurely. So, the question here is how to measure the
success of the company? Is it mere a stock price, turnover, profitability or
wealth? The answer is a company is not an economic machine. It’s an
organization of people which operates in a society and for the society.

In this
changing globalized world people are spending major portion of their disposable
income to satisfy their needs related to daily life, wherein case FMCG products
are such products which touches to the daily life of a common man. Hence, the
motive of the FMCG companies should not be limited to earn the profits but to
make sure that they are maximizing the shareholders’ value. In fact, profit is
a short term goal and today’s corporate world has understood that to stay in
long run it is very necessary to be connected with customer, supplier,
shareholders, employees and all the other stake holders. Here one question
arises that how one can maximize the values and what are its measures. Because
value is a qualitative analysis and it’s a psychological phenomenon which
varies person to person. For one group of people value means morale, ethics,
and code of conducts and so on and for another group of people it can be the
monetary representation of any commodity. So, to quantify value in terms of
statistics and to derive a meaningful conclusion on the basis of it is a
challenging task. Thus, to help corporate in order to establish value based
management system Stern Stewart & co. is accepting this challenging task
and giving model to measure shareholder’s value with contemporary tools namely
Economic Value Added , Market Value Added, Balance Score Card, Bench marking
and so on.

 

 

3.1.        
Identification
of Problem

The concept
of accounting profit is very old and it has its own limitation. So, now the
need is emerged to understand the difference in between of accounting profit
and economic profit. Accounting profit considers certain non cash and non
operating expenses and in addition to that it totally ignores the impact of
opportunity cost and inflation. Wherein case economic profit focuses on
opportunity cost that is imputed value of owner’s self supplied factors of
production and inflation. The stock price of the share considers accounting
profit and to measure the performance of the company we take stock prices of
the share as a concrete tool of analysis. So, in this whole cycle of analysis
the basis selected to do the analysis itself is wrong. The main purpose of this
study is to challenge the traditional tools for analyzing performance of the
company. The main purpose of the study is to see the growth of FMCG industry
and a kind of change this industry is making in society at large in terms of spreading
values to its stake holders. 

A researcher
is focusing specifically on FMCG industry because all the families spend major
portion of their income on FMCG products. The Indian FMCG market is playing
dominant role in overall market as its 4th largest sector in the
economy. Looking to the population of India we can say that more than 126 crore
people’s daily life is based on these various FMCG products. So, India is the
great opportunity for existing giant players and upcoming FMCG companies.

The title of
research work is as follows,

“A STUDY OF SHARE HOLDERS’
VALUE CREATION

OF FMCG INDUSTRY IN INDIA

USING CONTEMPORARY TOOLS”

Traditional
tools to measure the values are like Earnings per share (EPS), Return on
Capital Employed (ROCE), Return on Net worth (RONW) and so on. The contemporary
tools comprises of Economic Value Added (EVA), Market Value Added (MVA),
Balance Score Card, Bench Marking and so on.

 

3.2.        
Objectives
of the Study

This topic has been selected to achieve the following
objectives

Ø  To
analyze a growth and development of FMCG Industry

Ø  To
analyze overall performance of FMCG Industry

Ø  To
analyze EVA of FMCG Industry

Ø  To
analyze MVA of FMCG Industry

Ø  To
analyze Return on Investment (ROI) of FMCG Industry

Ø  To
analyze a relationship between ROI, EVA, MVA & Dividend.

 

3.3.        
Rationale
of the Study

Consulting firm
Stern Stewart and Co. has developed EVA and MVA as a tool for measuring shareholders’
value with an idea of quality analysis. EVA and MVA are useful to measure the
wealth generated by a company for its stake holders. It’s a contemporary tool
to do the analysis.

Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer
packaged goods. Items in this category include all consumables (other than
groceries/pulses) people buy at regular intervals. The most common in the list
are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe
polish, packaged foodstuff, and household accessories and extends to certain
electronic goods. These items are meant for daily of frequent consumption and
have a high return.

The Indian FMCG sector is the fourth largest sector in the economy with
a total market size in excess of ` 83, 982 Crore.1
It has a strong MNC presence and is characterised by a well established
distribution network, intense competition between the organised and unorganized
segments and low operational cost. Availability of key raw materials, cheaper
labor costs and presence across the entire value chain gives India a
competitive advantage. The FMCG market is set to treble from ` 74, 365 Crore in 2003 to ` 2, 14,122 Crore in 20152.
Penetration level as well as per capita consumption in most product categories
like jams, toothpaste, skin care, hair wash etc in India is low indicating the
untapped market potential. Burgeoning Indian population, particularly the middle
class and the rural segments, presents an opportunity to makers of branded
products to convert consumers to branded products. Growth is also likely to
come from consumer ‘upgrading’ in the matured product categories.

 

 

3.4.        
Hypothesis
of the Study

Hypothesis
is a mere assumption or some supposition to be proved or not. But for a
researcher hypothesis is a question that he intends to answer. Hence,
hypothesis can be defined as a proposition or a set of proposition set forth as
an explanation for the occurrence of some specified group of phenomena either
asserted merely as a provisional conjecture to guide some investigation or
accepted as highly probable in the light of established facts. Quite often a
research hypothesis is a predictive statement, capable of being tested by
scientific methods, that relates an independent variable to some dependent
variable.3

Null
Hypothesis

Ø 
There is no significant difference in the
EVA among the companies of the Industry under study.

Ø 
There is no significant difference in the
MVA among the companies of the Industry under study.

Ø 
There is no significant difference in the
Return on Investment (ROI) among the companies of the Industry under study.

Ø 
There is no significant difference in the
dividend paid among the companies of the Industry under study.

Alternate
Hypothesis

Ø 
There is a significant difference in the
EVA among the companies of the Industry under study.

Ø 
There is a significant difference in the
MVA among the companies of the Industry under study.

Ø 
There is a significant difference in the
Return on Investment among the companies of the Industry under study.

Ø 
There is a significant difference in the
dividend paid among the companies of the Industry under study.

 

3.5.        
Data
Collection

The task of
data collection starts once after finishing identification of research problem
and research design has been chalked out. Coming to the methods of data
collection, there are two methods to collect the data viz. Primary and
Secondary. Primary data collection method is one when researcher attempts to
collect the fresh data or data is getting collected for the first time to
process where secondary data collection method is the published sources. The
tools of primary data collection method are personal interview, questionnaire,
telephonic interview, observation method and so on. The tools for secondary
data are published sources like news papers, magazine, books, research article,
and web resources and so on. As compare to primary method of data collection
secondary method is economic and time saving.

The present
study is mainly based on secondary data. The researcher has used the data
published in annual reports of the companies selected under study. The research
magazines, journals, books and periodicals relating to FMCG industry is also referred
in order to reach to the conclusion. In addition to that ACEKP software is also
used to collect the data for analysis.

 

3.6.        
Period
of the Study

The period of the study is 5 years which begin from 2011-12
to 2015-16.

 

3.7.        
Tools
and Techniques used for Data Analysis

Once the data
is collected it’s become necessary to apply proper tools and techniques for its
analysis and interpretation. Sound measurement must meet the tests of
Reliability, Relevance, Comparability and understandability. In fact, these are
the four major considerations one should use in evaluating measurement tool.

The tools used to analyze and interpret the data for deriving
meaningful conclusions is categorized into two. Viz.

Accounting Tools

For the present study the researcher has used accounting
techniques such as EVA, MVA, ROI, and various Accounting Ratios.

Statistical Tools

For establishing cause and effect relationship between
various variables a researcher has used T-Test, Co-efficient of Correlation,
ANOVA, Mean, Standard deviation, Variance, Range, etc.

3.8.        
Universe
of the Study & Sample Size

The FMCG
industry is very broad consist of household products, oral care, skin care,
hair care, cosmetics, health related, dairy products, bakery products, paper
products, confectionery, foods, tobacco products, industrial products,
beverages, natural products, men and women apparels and so on. Out of these all
the following list of companies gives overall picture of FMCG industry.

1.      Britania
Industries Ltd.

2.      Godfry
Phillips India Ltd.

3.      Colgate-Palmolive
India Ltd.

4.      Dabur
India Ltd.

5.      Godrej
Consumer Products Ltd.

6.      Hindustan
Unilever Ltd.

7.      ITC
Ltd.

8.      Nestle
India Ltd.

9.      Marico
Ltd.

10.  P
& G India Ltd.

 

3.9.        
Criteria
of Selection of Sample

Researcher has taken sales/revenue from operations as basic
criteria for the selection of sample for the study. The above listed top ten
companies have been selected on the basis of its revenue from operations for
the accounting year 2011-2012.

 

3.10.      
Future
Scope of the Study

The researcher
has selected 10 companies to achieve the objectives of the study. The
researcher has covered almost all the financial part of the sampled units of
the study for the purpose of calculation of EVA and MVA. However there is a
more scope analysis by looking into other spheres too.

1.      The
researcher has taken only 10 companies operating in India to study. Still more
number of companies can be taken like on local, state, national and
international level.

2.      The
financial aspects are only covered to reach to the conclusion. Still there are
the more aspects like production, human resource, quality assurance,
information technology, managerial decision, market policy, social
responsibilities, etc can be studied in future.

3.      This
study is limited up to the 2011-2012 to 2015-2016. Still their financial
performance can be continued for upcoming years. Thus, this field is open for
further research.

 

3.11.      
Limitations
of the Study

1.     
Sample Size might not be reflecting true and
fair view of whole universe.

2.     
This study is based on secondary data which is taken
from published Annual report and available financial Literature of the FMCG companies
in India under study and from published journals and magazines and therefore
its findings depend entirely on the accuracy of such data.

The
present study is largely based on accounting techniques and statistical
techniques and they have their own limitations which also apply to the study.