Equity Research On Fmcg

A PROJECT REPORT ON A Equity research On Fast Moving Consumer Goods

In partial fulfillment of the requirement of Masters In Management Studies Through Rizvi Institute of Management Under the guidance of Prof. FURQAN SHAIKH

SUBMITTED BY: IMTIYAZ SIDDIQUE MMS-FINANCE 2008-10

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DECLARATION I Mr. Imtiyaz A. Siddique of Rizvi Institute of Management hereby declare that I have completed the summer project on ‘A EQUITY RESEARCH ON FAST MOVING CONSUMER GOODS” in the academic year 2008-10. The information submitted in the same is true & original of the best of my knowledge.

Signature

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CERTIFICATE I Mr. Kalim Khan hereby declare that Mr. Imtiyaz A. Sidddique of Rizvi Institute of Management has completed his summer project in the academic year 2008-10. The information submitted in the same is true & original of the best of my knowledge.

Signature

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ACKNOWLEDGEMENT “There is joy in work. There is no happiness except in the realization that we have accomplished something” - Henry Ford The making of any project requires contribution from many people, right from inception till its completion. In my case also, there had been a few people who have made this happen. It was not only learning but also an enriching experience. I am deeply indebted to Prof. Kalim Khan, Director, Rizvi Institute of Management Studies for having allowed me to carry out the project successfully. I specially thank my guide Prof. Furqan Shaikh for his constant guidance, professional help and support during the course of the project. I thank my colleagues and friends for providing constant encouragement and help. I am indebted to them for their timely help & the enthusiasm they expressed in helping me bring this project to the fruitful end. Finally, I am grateful to my family for their moral support and understanding. “Teachers open the door, but you must enter by yourself”

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Executive summary The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. FMCG market is expected to rise to 33.4 billion US$ till 2015. This report starts with a brief introduction of FMCG market along with Industry Overview. It further state that why FMCG sector is Analyzed and why India. In this report two FMCG company “HUL & Dabur India” is analyzed there history their shareholding pattern along with their product is being discussed. The company Fundamental & Technical is shown in the report. An analysts evaluates the stocks based on different parameter like fundamentals of the company i.e earnings of the company, P/E dividend yield etc. And technical based on Chart of the company share price the chart i.e Moving Average Crossover Chart, MACD chart through which we come to know the future price whether it is going to come down or go up. The report also include the distinguish feature of FMCG as compared to other sector and a well defined conclusion.

As consumer behavior and lifestyles changed, people no longer buy the way they used to. Simply increasing ‘width' and ‘depth' of coverage no longer seems to produce the magical results it once used to." -' Business Line, April 2003.

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TABLE OF CONTENT Sr No TOPICS 1.1 1.2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3.1 4.1 5.1 5.2 5.3 5.4 5.5 6.1 6.2 6.3 6.4 6.5 7.1 8.1 9.1 10.1 11.1 12.1

PAGE NO.

Introduction Indian FMCG market size Industry Overview Structural Analysis of FMCG Industry FMCG Market Review Why FMCG Sector is Analyzed FMCG Sector Product and Category India- a large consumer goods spender Consumer expenditure on food at international level FMCG sector product and category SWOT Analysis Hindustan Unilever LTD Product of HUL Distribution Network Fundamental Analysis Technical Analysis Dabur India Product of Dabur Distribution Network Fundamental Analysis Technical Analysis Sectoral opportunities Policy Issues Distinguishing Features of Indian FMCG Business Other Suggestions Salient Feature Conclusion

1.1 Introduction 6

The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a well established distribution network, intense competition between the organized and unorganized segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. 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. With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing industry. Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector. At the macro level, Indian economy is poised to remained buoyant and grow at more than 7%. The economic growth would impact large proportions of the population thus leading to more money in the hands of the consumer. Changes in demographic composition of the population and thus the market would also continue to impact the FMCG industry.

Recent survey conducted by a leading business weekly, approximately 47 per cent of India's 1 + billion people were under the age of 20, and teenagers among them numbered about 160 million. Together, they wielded INR 14000 Cr worth of discretionary income, 7

and their families spent an additional INR 18500 Cr on them every year. By 2015, Indians under 20 are estimated to make up 55% of the population - and wield proportionately higher spending power. Means, companies that are able to influence and excite such consumers would be those that win in the market place. The Indian FMCG market has been divided for a long time between the organized sector and the unorganized sector. While the latter has been crowded by a large number of local players, competing on margins, the former has varied between a two-player-scenario to a multi-player one. Unlike the U.S. market for fast moving consumer goods (FMCG), which is dominated by a handful of global players, India's Rs.460 billion FMCG market remains highly fragmented with roughly half the market going to unbranded, unpackaged home made products. This presents a tremendous opportunity for makers of branded products who can convert consumers to branded products. However, successfully launching and growing market share around a branded product in India presents tremendous challenges. Take distribution as an example. India is home to six million retail outlets and super markets virtually do not exist. This makes logistics particularly for new players extremely difficult. Other challenges of similar magnitude exist across the FMCG supply chain. The fact is that FMCG is a structurally unattractive industry in which to participate. Even so, the opportunity keeps FMCG makers trying. The FMCG sector in India is expected to grow at a compounded annual growth rate (CAGR) of 9% to a size of Rs 1,43,000 crore by 2010.

1.2 Indian FMCG Market Size (In US $ Billion) 8

(Source: IBEF FMCG Analysis) According to estimates based on China's current per capita consumption, the Indian FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. The dominance of Indian markets by unbranded products, change in eating habits and the increased affordability of the growing Indian population presents an opportunity to makers of branded products, who can convert consumers to branded products.

2.1 Industry Overview Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG).The FMCG sector seems to have finally joined India Inc's growth party by posting 9

surprising double-digit growth in sales in the past couple of years. With annual revenues of Rs 72,000 crore, it is the one of the largest sectors in the Indian economy. The industry's future prospects look bright, considering rising household incomes and the spread of modern retail. However, the per capita income level in India is still very low compared to the developed world. Besides, the penetration level of many products is also relatively low and several categories remain fairly unbranded. All these factors provide a huge untapped potential for the industry. In contrast to other manufacturing sectors, FMCG is relatively less capital-intensive, but demands immense skills and expenditure on branding and distribution. Most companies in the sector create value through product differentiation, package innovation, differential pricing and highlighting the functional aspect of foods. While inflation restricts the industry's growth, many companies in the sector thrive under inflationary pressures. Most companies pass on the cost inflation to consumers, via a judicious blend of price hikes, packaged size reduction and change in product mix. Few consumers react by downtrading to lower priced products, but most hang on to their preferred brands. The top five FMCG companies constitute nearly 70% of the total revenues generated by this sector. Multinational FMCG companies like Hindustan Unilever, ITC, Nestle, Procter & Gamble, Dabur India and GlaxoSmithKline Consumer Healthcare traditionally comprise the first category of FMCG companies. They tend to spend nearly 10% of their revenues on an average on advertising and promoting their products, which is the highest ad spend figure in the industry. Justifying their high product pricing, these companies largely tend to capture value by addressing a felt need. FMCG products are those that get replaced within a year. Example of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other nondurables such as glassware, bulbs, batteries, paper product, and plastic good. FMCG may also include pharmaceuticals, consumer 10

electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. Subsets of FMCGs are Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently than other electronic products.

2.2 Structural Analysis of FMCG Industry Typically, a consumer buys these goods at least once a month. The sector covers a wide gamut of products such as detergents, toilet soaps, toothpaste, shampoos, creams, powders, food products, 11

confectioneries, beverages, and cigarettes. Typical characteristics of FMCG products are: 1. The products often cater to 3 very distinct but usually wanted

2. 3.

4. 5.

for aspects - necessity, comfort, luxury. They meet the demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers. Individual items are of small value (small SKU's) although all FMCG products put together account for a significant part of the consumer's budget. The consumer spends little time on the purchase decision. He seldom ever looks at the technical specifications. Brand loyalties or recommendations of reliable retailer/ dealer drive purchase decisions. Limited inventory of these products (many of which are perishable) are kept by consumer and prefers to purchase them frequently, as and when required. Brand switching is often induced by heavy advertisement, recommendation of the retailer or word of mouth.

2.3 FMCG Market Review FY 09 Result Highlights

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2.4 Why FMCG Sector is Analyzed TATA Investment Corporation Limited, non non-banking financial company registered with Reserve Bank of India under the ' Investment Company' category. The company's activities comprise primarily of investing in long-term investments in equity shares and other securities of companies in a wide range of industries. 13

TICL invested in almost all the sectors. TICL’s portfolio proved to be a very successful portfolio. They had got a very good return from all the sectors. Among these sectors, Fast Moving Consumer Goods (FMCG) proved to be a very successful sector. It has a very good potentiality in long term in India. The overall cost of investment in FMCG sector was Rs. 13.69 crores on May 20, 2008, this investment valued Rs. 306.72 crores i.e. the cost of value of investment in FMCG sector was 5% of the overall investment that was increased in 2008 to 15% of the overall investment. Thus from this, we can conclude that, there is a 2140.47% increase in value of investment. For this significant increase and also recent development of retails shops, malls, etc. in India, the FMCG sector is one of the booming sectors in India. For this reason, I had chosen this sector for my equity analysis. Below, I had given a which explains, the detail investment of TICL in FMCG sector:

2.5 Why India Large domestic market India is one of the largest emerging markets, with a population of over one billion. India is one of the largest economies in the world in terms of purchasing power and has a strong middle class base of 300 million. 14

Around 70 per cent of the total households in India (188 million) resides in the rural areas. The total number of rural households are expected to rise from 135 million in 2001-02 to 153 million in 2010-11. This presents the largest potential market in the world. The annual size of the rural FMCG market was estimated at around US$ 33.4 billion in 2015. With growing incomes at both the rural and the urban level, the market potential is expected to expand further.

2.6 India - a large consumer goods spender An average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal care products. The large share of fast moving consumer goods (FMCG) in total individual spending along with the large population base is another factor that makes India one of the largest FMCG markets.

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(Source: KSA Technopak Consumer Outlook 2004.)

2.7 Consumer expenditure on food at International level Even on an international scale, total consumer expenditure on food in India at US$ 120 billion is amongst the largest in the emerging Markets, next only to China.

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3.1 FMCG sector Product & Category

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Category

Product

Food and Beverages

Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish). Health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.

Personal Care

Oral care, hair care, skin care, personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; feminine hygiene; paper products.

Household Care

4.1 SWOT Analysis: Whole Industry! 18

Strengths  Well established distribution networks extending to the rural areas  Backed by strong brands  Low cost operations  Presence of established distribution networks in  both urban and rural areas  Presence of well-known brands in FMCG sector Weakness  Low export levels  Small scale sector reservations limit ability to invest in technology and achieve economies of scale  Several “Me-Too” products Opportunities  Large domestic market  Export potential  Increasing income levels will result in faster revenue growth  High consumer goods spending Threats  Tax & Regulatory Structures  Slowdown in Rural Demands  Removal of import restriction resulting in replacing of domestic brands

5.1 Hindustan Unilever Ltd 19

Hindustan Unilever Limited, erstwhile Hindustan Lever Limited (also called HLL),Head quartered in Mumbai, is India's largest consumer products company, formed in 1933 as Lever Brothers India Limited. Its 41,000 employees are headed by Mr. Harish Manwani, the nonexecutive chairman of the board. HUL is the market leader in Indian products such as tea, soaps, detergents, as its products have become daily household name in India. The Anglo-Dutch company Unilever owns a majority stake (52%) in Hindustan Lever Limited. Recently in February 2007, the company has been renamed to "Hindustan Unilever Limited" to provide the optimum balance between maintaining the heritage of the Company and the future benefits and synergies of global alignment with the corporate name of "Unilever". Hindustan Unilever distribution cover over 1 million retail outlets across India directly and its products are available in over 6.3 million outlets in India, i.e. nearly 80% of the retail outlet in India. It has 39 factories in the country. Two out of three use the company’s products and HUL product have the largest consumer reach being available in over 80 percent of consumer homes across India. Unilever mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life.

Management Structure 20

Hindustan Unilever Limited is India's largest Fast Moving Consumer Goods (FMCG) Company. It is present in Home & Personal Care and Foods & Beverages categories.

Board Chairman

Harish Manwani

Managing Director & CEO

Nitin Paranjpe

Vice Chairman

D Sundaram

Director

D S Parekh C K Prahalad A Narayan S Ramadorai R A Mashelkar

Executive Director

Dhaval Buch

Executive Director

Gopal Vittal

Executive Director & CS Ashok Gupta

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Share holding pattern 15%

16%

15%

3% Foreign Institutions

51%

Non Promoter Promoters Public & Others

Listing Details of Equity Shares Name of the Stock Exchange Bombay Stock Exchange Limited National Stock Exchange of India Limited

Stock Code 500696 HINDUNILVR

5.2 Products of HUL 22

Home & Personal Care Personal wash  Lux  Lifebuoy  Liril  Breeze  Pears and Rexona  Hamam Beauty Products  Fair & Lovely  Lakme  Ponds Deo spray  Axe  Rexona

Laundry  Surf Excel  Rin  Wheel  Ala bleech

Hair-Care  Sunsilk naturals  Clinic  Dove Beauty Products  Pepsodent  Close-up

Foods Ice-cream  Kwality Wall's

Foods  Annapurna(Aata and salt)  Kissan(Jam,Ketchup,Squ ashes)  Knorr Soups Coffee  Brooke bond  Bru

Tea  Brooke bond  Lipton

5.3 Distribution Network 23

Hindustan Unilever's distribution network is recognised as one of its key strengths. Its focus is not only to enable easy access to their brands, but also to touch consumers with a three-way convergence of • product availability, • brand communication, • higher levels of brand experience.

HUL's products, manufactured across the country, are distributed through a network of about 7,000 redistribution stockists covering about one million retail outlets. The distribution network directly covers the entire urban population. The general trade comprises grocery stores, chemists, wholesale, kiosks and general stores. Hindustan Unilever services each with a tailor-made mix of services. The emphasis is equally on using stores for direct contact with consumers, as much as is possible through instore facilitators.

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The distribution network in general trade is as follows:-

FACTORY

JUST IN TIME DEPOT

REDISTRIBUTION STOCKIST

MARKET ( CHANNEL WISE )

CONSUMER

The products that are manufactured are first brought to the JIT (Just In Time) Depot from the factory. Then these products are delivered to the Redistribution Stockiest according to the order placed by them, this is done through Permanent Dispatch Plan. Then this stock is send to either retailers or wholesalers, according to the channel followed by them. From there it reaches to the consumers.

At the supermarkets 25

Self-service stores and supermarkets are fast emerging in metros and large towns. To service modern retailing outlets in the metros, HUL has set up a full-scale sales organisation, exclusively for this channel. The business system delivers excellent customer service, while driving growth for the company and the store. At the same time, innovative marketing initiatives are taken to provide consumers with experience of our brands at the store itself, through product tests and in-store sampling. This is termed as Modern Trade. It has got different distribution network and work differently. It is fast gaining pace as more and more people are turning to malls for shopping. Today shoppers don’t just want to buy their daily groceries but they also want a shopping experience. They want to spend time in air conditioned store, no more they are ready to sweat for spending money. These big box retailers provide them a platform where they can roam around, pick, compare and choose their products. These stores provide them a whole new experience of shopping without shedding any drop of sweat.

Distribution Network 26

FACTORY

JUST IN TIME DEPOT

CUSTOMER SERVICE PROVIDER

BIG BOX RETAILER

CONSUMER

5.4 Fundamental Analysis 27

Liquidity & Leverage Ratios Current Ratio Quick Ratio Total Debt/Equity Interest Coverage Ratio

March 09 0.92 0.51 0.20 118.70

Dec 07

Dec 06

Dec 05

0.68 0.25 0.06 83.09

0.73 0.34 0.03 171.62

0.70 0.33 0.02 83.27

Current Ratio of HUL has been less than 1 for all the 4 years taken for analysis. As the standard of current ratio is 1:1 for FMCG industry. This implies that working capital of HUL is always negative. This is generally considered an aggressive strategy i.e. to financing its long term asset by short term sources that increases profitability because current liabilities are non interest bearing items. There is significant difference between CR and LR which indicates that the current asset of HUL consists of good amount of inventory. Value of sundry debtors is quite low. The liquidity ratios have increase from previous year which shows that HUL has increase its liquidity further. The loans taken by HUL is high in 2009 which is indicated by high debt to total source ratio and this is why its ICR ratio gone up as compared to previous year (as compared to ICR in 2007). It has increased its loan as it currently operating the business through loan money. Debt to equity ratio was between 0.02 to 0.06 for previous 3 year as taken to comparision but all of sudden in current year it has increase to almost 3 times as compared to 0.06 in the year 2007 this means that the company has taken huge amount of loan to finance it business. Interest Coverage Ratio show that how Leverage the company is the higher the ratio the less leverage.

Management Efficency Ratios March 28

Dec 07

Dec 06

Dec 05

Inventory Turnover Ratio Debtor Turnover Ratio Asset Turnover Ratio

09 9.26 41.83 7.81

7.20 31.41 5.64

8.02 25.42 5.35

8.57 22.12 5.11

Management Efficency Ratio is also called as an Activity Ratio. Inventory turnover ratio show that how many times in a year have the company converted its Inventory into debtor. As the Inventory turnover ratio is high this year as compared to the previous 3 year this indicate the production and sales efficiency and show how fast the goods are moving in the market. As greater the inventory turnover ratio is in times more beneficial to the company. Debtor turnover ratio show how that how many times company can convert debtors into cash in a year.DTR has increased for all the four year taken in to comparison this indicate that company is getting the cash from debtor late in the year 2005 DTR was 22.12 it get increased to 41.83 in current financial year. It can be happened because company has increased its policy or Debtor are paying late to company this should be low as possible. Asset turnover ratio is net sales/net asset has ATR is increasing for the four year taken in to comparison indicating that net sales of the company is increasing year on year.

Profitability Ratios 29

Operating Margin (%) Gross Profit Margin (%) Net Profit Margin (%) Return On Net Worth (%) Return on Capital Employed (%) Earning Per Share Dividend Per Share CFO/PBIT(%)

March 09 14.46 13.50 12.05 121.34 121.06

Dec 07

Dec 06

Dec 05

14.95 15.86 12.58 122.97 138.72

14.74 15.80 14.94 68.14 65.89

14.14 15.03 12.42 61.09 67.66

11.47 7.50 13.35

8.12 9.00 13.78

8.41 6.00 13.50

6.40 5.00 12.87

PBIT as percentage of sales is moderately good and there has been significant change in it during last three years. There has not been any significant change in operating Margin in comparison with the last three years. The profit distributing ability of the firm is excellent with return on net worth (RONW) being around 121.34% and more for last two year. The profit generating ability similar to the profit distributing ability is pretty good with ROCE over 121.06% during the year 2009. ROCE in year 2007 has increased from the figure of 2006, perhaps because of the decrease in debt (change in capital structure) and increase in current liability (non interest bearing item). The face value of Equity Share of HUL is Rs. 1. Analyzing the EPS and DPS, which are profit distributing ability ratios, for HUL we can see that it has been generating more than 500% times profit for its shareholders over the years. The EPS increased over the years from Rs.6.40 in year 2005 to Rs. 11.47 in year 2009. It has been generous in distributing the profit in form of dividend with DPS Rs. 5.00 in year 2005 and Rs. 7.50 in year 2009.

Market Based Return March 30

Dec 07

Dec 06

Dec 05

Price to Earning Ratio Market Capitalization Price to book value

09 29.26 2.40 25.21

29.67 3.16 32.36

28.61 3.67 17.55

34.79 3.63 18.84

PE ratio for HUL is not so good with values over 30. In the year 2009, 2007 and 2006 and somewhat better with value around 30. It means an investor will get return around 1/30 times on his actual investment. If you multiply EPS & PER of 2009 you get Rs 336 and the current market share of Hul is Rs 272 this means that the company is undervalued. Market capitalization of HUL has increased after 2005, but there is a small decrease in the year 2007, and now it is 2.40 in current financial year it has decreased over here management should play a vital role to increase market capitalization.

5.5 Technical Analysis Moving Average Crossover Chart 31

This is the Moving Average Crossover Chart where,

- Price Line - 50 days moving average - 20 days moving average From the above Moving Average Crossover Chart we can see that in the month of January HUL stock was very volatile we cannot predict what is going to happen because price line is not able to cut 20 days moving average nor it is able to cut 50 days moving average from down or from up as it can be see from the chart that at the end of January price line has cut 20 days moving average from down so price has raise little bit but in march 20 days moving average has cut 50 days moving average from up this is the clear indication that price is going to fall and this is the time to sell the stock and we can see that in march price has gone down to the low as compared from January to june and for 3 month (march, april, may) price line and 20 days moving average was below 50 days moving average so price was low for that period but in the start of june price line and 20 days moving average has cut 50 days moving average from down so this is clear indication that price is going to go up and this is the right time to buy the stock.

MACD Chart

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This is MACD Chart

- Price Line - 9 days signal line - MACD line Moving Average Convergence Divergence chart means that when as MACD falls below the signal line, it is a bearish signal. When the MACD rises above the signal line, the indicator gives a bullish signal. From the above MACD chart we can make out that in the month of January MACD was above the signal line that means the price will also go up and till end of February the stock price that was indicated in the chart is more or less up. At the start of march MACD line has touch signal line and then it has gone down this is a signal to come out if you have a stock because the price is going to go down and till the end of march MACD was below the signal line in April it has try to cut signal line but it was not able to cut it so it is advice not to enter in this market we need to wait. As seen from the chart that at the start of June MACD line has cut signal line and gone up so stock price has also gone up and till now it is showing upward trend this is a good time to enter in the market.

Recommended to Hold 33

By going through Technical chart i.e. the Moving Average Crossover Chart and MACD chart of HUL it clearly state that the stock price is going to go up and this time you need to hold the stock or if you don’t have the stock right time to invest in the stock. You can book your profit if you are and investor or a trader i.e if you are a short term player or a long term player you can book your profit.

6.1 Dabur India 34

Dabur was started as a small pharmacy by Dr. S.K Burman. After more than 120 years, Dabur is a renowned brand in India and known for its trustworthiness more than anything else.Dabur, the fourth largest FMCG company of India, has recorded a 27.63 per cent surge in its consolidated net profit at Rs 105.3 crore for the fourth quarter ended March 31, 2009, as compared to Rs 82.5 crore in the same period a year ago. DIL operates under three categories, Consumer Care Division, Consumer Health Care division, and Dabur Food. In July 2007 Dabur Food became the separate identity, 2008). Dabur went through many structural and strategic changes to maintain its market strength. During the early 1900’s Dabur emerge as the first company to provide scientifically tested health care product. After setting up of R&D and automation of manufacturing Dabur achieved significant growth. Dabur Amla hair oil and Dabur Chyawanprash launch gave the company an opportunity to expand the business. To match with the changing time Dabur computerised its operation (Capitaline, 2008). Dabur consists of large array of products and it had to maintain the operational efficiency. To make sure it adjusted to the business environment it became public limited company in 1986 followed by diversification in Spain in 1992 (Vakhariya, 2004-2009). Dabur further divided its business into three separate groups: • • •

Health Care Products Division Family Products Division Dabur Ayurvedic Specialties Limited (Capitaline, 2008)

Successful implementation of procedure, and adapt with the changing time and maintaining its essence Dabur achieved its highest ever sales figure of Rs 1166.5 crores in 2000-01.

As FMCG sector was struggling with the slow growth in the Indian economy, Dabur decided to take numerous strategic initiatives, reorganize operations and improve on its brand architecture beginning 2002. It decided to concentrate its marketing efforts on 35

Dabur, Vatika, Amla, Real and Hajmola to strengthen their brand equity, create differentiation and emerge as a pure FMCG player recognized as an herbal brand. This was chosen after a study with Accenture, which revealed that Dabur was mainly perceived as an Herbal brand and connected more with the age group above 35 (Naukrihub, 2007). Large retailers were fighting for their market share in this lucrative FMCG sector. Apart from HUL, P&G, Marico and Himalaya, ITC was also posing a challenge. Because of the large number of products, supply chain was became complex.

Management Structure Dabur India's Fast Moving Consumer Goods (FMCG) Company. It is present in Home & Personal Care & Food categories. 36

Board Chairman

Anand Burman

Vice Chairman

Amit Burman

Executive Director

Pradip Burman

Additional Director

Mohit Burman

Director

P D Narang Sunil Duggal R C Bhargava P N Vijay S Narayan Albert Wiseman Paterson Analjit Singh

Company Secretary

Ashok Kumar Jain

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Share holding pattern 6%

9% 14% 1% Foreign Institutions Non Promoter Promoters Public & other

70%

Listing Details of Equity Shares Name of the Stock Exchange Bombay Stock Exchange Limited National Stock Exchange of India Limited

Stock Code 500096 DABUR

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6.2 Products of Dabur Home & Personal Care Hairoil  Vatika  Amla  Sarso

Skin Care  Vatika fairness  Gulabari  Olive oil  Dabur lal tel

Shampoo  Vatika heena conditioning  Anmol-natural shine  silky Oral Care  Babool  Meswak  promise  Binaca

Home Care  Odomos  Odonil  Sanifresh  Odopic Foods Digestive  Hajmola range  Hingoli  Pudin hara

Health Supplements  Chyawanprash  Dabur Honey  Glucose

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6.3 Distribution Network In 2001, Dabur decided to tackle its extended supply chain of over 30 factories, six key warehouses, and 52 stocking points distributing over 1,000 SKUs to 10,000 stockists countrywide. The company needed a system to accurately control distribution and sales forecasting to reduce inventory in the pipeline. Dabur went ahead and built a system using Visual Basic and ASP with SQL Server 2000 as the database. It decided not to use a packaged SCM solution due to the high cost and relative lack of complications in its supply chain.

The initiative An in-house developed, easy-to-use, Intranet based data-warehouse displays as-of-yesterday sales, stock, receivables, banking, and other MIS. Over 5,000 ASP pages meet almost all reporting requirements and make this a single source of MIS for all levels of decision makers. This success paved the ground for the company's supply chain initiative. Fifty-five Ku Band TDMA VSATs were used to link primary distributors to the system. Factories were hooked up using PAMA (Permanent Assigned Multiple Access) VSATs. At some locations VPNs had to be used because it was not possible to set up a dish. The zonal offices in Mumbai were hooked up in a similar manner. The hardware is mostly owned by the primary CFA (Carry and Forward Agent) except for the networking equipment, which is owned by Dabur. In the case of the secondary systems, stockists wholly own the hardware. The primary rollout began in April 2001 and took 16 months. The first six months were used to create a business model common to all divisions (family products, healthcare, ayurvedic products, and pharmaceuticals), and testing and piloting the same.

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The Innovation The integrated primary and secondary system has a number of unique features. The features like tight integration of schemes, stockists credit limit control, automated banking of cheques, and online cheque reconciliation have obvious advantages in the primary distribution. These are basically extensions to the MFG/PRO ERP system and not core customizations. Dabur's stockists supply to 1.5 million retailers. Seventy percent of the sales are accounted for by the top 500 stockists. The incorporation of these top stockists into its supply chain is a first for any FMCG company in India. The average sale of each stockist and the current stock are the two parameters. A 'My Page' allows the stockist to see the 'as-of-yesterday' details pertaining to the in-transit shipments, transporter details, back-orders, account statement, cheque status, credit notes, and claim settlements. Details are collected from stockists on a weekly basis. In case of primary distribution points, an incremental backup is sent to the central location when the CFA closes operations for the day. These are computed at night in a process called ‘cubing’. And when managers come into office in the morning the information is ready for them. The integrated system allows each Area Manager to plan for the month's sales forecasts, stockists performance, and sales officers' performance. The integration allows better control on pipelines in primaries and secondaries, brings down inventories, and offers better control on production and sales against a confirmed forecast. “The company has added an SMS interface that lets authorized phones query the system for aspects like stock status, credit limits, current outstanding and division-wide sales. An control list of mobile phone numbers is used to restrict access to the system. Salespeople can get responses to their queries in a minute with this system," said Gopal Shukla, Chief Information Officer, Dabur India Limited. 41

6.4 Fundamental Analysis Liquidity & Leverage Ratios

Current Ratio Quick ratio Total Debt/Equity Interest Coverage

March 09 1.19 0.99 0.19 38.34

March 08 0.91 0.58 0.03 46.79

March 07 0.97 0.63 0.05 140.69

March 06 0.82 0.52 0.05 70.12

Current Ratio of dabur for last 3 year is near to 1 and for this financial year it is more then 1 this indicate that the company is in good position as Current Ratio standard for FMCG industry is 1:1.There is less difference between CR and LR which indicates that the current asset of Dabur consists of less amount of inventory. Value of sundry debtors is quite high. The liquidity ratios have increase from previous year which shows that dabur has increase its liquidity further. Debt/Equity ratio means the ratio of finance coming from Debts compared to shareholders. A ratio exceeding 1 may be cause for concern. As it can be seen that the Debt/Equity ratio is near to 0.03 & 0.05 for the last three year this means that company operate the business mainly through owner funds but this financial year Debt/Equity ratio has increased from 0.03 to 0.19 this indicate that company has taken loan from market to finance the business with Debt/Equity ratio we can say that in this financial year 2009 company is investing Rs 1 from there pocket and 19 paisa from out side. As they have taken loan from market then there Interest coverage ratio has decreased. Interest Coverage Ratio show that how Leverage the company is the higher the ratio the less leverage

Management Efficiency Ratio 42

Inventory turnover Debtor turnover Asset turnover

March 09 10.94 22.63 4.84

March 08 12.52 25.94 4.67

March 07 11.11 39.70 4.50

March 06 11.65 35.30 4.24

Management Efficiency Ratio is also called as an Activity Ratio. Inventory turnover ratio show that how many times in a year have the company converted its Inventory into debtor. As the Inventory turnover ratio has decreased as compared to the previous 3 year this show how slow the goods are moving in the market of Dabur this also indicate the production and sales efficiency of the company. As greater the inventory turnover ratio is in times more beneficial to the company. But in case of Dabur Inventory Turnover Ratio has decreased this Is a cost of concern to the company they have the inventory but it is not turning in to debtor. Debtor turnover ratio show how that how many times company can convert debtors into cash in a year.DTR has decreased as compared to the previous 3 year which is good on behalf of the company because they are recovering money faster from debtor. Asset turnover ratio is net sales/net asset has ATR is increasing marginally for all the 4 year this show that company net sales is increasing year on year which is good from company point of view.

Profitability Ratios 43

Operating Margin (%) Gross Profit Margin (%) Net Profit Margin (%) Return On Net Worth (%) Return on Capital Employed (%) Earning Per Share Dividend Per Share CFO/PBIT(%)

March 09 18.33 17.19 15.44 51.20 47.98

March 08 18.60 17.37 15.06 61.58 67.51

March 07 17.45 17.49 14.41 62.52 66.07

March 06 17.90 17.74 14.04 42.22 46.69

4.32 1.75 17.11

3.67 1.50 17.29

2.92 1.75 16.16

3.30 2.50 16.47

PBIT as percentage of sales is good and there has been significant change in it during last three years from 16.47 in 2006 it is 17.11 in 2009. There has been a significant change in operating Margin as compared to the last three years, In year 2009 it is 18.33% as compared to 2006 it was 17.90%. The profit distributing ability of the firm is not so good with return on net worth (RONW) being decreasing from 61.58%in year 2008 to 51.20% in year 2009. The profit generating ability similar to the profit distributing ability is not so good as fall in (RONM) there is a fall in (ROCE) it has reduce to 47.98% in year 2009 as compared to 67.51% in 2008. ROCE in year 2009 has decreased from the figure of 2008, perhaps because of the increased in debt (change in capital structure) and decreased in current liability (non interest bearing item). The face value of Equity Share of Dabur is Rs. 1. Analyzing the EPS and DPS, which are profit distributing ability ratios. The EPS increased over the years from Rs.3.30 in year 2006 to Rs. 4.32 in year 2009. It has been not so generous in distributing the profit in form of dividend with DPS Rs. 2.50 in year 2006 and Rs. 1.75 in year 2009.

Market Based Return 44

Price Earning Ratio Market Capitalization Price to book value

March 09 24.55 3.52 11.57

March 08 32.23 4.48 17.99

March 07 34.91 5.00 20.33

March 06 40.64 5.19 15.87

PER ratio for Dabur is not so good with values over 30 In the year 2006, 2007 and 2008. But for this financial year it is 24.55 that means it is decreasing the PER should be as low as possible. This means that the market is valuing the company 24.55 times then its EPS if you multiply EPS & PER for 2009 you get Rs 106 and the current market share of Dabur is Rs 124 this means that the company is overvalued. Market capitalization of Dabur is decreasing from 2006 which was 5.19 and for 2009 it is 3.52 every year it is decreasing Management need to look forward to increased their market capitalization.

6.5 Technical Analysis 45

Moving Average Crossover Chart

This is the Moving Average Crossover Chart where, - Price Line

- 50 days moving average - 20 days moving average From the above Moving Average Crossover Chart we can see that in the month of January to June Dabur price line has shown upward trend as the price was moving along with 20 days moving average and 50 days moving average. In the mid of march 20 days moving average is suppose to cut 50 days moving average but it does not happen if suppose it has cut the 50 days moving average then the price should have fall. As from April the gap between 20 days moving average and 50 days moving average goes on increasing so from April to June price of Dabur stock has also gone up it can be seen that the stock price of Dabur is going to raise further and it is seems that it will go further up so if you have the stock you hold and if you don’t you buy it.

MACD Chart

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This is MACD Chart

- Price Line - 50 days moving average - 20 days moving average Moving Average Convergence Divergence chart means that when as MACD falls below the signal line, it is a bearish signal. When the MACD rises above the signal line, the indicator gives a bullish signal. When the security price diverge from the MACD. It signals the end of the current trend. From the above MACD chart we can make out that from January to June MACD was above the signal line that means the price will also go up and the price line has gone up if you see the price line chart In the start of March MACD was almost equal to signal line at this point we can’t predict any think because it may go up or also it can come down but as in the mid of march MACD goes on increasing and gone above the signal line the price goes on increasing and the price is showing the upward trend.

Recommended to Hold 47

By going through the Technical chart i.e. Moving Average Crossover Chart and MACD chart of Dabur India it clearly state that the stock price is going to go up and this time you need to hold the stock or if you don’t have the stock right time to invest in the stock with the point of view of trader if you are an investor this stock would not be the right decision to make as in the Moving Average Crossover Chart 20 days moving average line is bit closer to 50 days moving average line and at any time 20 days moving average may cut 50 days moving average from up so the stock price will fall and even stock price is showing a little bit downward trend it would be not safe for a long term investor to enter in this stock but trader can book profit.

7.1 Sectoral opportunities 48

According to the Ministry of Food Processing, with 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment to raise food processing levels by 8-10 per cent. In the personal care segment, the lower penetration rates also presents an untapped potential. Key sectoral opportunities are mentioned below: • Staple: branded and unbranded: While the expenditure on massbased, high volume, low margin basic foods such as wheat, wheat flour and homogenised milk is expected to increase substantially with the rise in population, there is also a market for branded staples is also expected to emerge. Investment in branded staples is likely to rise with the popularity of branded rice and flour among urban population. • Dairy based products: India is the largest milk producer in the world, yet only 15 per cent of the milk is processed. The US$ 2.4 billion organized dairy industry requires huge investment for conversion and growth. Investment opportunities exist in valueadded products like desserts, puddings etc. The organized liquid milk business is in its infancy and also has large long-term growth potential. • Packaged food: Only about 8-10 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry. Currently, the semi processed and ready to eat packaged food segment has a size of over US$ 70 billion and is growing at 15 per cent per annum. Growth of dual income households, where both spouses are earning, has given rise to demand for instant foods, especially in urban areas. Increased health consciousness and abundant production of quality soyabean also indicates a growing demand for soya food segment.

• Personal care and hygiene: The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates below 45 per cent. With rise in per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller 49

packs are also likely to drive potential up trading. In the personal care segment, according to forecasts made by the Centre for Industrial and Economic Research (CIER), detergent demand is likely to rise to 4,180, 000 metric tonnes by 2011-12 with an annual growth rate of 7 per cent between 2006 and 2012. The demand for toilet soap is expected to grow at an annual rate of 4 per cent between 2006-12 to 870,000 metric tones by 2011-12. Rapid urbanization is expected to propel the demand for cosmetics to 100,000 metric tonnes by 2011-12, with an annual growth rate of 10 per cent. • Beverages: The US$ 2 billion Indian tea market has been growing at 1.5 to 2 per cent annually and is likely to see a further rise as Indian consumers convert from loose tea to branded tea products. In the aerated drinks segment, the per capita consumption of soft drinks in India is 6 bottles compared to Pakistan's 17 bottles, Sri Lanka's 21, Thailand's 73, the Philippines 173 and Mexico's 605. The demand for soft drink in India is expected to grow at an annual rate of 10 per cent per annum between 2006-12 with demand at 805 million cases by 2011-12. Per capita coffee consumption in India is being promoted by the coffee chains and by the emergence of instant cold coffee. According to CIER, demand for coffee is expected to rise to 535,000 metric tonnes by 2012, with an annual growth rate of 5 per cent between 2006-12. • Edible oil: The demand for edible oil in India, according to CIER, is expected to rise to 21 million tonnes by 2011-12 with an annual growth rate of 7 per cent per annum. • Confectionary: The explosion of the young age population in India will trigger a spurt in confectionary products. In the long run the industry is slated to grow at 8 to 10 per cent annually to 870,000 metric tonnes by 2011-12.

8.1 Policy issues Tax reforms 50

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 rationalized 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: 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 made imported product cheaper as compared to indigenously manufactured products, due to irrational domestic tax structure. For instance, goods manufactured in India suffer from cascading effects of taxes on inputs as additional cost compared to imports.

The cascading effect of sales tax and local levies on inputs used in domestic manufacture should be eliminated by providing either MODVAT credit or by introducing notional VAT covering both central and state taxes on an urgent basis. 51

Moreover, MRP-based excise duty is levied on a large number of FMCG products. Countervailing duty on the same product when imported is charged on CIF value. The MRP based assessable value for excise duty does not allow abatement for post manufacturing costs such as advertising and selling expenses whereas CIF value considered for the purpose of import duty does not include costs of these elements incurred subsequently by importers. This differential basis creates unfair competition as tax incidence on domestic manufacture could be considerably higher in case of those products which incur significant marketing and distribution cost. There is a need to bring parity in tax incidence between domestic manufacture and imports by including all such elements of post manufacturing costs while deciding the abatement percentage of MRP based duty. 3) Inverted Duty structure for selected inputs Duty on certain raw materials is higher or the same as compared to finished products in which these materials are used. Such raw materials include oils and chemicals like Soda ash, caustic soda and LAB. In addition to customs duty, raw materials are also subject to SAD/sales tax and octroi and therefore total tax incidence and cost of indigenous manufacture goes up. The import duty on raw materials needs to be rationalized so that it does not exceed 60 to 70 per cent of the duty on finished goods. 4) Need for rationalization of taxes on processed foods Processed food industry, with its vertical integration with the agricultural sector has significant potential for employment generation and economic growth. The existing tax structure and its high overall incidence, however, has been hampering the growth of the processed industry. The increase in excise duty in last year’s budget from eight per cent to 16 per cent has adversely affected the growth of processed foods industry. It is recommended that marginal rate of excise duty on processed foods should not be more than eight per cent and the sales tax should be levied at four per cent. 52

5) Cascading effect of Special Excise Duty The special excise duty introduced last year is not "cenvatable’’ except in the case of selected products. Most FMCG products covered by tariff such as shampoos, ice creams and cosmetics are subject to SED. This tariff also contains very wide definition of the term "manufacture’’ which includes labeling, relabeling or conversion of large packs into small packs. The levy of SED on such products therefore leads to double taxation when goods are labeled or converted into small packs after manufacture. It is recommended that SED should be made "cenvatable’’; alternatively the term "manufacture’’ needs modification , atleast for the purpose of SED by excluding labeling, relabeling or conversion into small packs.

FDI Policy Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). 24 per cent foreign equity is permitted in the smallscale sector. Temporary approvals for imports for test marketing can also be obtained from the Director General of Foreign Trade. The evolution of a more liberal FDI policy environment in India is clearly supported by the successful operation of some of the global majors like PepsiCo in India.

9.1 Distinguishing features of Indian FMCG Business FMCG companies sell their products directly to consumers. Major features that distinguish this sector from the others include the following: 53

1. Design and Manufacturing 1. Low Capital Intensity - Most product categories in FMCG

require relatively minor investment in plan and machinery and other fixed assets. Also, the business has low working capital intensity as bulk of sales from manufacturing take place on a cash basis. 2. Technology - Basic technology for manufacturing is easily available. Also, technology for most products has been fairly stable. Modifications and improvements rarely change the basic process. 3. Third-party Manufacturing - Manufacturing of products by third party vendors is quite common. Benefits associated with third party manufacturing include (1) flexibility in production and inventory planning; (2) flexibility in controlling labor costs; and (3) logistics - sometimes its essential to get certain products manufactured near the market. 2. Marketing and Distribution Marketing function is sacrosanct in case of FMCG companies. Major features of the marketing function include the following: 1. High Initial Launch Cost - New products require a large front-

ended investment in product development, market research, test marketing and launch. Creating awareness and develop franchise for a new brand requires enormous initial expenditure on launch advertisements, free samples and product promotions. Launch costs are as high as 50-100% of revenue in the first year. For established brands, advertisement expenditure varies from 5 - 12% depending on the categories. 2. Limited Mass Media Options - The challenge associated with the launch and/or brand-building initiatives is that few no mass media options. TV reaches 67% of urban consumers and 35% of rural consumers. Alternatives like wall paintings, theatres, video vehicles, special packaging and consumer promotions become an expensive but required activity associated with a successful FMCG. 3. Huge Distribution Network - India is home to six million retail outlets, including 2 million in 5,160 towns and four million in 54

627,000 villages. Super markets virtually do not exist in India. This makes logistics particularly for new players extremely difficult. It also makes new product launches difficult since retailers are reluctant to allocate resources and time to slow moving products. Critical factors for success are the ability to build, develop, and maintain a robust distribution network 3. Competition 1. Significant Presence of Unorganized Sector - Factors that enable small, unorganized players with local presence to flourish include the following: 2. Basic technology for most products is fairly simple and easily available. 3. The small-scale sector in India enjoys exemption/ lower rates of excise duty, sales tax etc. This makes them more price competitive vis-à-vis the organized sector. 4. A highly scattered market and poor transport infrastructure limits the ability of MNCs and national players to reach out to remote rural areas and small towns. 5. Low brand awareness enables local players to market their spurious look-alike brands. 6. Lower overheads due to limited geography, family management, focused product lines and minimal expenditure on marketing.

10.1 Other suggestions 1. A joint industry –government initiative for building a "Made in India’’ brand for FMCG products is required. With many multinationals moving into the Indian FMCG market, a concerted marketing strategy which creates strong brands will be needed for Indian FMCGs to gain recognition in the market. 2. Better packaging materials are necessary as a large number of FMCG products are perishable . The government must facilitate 55

more R&D in packaging materials as this will help in cutting wastes and costs in the sector. The possibility of a longer shelf life will encourage production of goods of higher value addition by companies in the sector. 3. While import of most items has been allowed, the government is not geared to prevent import of spurious products. In other countries, FMCG goods have to be cleared by regulatory authorities before they are allowed to enter domestic stores. This is not happening in India and the government needs to undertake a comprehensive crackdown on these products. 4. The small-scale reservation policy should be reviewed as it hampers the growth of this sector. Many reserved products, including several FMCG products can be freely imported. Under the current policy, not only are Indian producers of many FMCG products restricted from attaining economies of scale, they also have to compete against import that do not face constraints on small scale reservations.

11.1 Salient feature The FMCG sector is a key component of India’s GDP and is a significant direct and indirect employer. It is the fourth largest sector in the economy and is responsible for five per cent of total factory employment in the country. The sector also creates employment for three million people in downstream activities, much of which is disbursed in small towns and rural India. Unlike the perception that the FMCG sector is a producer of luxury items targeted at the elite, in reality the sector meets the every day 56

needs of the masses, across the country. Low-priced products contribute the majority of the sales volume and lower income and lower middle income groups account for over 60 per cent of the sector’s sales. Moreover, rural markets account for 56 per cent of total domestic FMCG demand and FMCG outlets reach more villages than any other basic facility such as primary schools or bus facilities. The FMCG sector has several other salient features. It has strong links with agriculture and 71 per cent of sales come from agro-based products; it is a significant value creator with a market capitalisation second only to the IT sector and it is a key contributor to the exchequer. In 1998-99, it accounted for eight per cent of total corporate tax; six per cent of central excise revenue and seven per cent of state tax revenues.

12.1 Conclusion The FMCG sector has traditionally grown at a very fast rate and has generally out performed the rest of the industry. Over the last one year, however the rate of growth has slowed down and the sector has recorded sales growth of just five per cent in the last four quarters. The outlook in the short term does not appear to be very positive for the sector. Rural demand is on the decline and the Centre for Monitoring Indian Economy (CMIE) has already downscaled its projection for agriculture growth in the current fiscal. Poor monsoon in some states, too, is unlikely to help matters. Moreover, the general 57

slowdown in the economy is also likely to have an adverse impact on disposable income and purchasing power as a whole. The growth of imports constitutes another problem area and while so far imports in this sector have been confined to the premium segment, FMCG companies estimate they have already cornered a four to six per cent market share. The high burden of local taxes is another reason attributed for the slowdown in the industry At the same time, the long term outlook for revenue growth is positive. Give the large market and the requirement for continuous repurchase of these products, FMCG companies should continue to do well in the long run. Moreover, most of the companies are concentrating on cost reduction and supply chain management. This should yield positive results for them.

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