This Global/ Country Study and Report is prepared as the partial fulfillment for Forth Semester of degree Program of Masters of Business Administration curriculum of GUJARAT TECHNOLOGICAL UNIVERSITY. The topic of the project is “FMCG Industry in Netherland”.
Here, the project report on Netherland, we have tried our level best to Collect information from it and prepare this report as an error free report; We assured that all information is trusted: every effort has been made to offer the most authenticate position with accuracy.
During the whole project period we got a lot of knowledge and came to know about the reality of the mining industry of the country.
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The FMCG industry of Netherland
Upgrades on major mines in North Korea
The North Korea Mining Business Projects
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Foreign Company Mining Projects
The outlook for Inter Korean Mining Corporation
The Indian Mining Industry- Market Opportunities & Entry
Introduction of FMCG Industry
Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost . Examples include non-durable goods such as soft drinks, and grocery items. Though the absolute profit made on FMCG products is relatively small, they are generally sold in large quantities, and so the cumulative profit on such products can be substantial.
Fast-moving consumer electronics are a type of FMCG and are typically low priced generic or easily substitutable consumer electronics, including lower end mobile phones, MP3 players, game players, and digital cameras, which have a short usage life, typically a year or less, and as such are disposable. Cheap FMCG electronics are often retained even after immediate failure, as the purchaser rationalizes the decision to not return the goods on the basis that the goods were cheap to begin with, and that the cost of return relative to the low cost of purchase is high. Thus low-quality electronic FMCG goods can be highly profitable for the vendors.
The term FMCGs refers to those retail goods that are generally replaced or fully used up over a short period of days, weeks, or months, and within one year. This contrasts with durable goods or major appliances such as kitchen appliances, which are generally replaced over a period of several years.
FMCG have a short shelf life, either as a result of high consumer demand or because the product deteriorates rapidly. Some FMCGs-such as meat, fruits and vegetables, dairy products, and baked goods-are highly perishable. Other goods such as alcohol, toiletries, pre-packaged foods, soft drinks, and cleaning products have high turnovers rates. An excellent example is a news papers-every day’s newspaper carries different content, making one useless just one day later, necessitating a new purchase every day.
The following are the main characteristics of FMCGs:
From the consumers’ perspective:
Low involvement (little or no effort to choose the item – products with strong brand loyalty are exceptions to this rule)
From the marketers’ angle:
Low contribution margins
Extensive distribution networks
High stock turnover
Introduction of FMCG Industry in Netherland
The Fast Moving Consumer Goods (FMCG) market in Europe is highly competitive. This market is quite saturated, with thight margins and difficult to predict consumer behavior. The battle to win consumers is forcing companies to give highest priority to cost reduction, risk management and logistics efficiency. Moreover, the recession has changed the behaviour of almost all consumers. Instead of impulsive shopping, price value trade-offs and extensive search for value are nowadays leading.
In this respect, you can imagine that e-tailing and e-commerce are becoming more and more trending topics. Online presence of companies has improved enormously in recent years. Every company which delivers their products to end-consumers has its own webshop. MediaMarkt, the electronica retail chain with a franchise-formula, part of the German METRO Group, was one of the last large retail chains which hasn’t a webshop untill now. Their invisibility on the web was due to regional price differences of their products. Up to now, because even the MediaMarkt now opened its webshop. Other examples are the British company, The Body Shop, which started last November with their webshop in the Netherlands.
It’s important to take care of reinforcement between online and offline shop, instead of the other way around. On the other hand, companies with a pure online focus, like bol.com and wehkamp.nl, are reaching the highest turnover levels.
A recent research of JP Morgan reveals that the worldwide growth of e-commerce in 2011 will be 19%. In 2012 this growth will be more than 20%. The online sales in the US and Europe will grow at a stable level, but Asia will emerge as a growing e-commerce market.
Regarding e-commerce in Europe, the main importance and presence in this segment is coming from West-Europe. In this are, the market is expected to grow with 11% per year in the coming four years. The turnover from online shopping in Western Europe in 2009 was equal to â‚¬ 68bln. The most popular products to buy online are books, event-tickets and clothing.
Recent transactions in the e-commerce market support the above statement. In 2007 Sanoma acquired mrticket.nl, an online ticketing agency. In 2010, the Italian company Arnoldo Mondadori Editore acquired Mondolibri, active in the book segment. Recently, Sanoma Digital acquired (a part of) No Search, an internet marketing company, active in the development of several fashion portals like Fashionchick.nl. As mentioned earlier, online fashion is a high growth segment in the e-commerce market. Based on recent transactions in the e-commerce market, the estimated EBITDA multiple for mid-market companies is on average around 6-8 times EBITDA.
Despite the international character of the European e-commerce market, only 7% of all European consumers buy their products in webshops in other EU-countries. Probably, this number will rise in coming years. Looking at the Dutch e-commerce market, you’ll see that the Netherlands are rather active in this online segment, because 71% of all consumers buy products online. An important reason for the growth of the e-commerce market is the trust that consumers have in the security regarding payments. Just 7% of the Dutch population is worried about this financial security. In the Netherlands, since several years an online secure payment system exists, callled iDeal, which means that customers can easily connect with their bank to make safe online payments. This type of payment is an important succes factor in the e-commerce market.
To further realise growth in the e-commerce market in the future, it will be important to develop a cross-channel strategy in the coming years. Consumers will buy offline as well as online and mobile commerce is a new channel, which will develop in the near future. In the Netherlands 69% of the consumers buy products via 2 or more different channels, in the US this percentage is even higher, 78%. In general, for the retail sector, branding and customer loyalty are important factors for success. Nowadays, social media is used to reinforce branding and to promote several in-store loyalty programs as well as customer loyalty programs. In the near future, social media could be used as well for sharing online purchasing activities. Recently, wehkamp.nl has invested in social shopping applications in their webshop, so that customers can shop online together with friends, or could start a private shopping session.
Other key factors, which are important to realise the predicted growth in the future are the focus on expansion in other countries as well as a variety of segments in different webshops. Furthermore, the e-commerce segment is of interest to several private equity clubs. It is expected that this will lead to consolidation in the market, which will lead to larger e-commerce companies and a stronger competitiveness in the market.
Figures released by Statistics Netherlands show that retail turnover was nearly 1 percent higher in August 2012 than in the same month last year. Prices rose by 1.9 percent, while the volume of sales fell by 1 percent.
The favourable shopping-day pattern had a positive effect on turnover in August this year. After correction for this effect, turnover is nearly 2 percent lower, and the volume is around 4 percent lower.
Compared with August 2011, turnover in non-food shops was nearly 5 percent lower. The decrease in turnover in the first eight months of 2012 is now just under 4 percent. The largest drop in turnover was reported by shops selling home furnishings; their turnover was 13 percent down on August last year. Textile supermarkets and clothes shops, too, experienced large decreases in turnover. Chemists were the only shops that saw turnover increase.
For shops selling food, drink and tobacco turnover rose by 7 percent. After adjustment for the effects of shopping-days, however, this drops to only 2 percent. Prices in these shops rose by 1.5 percent, while the increase in volume was limited.
Turnover for mail order companies and internet retailers rose by 9 percent, for petrol stations it grew by nearly 4 percent.
FMCG companies/Retail stores in Netherland
HEMA (originally an acronym for Hollandsche Eenheidsprijzen Maatschappij Amsterdam, “Dutch Standard Prices Company Amsterdam”) is a Dutch discount retail chain that started life as a dimestore. It was part of the Maxeda company until June 2007, when it was bought by Lion Capital LLP. The chain is characterized by relative low pricing of generic housewares, which are mostly made by and for the chain itself, often combined with original design.
The first HEMA opened in Amsterdam on 4 November 1926, set up by the Jewish owners of the luxury department store De Bijenkorf. Originally, as a price-point retailer at prime locations in town centers, goods were sold using standard prices (hence its name), with everything having a Standard price of 10, 25 or 50 cents, and later also 75 and 100 cents. The relative economic boom in the Netherlands in the period 1900-1930 benefited HEMA.
Since the 1990s, HEMA has also expanded into neighboring countries.
HEMA branches by country per 2011:
Germany: 10 (in 2013)
Luxembourg: 4 (in 2013)
France: 16 (in 2013)
De Bijenkorf (literally, “the beehive”) is a chain of high-end department stores in the Netherlands with its flagship store on Dam Square, Amsterdam. It was founded by Simon Philip Goudsmit (1845-1889).
De Bijenkorf flagship store on Dam Square in Amsterdam
De Bijenkorf was founded in 1870 by Simon Philip Goudsmit (1845-1889), starting as a small haberdashery shop at 132 Nieuwendijk, one of Amsterdam’s oldest streets. Initially limited to yarn and ribbons and employing a staff of four, the stock expanded gradually. After the death of Goudsmit in 1889, Goudsmit’s widow expanded the business with the help of a cousin, Arthur Isaac, and her son Alfred, eventually purchasing adjacent buildings. In 1909, these connecting shops were replaced by a new building.
That same year, a temporary building was erected on the site of the demolished Beurs van Zocher, and construction of a new store commenced beside it.
De Bijenkorf in The Hague
Rotterdam store, 1930-1940
A third store opened in Rotterdam in 1930, designed by Willem Dudok. 700,000 people attended the ceremony. The store was heavily damaged in the Rotterdam Blitz of 1940. The intact part of the store remained open to business until 1957, but was cleared in 1960 to build the Rotterdam Metro. A new store was designed by Hungarian-American architect Marcel Breuer (1902-1981).
As of 2012, de Bijenkorf has 12 stores nationwide. The oldest and largest branches, situated in Amsterdam, The Hague and Rotterdam have retail space ranging between 15,000 and 21,000 square meters. Smaller stores (7,500-10,000 m² of retail space) can be found in Amstelveen, Arnhem, Eindhoven, Enschede, Utrecht and Maastricht. The branches in Breda, Den Bosch and Groningen specialize in fashion (3,000 m² retail space).
Metz & Co
Metz & Co is a department store in Amsterdam, The Netherlands, founded in 1740 by Mozes Samuels who sold his company to his three sons in 1794. Metz & Co. has the right to display the Dutch royal coat of arms with the legend ‘By Royal Warrant Purveyor to the Royal Household’ since 1815. To celebrate its 150th anniversary in 1890 the store moved to a new location on the Leidsestraat, where the company is still located. One of the first designers was Paul Bromberg (1893-1949), he became famous as a author and promotor of Decorative Arts and Interior Design. The distinctive cupola on the store’s roof was built in the 1930s and designed by Dutch artist Gerrit T. Rietveld. Metz & Co celebrated its 250th anniversary in 1990 by launching its own fragrance. The roof of the store doubles as an exclusive location for wedding ceremonies.
Introduction of FMCG industry in India
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.
FMCG companies operate in a highly competitive and fast-changing environment. In order to stay ahead, they need to regularly renew their product portfolio to suit the ever changing needs and preferences of their customers. ValueNotes has executed in-depth research in many segments of the FMCG industry and can help you keep your finger on the pulse of your existing consumers; identify new markets for your products; track the activities of your competitors; and monitor industry trends.
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.
FMCG Category and products
Household Care 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).
Food and Health beverages; soft drinks; staples/cereals;
Beverages 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.
INDIA COMPETITIVENESS AND COMPARISON WITH THE WORLD
India has a diverse agro-climatic condition due to which there exists
a wide-ranging and large raw material base suitable for food
processing industries. India is the largest producer of livestock, milk,
sugarcane, coconut, spices and cashew and is the second largest
producer of rice, wheat and fruits & vegetables.
India also has an ample supply of caustic soda and soda ash, the raw
materials in the production of soaps and detergents – India
produced 1.6 million tonnes of caustic soda in 2003-04. Tata
Chemicals, one of the largest producers of synthetic soda ash in the
world is located in India. The availability of these raw materials gives
India the locational advantage.
Labour cost comparison
Apart from the advantage in terms of ample raw material availability,
existence of low-cost labour force also works in favour of India.
Labour cost in India is amongst the lowest in Asian countries. Easy
raw material availability and low labour costs have resulted in a lower
cost of production. Many multi-nationals have set up large low cost
production bases in India to outsource for domestic as well as
Leveraging the cost advantage
Global major, Unilever, sources a major portion of its product
requirements from its Indian subsidiary, HLL. In 2003-04, Unilever
outsourced around US$ 218 million of home and personal care
along with food products to leverage on the cost arbitrage
Opportunities with the West.
To take another case, Procter & Gamble (P&G) outsourced the
manufacture of Vicks Vaporub to contract manufacturers in
Hyderabad, India. This enables P&G to continue exporting Vicks
Vaporub to Australia, Japan and other Asian countries, but at
more competitive rates, whilst maintaining its high quality and cost
Presence across value chain
Indian firms also have a presence across the entire value chain of the
FMCG industry from supply of raw material to final processed and
packaged goods, both in the personal care products and in the food
processing sector. For instance, Indian firm Amul’s product portfolio
includes supply of milk as well as the supply of processed dairy
products like cheese and butter. This makes the firms located in India
more cost competitive.
FAST MOVING CONSUMER GOODS POLICY
India has enacted policies aimed at attaining international
competitiveness through lifting of the quantitative restrictions,
reduced excise duties, automatic foreign investment and food laws
resulting in an environment that fosters growth. 100 per cent export
oriented units can be set up by government approval and use of
foreign brand names is now freely permitted.
TRENDS AND PLAYERS
The Indian FMCG sector is the fourth largest sector in the economy
and creates employment for three million people in downstream
activities. Within the FMCG sector, the Indian food processing
industry represented 6.3 per cent of GDP and accounted for 13 per
cent of the country’s exports in 2003-04.
A distinct feature of the FMCG industry is the presence of most
global players through their subsidiaries (HLL, P&G, Nestle), which
ensures new product launches in the Indian market from the
Critical operating rules in Indian FMCG sector
â€¢ Heavy launch costs on new products on launch
advertisements, free samples and product promotions.
â€¢ Majority of the product classes require very low investment
in fixed assets
â€¢ Existence of contract manufacturing
â€¢ Marketing assumes a significant place in the brand building
â€¢ Extensive distribution networks and logistics are key to
achieving a high level of penetration in both the urban
and rural markets
â€¢ Factors like low entry barriers in terms of low capital
investment, fiscal incentives from government and low brand
awareness in rural areas have led to the mushrooming of
the unorganised sector
â€¢ Providing good price points is the key to success
THE TOP 10 COMPANIES IN FMCG SECTOR
Hindustan Unilever Ltd.
ITC (Indian Tobacco Company)
Asian Paints (India)
Procter & Gamble Hygiene and Health Care
Approximately 80 percent of the Dutch food retail outlets are full service supermarkets, operating on floor space between 500 and 1,500 square meters located downtown and in residential
areas. The remaining 20 percent includes superstores located in industrial parks, convenience stores near human traffic and department stores. In Belgium, full service supermarkets, like Colruyt and AD Delhaize, account for an estimated 75 percent of the market. The share of superstores and convenience stores in Belgium is higher than in the Netherlands, an estimated 25%. In Luxembourg, full service supermarkets like Cactus, Alvo and Match dominate the market as well. In all three markets, independent food retail stores are increasingly leaving the
scene. On-going consolidation in the retail market, changing consumer demands and shrinking margins seem to drive this trend.
The top 3 biggest retailers in the Netherlands, Albert Heijn, C1000, and Jumbo  , have a market share of 56 percent. The market for discounters like Aldi and Lidl has stabilized around 15%. Also discounters like Bas van der Heijden, Dirk van den Heijden and Digros were able to maintain their share of the market. In Belgium, the leading 3 retailers have 75 percent of the market. The market share of the discounters in Belgium is about 40% where Colruyt saw its market share growing at the expense of Aldi and Lidl. Recent market share figures for Luxembourg were not available when writing the report.
Table 1: Market Shares of Leading Food Retailers in 2010
No. of Stores
Higher Prices For Food Products
The turnover of the Benelux food retail industry in 2009 was an estimated â‚¬52.7 billion (â‚¬31.1 billion in the Netherlands, â‚¬21.1 billion in Belgium and â‚¬0.5 billion in Luxembourg). For 2010 turnover is expected to increase by 1.5%. Reasons for this moderate growth:
Expected moderate increase of the unemployment rate
Limited economic growth
Consumers plan to spend more food euros at retail than foodservice
Due to the current economic situation the growth of value-added products has decreased at the expense of more basic products.
Table 2: Turnover Benelux food retail, past 5 years
â‚¬ 44.1 billion
â‚¬ 45.7 billion
â‚¬ 47.7 billion
â‚¬ 50.5 billion
â‚¬ 52,7 billion
The trend of higher prices for raw materials and therefore consumer products, as discussed in the previous Food Retail report, seems to have stopped. Benelux consumer prices rank among the cheapest within the EU-27.
Changing Consumer Needs
In addition to the fact that Benelux consumers are shedding retailer-loyalty, they shop at different times and locations. During lunch breaks, people buy their lunch and often the ingredients for that eveningâ€Ÿs meal. Small convenience stores, like “AH To Go” and “Delhaize shop â€žn go” are opened at locations near heavy traffic like train stations, schools, and shopping malls to satisfy these consumersâ€Ÿ needs.
The traditional neighborhood grocery stores are either going out of business, are taken over or are changing their product portfolio. They are expanding the grocery line of fresh and convenient prepared-foods with tailor-made sandwiches, filled tortillas and drinks to satisfy the consumersâ€Ÿ need for “food for now”. The ready-to-cook segment is also expanding.
Awareness of Health and Well-Being
Consumers are becoming more aware of and are more concerned about the effects food has on their health and well-being. There is a trend to a healthier lifestyle in Western countries. The following US industries have all benefitted from this trend: nuts (like pistachios, almonds, walnuts, etc.), fruits (like cranberries, pomegranates, berries, etc.), seafood (like salmon, halibut,
etc.). Consumers are more cautious about foodborne illnesses.
Consumers are looking for and finding more information on this topic; the media, including the Internet, TV and magazines, respond to this desire and feed into it. Food processors and retailers play a crucial role as well, as they develop and market food products (like juices from POMwonderfull, Healthy People, etc.) to create, anticipate and meet consumersâ€Ÿ needs.
Climate Change – Carbon Footprint Labeling
Last year the European Commission conducted a survey on mandatory Carbon Footprint Labeling (CFL). Popular support for CFLl by country, varied between 47% to 90% of all 27,000 Europeans that were interviewed. Seventy percent of the respondents in Belgium and Luxemburg were supportive of a mandatory label whereas this was only supported by half of the Dutch interviewees. The latter, on the other hand, were after the Finnish the most likely (28%) to prefer a voluntary labeling system.
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After the December 2009 U.N. Climate Change Conference in Copenhagen, the discussion on CFL got a new boost. Belgian federal Minister of Climate and Energy, Mr. Paul Magnette, stated that in addition to the price, the CO2 emission should also be mentioned on each product. This way, consumers become aware and see to what extent the products they buy influence global warming.
Carbon Footprint Labeling is not (yet) an issue in the Netherlands. The government hasnâ€Ÿt come out with a statement or position on CFL. It seems that all the individual stakeholders are waiting for the other to make the first move.
Within the EU-27, the U.K. and Sweden are taking a leading role in CFL. For more information on Sweden, see GAIN Report SW9016. The overall labeling requirements for the Benelux can be found in the following GAIN Reports: NL9020 and GAIN BE9004.
Advantages and Challenges of the Benelux Food Retail Market
Sector Strengths & Market Opportunities:
Sector Weaknesses and Competitive
Expected slight recovery of the economy in the
EU import regulation and tariffs. EU
Benelux is a promising prospect (expecially
enlargement has given and will give
compared to some other EU economies) for the
preferential access to products from
new member countries.
Affluent, open minded and curious consumers create
Discounters are the fastest growing
opportunities for new products.
segment in the Benelux retail market;
margins continue to be under pressure.
The region has an excellent infrastructure which
Competition is growing from non-food
offers great opportunities.
retail players like IKEA, HEMA, V&D and
Bijenkorf as they enter the food
Greater demand for healthy food products not or not
The industry is highly consolidated and
suffiently available on the local EU market; e.g.
therefore has a strong negotiating
seafood, tree nuts, (exotic) fruit, vegetables, juices,
position and good contacts.
Road Map For Market Entry
Success in introducing your product in the Benelux market depends mainly on knowledge of the market and building personal contact with knowledgeable and established importers. Prior to any export, invest in research that analyzes the Benelux food culture (concepts, flavor, price, requirements). Once the product has been chosen, be aware of fierce competition. There are tariff and non-tariff trade barriers that can complicate exporting to the Benelux. An importer knows the market, the trade barriers and the required documentation. The Office of Agricultural Affairs (OAA) offers guidelines on business practices and import regulations. For a complete overview of offered reports, see Section V of this report.
Supermarkets and Superstores
The vast majority of supermarkets and superstores buy foreign (specialty) products via specialized importers. This is especially the case for retail-ready consumer-oriented products like sauces, beverages and snack products. Convenience stores operate, in general, on a much smaller scale and therefore buy smaller quantities through wholesalers. Department stores work either
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