Tag: fmcg industry

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Jargons

Which are the Top FMCG Stocks in India?

Products that are sold quickly and at relatively low cost are known as fast-moving consumer goods (FMCG). Another name for such products is consumer packaged goods. FMCGs have a limited shelf life due to high consumer demand (such as for soft drinks and confections) or perishability (such as for meat, dairy products, and baked goods). The top three sectors of this business are Food & Beverages (19%), Healthcare (31%), and Household & Personal Care (50%), respectively. In this article, explore the top FMCG stocks in India!

An Overview of the FMCG Industry

India’s FMCG industry is the biggest in the world. It is estimated that the FMCG sector accounts for around 15% of India’s gross domestic product (GDP) and employs more than 1 crore people. Consumer electronics, food, personal care products, home goods, over-the-counter medications, and other items are all included in this industry. The FMCG industry is optimistic about at least 20% growth in 2023 after ‘exponential growth’ in 2022:

  • Favourable government policies, a growing rural market and young population, and the expansion of e-commerce platforms are some of the sector’s main development factors.
  • India has a middle-class population that is greater than the population of the USA, making it a country that no FMCG company can afford to ignore.  The FMCG market keeps expanding as more and more people begin to climb the economic ladder and the general public obtains access to the benefits of economic progress. 
  • More importantly, India’s population is getting more consumerist with growing disposable income. Government efforts to broaden financial inclusion and provide social safety nets have further contributed to this. 
  • The FMCG market in India is expected to increase at a CAGR of 14.9% to reach $220 billion by 2025, from $110 billion in 2020. 

Top FMCG Stocks in India:

S. No.Stocks5-Year Returns
1Hindustan Unilever Ltd. 62%
2ITC Ltd.72%
3. Nestle India Ltd. 123%
4Britannia Industries Ltd. 61%
5Varun Beverages Ltd.696%
(Figures are as of July 17, 2023. Past performance is no guarantee of future results)

1. Hindustan Unilever Ltd (HUL)

Home care, beauty & personal care, and foods & refreshment are Hindustan Unilever Ltd’s three main FMCG business sectors. The company sells its products largely in India and has manufacturing plants all across the nation. With over 40 brands available across 12 distinct categories, including personal care, fabric care, skincare, hair care, oral care, deodorants, cosmetics goods, beverages, ice cream, frozen desserts, and water filters, HUL is an important part of millions of Indians’ lives. Dove, Lifebuoy, Knorr, and Pears Soap are a few of their brands. Home care brings in 34% of the company’s income, followed by beauty and personal care (44%) and food & drink (19%). HUL has also forayed into the health and wellbeing segment through two strategic investments.

Over the last 5 years, the company’s revenue has grown at a CAGR of 9.35%, while profits have a CAGR of 14.6%. The company is nearly debt free and has a healthy dividend payout ratio of 99.9%. The stock has moved up 62% over the past five years. 

2. ITC Ltd

Established in 1910, ITC is the biggest cigarette producer and retailer in the nation. The five business divisions that ITC now works in are FMCG Cigarettes, FMCG Others, Hotels, Paperboards, Paper and Packaging, and Agri-Business. Aashirvaad, Sunfeast, Yippee!, Bingo!, B Natural, ITC Master Chef, Fabelle, Sunbean, and Fiama are among ITC’s top FMCG brands. Additionally, it has added frozen food items, ghee, dairy products, and premium chocolates to its collection of branded packaged meals. ITC is known for assuring precise production and packaging quality. They have a wide variety of distribution outlets in India and have gained access to the remotest of locations through a variety of stores. It is anticipated that ITC will increase its involvement in the eastern market for spices due to its most recent acquisition of Sunrise Foods Pvt Ltd. 

The company is nearly debt free and has been maintaining a debt payout of 92%. Over the past five years, the revenue had a CAGR of 7% and net income has had a CAGR of 8%. The company has delivered a poor sales growth of 10% over the past five years. ITC stock has given a decent return of 72% over the past 5 years. 

3. Nestle India Ltd. 

Nestle India Ltd. is a dominant company in the Indian FMCG market with a strong market presence in the majority of its product categories. The business, which sells various goods under the Maggi brand is a trendsetter in the food service industry. In terms of dairy and nourishment products (96% in infant cereals), drinks (Nescafe 51%), processed foods (Instant Pasta Maggi -69%), kitchen aids (Nestle everyday 44%), and confectionery (63%). The company markets its products under the EVERYDAY, NESCAFE, NESTEA, Maggi, KitKat, Munch, Nestle, POLO, Bar-One, Milkmaid, Milkybar, Alpino, and Eclairs brands, among others.

Nestle India’s revenue has given a CAGR of 11.5% over the past 5 years while the net income has grown at a CAGR of 14%. The company has maintained a healthy dividend payout of about 91%. However, it has delivered poor sales growth of 11.0% over the past five years. The company’s stock has jumped 123% over the past five years. 

4. Britannia Industries Ltd. 

Britannia Industries has a rich 100-year history. It is one of the major leaders in the Indian biscuit industry with a market share of more than one-third in terms of value. The company’s portfolio has a good proportion of each of the seven varieties of biscuits it produces, including glucose, Marie, cookies, crackers, cream, milk, and health. Additionally, the company’s whole product line includes recognisable trademarks including Milk Bikis, Tiger, Marie, and Good Day. 

Over the past five years, revenue and net income have seen a decent CAGR of 9.3% and 11.5%, respectively. Despite maintaining a high dividend distribution of 123%, the company’s growth in sales over the previous five years was just 10.5%. Britannia’s shares have risen 61% in 5 years. 

5. Varun Beverages Ltd.

Varun Beverages Ltd (VBL) is engaged in the manufacturing, sales, and distribution of PepsiCo’s beverages in pre-defined territories in India. The company is PepsiCo India’s second-largest international franchisee (after the United States) for carbonated soft drinks and non-carbonated beverages. VBL is a part of the RJ Corp group, a commercial conglomerate with holdings in quick-service restaurants, dairy products, and healthcare. Some of the key brands sold under VBL include Pepsi, Mirinda, Mountain Dew, Seven-Up, etc. In addition, the company offers its products in Nepal, Sri Lanka, Morocco, Zimbabwe, Zambia, and Mozambique.

The company has reported an impressive revenue CAGR of 27% and a net income CAGR of 48% over the past 5 years. It has delivered good profit growth of 49.2% CAGR over the last 5 years. It has been maintaining a healthy dividend payout of 17.5%. However, promoter holding has decreased by about 4% over the last 3 years. The stock has given a spectacular return of 696% in the past 5 years.

Other Top FMCG Stocks in India:

  • Marico
  • Dabur India
  • Godrej Consumer Products
  • Colgate Palmolive
  • Tata Consumer Products
  • Jyothy Labs

In conclusion, India’s FMCG market is expanding quickly. Consumers are increasingly choosy and willing to pay more money for high-quality goods than low-quality ones. The FMCG market has expanded as a result of the rising demand for branded goods. It has grown faster in rural India than in urban India as a result of the expanding number of FMCG startups. The semi-urban and rural sectors are also experiencing rapid growth for these publicly listed FMCG firms in India. This makes FMCG one of the strongest sectors with very high potential. And now you know which are the top FMCG stocks in India you could invest in!

Disclaimer: The stocks mentioned in the article are solely for educational purposes. Please do your own research before investing.

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Editorial

Why are FMCG Distributors on Strike?

FMCG distributors in Maharashtra have called for a boycott of Hindustan Unilever Ltd’s products. They have also warned Colgate Palmolive India Ltd of taking strict action after the company failed to respond to their concerns. If the demands proposed by traditional FMCG distributors are not addressed, it could get difficult to buy essential products at our neighborhood stores. In this article, we discuss why distributors have clashed with fast-moving consumer goods (FMCG) firms. 

Why are FMCG Distributors Revolting Against Manufacturers?

For decades, distributors have been the link between manufacturers and retailers. They deliver the milk, bread, eggs, biscuits, snacks, and other essential items to your neighborhood store. These traditional distributors get the products of FMCG companies featured on the shelves of general stores across India, and consumers have a wide variety to choose from. As per reports, they service nearly 90% of the overall retail market in our country.

The Rise of New-Age Wholesale Distributors:

Unfortunately, the Covid-19 pandemic caused a severe blow to their operations. Tens of thousands of distributors were unable to operate due to lockdown restrictions. At the same time, major FMCG companies such as Hindustan Unilever, ITC, Nestle India, Colgate Palmolive India, and others turned to tech-driven organised wholesale distributors. The businesses of JioMart, Udaan, Booker, Metro Cash & Carry, ElasticRun, and Jumbotail have flourished over the past year. 

These firms are backed by global venture capital and private equity firms and thus, have a lot of cash at their disposal. While traditional distributors pay for the goods within 10-15 days (on a credit basis), companies like JioMart pay the manufacturers right away. As a result, FMCG companies prefer new networks and offer huge discounts on their products to wholesale distributors that operate online. 

This ultimately means that new-age distributors can now offer significantly large margins to shop owners in the range of 15-20%. They are able to sell goods at much lower rates. The apps offered by Jiomart and Udaan allow shop owners to get products efficiently. Their margins have improved after buying at lower prices from these firms. Meanwhile, traditional distributors can only provide margins of 7-12%.

What Next?

The All India Consumer Products Distributors Federation (AICPDF), which represents over 4 lakh distributors, is holding talks with FMCG firms on the price disparity of products between traditional and new-age distributors. They feel that the networks established by Jiomart and other such companies are destroying their businesses. The AICPDF had written to firms that new-age business-to-business (B2B) firms are offering products at lower rates to local shops than what they offer, and are now severely affecting their reputation and goodwill.

From January 1, traditional distributors have boycotted or stopped supplying popular FMCG products to Kirana stores. They have warned companies of holding strikes until they promise to give them similar prices and margins as that of the new-age distributors. As per reports, it is unlikely that traditional distributors would completely go out of business. However, the entire industry dynamics would change. 

Let us look forward to seeing how the situation unfolds in the days to come. 

Categories
Editorial

Godrej Consumer Products: An Analysis

As you may know, the FMCG industry in India is highly competitive. Companies such as Tata Consumer Products, Hindustan Unilever, Dabur, ITC, and Britannia have time and again launched some of the best brands and products that have become a big part of our lives. These firms have kept a constant track of rapid changes in consumer tastes and preferences. At the same time, they have ensured superior quality and have established strong distribution networks for their products.

Let us learn more about one such FMCG firm that has created a wide portfolio of essential products that have become a part of our everyday lives— Godrej Consumer Products. Like most prominent business houses, the 124-year old Godrej Group has focused extensively on scaling up its FMCG segment as well. And, they have become highly successful in the field. Let us dive into the specific details surrounding this company and its financial highlights.

Company Profile – Godrej Consumer Products

Godrej Consumer Products Limited (GCPL) is one of the leading fast-moving consumer goods (FMCG) firms in India. It was established in 2001 and is headquartered in Mumbai. The company manufactures and markets personal care and household products in India and internationally. GCPL offers a wide range of air care products, household insecticides, liquid detergents, soaps, air fresheners, hair care products, personal wash products, wet wipes, and color cosmetics. It also offers skincare, fabric care, and hygiene products. Godrej Consumer sells its products primarily under the Good Knight, Godrej Expert, Cinthol, Godrej No. 1, Hit, Darling, Stella, Godrej Protekt, Godrej Aer, TCB Naturals, MegaGrowth, Renew, African Pride Moisture Miracle, NYU, Mitu, and Godrej Professional brands. It has established a strong presence in more than 90 countries.

GCPL’s geographic segmentation. Source: godrejcp.com

GCPL is currently one of the largest household insecticide and hair care players in emerging markets. The company’s manufacturing units are spread across Madhya Pradesh, Himachal Pradesh, Assam, and Sikkim.

Financial Performance

Godrej Consumer Products has been reporting a very gradual yet consistent increase in revenues and profits since 2016. Its total revenue has grown at a CAGR of 3.68% over the last 5 years, whereas the industry average stood at 3.6%. The firm’s Return on Capital Employed (ROCE) stands at 18.65%, which is quite low when compared to peers. This means that for every Rs 100 worth of capital employed, GCPL earns Rs 18.65 on it. Moreover, the company is virtually debt-free.

Despite challenges posed by the Covid-19 pandemic, GCPL has thrived in terms of sales. This can be attributed to its strong and diversified product portfolio that focuses on health and hygiene. The company reported a 12.77% year-on-year (YoY) increase in consolidated net profit to Rs 502.08 crore for the quarter ended December (Q3 FY21). GCPL’s household insecticides, hygiene, and value for money segments grew by over 14% YoY. These three categories contribute to 81% of its global portfolio.

The company had entered into strategic partnerships with Zomato, ShopKirana, and Zoomcar for the delivery of essential goods to consumers, retailers, and distributors during the government-imposed lockdowns. This has helped Godrej Consumer to deliver consecutive quarters of double-digit, profitable sales growth in FY21. GCPL has been able to secure a market share of 24.82% so far. 

GCPL – Stock Performance

The shares of Godrej Consumer Products have been underperforming the Nifty indices for quite a while now. It had touched a new 52-week high of Rs 808.35 in January 2021. Since then, the stock has declined and is now trading ~8% lower from those levels. Financial analyst Nomura Financial Advisory & Securities believes that two out of GCPL’s three core segments (India household insecticides and Indonesia market) have still not recovered in terms of sales margins. This conclusion was based on forecasts and current industry trends. In the report, Nomura states that the company’s growth in both segments will pick up very gradually.

However, there are promising signs of steady growth in the Indian market and improvements in the operating performance of its international units. 

1-Day Chart of Godrej Consumer Products

The Way Ahead

On April 5, Godrej Consumer Products announced a highly promising market expansion plan. They have initiated a Go-to-Market (GTM) strategy to increase its overall distribution footprint from 1.2 million to 1.5 million direct coverage outlets. The company will also enhance indirect coverage from 6 million to 7 million over the next 2-3 years. GCPL’s primary objective from this mission is to deliver consistent double-digit growth within 3-4 years. A GTM strategy is basically an action plan that specifies how a company will reach target customers and achieve a competitive advantage. It provides a blueprint for delivering a product or launching an existing product in a new market.

As part of this strategy, the FMCG firm will leverage emerging channels and invest in innovative technologies (including analytics). It will transform the existing distribution software by converting it into cloud-based systems. This would ensure better accuracy and promptness. They would focus on expanding coverage in key rural markets and improve the quality of existing outlets in urban areas. GCPL expects its e-commerce segment to contribute 8-10% of its total business in the coming years.

Godrej Consumer is also building an integrated chemists’ network. The company has appointed over 400 distributors and acquired 50,000 pharma outlets for the same. It will focus on building a technology structure that will support the pharma channel. Through this, GCPL will be able to push its range of hygiene products (via the Godrej Protekt brand).

All eyes will be focused on how GCPL executes these strategic plans.