Tag: FMCG

Which are the Top FMCG Stocks in India?

Post author By marketfeed Team
Post date July 17, 2023

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.	Stocks	5-Year Returns
1	Hindustan Unilever Ltd.	62%
2	ITC Ltd.	72%
3.	Nestle India Ltd.	123%
4	Britannia Industries Ltd.	61%
5	Varun 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.

Tags britannia industries, Dabur, FMCG, fmcg industry, fmcg stocks, HUL, India FMCG market, Indian market investments, ITC, Jargons, MARICO, nestle india, Portfolio diversification, varun beverages

Editorial

Zomato Q4 Results: How Has The Food and Delivery Platform Fared?

Post author By Maarg Vaidya
Post date May 31, 2022

Zomato got listed in July 2021. The food delivery platform’s share price has tanked by nearly ~42% since then. Amidst tough economic conditions, the company is trying to expand into the B2B segment with Hyperpure, growing breakneck, and keeping up with peers like Swiggy, Zepto, and Dunzo.

Zomato had recently announced its Q4 results for the quarter ended March 2022. The company has seen an 11-15% jump in share prices in the past few days. This article explores how the food delivery giant performed last quarter and how it plans to expand its wings.

Q4 FY22 Results

In the quarter ended March 2022, Zomato’s consolidated net loss jumped 434% QoQ and 168% YoY to Rs 360 crore. The company had a net loss of Rs 134 crore in the previous fiscal year. In Q4 FY22, consolidated revenue from operations increased 75% YoY and 9% QoQ to Rs 1,212 crore, up from Rs 692 crore last year.

Zomato’s expenses outweighed its revenue. The company’s total expenses almost doubled to Rs 1,701 crore from Rs 880 crore in the same quarter the previous year.

Average monthly transacting customers were at an all-time high of 15.7 million in Q4 FY22, growing from 15.3 million in the previous quarter. The average monthly active restaurant partners and delivery partners were at all-time highs as well. The Average Order Value (AOV) for FY22 was Rs 398 as compared to Rs 397 for FY21. For the top 8 cities, AOV increased by 3% YoY. Gross Order Value (GOV) grew by 6% QoQ and 77% YoY to a record high of Rs 5,850 crore

Business Segments

The company’s B2B segment (Hyperpure) saw an 18% QoQ increase in revenue to Rs 160 crore in Q4 FY22. Hyperpure delivers fresh, hygienic, high-quality ingredients and supplies to restaurants and other businesses.

The e-commerce, last mile, and hyperlocal delivery platforms currently face a shortage of workers due to high fuel prices and the post-COVID effect. “We are seeing some stress on the availability of delivery partners in the current quarter in select large cities since the last week of April. This is short-term in nature, as the post covid economic recovery has brought back jobs in cities. We lost some delivery partners to such jobs”, said Deepinder Goyal, Founder & CEO of Zomato.

Labour-intensive companies worldwide are doubling employee benefits to retain employees who are resigning in a phenomenon known as “The Great Resignation”. Similarly, Zomato’s employee benefit expenses have nearly doubled, increasing by 92% YoY to Rs 406 crore in Q4 FY22.

What Lies Ahead

Zomato has recovered measurably from the post-COVID lull. While we do see a jump in the company’s revenue, we also see increasing expenses led by rising fuel costs, delivery costs, and acquisition costs. The company has a negative working capital. Cash is collected upfront from customers and paid to delivery and restaurant partners in a few days. Zomato also has a small capital expenditure (CAPEX).

The company has been acquiring minority equity investments in relevant businesses to expand its own horizons. According to Founder CEO Deepinder Goyal, “The rationale behind making minority investments has been twofold – 1) put the building blocks for a robust quick-commerce business in India, and 2) accelerate digitisation and growth of the food and restaurant industry which accelerates our core food business”.

While still being in loss, the company is on its way to growth and prosperity after a long period of doldrums. It could be in an investor’s best interest to look at the company’s growth in a positive light. Certain factors could drive Zomato towards profitable growth. These include a stable labour market, decreasing fuel costs, and declining marketing and customer acquisition costs. high expenses.

Do you think Zomato might be profitable in the near future? Can it be a good investment bet? Let us know in the comments section of the marketfeed app.

Tags F&B, FMCG, Food Delivery, q4 results, Swiggy, Zepto, zomato

Editorial

How Has Inflation Impacted The FMCG Sector?

Post author By Maarg Vaidya
Post date March 30, 2022

The Russia-Ukrainian crisis, rising fuel prices, and global interest rate hikes have fueled inflation. Many sectors of the worldwide economy are impacted by it. One such is the FMCG or Fast Moving Consumer Good sector.

In a December 2021 issue, we discussed the WPI-CPI divergence and how inflation wasn’t reflecting on retail prices. While manufacturers continued to produce goods, there wasn’t sufficient demand YET among consumers. Businesses had not yet started passing on the burden of inflation to consumers. The FMCG companies cannot sustain any longer and have now decided to hike prices and pass on the responsibility of inflation to consumers. In this piece, we discuss the outlook of the FMCG sector and the impact of inflation on it.

Effects of Inflation

Central banks across the globe have started hiking interest rates. Most are following a contractionary monetary policy, meaning they have started taking money out of the economy. If the tapering of liquidity impacts personal income, it could restrict consumers from spending, eventually stalling economic growth and causing a considerable output gap.

High prices could mean the following for FMCG companies:

Lower Profit Margins
High Cost of Transportation/Supply Chain
Increased Cost of Storing
Reduction In Volumes of Goods Sold

Where do we see the impact of inflation around us? For the first time since 2007, the price of a matchbox has doubled from Rs 1 to Rs 2. Even the iconic, Maggi Noodles are now dearer by Rs 3 for a pack of Rs 140 gm. India has a long battle to fight against inflation.

How is Dalal Street Reacting To It?

The NIFTY FMCG, a benchmark index consisting of the top four FMCG Companies, was fueled by the COVID bull run till September 2021. The index has stalled ever since then, sliding by 12-15% since it hit an all-time high of 40,426. The market has been on a downtrend, and the reason is apparent. It is dimming investor sentiment due to inflationary pressures on the FMCG sector.

Varun Beverages, Colgate-Palmolive, Proctor & Gamble (PGGH), and ITC have been the top gainers for the quarter, seeing around 4-16% gain in share price in the last three months. Top FMCG Players like Hindustan Unilever, Jubilant Foodworks, Bajaj Consumer Care, and Nestle India lost anywhere between 9-21% in share price in the last three months.

The Way Ahead

According to the latest reports, FMCG companies have decided to hike prices by around 10-15%. One can eventually expect the prices to go down with time. With events that folded after the COVID-19 pandemic, inflation was imaginable.

There is one interesting paradigm that we can see in India’s case. India’s exports are at an all-time high, crossing $400 billion. Even the USD to INR conversion rate is fluctuating at higher levels. This means that we could make more in rupee terms for every commodity that we export. India hasn’t yet started to take advantage of the global shortage of certain commodities. If Indian FMCGs managed to tune the exports to get better realization and higher gross margins, they could use the surplus from exports to adjust domestic prices to improve domestic volumes. However, this remains a possibility until domestic FMCG companies act on it.

Do you think FMCG stocks are likely to perform better in the coming months? Let us know in the comment section available in the marketfeed app.

Tags Editorial, FMCG, Food, HUL, inflation, ITC, NESTLE

Editorial

Adani Wilmar Ltd IPO: All You Need to Know

Post author By marketfeed Team
Post date January 27, 2022

Another mainstream IPO has hit the Indian stock markets! Adani Wilmar Ltd, the company behind the popular “Fortune” brand of edible oils, has launched its IPO today. In this article, we take a close look into the company and learn more about its IPO.

Company Profile – Adani Wilmar Ltd

Adani Wilmar Ltd (AWL) is a fast-moving consumer goods company (FMCG) that offers essential kitchen commodities. Incorporated in 1999, it is a joint venture between the Adani Group and Wilmar Group (a multinational agribusiness group).

AWL offers a diverse range of products across three categories:

Edible oils such as soya oil, palm oil, sunflower oil, groundnut oil, cottonseed oil, mustard oil, rice bran oil, and specialty fats. The company’s flagship brand, Fortune, is the largest selling edible oil brand in India.
Packaged food and FMCG products: This segment includes wheat flour, basmati rice, soya nuggets, pulses. AWL is among the top five fastest-growing packaged food companies in India in terms of revenue.
Industry essentials such as de-oiled cakes, oleochemicals, castor oil & derivatives.

The company has a well-established operational infrastructure and strong manufacturing capabilities. It operates 22 plants across ten states in India, comprising 10 crushing units and 19 refineries. Its refinery in Mundra (Gujarat) is one of the largest single-location refineries in India, with a capacity of 5,000 metric tonnes (MT) per day. As of Sept 30, 2021 (Q2 FY22), the company had 88 depots in India, with an aggregate storage space of ~1.8 million square feet.

Adani Wilmar claims to have the largest distribution network among all branded edible oil companies in India. They had 5,590 distributors across 28 states and 8 Union Territories, catering to over 16 lakh retail outlets as of Q2.

About the IPO

Adani Wilmar Ltd’s public issue opens on January 27 and closes on January 31. The company has fixed Rs 218-230 per share as the price band for the IPO.

The IPO includes a fresh issue of about 15.65 crore shares, aggregating to Rs 3,600 crore. Individual investors can bid for a minimum of 65 equity shares (1 lot) and in multiples of 65 shares thereafter. You will need a minimum of Rs 14,950 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 845 equity shares (13 lots).

AWL will utilise the net proceeds from the IPO for the following purposes:

Funding capital expenditure for expansion of existing manufacturing facilities and developing new facilities – Rs 1,900 crore
Repayment or prepayment of borrowings – Rs 1,058.9 crore
Funding strategic acquisitions and investments – Rs 450 crore
General corporate purposes – Rs 191.1 crore

The total promoter holding in the company will decline from 100% to 87.92% post the IPO.

Financial Performance

Adani Wilmar Ltd has posted a consistent increase in revenue and net profit over the past three financial years (FY19-21). It reported revenue growth of 13.5% year-on-year (YoY) to Rs 37,090 crore in FY21. The FMCG company’s EBITDA grew at a CAGR of 8.2% to Rs 1,325 crore over the same period. Nearly 73% of their revenue came from edible oil and packaged food & FMCG sales in FY21. However, its margins have been affected by higher input costs.

AWL’s revenue from operations for the six months ended September 30, 2021 (H1 FY22) rose 53.65% YoY to Rs 24,874.51 crore. Net profit stood at Rs 357.13 crore in H1 FY22, up 23.6% YoY.

Risk Factors

AWL is dependent on the regular supply of large amounts of raw materials, including unrefined palm oil, soybean oil, wheat, paddy, etc. Unfavourable local and global weather patterns may have an adverse effect on the availability of raw materials.
The inability to manage its diversified operations could have a severe impact on the company’s business and financial conditions.
AWL derives a significant portion of its revenue (~82%) from its edible oil business segment. Any reduction in demand for such products can harm the company’s financial performance.
Import restrictions by other countries on Adani Wilmar’s products could have an adverse impact on its business.
Improper handling, processing & storage of raw materials and products or any damage/contamination of products could subject AWL to legal actions.
Certain companies within the Adani Group (including its promoters) are involved in legal proceedings.

IPO Details in a Nutshell

The book-running lead managers to the public issue are BNP Paribas, BofA Securities India, Credit Suisse Securities, HDFC Bank, ICICI Securities, J.P. Morgan India, and Kotak Mahindra Capital. Adani Wilmar Ltd had filed the Red Herring Prospectus (RHP) for its IPO earlier this month. You can read it here.

Ahead of the IPO, AWL raised Rs 940 crore from anchor investors. The marquee investors include the Government of Singapore, Jupiter India Fund, Societe Generale, and Volrado Venture Partners Fund. It also includes HDFC Mutual Fund, Nippon Life India Trustee, Sun Life Excel India Fund, etc.

Conclusion

Adani Group is coming out with an IPO after 12 years! Adani Wilmar aims to capture a large share of kitchen spends across India with its differentiated and diversified product portfolio with market-leading brands. The strong brand value and raw material sourcing capabilities will augment its future growth. The company seeks to acquire manufacturing units or brands in the food staples business such as wheat flour, rice, ready-to-cook, and ready-to-eat segments. They have also been focusing on value-added products (rice bran oil, besan, pulses) and healthy superfoods to diversify revenue streams and generate higher margins. Thus, one could invest in AWL for the long term based on its future prospects.

AWL will be directly competing with major FMCG players such as Hindustan Unilever Ltd, Britannia Industries, Tata Consumer Products, Marico, and Patanjali Ayurved once it gets listed.

Adani Wilmar’s IPO shares are trading at a premium of just Rs 45-50 in the grey market. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. Do consider the risks associated with this company and come to your own conclusion.

What are your views on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

Tags Adani Group, adani wilmar, adani wilmar limited ipo, Editorial, FMCG, IPO

Editorial

Why are FMCG Distributors on Strike?

Post author By marketfeed Team
Post date January 4, 2022

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.

Tags colgate palmolive, FMCG, fmcg distributors, fmcg industry, Hindustan Unilever

Editorial

Is Marico Overly Dependent on Parachute?

Post author By marketfeed Team
Post date August 26, 2021

Right from our childhood, a blue bottle of coconut oil might have influenced various aspects of our life. It has helped generations to ensure adequate growth and consistency of hair. Yes, today we are going to analyse the company behind this market leader. The name of the product is Parachute coconut oil, and the parent company is Marico Limited.

The main objective of our analysis is to find out whether Marico is highly dependent on the Parachute brand, or whether they have adequately diversified their Fast Moving Consumer Goods (FMCG) business portfolio. Let us first look at the current business segments of the FMCG company.

Present Verticals of Marico

Coconut Oil: Parachute coconut oil is the major brand under this segment, along with Nihar oil and Oil of Malabar. Parachute has 54% of the market share in terms of total volume of coconut oil sold in India.
Value-Added Oil: Products that are used to maintain the health of hair such as anti-hairfall oil, amla oil, light hair oil falls in this category.
Saffola Oil & Food: All the products under the Saffola brand belong to this category. Saffola refined cooking oil, Oats, Honey, instant breakfast, Noodles are the key products. The brand has a 94% volume share in the masala oats segment. In premium refined edible oil, Saffola cooking oil has an 81% volume share.
Male Grooming, Beauty & hair nourishment: This is a small vertical of the company that contributes around 2% of business revenue. But the products in this segment are well known- Setwet and Beardo. Hair creams, deodorants, and other cosmetic products are present here. Livon and Hair & Care are premium hair nourishment products.
Health & Hygiene: This segment was created as part of a tactical move by the company during the Covid-19 pandemic. It caters to the rising hygiene concerns of citizens. So they introduced sanitisers and vegetable cleaning products. It contributes a mere 0.5% to Marico’s total revenue.

Now, we know the different business verticals of the company and how well they are strategically increasing their reach in different areas of the market. In their investor presentation, Marico stated that the Health and Hygiene segment will be defocused in the current financial year (FY22). This can be considered as a good sign, as the company does not want to focus on a segment where they have less experience.

Major Acquisitions and Product Launches

Let us look at some of Marico’s major acquisitions and product launches across the last decade.

2010 – Marico introduced Saffola breakfast and Oats.
2011 – The company entered the Vietnam market by acquiring ICP. X-Men (a body deodorant brand) became a major contributor.
2012 – Marico acquired Livon & Setwet
2017-18 – Invested in Beardo, which was a startup.
2018-19 – Marico launched Saffola Fittify (instant breakfast), Kavya Youth & Coco Soul (skincare)
2020 – Acquired 100% stake in Beardo.
2020– Saffola Honey was launched.

As we can see, Marico is wisely looking for good opportunities in various geographical markets as well as launching new key products.

Marico’s Progress Over a Decade

For a company, acquisitions and product launches are inherently good aspects. Let us look at how these products are financially growing and their role in contributing to the company’s overall revenue.

Revenue from operations has increased from Rs 5,733 crore in FY15 to Rs 8,048 crore in FY21, at a CAGR of 5.8%.

Looking at the bottom line, Profit After Tax (PAT) from Rs 573 crore in FY15 reached Rs 1,162 crore in FY21, at a CAGR of 11.8%.

The graph given below shows the contribution of major segments to the revenue of Marico in percentage terms.

The Coconut Oil segment has increased its contribution to the total revenue. Also, the Saffola brand has heavily increased its contribution to revenue from 14% in FY15 to 27% in FY21. Value-added oil had a headwind in FY21 due to the pandemic, as citizens were facing a liquidity crunch. The company may cut short their expenses by keeping out value-added oil from their priority list.

Peer Analysis

As Marico is an FMCG player, let us look at how well the company is performing among its competitors.

Profit Before Tax (PBT) is the income of the company after settling their expenses and before paying the taxes. The average PBT margin of FMCG companies stands at 15.8%. Marico has a healthy margin of 18.6%. This tells us that for every Rs 100 Marico earns as revenue, the company is able to retain Rs 18.6 as profit before paying taxes.

Conclusion

Marico definitely has a strong presence in the coconut oil and value-added oil Industry. Now, the FMCG player is trying to gain increased market share in the food industry through the Saffola brand, as well in the male and female grooming products industry through brands such as Set Wet, Beardo, Livon. It is also interesting to note that products developed and marketed by the company have a good market share (a monopoly effect). Marico often caters to a niche market where competition is low. This enables the company to have a higher profit margin in these segments.

We can conclude that Marico is trying to be versatile in their business, which in turn concretes the future business growth of the company. Their focus on acquiring digital-first brands is highly commendable. As a long-term investor myself, I will be allocating more capital from my portfolio to Marico.

Do let us know your thoughts on Marico in the comments section of the marketfeed app. Will you be adding the stock to your portfolio?

Tags beardo oil, Editorial, FMCG, long term, MARICO, parachute, saffola, set wet

Editorial

Godrej Consumer Products: An Analysis

Post author By marketfeed Team
Post date April 7, 2021

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.

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.

Tags Editorial, FMCG, fmcg industry, godrej consumer, godrej group

Editorial

ITC. What you need to know before investing.

Post author By marketfeed Team
Post date September 8, 2020

ITC Ltd. or Indian Tobacco Company established as Imperial Tobacco Company was established in Calcutta in 1910. It began as a Tobacco Conglomerate, later on expanding to a variety of areas such as Luxury Hotels, Paperboards, Agri-Business and FMCG sectors. ITC is a blue-chip stock and for long been known as a safe investment that gives a high dividend. In case you are planning to invest in ITC, here are __ things you need to know.

Company Profile

ITC is India’s leading tobacco company. It has a near-monopoly when it comes to cigarettes. ITC manufactures more than 84% of India’s cigarettes and controls 75% of India’s entire tobacco industry.

In the late 70s, ITC ventured out into the world of luxury hotels and hospitality. It currently operates more than 100 hotel chains. ITC has been expanding on its FMCG sector having faced a massive growth in revenue from it in the past 10 years. Its Agri-business has gained a fair amount of traction last year with a 9% revenue growth (YoY) between Q1FY20 and Q1FY21 in its Agri-Business segment.

ITC’s inter-segment revenue stood at Rs. 5907 Crores facing a revenue growth of 20% as compared to the same quarter last year. This portrays the efficiency of ITC on being able to manufacture its own raw material and the fair dependability of companies on each other. Over the last 10 years, Total Shareholder Return has grown at a CAGR of 11%, significantly outperforming Sensex (CAGR: 6.9%)

Efficiency

ITC as a company is a virtually debt-free company. Cash generated by ITC is significant for it to fund its own new ventures.

ITC’s ROCE(Return on Capital Employed) stood at 72%. This means for every Rs. 100 worth of Capital Employed ITC earns Rs. 72 on it.

In the past 5 years, ITC’s Basic EPS has seen a growth of 9.1% CAGR. Basic EPS is the net-income generated by the company per outstanding share. Its Cash EPS or cash flow generated per share stood at Rs 13.59/share. Its Cash EPS grew at 9.7% CAGR over 5 years. CAGR stands for Compounded Annual Growth Rate.

Ex-Company Chairman (Late) Y C Deveshwar had set the target of making ITC the biggest player in the FMCG segment by year 2030 targeting revenue of Rs. 100,000 crore from the FMCG business.

ITC’s Profitability ratios are better than Godfrey Philips and HUL this means that ITC as compared to industry peers, is financially sounder and is in a better financial position to commit to growth and expansion.

The company’s dividend payout ratio as of March 20′ was 42% which is expected to pump up once the dividend is announced in the future. Dividend Payout Ratio of 42% means the company is giving out 42% of its net profit as dividend.

Coming to the shareholding of the company, the company has 0 promoter holding. Often times in corporates, the management makes decisions that support the interest of promoters or major stakeholder. In ITC, majority stake lies in the hands of public shareholders, the company is likely to make decisions in the public interest.

Tobacco and Diversification.

Cigarette has an inelastic demand. This means that compulsive smokers won’t stop smoking even if the price of cigarettes rise. When the government increases the duty, the cost of it get passed down to the consumer

The COVID-19 pandemic has reduced the contribution of cigarettes in the revenue of the company. It faces a temporary ban for sale and/or public smoking in few states as well. Before the pandemic as well, ITC had been reducing its focus on Cigarettes and Tobacco Products. This has many reasons behind it. According to an ITC report:

India is the 4th largest market for illegal cigarettes in the World; causing a revenue loss of over 15,000 crores every year.
42% of adult Indian males consume tobacco. Only 7% of adult Indian males smoke cigarettes as compared to 14% who smoke bidis and 30% who use smokeless tobacco.
Since 2010/11, legal cigarette industry volumes have declined by about 20% while the illicit duty-evaded cigarette segment has grown by 36%.

The above reasons have led ITC to diversify into other sectors like FMCG and Agri-Business. For ITC, Cigarette Business’ share in the revenue of ITC has reduced over the years and increased in other sectors.

ITC has started pumping into FMCG segment like never before. The graphical representation below shows the expansion of ITC into FMCG products over the past decade.

Supply and Distribution Chain.

ITC has the most unparalleled supply and distribution chain in the country. The reason why it has managed to capture 75% of the tobacco market is its supply and distribution chain. ITC has managed to access the remotest areas in the country. To know more about ITC’s supply chain. Click Here

E-Choupal is a business initiative by ITC Limited that provides Internet access to rural farmers. The purpose is to inform and empower them and, as a result, to improve the quality of agricultural goods and the quality of life for farmers. ‘e-Choupal’ services today reach out to over 4 million farmers growing a range of crops – soybean, coffee, wheat, rice, pulses, shrimp – in over 35000 villages through 6100 kiosks across 10 states (Madhya Pradesh, Haryana, Uttarakhand, Uttar Pradesh, Rajasthan, Karnataka, Kerala, Maharashtra, Andhra Pradesh and Tamil Nadu). To Read More about E-Choupal, Click Here.

The Future

ITC has started to shift its dependency from cigarettes to other areas. It suffered a huge reduction in cigarette sales by almost 33%. ITC has realised that its dependency on cigarettes won’t be viable in the long term. During COVID-19, the only two sectors showing positive growth were FMCG and Agri-Business.

ITC is diversified in FMCG and foods segment, with a wide variety of products to offer the company has recently crossed 10,000 crore revenue mark and targets 100,000 crore revenue from FMCG by 2030. A good financial history and a stable distribution setup make it a good company to invest in the long term. However, it is necessary that one performs their own research before investing.

Tags analysis, Editorial, FMCG

Market News

ITC: Food business sales clocked Rs 10,000 crore for the first time!

Post author By marketfeed Team
Post date August 7, 2020

ITC, India’s third-largest packaged food company, broke its records yesterday. The company’s food business grew by 7.3%. Gross sales for FY20 was clocked at Rs 10,377.73 crore. ITC’s competitor Britannia and Nestle recorded the gross sales worth Rs 10,986.68 crore and Rs 12,368.9 crore respectively.

Last fiscal, the gap between Britannia and ITC was of Rs 810 crore. This fiscal year, it has reduced to around Rs 600 crore. This is a signal that how fast the company is growing in the food business. Its aim of being a market leader won’t take long if the company continues to do this well.

ITC’s Aashirvaad brand atta, which is a market leader in its segment, grew by almost 30% to record sales of more than Rs 6,000 crore. ITC’s second-largest FMCG brand, Sunfeast, crossed the sales of Rs 4,000 crore, followed by Bingo! sales worth Rs 2500 crore.

Better performance in this segment is crucial as the company looks to reduce its dependence from the flagship cigarette business. The cigarette segment is under continuous scrutiny due to heavy government tax rates.

ITC’s packaged food portfolio

Aashirvaad
Sunfeast
Kitchens of India
Bingo!
Mint-o
Candyman

Expanding the business

This Multinational conglomerate company also announced the acquisition of Sunrise Foods Private Ltd (SFPL). The deal was valued at around Rs 2,150 crore. SPFL, a Kolkata-based family-owned company, is a 70-year-old spice manufacturing company. Sunrise is a focussed company which operates in the Eastern part of India. This acquisition will help ITC enjoy the benefits of synergies and make use of the established supply chain operations of SPFL.

Tags FMCG, ITC, Market News