Disha's Diary: Takes a look at the fourth largest sector: FMCG
The previous two articles highlighted the small yet known brands of FMCG products. To know about how the giants in the FMCG have been performing, read the article below
18 Sep 2023 | By Disha Chakraborty
Per capita increase is a huge opportunity for the FMCG sector
In spite of all the volatility, the FMCG market in India is both large as well as competitive. As a mono-carton major shared on the sidelines of the Respack conference at Lalit Hotel, FMCGs have low-profit margins. Having said that, FMCG accounts for 50% of consumer spending in India. It is the fourth largest sector in the country.
As per research from retail intelligence platform Bizom, the sales growth in high-value packs across FMCG categories shrank in July over the previous year. During the recently concluded Fi show, one trend that was discerned was: in packaged foods, sales of high-value packs saw a 1% decline even as mid-and-low-priced packs recorded 0.5% growth, the report showed. In confectionery, consumers shifted to mid-priced packs (4.6% growth) while high-value packs saw a 4.7% decline. In branded commodities, both high-value and mid-priced packs saw growth declining, as consumers moved to small packs (4.7% growth).
Azaz Motiwala, founder at IKON Marketing Consultants said, "The FMCG industry in India grew by 7- 8% in 2022 in terms of sales. It is likely to grow at the same pace in 2023 if the growth trajectory remains the same. I expect the F&B sector to grow around 10-12% whereas the home and personal care segments are likely to grow 8-9% in 2023.
Almost every stall that was showcasing packaging technology spoke about "a movement towards innovative packaging and cost-effective solutions." Since the advent of the Covid pandemic in 2019, categories such as soaps and detergent saw an increase in price as their manufacturing cost (linked to palm and crude oil prices had doubled). This led to consumers shifting to small Rs 10 packs. This price-point accounts for 40% of the laundry category sales.
A housewife I spoke to said, "Large FMCG packs have become unaffordable for the middle-class family." She said, "Household savings have plummeted to a new low in FY23." Meanwhile household debt has soared to a high of Rs 7,138 trillion in FY22.
This is one of the reasons (as pointed out by me in my column), super-local FMCG brands are growing, and racing ahead of their big brand rivals like HUL and Britannia.
Another trend we picked up at the Fi show was anti-counterfeiting. As Nityanand Shenoy, advisor (earlier president and managing director) at PRS Permacel (Saint Gobain Group) said, "Most regulations like traceability are more print related activities. I think it is very easy for the packaging industry to adopt." But he added, "Regulations do not mention the use of tamper proof packaging / anti counterfeit packaging – as a result impact on the industry is limited". And so, we see a rise in counterfeiting and other forms of brand attack.
Shenoy added, "The scope of packaging, the number of players are huge (Be it: micro/ small/medium/registered/unregistered/large/local/international) hence implementing regulatory challenges will be not easy."
Top FMCG companies - At a glance
Anand Milk Union Limited (Amul) - Amul has achieved a turnover of Rs 72,000 cr. with record growth of 18.5%. The growth has been seen in ice-cream 40%; curd 40%,; beverage 34%; milk 20%; butter 19%; ghee 9%; buttermilk 16%. India's pre-eminent FMCG brand, has set a target to achieve a turnover of Rs 80,000 crore in FY 23-24.
India Tobacco Company Limited (ITC) - Food products and scaling up in multi areas. Q1FY24 numbers from ITC Corp looking good. Tobacco revenue growth of 11%; FMCG growth is 13%. PAT growth of over 17%, much higher than expectations of 11-14%. Today ITC shall become the second largest FMCG company in India by revenue, post ITC hotel demerger
Hindustan Unilever Limited (HUL) - In FY23, HUL added Rs 8,000 crores to its turnover, taking it to Rs 58,154 crores. The group grew its top line and underlying volumes by 16% and 5% respectively. Growth was significantly ahead of the market with more than 75% of the business winning market shares. In India, 90% of households use at least one HUL brand. Out of which 52.95% are male and 47.05% are women. People who prefer HUL brands are mostly the young generation of 18-24 years that covers 37.37% of the total audience.
Adani Wilmar Limited (AWL) - Adani Wilmar Limited reported earnings results for the first quarter ended June 30, 2023. For the first quarter, the company reported sales of Rs 12,928 crores as compared to Rs 14,7240 crores a year ago. Revenue was Rs 12,928 crores compared to Rs 14,7240 crores a year ago. Adani Wilmar offers essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses and sugar.
Patanjali Ayurved Limited - Other than its pricing strategy, Patanjali's promotion strategy relies on minimal advertising and marketing expenses. Instead, the company leverages the popularity of its founders, Baba Ramdev and Acharya Balkrishna, who have a huge following as yoga gurus. The company has shown a good profit growth of 119.04% for the past three years. The company has shown revenue growth of 23.89% for the past three years. As per the Patanjali marketing team, the food products are manufactured with organic produce and do not use any preservatives. For example, Patanjali shampoo deploys herbs such as Reetha, Shikakai, Amla etc. which are known for their hair care properties.
Nestle India Ltd (Nestle India) - FMCG major Nestle India on Thursday reported a net profit of Rs 698.34 crore for the quarter ended June 2023. Meanwhile total sales stood at Rs 4,619.5 crore, up 15%. It all began in 1956 for Nestle India. The company set up its first production facility in the year 1961 at Moga in Punjab. One of the main reasons for Nestle's competitive advantage is its global scale. The company operates in over 190 countries, with a workforce of over 300,000 employees. Nestlé plans to invest Rs 5,140 crores (USD613m) in India by 2025.
Britannia Industries Limited (Britannia) - The maker of Good Day and Marie Gold biscuits saw its PBIDT at Rs 745.8 crore. It was down 13.4% on a quarter-on-quarter basis. For the first quarter, the company reported revenue was Rs 40,646 crores as compared to Rs 37,56 crores a year ago. The group manufactures biscuits, bread, rusk, cakes and dairy products.
Godrej Industries Limited (Godrej) - Godrej Industries Limited reported earnings results for the fourth quarter and full year ended 31 March 2023. For the fourth quarter, the company reported sales of Rs 4852.11 crore compared to Rs 44,448 crores a year ago. Revenue was Rs 50,852 crores compared to Rs 47,273 crores a year ago.
Parle Industries Limited (Parle) - Parle Industries Limited reported earnings results for the first quarter ended June 2023. For the first quarter, the company reported net loss was INR 6,86,000 compared to net income of INR 29 crore a year ago.
Marico Industries Limited (Marico) - Marico reported a net profit of Rs 427 crore for the quarter ended June 2023. Meanwhile total sales stood at Rs 2,477 crore, down 3.2%. During FY 2021-22, Marico recorded a turnover of about Rs 9,500 crore through its products sold in India and chosen markets in Asia and Africa.
Procter & Gamble (P&G) - Procter & Gamble gross profit for the quarter ending June 30, 2023 was Rs 82.08 crores, a 14.08% increase year-over-year. P&G was founded over 180 years ago as a soap and candle company. In India, P&G's history started in 1985 with the acquisition of Richardson Hindustan Limited (RHL).
PepsiCo India- Pepsi has witnessed a surge in net profit to Rs 225 crore. Total revenue up by 29% when compared to Rs 8,129 crores in FY 2022. PepsiCo began in 1965 with the merger of Pepsi-Cola and Frito-Lay. Today, it's a global food and beverage leader.
The Coca-Cola Company (Coke) - In the June quarter, the company witnessed a growth in the unit case volume in developing and emerging markets like India and Brazil. In the Asia Pacific market, including India, Coca-Cola's unit case volume grew 2%, driven by growth across most categories. The Atlanta-headquartered company reported a 5.71% growth in its consolidated net operating revenue to INR 994 crores.