FMCG firms ramp up acquisitions as spending booms

Betting on probable growth, large consumer names such as Emami, Marico, Hindustan Unilever Limited (HUL), among others, are ramping up on acquisitions.

Bengaluru: India’s fast moving consumer goods (FMCG) market is expected to grow at 14.9% compound annual growth rate (CAGR) to $220 billion by 2025, up from $167 billion in 2023, according to a report released by TeamLease earlier this year. Betting on this probable growth, large consumer names such as Emami, Marico, Hindustan Unilever Limited (HUL) among others, are ramping up on acquisitions.

These sectoral majors are looking at expanding their portfolio owing to the growing demands of consumers, and are betting on the established smaller brands which already have a presence in the digital space as well as a good brand recall, instead of building a product from scratch, analysts and experts told DH.

In August, Kolkata-based FMCG giant Emami acquired a 100% stake in Helios Lifestyle, the company behind the premium male grooming brand 'The Man Company’.

Its peer, Tata Consumer Products also acquired Capital Foods, owner of the brands Ching’s Secret and Smith & Jones, and Organic India, a company that sells organic herbal teas and health foods, in 2023.

Meanwhile, Adani Wilmar is said to have a $1 billion war-chest for strategic acquisitions. Additionally, Reliance Industries is also planning to infuse Rs 3,900 crore into its consumer goods division. 

“FMCG giants are looking at portfolio expansion to grow inorganically. It makes sense to acquire these brands because most of them are discoverable through digital channels - a place where bigger players are looking at growing their presence,” said Karan Taurani, senior vice president, Elara Capital. 

Share of e-commerce and quick-commerce for the FMCG sector has increased significantly to 10-12% currently as compared to 4-5% in the pre-covid era, on the back of the rapid adoption of online platforms, which provide products at a discounted price with the convenience of doorstep delivery within minutes, highlighted a report by Elara Capital.

The preferences and choices of India’s consumers are also changing, as they are opting for premium products and competitive prices, and in urban areas, customers are moving towards organic produce, which is also reflected in the acquisition behaviour of the companies

“FMCG brands are doing acquisitions to broaden their portfolios and to catch up on trends,” said Ankur Bisen, Senior Partner & Head - Consumer, Food & Retail, Technopak Advisors. 

“Consumers are spoilt for choice and I don’t think that’s changing anytime soon. More than brand, people are looking at quality, even if it comes at a higher price,” said Neeti Sharma, CEO, TeamLease Digital. 

However, analysts differed on the matter of smaller brands eating up market share of the bigger players. “While distribution is a big benefit for the smaller brands due to their presence on digital platforms, they may be eating the market but a very miniscule bit, hence it’s not a big concern,” added Taurani. 

Consumer spending in India is expected to reach $6 trillion by the end of the decade due to middle-and upper-income family growth, as per a report by Teamlease.

Counting on this, experts believe that a wave of acquisitions is likely to continue in the near term. Even Indian conglomerates who do not have a strong hold in the consumer goods space are bullish on this sector. 

“It also makes sense to acquire brands inorganically which are working right. So that's one of the reasons why you'll continue to see a lot of acquisitions in the FMCG space for the next three to five years,” said Anand Ramanathan, Partner, Consumer Products and Retail Sector Leader, Deloitte India.