FMCG Giants Ramp Up Acquisition Strategies
MUMBAI: Major players in the fast-moving consumer goods (FMCG) sector are actively pursuing acquisitions as they seek to expand their market presence. Companies like Hindustan Unilever (HUL), ITC, Reliance Consumer Products, and Adani Wilmar have made significant moves in recent months, capitalizing on a more rational market valuation. Analysts suggest that the current subdued market conditions are prompting corporate CFOs to explore mergers and acquisitions (M&As) more aggressively.
Market Dynamics Favor Acquisitions
The FMCG landscape is witnessing a surge in acquisition activity, particularly in the mid-market segment. Firms are focusing on brands with revenues between Rs 100-500 crore. According to Mayank Rastogi, markets leader at EY India, the cautious approach of private equity firms has made valuations more attractive for potential buyers. “Corporate CFOs are hungry for M&As as long as valuations are reasonable,” Rastogi noted. This shift in strategy reflects a broader trend where companies are looking to enhance their portfolios through strategic acquisitions rather than relying solely on organic growth.
The changing consumer behavior in India, driven by increased disposable incomes, has also influenced acquisition strategies. As consumers become more adventurous with their spending, FMCG companies are targeting brands in high-growth categories such as convenience foods and beauty and personal care. This trend is evident in HUL’s recent acquisition of the beauty brand Minimalist for Rs 2,955 crore and ITC’s purchase of Prasuma, a brand known for frozen and ready-to-cook foods.
E-commerce Growth Fuels Brand Expansion
The rise of e-commerce has played a pivotal role in shaping the FMCG acquisition landscape. New brands are emerging rapidly, leveraging online platforms to reach consumers. This influx of brands has created opportunities for larger FMCG companies to fill gaps in their offerings. Anand Ramanathan, a partner at Deloitte India, emphasized that many mainstream FMCG brands have recognized the need for innovation. “Their R&D pipeline was lacking, and inorganic acquisitions are a quick way to grow,” he stated. Reliance Consumer Products has been particularly aggressive in expanding its FMCG footprint through acquisitions. The company is focused on reviving heritage Indian brands, recently adding Velvette and Sil to its portfolio. This strategy has proven effective, with the relaunch of Campa resulting in a significant market share gain in the sparkling beverages category.
Targeting Regional Brands for Growth
As FMCG companies eye expansion into tier two and three cities, there is a growing interest in acquiring regional brands. Analysts suggest that these brands often have strong local recognition and can provide established distribution networks. Neeraj Shrimali, MD and co-head of digital and technology investment banking at Avendus Capital, noted that being part of a larger FMCG company allows these brands to access wider offline distribution channels. The ongoing consolidation in the FMCG sector is expected to continue, particularly in the beauty and personal care, food, and beverage segments. With many regional and new-age brands gaining traction, larger companies are poised to capitalize on this trend. The focus on acquiring brands with strong market recall and scalability will likely shape the future of the FMCG landscape in India.
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