FMCG makers continue to bet on M&A for growth

Fast-Moving Consumer Goods (FMCG) makers continue to bet on Mergers & Acquisitions (M&A) to diversify their product categories and digital presence.

Companies are utilizing acquisitions to solve portfolio gaps in their product offerings and enter new categories. Tata Consumer Products Limited (TCPL) in January announced the acquisition of Capital Foods and Organic India. Similarly, Marico recently acquired a 58 per cent stake in Direct-To-Consumer (D2C) Satiya Nutraceuticals Pvt Ltd and its wholly-owned subsidiary Juizo Advisory Pvt Ltd owns the brand ‘The Plant Fix-Plix’.

“We have made substantial progress but we are not there quite yet. Capital foods complement from a cuisine perspective, we cover the three cuisines; Indian with Sampann, Western with Smith & Jones and then Oriental with Capital Foods. It gets us into categories of chutney, dips, sauces, and noodles, which we did not have in our portfolio. This has filled some gaps in our portfolio but I think we still have got options to play. In the short term, we will make sure we integrate the businesses and make value but we remain quite open to organic and inorganic options to grow forward. It is not the end of the road for M&A and we still have options providing if they make sense from strategic and financial perspective. A strategic perspective means filling in gaps faster than what we can on our own on the entire roadmap,” said Sunil D’Souza, CEO and MD of Tata Consumer Products Ltd during the earnings call.

• Also read: FMCG players see sluggish growth in general trade channel in December quarter, modern trade channel sees double-digit growth

With the acquisitions, the FMCG maker is also in the process of starting its pharmaceutical distribution network, “We have Gofit and Soulful products that can sell in pharmacies but we never had the scale to put up an independent distribution system work. We have a target right now for closing and integration. We aim to integrate the businesses within three to four months of closing. The work has started on how to build the pharma channel. We had access to information, but not all of it. Now that we’ve done the signing, we will have access to almost all the information. I expect in the next three to four months for us to have a very clear view of how we will get into the pharma channel,” said D’Souza to businessline after the acquisition.

Digital growth --

With D2C acquisitions, FMCG makers have registered a jump in their digital revenues and further plan to grow their digital brands.

• Also read: Tata Consumer Products Q3 profit dips 21%

“We believe that the digital acquisitions have been immensely successful. We might not be the best in the world in creating digital brands, but Marico aims to be in the top quartile in scaling up brands profitably. We are just about starting the process of synergies, synergies within the digital brands and taking some of the digital brands to General Trade. So, if there are opportunities, we will do it. We always believe that M&A is not a substitute for organic growth. Our focus remains that we must deliver organic growth and M&A is a multiplier and not an escape button for not being able to do organic growth,” said Saugata Gupta, Managing Director and Chief Executive Officer of Marico Ltd.

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