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    Competition builds up fast for FMCG companies

    Synopsis

    To be sure, RIL is not alone in articulating its FMCG ambitions. Amul India's goal, under its new CEO, is to become a total foods company and not just a dairy major. Mondelez, meanwhile, has announced plans to invest ₹4,000 crore over next four years in the Indian market. Tata Consumer Products (TCPL) has been aggressively foraying into various categories of consumer staples. Large players such as ITC straddle across most consumer categories.

    FMCGiStock
    Reliance Industries' (RIL) aggressive expansion of own consumer product brands to neighbourhood stores is expected to add to mounting competition in India's FMCG industry. By-products of stiffer competition could mean lower valuations for some existing players and, probably, some relief to the consumers at the bottom of the pyramid.

    To be sure, RIL is not alone in articulating its FMCG ambitions. Amul India's goal, under its new CEO, is to become a total foods company and not just a dairy major. Mondelez, meanwhile, has announced plans to invest ₹4,000 crore over next four years in the Indian market. Tata Consumer Products (TCPL) has been aggressively foraying into various categories of consumer staples. Large players such as ITC straddle across most consumer categories.

    At a time when rural demand is lagging the urban demand and companies are struggling to boost volumes, Reliance Consumer Products (RCPL), the FMCG arm of RIL, is reportedly rolling out household products that address the 'real India's consumer problems.' The move, if successful, could mean good quality personal care and food products available at affordable prices for rural consumers in direct competition with the regional brands.

    Competition Builds Up Fast for FMCG Cos

    Meanwhile, the mainstream FMCG players are strengthening their business structures and product portfolios to gear up for the renewed challenges such as increased competitive intensity in inflationary times.

    Britannia, Godrej Consumer Products (GCPL) and HUL (being the latest) have roped in a new CEO at the helm. Most large players have also acquired local brands or businesses and direct-to-consumer (D2C) digital brands to spruce up their existing portfolios. Companies are investing in their brands to make them omni-channel.

    Given these measures, it may not be easy for Reliance to displace the existing popular brands with its new brands. But its aggressive expansion into categories of home and personal care products through Reliance Retail and Kirana stores and through promoting home grown legacy Indian brands (like Campa Cola) may well check the market share gains of flagship brands of companies such as HUL, ITC and GCPL.

    Except for ITC, the PE valuations of most other FMCG companies have rationalised in the past few months and are likely to remain in check in the absence of any major positive trigger. Investors in the FMCG space that is typically considered to be defensive cannot maintain a passive stance as the sector has a lot of action in store.



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