THEY STARTED FROM scratch and built enviously huge business empires. The founder-promoters of some of India's largest fast moving consumer goods (FMCG) firms have a knack for identifying the perfect product at the perfect price, making it available at the perfect store, at the perfect time, with a brand name that sounds, you guessed it right, perfect.
Post-Covid, India's booming consumer spending is propelling the FMCG industry at a faster pace. After struggling with high inflation and fuel prices in last two years, the sector is poised for an era of growth, driven by innovation and demand for diverse, healthy and convenient products and services. This explains the presence of dozen-plus promoters of FMCG companies in Fortune India's Rich List this year — their combined wealth exceeding ₹5.2 lakh crore — thanks to strategic investments aided by consumer data and technology.
For instance, a stellar rally in stocks of companies named after his children took promoter and chairman of RJ Corp Ravi Kant Jaipuria's net worth to ₹83,783 crore in 2023. Rise in shares of Varun Beverages and Devyani International swelled the coffers of India's "cola king" by ₹24,578 crore. The surge has propelled Jaipuria to the 17th spot in the list of India's wealthiest individuals.
Asian Paints, a favourite of domestic as well as foreign investors, also continues to swell the fortunes of its three promoters — Ashwin Suryakant Dani, Mahendra Chimanlal Choksi, and Nehal, Bhairavi, Vivek-Abhay Vakil family. While Dani saw a 9.55% increase in net worth to ₹68,080 crore, Choksi and Vakil families saw a slight decline in their wealth, by .077% and 2.05%, respectively. Despite the downturn, the two figure among rich FMCG entrepreneurs with ₹52,606 crore and ₹50,529 crore wealth, respectively.
The promoters managed this feat despite FMCG sector volumes shrinking in each quarter of 2022 due to consumer price inflation and high base of the previous year. However, volume growth turned positive in the first quarter (January to March) of 2023, indicating a turnaround. Overall value growth for FMCG sector has been 8-10% over last two-three years.
"Most of the revenue growth has been through price hikes. In order to sustain on a long-term basis, volume growth is crucial. It was not present in last two years. Although the scenario has changed due to stable raw material prices," says Preeyam Tolia, research analyst, Axis Securities. Notably, some promoters saw a decline in their net worth. Parle Biscuits, Nirma Industries and Hatsun Agro Product are among companies whose promoters saw a dip in wealth during the year.
On the other hand, the promoter family of Berger Paints saw a 14.97% increase in wealth to ₹48,720 crore. Improved sales and margins helped the company report strong earnings in Q1 FY24. Consolidated revenue rose 9.8% to ₹3,030 crore, led by significant volume growth and strong performance by decorative paints. EBITDA margins expanded 370 bps YoY (+330 bps QoQ) to 18.4% bolstered by lower raw material prices.
Marico promoters Harsh Mariwala and Kishore Mariwala witnessed a 5.38% increase in combined net worth to ₹41,459 crore. Focus on optimising food portfolio and D2C brands helped. "Marico is diversifying by growing its food business and digital brands, although they have started seeing slight growth here only in last few years," says Ajay Thakur, research analyst, Anand Rathi Group. The company has also taken the road to premiumisation considering that its main categories have high penetration levels. "The problem with large companies such as Marico, Cadbury and Unilever is that their first product is so strong that innovations are a struggle," says Sharavana Raghavan, an FMCG sector consultant.
Talking of innovation, promoter of Patanjali Ayurved And Foods Acharya Balkrishna saw a whopping 62% jump in net worth from ₹21,141crore in 2022 to ₹34,376 crore in 2023. With an objective of attaining self-sufficiency, the company intends to source 70% palm oil from its own plantations within the next six-seven years. However, due to market-to-market losses through commodity hedging, net profit in the first quarter of FY24 dipped 64% to ₹87.75 crore from the previous year's ₹241.25 crore.
Despite being crowded and competitive, the FMCG sector remains well-positioned to face the coming challenges. "FMCG growth has been driven by entrepreneurial spirit of promoters who have set up institutional mechanisms and brought the right talent on board," says Thakur. He adds while commodity prices are softening, the companies have started digitising and focusing on distribution in rural and Tier-II/III cities. Two examples are Haldiram Snacks, which is pushing growth through robust digital investments, and Parle Products. Manohar Lal and Madhusudan Lal of Haldiram witnessed a 20.49% rise in wealth to ₹15,752 crore. As the snacks industry is highly competitive, with strong regional players, Haldiram stands out for its rapid transformation into a QSR (Quick Service Restaurants). "As a QSR, market share and EBITDA margins have a higher scope for increase," says Tolia of Axis Securities.
While it is too early to call it a complete recovery, the ebbing of the pandemic along with stabilisation of commodity prices has put FMCG consumption on road to recovery. "NSE FMCG index has registered a compounded annual growth rate of over 19% in last three years, reflecting strong demand for FMCG products," says Anand Ramanathan, partner, consumer industry leader, consulting, Deloitte India. He says FMCG companies command a high price-to-earnings ratio, which indicates the market's confidence in their earnings potential and consistent growth in demand, revenue and return on equity.
To keep up with growing demand, the industry is looking to invest in technology. Product innovation for meeting local requirements and increase in discretionary incomes will continue to drive consumption, say analysts. "Companies are developing strategies to leverage opportunities using artificial intelligence, machine learning and omni-channel distribution, while also investing in technology for higher RoI on marketing spends. Overall, the sector will continue to be attractive, powered by favourable demographics, economic development and some very progressive companies that will be focused on driving sustainable consumption," says Ramanathan. With shift to organised market, increase in rural consumption and spread of e-commerce, fortunes of promoters are likely to keep turning for the better.