September 24, 2024
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Stock Market

Best FMCG stocks in India 2024 to add to your watchlist!

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Stock Market

Best FMCG stocks in India 2024 to add to your watchlist!

India’s fast-moving consumer goods (FMCG) sector faces a dynamic landscape in 2024, with companies navigating shifting consumer preferences, rural demand fluctuations, and digital transformation. This analysis article examines the top FMCG stocks, evaluating their financial performance, market positioning, and growth strategies. We’ll explore how industry leaders adapt to challenges and capitalize on opportunities in India’s evolving consumer market.

Industry Overview Of FMCG

India’s food processing and FMCG sectors are experiencing robust growth, with the market projected to reach US$ 547.3 billion by 2028. Digital advertising is flourishing, particularly in the FMCG industry. The dairy sector anticipates strong revenue growth, driven by consumer demand and increased raw milk supply.

Entrepreneurs benefit from government-designated agro-processing clusters, reducing setup costs. E-commerce has expanded the market reach for FMCG businesses nationwide. The government supports growth through PLI schemes, allocating US$ 976 million to enhance domestic competitiveness and promote exports.

The 2023–24 Union Budget aims to revitalize rural demand by boosting disposable income and investing in rural infrastructure, fostering long-term job creation and sector development.

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Best FMCG stocks In India 2024

Hindustan Unilever(HUL)

Hindustan Unilever(HUL) stands as India’s largest fast-moving consumer goods (FMCG) company and operates as a subsidiary of Unilever, a global leader in food, home care, personal care, and refreshment products. Established on October 17, 1933, initially as Lever Brothers India Ltd, HUL has undergone significant evolution throughout its 90-year history. The company has become a household name across India, with its products reaching an impressive 9 out of 10 households.

HUL’s founding entities include Lever Brothers, United Traders Ltd., and Hindustan Vanaspati Mfg. Co. Ltd. The company’s business is primarily focused on the FMCG sector, encompassing three main segments: Home Care, Beauty & Personal Care, and Foods & Refreshment. With manufacturing facilities spread across the country, HUL’s operations are predominantly centered in India, where it has established a strong market presence and consumer loyalty.

Revenue Growth: HUL has shown modest revenue growth of 2.17% year-over-year, with revenue increasing from ₹60,580 crores in the year 2023 to ₹61,896 crores in the year 2024, indicating steady performance in a competitive market.

Profitability: Net profit has increased by 1.37%, rising from ₹10,143 crores in the year 2023 to ₹10,282 crores in the year 2024. This increase is slightly lower than the revenue growth rate, suggesting some pressure on margins, possibly due to increased costs or competitive pricing.

Operating Profit Margin (OPM): The OPM has improved from 24% to 25%, indicating better operational efficiency or favourable input costs.

Borrowings: There’s a significant increase in borrowings of 22.00%, rising from ₹1,137 crores in the year 2023 to ₹1,387 crores in the year 2024. This increase is in line with the growth in revenue and is mostly due to an increase in lease liabilities, which could be supporting expansion of the business.

Future Outlook

1. Market Dynamics:

FMCG and rural demand are expected to improve gradually.
HUL should monitor rural demand closely.

2. Pricing and Margins:

Near-zero price growth is expected if commodity prices stay stable.
Vigilance on commodity prices is necessary.
EBITDA margins are expected to remain stable.

3. Growth Strategy:

Focus on competitive volume-led growth.
Emphasise volume growth and market share expansion.

4. Investment and Innovation:

Continue investing in brands and strategic priorities.
Maintain investment in brand building and innovation.

5. Operational Efficiency:

Emphasise cost savings through the Net Productivity Programme.
Optimise the program to improve margins.

6. Market Expansion and Digital Transformation:

Explore new product categories or deepen market penetration.
Invest in digital capabilities for operations and customer engagement.
align with global sustainability trends.

Key Metric

Nestle India

Nestle India, a subsidiary of the Swiss multinational Nestle, is a prominent player in the Indian food industry. Incorporated in 1959, it was promoted by Nestle Alimentana S.A. through its wholly owned subsidiary, Nestle Holdings Ltd. While Nestle India was established in the mid-20th century, it’s part of a rich heritage dating back to 1866, when Henri Nestle, a German-Swiss pharmacist, founded the parent company in Switzerland.

The global Nestle company as we know it today was formed in 1905 through a merger of Henri Nestle’s venture with the Anglo-Swiss Milk Company. In India, Nestle operates primarily in the food segment and has established itself as a top-tier player in various product categories, including milk products and nutrition, beverages, prepared dishes and cooking aids, and chocolate and confectionery. The company boasts an extensive distribution network with over 10,000 distributors and reaches 5.2 million outlets across the country.

Revenue Growth: Nestle India has shown exceptional revenue growth of 44.43% year-over-year, with revenue increasing from ₹16,896.96 crores in 2022 to ₹24,393.89 crores in 2024. This indicates strong market performance and demand for its products.

Profitability: Net profit has increased by an impressive 64.52%, rising from ₹2,390.52 crores in 2022 to ₹3,932.84 crores in 2024. This outpaces revenue growth, suggesting improved operational efficiency and possibly favourable input costs.

Operating Profit Margin (OPM): The OPM has improved from 23.22% in 2023 to 24.33% in 2024, indicating better operational efficiency despite the significant growth in revenue.

Borrowings: Borrowings have increased by 27.36%, rising from ₹2,705.2 crores in 2022 to ₹3,445.3 crores in 2024. This increase is considerably lower than the growth in revenue and profit, suggesting that the company is funding its growth primarily through internal accruals.

Disclaimer: Nestlé India changed its financial year to April-March in 2023. The 2023-24 report covers 15 months (Jan 2023-Mar 2024). Figures aren’t directly comparable to previous 12-month periods due to this transition.

Future Outlook

1. Demographic Dividend:

India’s large Gen Z population presents a significant opportunity but also a challenge in meeting their demand for purpose-driven brands.
The growing ageing population investing in personal well-being offers another key market segment.

2. Innovation and Product Development:

Continuous investment in brand building and new product launches.
Focus on expanding the nutritional profile of the product portfolio.

3. Rural market expansion:

Significant growth potential in rural areas due to improving infrastructure and increasing purchasing power.

4. Premiumization:

Growing trend of premiumization, especially in top 100 cities.

5. Technology Integration:

Increasing role of AI in various business aspects, from sourcing to customer engagement.

6. Distribution Network:

strong partnerships with over 2,000 distributors.

Key Metric

Britannia Industries

Britannia Industries, established in 1892 in Kolkata, India, has evolved into a leading fast-moving consumer goods(FMCG) company, particularly renowned for its diverse range of bakery and dairy products. With a rich history spanning over 130 years, Britannia has become a household name in India.

The company is part of the Wadia Group, a prominent Indian conglomerate. Britannia’s leadership includes Nusli Wadia as the Chairman and Varun Berry serving as the Executive Vice-Chairman and Managing Director. This combination of heritage and modern management has positioned Britannia as a key player in the Indian FMCG sector.

Revenue Growth: Britannia has shown modest revenue growth of 2.87% year-over-year, increasing from ₹16,300.55 crores in 2023 to ₹16,769.27 crores in 2024, indicating steady performance in a competitive market.

Profitability: Net profit has decreased by 7.86%, from ₹2,316.33 crores in 2023 to ₹2,134.22 crores in 2024, despite the increase in revenue. This suggests pressure on margins, possibly due to increased costs or competitive pricing strategies.

Operating Profit Margin (OPM): The OPM has improved from 21% to 20%, indicating a slight decline in operational efficiency, the same as the decrease in net profit. This suggests that the company has managed to control its operational costs from going down further effectively.

Borrowings: There’s a significant decrease in borrowings from ₹2,997.37 crores in 2023 to ₹2,064 crores in 2024, a reduction of 31.14%, which is a positive sign indicating improved financial health and reduced dependence on debt.

Future Outlook

1. Brand Investment and Innovation:

The company is stepping up investments in brands and innovation.
Continue to allocate resources to R&D and marketing to stay ahead of changing consumer preferences and maintain brand relevance.

2. Cost Efficiency:

Delivered cost efficiencies across functions.
Maintain focus on operational efficiency to improve profitability without compromising product quality.

3. Competitive Pricing:

The company remains vigilant of competitive pricing actions.
Regularly review pricing strategies to maintain a balance between market share growth and profitability.

4. Commodity Situation:

Closely monitoring the commodity situation and assessing its impact.
Develop robust forecasting models and consider hedging strategies to mitigate the impact of commodity price fluctuations.

5. Competitive Challenges:

acknowledged headwinds from increased competition, particularly in the cheese segment.
Aim to reduce pricing premiums in certain segments.

6. Volume Growth:

Management is optimistic about achieving high single-digit volume growth.

Key Metric

Dabur India

Dabur India, founded in 1884 by Dr. S.K. Burman in Kolkata, has grown to become the fourth largest FMCG company in India and the world’s largest Ayurvedic and Natural Health Care Company. The name “Dabur” originates from “Daktar Burman,” reflecting the founder’s background as a physician committed to making healthcare accessible to the masses, particularly in rural areas.

With a portfolio of over 250 herbal/ayurvedic products, Dabur has established itself as a leading player in the consumer care and food products sector.

Revenue Growth: Dabur India has shown a solid revenue growth of 7.58% year-over-year, increasing from ₹11,529.89 crores in 2023 to ₹12,404.01 crores in 2024, indicating strong market performance and demand for its products.

Profitability: Net profit has increased by 6.47%, from ₹1,701.33 crores in 2023 to ₹1,811.31 crores in 2024, slightly lower than the revenue growth rate. This suggests that the company has maintained its profitability while expanding its operations.

Operating Profit Margin (OPM): The OPM has remained stable at 22%, indicating consistent operational efficiency despite the growth in revenue and increased competition.

Borrowings: There’s an increase in borrowings from ₹1,173.79 crores in 2023 to ₹1,365.09 crores in 2024, a rise of 16.30%, which is higher than the growth in revenue and profit. This could indicate investments in expansion or working capital needs.

Future Outlook

1. Consumer-centric engagement:

Focus on consumer-centric engagement initiatives and strengthening doctor advocacy channels.

2. Marketing and Brand Building:

Increased A&P expenditure by 16%, with over 30% allocated to digital marketing.

3. Distribution Expansion:

Ongoing investments in distribution expansion to drive sustainable growth.

4. Product Innovation:

Plans to introduce premium offerings in oral care and expand the Odomos brand into new categories.

5. Competitive Landscape:

Increased competition in the hair oil segment, with price pressures from new entrants.

6. Health and Wellness Trend:

Leverage Dabur’s strong position in Ayurvedic and natural products to capitalise on growing health awareness.

Key Metric

Marico

Marico, founded by Harsh Mariwala, is a prominent Indian multinational consumer goods company headquartered in Mumbai. Established on October 13, 1988, initially as Marico Foods Limited, the company rebranded to Marico Industries Limited in 1989 and went public in 1996.

Marico specialises in health, beauty, and wellness products, operating in over 25 countries across emerging markets in Asia and Africa. The company has built a strong portfolio of leading brands across various categories, including hair care, skin care, edible oils, healthy foods, male grooming, and fabric care.

Revenue: Marico experienced a slight decrease in revenue of 1.14% year-over-year, from ₹9,764 crores in 2023 to ₹9,653 crores in 2024, indicating some challenges in the market or specific product segments.

Profitability: Despite the revenue decline, net profit increased significantly by 13.62%, from ₹1,322 crores in 2023 to ₹1,502 crores in 2024. This suggests successful cost management and possibly improved product mix or pricing strategies.

Operating Profit Margin (OPM): The OPM has increased from 20% to 22% for FY24, demonstrating consistent operational efficiency despite market challenges.

Borrowings: There’s a notable decrease in borrowings from ₹608 crores in 2023 to ₹528 crores in 2024, a reduction of 13.16%, which is a positive sign indicating improved financial health and reduced dependence on debt.

Future Outlook

1. Revenue Growth Target:

aiming for double-digit consolidated revenue growth.

2. Margin Maintenance:

Expect to hold operating margins at FY ’24 levels despite mild inflation in commodities.

3. Sustainability Focus:

commitment to the Sustainability 2.0 framework across eight themes.

4. Portfolio Optimisation:

Challenges in certain segments, like value-added hair oils.

5. Cost Optimisation:

Anticipated improvement in margins through structural levers and ongoing cost optimisation initiatives.

6. Innovation in Health and Wellness:

Capitalise on growing health awareness trends.
Invest in R&D to develop innovative health and wellness products, potentially expanding the Saffola brand beyond edible oils.