Fast Moving Consumer Goods (FMCG) are non-durable goods that must be sold and consumed within a specified time frame. Due to their high demand and perishability, FMCG products are produced and sold in large quantities. These items include processed, baked, frozen, and fresh foods, beverages and sweets; toiletries; and over-the-counter medications, among others.
The recent shift in consumer sentiment toward purchasing and supporting local brands has increased the significance of local contributions to the FMCG industry and brought them to light. Local consumption reduces marketing, packaging, and transportation costs while also making it more convenient for consumers to obtain products. Due to their shelf-life, these products are frequently divided into categories. They include processed foods such as cheese, cereal, etc., as well as ready-to-eat prepared meals and/or frozen food that must be heated before consumption.
The fast-moving consumer goods (FMCG) industry has grown at a rapid rate over the years due to increasing urbanisation, a rising middle-class population, changing consumer lifestyles, and rising disposable incomes. This sector’s expansion is fueled by a number of factors, including rising disposable income levels and a rise in consumer spending power.
It is also one of the most appealing industries to investors due to its high growth potential and low levels of competition. Hindustan Unilever Ltd., Dabur, and Nestle are just a few of the major players in this industry.
The industry is transitioning from traditional grocery stores to modern retail stores such as hypermarkets, supermarkets, and convenience stores as a result of rapid urbanization and rising consumer disposable income. In addition, consumers are increasingly choosing online shopping over traditional grocery store visits due to the convenience and lower cost of online shopping compared to offline options such as supermarkets and hypermarkets.
Things to Consider Before Investing in the FMCG Stocks in India in 2022
- Present Financial Performance
As an investor, one must have a solid understanding of the company’s current financial performance before selecting the best FMCG stocks to purchase. A seasoned investor will always consider the company’s profit margins, revenue model, return on equity, and other crucial metrics before finalizing investment plans.
In the future, a company with low revenue and high-profit margins may prove to be a good investment. Similarly, if a company’s revenue has increased over the past few years, it is an indication that the trend will continue for some time, and individuals may choose to invest in it. If a company’s revenue has decreased annually over the past few years, it may be an indication that its finances and resources are struggling to grow at an acceptable rate.
- Future Growth Prospects for FMCG Shares
Investors select FMCG shares in India in order to maximise their future profits. Therefore, it is crucial to consider future growth prospects when choosing stocks to purchase. Ideally, the investor should conduct research on FMCG stocks and identify the companies with the greatest growth potential. This will ensure that the selected company will generate enormous profits in the future, resulting in a significant increase in its share prices.
- Brand Equity and Market Share
Brand equity and market share of FMCG stocks are two vital factors that can help investors determine whether or not the company can sustain its current growth rate over the long term. To determine the dependability of such FMCG shares in India, an investor must ensure that the company has a positive brand image among its immediate target market and that its market share is stable enough to maintain consistent figures over time.
- Valuation Ratios of Fast Moving Consumer Goods (FMCG) Stocks
The valuation ratios of the best FMCG stocks are used to assess the attractiveness of a company’s shares. At the time of purchase, they can be used to determine whether a stock is undervalued or overvalued. Valuation ratios assist investors in identifying buying opportunities during market phases such as downturns, sell-offs, and price declines that are significantly below their intrinsic value. Sometimes, when an economic recession or panic-selling market conditions happen because of unexpected news, the valuation ratio of stocks tends to landslide. All of these conditions must be considered before purchasing FMCG shares in India.
- Portfolio Diversification of FMCG Items
The FMCG companies with the strongest brand equity in India are those with a diverse portfolio of products that are differentiated from each other and have solid brand equity. Companies with a diverse portfolio have an advantage over competitors in the same sector.
- Consumer companies’ Supply Chain Management
Even though a seasoned investor understands that supply chain management is a company’s procedure for managing raw materials in the manufacturing phase, it is essential that they understand how a company’s supply chain maintains its efficiency. This will ensure that investors will not incur losses from investing in FMCG stocks as a result of a lack of raw materials and finished goods.
- Distribution Network of Indian FMCG Companies
A well-managed distribution network contributes to the company’s efficient operation, allowing it to reach the greatest number of its intended customers and generate greater profits through increased sales. When buying FMCG stocks in India, an investor needs to be aware of the distribution network to get a sense of how sales will go smoothly and how much of the market the company will capture.
India’s Top FMCG Stocks’ Performance
As of April 2022, the list consists of the five FMCG stocks in India with the highest market capitalization.
| Stock Name | NSE | Share Price | Market Cap |
| Hindustan Unilever Ltd | NSE:HINDUNILVR | ₹2,682.00 | ₹6.3 Lac Cr |
| Nestle India Ltd | NSE:NESTLEIND | ₹19,048.25 | ₹1.8 Lac Cr |
| Dabur India Ltd | NSE:DABUR | ₹573.05 | ₹1.0 Lac Cr |
| Godrej Consumer Products Ltd | NSE:GODREJCP | ₹906.55 | ₹92,962.6 Cr |
| Britannia Industries Ltd | NSE:BRITANNIA | ₹3,827.80 | ₹92,298.3 Cr |
Let’s take a closer look of top five FMCG stocks in India:
- Hindustan Unilever Limited
Hindustan Unilever Limited (HUL) is one of India’s largest fast-moving consumer goods companies, with a nearly 90-year history. In 1933, Hindustan Unilever was founded. It is a leading manufacturer of consumer goods and one of the largest marketing companies in India.
With over 50 brands spanning categories including fabric solutions, home and hygiene, life essentials, skin cleansing, skincare, hair care, colour cosmetics, oral care, deodorants, tea, coffee, ice cream & frozen desserts, foods, and health food drinks, the company is an integral part of the daily lives of millions of Indian consumers. Lux, Lifebuoy, Surf excel, Rin, Wheel, Glow & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Simple, Love Beauty Planet, TRESemmé, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s, Horlicks, and Pureit are among the portfolio’s leading household brands. The company has over 50,000 crores in revenue and approximately 21,000 employees (in the financial year 2021-22). HUL is a subsidiary of Unilever, one of the largest suppliers of food, home care, personal care, and beverage products in the world, with sales in over 190 countries.
- Nestle
NESTLÉ India is a subsidiary of the Swiss-based NESTLÉ S.A. Nestlé India is a vibrant company with eight factories and a large number of employees that provides consumers in India with products of international quality
Over the years, Nestle India Ltd has grown exponentially. It is a leading brand in the FMCG industry and provides a vast selection of products, including water, coffee, tea, food, and more. The company’s operations fall into four categories: beverages, comprising water and carbonated soft drinks; chocolate and confectionery, comprising chocolate confectionery products; nutrition, health & wellness, comprising infant nutrition products; and pet care.
- Dabur
As a subsidiary of Burman Family Holdings, Dabur India Ltd. (Dabur) develops, markets, and sells ayurvedic and natural healthcare products. It is one of the largest companies in India’s FMCG industry.
Health supplements, digestives, cough and cold syrups and drops, energizers, women’s health, and baby care products are included in the company’s product line. In addition, it offers hair oils, shampoos, moisturising creams and lotions, toothpaste and toothpowder, room deodorizers, fruit juices, beverages, and other products.
Dabur sells its products under the brand names Vatika, Hajmola, Dabur Amla, Odonil, and Odomos. Through organised retail chains, e-commerce platforms, and specialised channels such as beauty retail and salons, chemists, and ayurvedic pharmacies, the company distributes its products.
- Godrej Consumer Products Ltd (GCPL)
Godrej Consumer Products Ltd (GCPL) is one of India’s leading FMCG (Fast Moving Consumer Goods) companies. GCPL is a manufacturer, distributor, and marketer of fast-moving consumer goods.
The company’s product lines include household insecticides, soaps, hair colours, liquid detergents, and air fresheners. Its portfolio of products includes soaps, toiletries, cosmetics, hair care, air care, health and hygiene, household insecticides, and fabric care items. The company offers aerosol, electric, and burning insecticides for household use. Cinthol, Saniter, Godrej No. 1, Ezee, Stella, Good Knight, TCB Naturals, Darling, Bblunt, HIT, Inecto, and Nupur are some of the brands under which GCPL markets these products. The firm’s manufacturing facilities are located in Malanpur, Madhya Pradesh. Baddi in Himachal Pradesh, Guwahati in Assam, and Namchi in Sikkim. Through numerous acquisitions over the years, the company has established a strong international presence.
- Britannia Industries Ltd (BIL)
Britannia Industries Ltd (BIL) produces and distributes bakery and dairy products. The company’s product line consists of bakery items such as biscuits, bread, croissants, cakes, wafers, and rusks, as well as dairy items including milk, butter, cheese, milk-related ready-to-drink beverages, and yoghurt. BIL sells its products under a variety of brand names, including Good Day, Treat, 50-50, Tiger, Crackers, Bourbon, Milk Bikis, MarieGold, and NutriChoice. It markets and sells its products via distributors, direct sales channels, vendors, and contract packers. The company’s products are distributed throughout Asia-Pacific, the Middle East, Europe, Africa, and the Americas. It owns and operates factories throughout India. BIL is headquartered in Bangalore, Karnataka, India.
Advantages of Investing in FMCG Stocks in India
An investor can hold FMCG stocks in India for a variety of reasons, some of which are discussed below:
- Growing Demand
The best fast-moving consumer goods (FMCG) stocks in India are expanding at a faster rate than in the past due to India’s massive population of 1.3 billion, which accounts for approximately 16-17% of the world’s population. In addition, the rural population has also grown over the past few years due to its increasing consumption expenditures. As long as government policies for rural areas continue to be improved and the industrialization process is accelerated, it might be anticipated that FMCG shares in India will increase in value, thereby providing investors with substantial returns.
- Abundant Competition in the FMCG Industry
Several new market entrants, such as Patanjali, have grown exponentially over the past few years, compelling market leaders such as Dabur, ITC, and Hindustan Unilever Limited to launch newer products across the country in various segments. The higher the increase in consumption of goods, the more value is created for FMCG stocks in India.
- Innovation Model in the FMCG industry
The FMCG sector stocks have seen interesting developments in terms of innovation and development. The FMCG industry, which is fueled by start-ups, is launching all-inclusive services and products that cater to the diverse needs of the current generation and are facilitated by door-to-door delivery and online shopping, thereby satisfying the company’s need to rely on internal funds. This rigorous innovation model has helped in generating returns.
Conclusion
The FMCG market is expanding rapidly. Demand and supply are undergoing a transition in the industry at present. Consumers are now more selective and willing to invest in products of superior quality rather than higher quantities. The increasing demand for branded products has contributed to the expansion of the FMCG market. In the coming years, the Indian fast-moving consumer goods (FMCG) industry is anticipated to expand at a healthy rate due to rising disposable income, changing lifestyles, and rising packaged food consumption. The sector is highly competitive, but its high growth potential and low valuations make it an attractive investment opportunity.
Individuals can monitor top-performing stocks to determine which FMCG stock to purchase to diversify their portfolio, generate substantial returns, and meet the needs of their current portfolio. In light of the growing demand for top stocks among Indian investors, they may wish to consider these lucrative investment opportunities that satisfy both short-term and long-term portfolio needs.
Frequently Asked Questions (FAQs)
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What are some important points to consider before investing in FMCG stocks?
Important things to remember before investing in FMCG stocks:
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- Do Not Blindly Follow Tips: Never blindly implement a stock marketing tip without conducting in-depth research yourself, regardless of how reliable the source may be. Invest in stocks only after conducting thorough research and analysis of the performance and the companies. While some tips have the potential to yield enormous benefits, the wrong ones can quickly expose you to risk.
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- Eliminate Loser Stocks from Portfolio: There is no assurance that a stock will recover after a significant decline. Understand that it is crucial to be realistic about what is possible and what is not in the stock market. When you realise that a stock in your portfolio is performing poorly, you should immediately sell it to prevent further losses.
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- Do Not Abruptly Exceed Your Investment Budget: You should not exceed your investment budget. Instead, choose a fixed amount and invest it in a variety of quality stocks. Instead of investing solely in a single stock, allocate your funds across multiple well-performing stocks and shares.
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