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| FMCG sales abroad outpace home growth |
| Seema Sindhu / New Delhi Apr 09, 2009, 00:59 IST |
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The overseas growth rate of Indian fast moving consumer goods (FMCG) companies like Dabur, Marico and Britannia is outpacing their domestic growth. While their domestic sales have been growing around 15 per cent on an average, the overseas growth rates range between 40 and 44 per cent.
Dabur’s overseas operations, for instance, accounted for over 18 per cent of its consolidated revenues during the nine-month period ended December 31, 2008. “This was up from around 16 per cent in the 2007-08 fiscal. Dabur’s international business has been one of the key growth drivers, reporting 43.3 per cent growth during the first nine months of the current fiscal, with robust performance in Gulf Cooperation Council and North African Markets,” said Rajan Varma, executive director, Dabur India Ltd.
Sales in the GCC region grew 47 per cent. The category drivers for growth were hair cream, toothpaste, hamam zaith and olive oil. Vatika olive oil was the fastest growing brand. Dabur’s core FMCG business in the domestic market reported around 13 per cent growth, according to Varma.
Dabur this year forayed into several new markets like Algeria, Lebanon, Turkey, Mauritania and China.
Marico’s International Business Group (IBG) has been growing over 40 per cent yearly for the past three years, with a healthy mix of organic and inorganic growth, according to Vijay Subramaniam, CEO, IBG, Marico. The division contributes to about 18 per cent of the company’s turnover. In FY09, IBG was expected to clock a turnover in excess of Rs 400 crore, he added. Marico has full-fledged operations in Bangladesh, West Asia and South Africa. The IBG exports to over 20 countries.
Britannia’s overseas sales are outpacing growth in the domestic market, agreed a company spokeperson. The firm has formed a joint venture with the Khimji Ramdas Group to run two bakery product companies in the fast-growing West Asia market.
ITC and Godrej Consumer do not have a significant overseas presence.
Ashish Nanda, partner, retail and consumer products practice, Ernst & Young, says: “What works well for these companies in these markets is their consistent business model and replication of the domestic business model in similar markets.”
Ramesh Srinivas, head of consumer markets, KPMG, says: “These companies are reaping the benefit of investing in overseas markets years ago in terms of brand-building and distribution. This is also a good time to look for potential acquisitions since they will be available at reasonable valuations. Many of the companies have a robust balance sheet and reserves that will enable them to fund strategic acquisitions.”
Dabur expects the growth rates to be slightly lower because of the growing scale of operations and inability to increase prices. “There could be a resultant ripple effect of the slowdown across industries. While aggressive growth, such as in the past, may not be easy, we expect the effect on the FMCG sector to be less pronounced. Over time, we have built a loyal base of consumers and our brands are reasonably well-poised,” Subramaniam added.
Meanwhile, the companies are sticking to their expansion plans. Dabur will continue to look at new geographies and is exploring both organic and inorganic routes.
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