Even though India’s companies that make fast-moving consumer goods have come back and given investors modest returns, their volume growth stories have remained quiet, according to Ayaz Motiwala, senior fund manager at Nivalis Partners.
Some of these companies have dropped 10–30%, although they have come back in the past two quarters, Motiwala said. “If you look at Hindustan Unilever Ltd., Asian Paints Ltd., and others, they had indeed corrected quite a bit in the last six to nine months, therefore they’ve come back recently.”
Sales volume growth has been muted, according to Motiwala, for a variety of reasons.
“New-age challenger companies are using three-party distribution, i.e., platform companies, to reach out to consumers. That is an effective method of reaching customers, whether through a website or a marketplace,” Motiwala told BQ Prime’s Niraj Shah.
“So the route-to-market and distribution, which were the strength of the legacy FMCG companies, are being surmounted by these companies,” he said, describing the challenges consumer tech labels such as Mamaearth are posing.
“Discretionary spending on paints and home improvement products has also taken a hit,” he said. “Regional companies have also become smarter and bigger. They’ve eaten away at the share.”
“Furthermore, with COVID-19, daily consumption needs for products such as soaps and shampoos have been challenged. Dressing up and going out while working from home was a true challenge to the volume growth expected from these companies,” Motiwala said.