Steering the expansion drive by way of inorganic growth opportunities seems to be the latest obsession amongst home-grown FMCG companies. But is it a viable strategy? Savreen Gadhoke finds out
“And the sea will grant each man new hope . . . his sleep brings dreams of home,” said the master of exploration, Christopher Columbus about the joys of going beyond borders in search of new pastures.
After years of exploring products and markets (including rural) within home territoy, Indian FMCG players seemed to have inculcated a ‘Columbus’ spirit of late. They are now expanding their reach to overseas markets through inorganic expansion. And this acquisition drive has gained momentum in the last one year.
Consider this: In July 2009, Godrej Consumer Products Ltd. (GCPL) acquired a 49% stake in Godrej Sara Lee for Rs.2.14 billion. Marico recently acquired Malaysia’s third largest hair-styling brand, Colgate-Palmolive’s Code 10 for Rs.250 million and Wipro Consumer Care & Lighting (FMCG arm of Wipro) acquired the Yardley business from UK-based Lornamead Group for Rs.2.14 billion. Even other domestic FMCG players like Dabur, Emami, et al, are vying for overseas acquisitions. For instance, Dabur India has set aside a sum of $250-500 million for its foreign buy-outs, and Emami Ltd. is planning to spend Rs.8 billion for an acquisition in US. GCPL, too, has announced plans to raise a whopping Rs.30 billion (both through debt and equity) to acquire large & small firms in both local & international markets.
The valuations of international FMCG companies have gone down in the last two years, thanks to the financial tsunami, making them vulnerable to take-over attempts. Overseas buyouts do lead to faster and positive growth, drive shareholder’s value, establish presence in foreign markets, increase size of the customer base and enhance the product portfolio. But at the same time, these acquisitions may also put a strain on the balance sheets of domestic FMCG companies, as ROIs may not give desired results. So is an aggressive approach to such acquisitions apt?
“And the sea will grant each man new hope . . . his sleep brings dreams of home,” said the master of exploration, Christopher Columbus about the joys of going beyond borders in search of new pastures.
After years of exploring products and markets (including rural) within home territoy, Indian FMCG players seemed to have inculcated a ‘Columbus’ spirit of late. They are now expanding their reach to overseas markets through inorganic expansion. And this acquisition drive has gained momentum in the last one year.
Consider this: In July 2009, Godrej Consumer Products Ltd. (GCPL) acquired a 49% stake in Godrej Sara Lee for Rs.2.14 billion. Marico recently acquired Malaysia’s third largest hair-styling brand, Colgate-Palmolive’s Code 10 for Rs.250 million and Wipro Consumer Care & Lighting (FMCG arm of Wipro) acquired the Yardley business from UK-based Lornamead Group for Rs.2.14 billion. Even other domestic FMCG players like Dabur, Emami, et al, are vying for overseas acquisitions. For instance, Dabur India has set aside a sum of $250-500 million for its foreign buy-outs, and Emami Ltd. is planning to spend Rs.8 billion for an acquisition in US. GCPL, too, has announced plans to raise a whopping Rs.30 billion (both through debt and equity) to acquire large & small firms in both local & international markets.
The valuations of international FMCG companies have gone down in the last two years, thanks to the financial tsunami, making them vulnerable to take-over attempts. Overseas buyouts do lead to faster and positive growth, drive shareholder’s value, establish presence in foreign markets, increase size of the customer base and enhance the product portfolio. But at the same time, these acquisitions may also put a strain on the balance sheets of domestic FMCG companies, as ROIs may not give desired results. So is an aggressive approach to such acquisitions apt?
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
