×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Indian FMCG firms eye Africa to boost growth

Indian FMCG firms eye Africa to boost growth
Comment E-mail Print Share
First Published: Tue, Apr 06 2010. 01 58 PM IST
Updated: Tue, Apr 06 2010. 01 58 PM IST
Mumbai: Indian consumer firms, faced with rising competition at home, are eyeing the African market whose rising demand may help boost growth, even as higher valuations may hurt profitability, analysts and officials say.
Godrej Consumer Products Ltd. is among the early movers with recent buys in Nigeria and South Africa, while Marico Ltd., Dabur India and Emami are other firms following this trend.
“African countries are now witnessing similar growth rates in the consumer category as we have seen in India in the past years and there are not enough organised players in that market,” said Neha Pathak, an analyst with brokerage firm K.R.Choksey.
“The other advantage for Indian FMCG firms is that penetration levels (in Africa) are low and it gives them an opportunity to grow a minimum of 20 percent year-on-year”.
Africa, the second largest and second most populous continent after Asia, is home to 12-13% of the world’s population.
A United Nation’s report late March said Africa’s economy is likely to grow by an average 4.3% in 2010 from just 1.6% in 2009.
Godrej Consumer Products Ltd acquired Nigerian household brand Tura last month, followings its purchases of South African hair care brands Rapidol and Kinky over the last two years.
It continues to scout for buys in Africa, Asia and Latin America, its chairman Adi Godrej told Reuters last month.
“Kinky and Rapidol have shown growth of more than 30 percent year-on-year and the growth in that market is expected to remain robust,” said Ashish Upganlawar, an analyst with Sharekhan.
The African business accounts for nearly 8% of Godrej Consumer’s consolidated overseas revenue of 20%.
Indian companies are looking at the region to boost their topline as well as offsetting margin pressures due to rising costs and competition, at home.
Tura “will help us expand our businesses in South Africa into Nigeria and we may be able to launch some Indian products in the toilet soap field there as well,” Godrej said.
Rivals Marico, which has already acquired Egyptian haircare brand Fiancee and Dabur, which has manufacturing units in Egypt and Nigeria, are also increasing their presence in the continent, with latter looking to buying South African haircare company Isoplus, according to unconfirmed media reports.
“We are open to acquisitions in India and abroad. Overseas we are looking at the more developed markets of Africa such as Kenya, Nigeria etc,” Director, Harsh Agarwal of Emami said.
While personal care products are leading the trend at present, other categories such as household products are yet to be tapped, analysts say.
“Haircare, soaps and household product segments are the ones showing strong growth prospects now but going forward there will be a lot of other categories that will open up,” said Sharekhan’s Upganlawar.
However, industry players warned the space could get cluttered very soon with so many Indian companies turning to the continent, raising asset valuations.
“The main concern going forward will be the value at which they acquire assets,” K.R. Choksey’s Pathak said. Another problem is of regional diversity in the African continent.
“The demographics in Africa vary hugely in terms of natural resources, political stability, and economic stability,” said Debashish Mukherjee, Principal, A.T Kearney.
Comment E-mail Print Share
First Published: Tue, Apr 06 2010. 01 58 PM IST
More Topics: India | Consumer | Africa | FMCG | Takeover |