Conservative equity investors prefer FMCG stocks for investment due to their stable growth and regular dividend payouts. They are also ideal to add stability to your overall portfolio.
Should you consider investing in the stocks of best FMCG companies in India to build an all weather portfolio?
In this article let’s take a detailed look at:
What are FMCG companies?
Why FMCG stocks are considered defensive bets?
Best FMCG companies in India for investment
What are FMCG companies?
Products that sell quickly due to relatively low cost and high consumer demand are known as FMCG or Fast Moving Consumer Goods. Products under the FMCG category generally have a short shelf life (packed food products), are purchased repeatedly, consumed rapidly, and have a high turnover rate on shelves at stores.
FMCG goods can be further classified into different categories such as:
- Processed foods such as biscuits, pasta, instant noodles, jams, sauces, etc.
- Ready-to-eat meals
- Beverages such as health drinks, mineral water, energy drinks, and packed juices
- Baked food products such as bread, cookies, etc.
- Frozen foods such as frozen peas, and dry fruits such as almonds, raisins, dates, etc.
- Cosmetics and toiletries: Haircare products such as shampoos, hair colours, hair conditioners, beauty, and makeup products, toothpaste and dental care products, soaps, perfumes, deodorants, etc.
Why FMCG stocks are considered defensive bets?
Irrespective of the economic conditions in a country, people buy fast-moving consumer goods due to basic necessity.
While consumption of food products, beverages, beauty, and hygiene products generally increases during the bullish phase of an economy, people continue using such products even during an economic downturn. During a recession, people may resort to switching to cheaper alternatives for a particular product. For example, a person buying a toothpaste priced at INR 100 may buy a cheaper alternative to it but would not completely stop using toothpaste.
Even at the height of the 2008 global financial crisis when America\’s Standard & Poor\’s 500 witnessed its 2nd ever worst crash in history on 15th October 2008 there was one stock that ended in positive. It was none other than the stock of Coca-Cola which ended in positive. Even as most stocks across global markets were hammered badly the stock of Coca-Cola went against the trend as it had beaten market estimates and there was an increase in its revenues.
Best FMCG companies in India for investment
|
Company |
Dividend Yield (%) |
Profit Growth (5 yly %) |
Debt to Equity Ratio |
Sales growth ( 5 yly % ) |
5 year Returns (%) |
|
Hindustan Unilever |
1.04 |
13.32 |
0.00 |
4.47 |
23.16 |
|
Nestle India |
1.13 |
18.65 |
0.07 |
10.31 |
24.24 |
|
Dabur India |
0.54 |
7.56 |
0.06 |
2.18 |
17.46 |
|
Britannia Industries. |
3.80 |
20.28 |
0.92 |
8.10 |
23.22 |
|
Godrej Consumer |
0.81 |
11.40 |
0.15 |
3.68 |
10.03 |
|
Marico |
1.81 |
13.12 |
0.09 |
4.99 |
10.46 |
|
Colgate-Palmolive |
2.39 |
7.86 |
0.06 |
2.59 |
14.16 |
|
P & G Hygiene |
0.80 |
4.21 |
0.00 |
5.16 |
15.55 |
|
Varun Beverages |
0.50 |
30.02 |
0.91 |
13.70 |
N.A |
|
Emami |
2.32 |
-11.89 |
0.11 |
5.04 |
1.58 |
Hindustan Unilever
Hindustan Unilever Ltd. (HUL) is the Indian subsidiary of Unilever, an international FMCG giant and is India’s largest fast-moving consumer goods company with over 85 years of heritage in the country.
The company offers 44 brands across 14 distinct categories such as soaps, detergents, shampoos, skin care, toothpaste, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers. Some of its popular brands in the household consumer goods segment includes Surf Excel (detergent), Lux and Lifebuoy, Dove (hygiene), Pond’s, Vaseline, Lakmé (beauty products), Pepsodent, Closeup (toothpaste), Brooke Bond (tea), Bru (coffee) and Pureit (water purifier).
Nestle India
Nestle India is the Indian subsidiary of the largest food and beverage company in the world, Nestle. The company has a loyal customer base for its wide range of products such as chocolates, breakfast cereals, confectionaries, pet food, dairy products, infant foods, nutritional drinks, coffee, beverages, seasonings, soups, sauces, frozen and refrigerated foods.
Some of Nestle’s popular brands in the packed food segment include Nescafe (coffee), Kitkat (chocolate), Cerelac (infant food), and Maggi (instant noodles).
Dabur India
Founded in 1884, Dabur India is an Indian multinational consumer goods company, which manufactures natural consumer products and ayurvedic medicines. Dabur is one of India’s largest FMCG companies that offers hair care, dental care, health care, skin care, home care, and packed foods. The company has a well-established distribution network and a high penetration in both urban and rural markets.
Its popular brands include Dabur Chyawanprash (immunity booster), Dabur Pudin Hara (for stomach disorders), and Dabur Hajmola (digestive tablet).
Britannia Industries
With a 100-year legacy, Britannia Industries is one of India’s leading FMCG companies and offers a wide range of products such as biscuits, bread, cakes, rusk, and dairy. The company is a market leader in the organized bread market in the country. Britannia has a global presence in more than 60 countries across the globe.
Some of its popular brands include Good Day, Tiger, Nutrichoice, Milk Bikis and Marie Gold in the biscuits segment.
Godrej Consumer Products
A group company of the 123-year-old Godrej Group, Godrej Consumer Products offers products in three categories such as hair care, home care, and personal care.
Its popular brands include Godrej Fair Glow, Cinthol, Godrej No.1 in personal care, Godrej Hair Dye in hair colour, and Ezee in liquid detergent.
Marico
Marico Limited is a leading consumer goods company in India offering products across categories such as health, beauty, and wellness. With a global presence in over 25 countries across Asia and Africa, the company offers a variety of products for hair and skincare, edible oils, healthy foods, hygiene, male grooming, and fabric care. Parachute, Saffola, Livon, Set Wet, Veggie Clean, Revive and Beardo are some of its well-known brands that have become a household name across India.
Colgate-Palmolive
Colgate-Palmolive (India) Ltd is a subsidiary of American FMCG major Colgate-Palmolive and mainly offers consumer products in the oral care and body care segment. Colgate-Palmolive’s product offerings include cosmetics, toothpaste, toothbrushes, shaving brushes, shaving creams, and soaps.
Procter & Gamble Hygiene & Health Care Limited
Procter & Gamble Hygiene and Health Care Limited is engaged in the business of manufacturing and marketing branded packaged FMCG products in the healthcare and female care segment. Some of its iconic brands include Pampers (baby diapers), Arial and Tide (fabric care), Head & Shoulders, and Pantene (haircare)
Varun Beverages
Varun Beverages is a leading player in the Indian beverage industry and the second-largest franchisee of PepsiCo in the world (outside America) for carbonated soft drinks and non-carbonated beverages. Some of its popular brands in India include Pepsi, Seven-Up, Mirinda, Mountain Dew, Tropicana Frutz, and Aquafina.
Emami
Established in 1974, Emami is one of India’s leading and fastest-growing FMCG companies in the personal and healthcare segment. The company offers a wide range of products based on ayurvedic formulations and has a global presence across 60 countries.
Its popular brands include Fair and Handsome, BoroPlus, Navratna, Zandu Balm, Fast Relief, Menthol Plus Balm and Kesh King.
Disclaimer: The stocks mentioned in the above list is only for information purpose and should not be considered as a recommendation to buy or invest.
Bottom line: Should you include the best FMCG stocks in India in your portfolio?
FMCG stocks in India are good defensive bets which can add stability to your portfolio. Such stocks can generally withstand any recession as well as generate passive income due to consistent dividend payouts.
However, to compound your wealth at a faster pace a well-diversified portfolio also needs high growth stocks.
Our team of experts can help you to identify and invest in stocks of solid, high-growth businesses, that have the potential to grow up to 4-5 times or more in 5 years. Know more.
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