Tuesday, February 5, 2013

FMCG: OVERSEAS ACQUISITIONS

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

“Achieving short-term growth through overseas acquisitions is difficult but not impossible. Take for instance Marico’s acquisition of South Africa’s Enaleni Pharma’s consumer division. Within two years of the acquisition, Marico has started driving immense growth from the buyout,” says D. Sadanand, Executive Director, Info Edgeline. Marico had acquired Enaleni Pharmaceuticals’ consumer division in November 2007 for Rs.93 million. Today, its brands Fiancée and Hair Code give Marico a 58.5% share in the hair creams and gels market in Egypt. Marico’s international business, which comprises of 23% of the group’s total turnover, achieved a turnover in excess of Rs.450 crore during the three quarters of FY2010. The recent acquisition of Malaysia’s Code 10 marks Marico’s entry into the South East Asian market. While Code 10 syncs perfectly with Marico’s expertise in the hair-care category; the fact that Code 10 has over 10% market share in Malaysia and a turnover of Rs.12 crore gives immense space for growth for Marico in the Rs.200 crore hairstyling market. Overall, Marico expects to achieve a growth of about 20% per annum during the next few years from its global businesses. Says Vijay Subramaniam, CEO, International Business, Marico, “Our focus on brand building in our key markets is yielding results. We’ve created winning propositions.”

GCPL, too, achieved 26% growth from its international business in the quarter-ending December 2009. GCPL had acquired South Africa’s hair-care brand Kinky in 2008 and posted revenues to the tune of ZAR 96.2 million for FY-09. And for the quarter ending December 2009, Kinky continued its strong sales growth, increasing by 39% over the corresponding period last year. During a conference call with analysts held on January 25, 2010, Dalip Sehgal, MD, GCPL said, “South African businesses have grown almost by 50% in terms of topline and that has resulted obviously in better bottomline growth as well. We have increased the footprint for Kinky, which used to sell essentially through 20-22 of our own stores; it has gone in to retail trade as well…”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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