Recently, a lot has been happening in the FMCG space. Companies like Hindustan Unilever, Tata Consumer Products, Marico, and ITC have all taken part in the acquisition spree of small Direct-to-Consumer (D2C) brands. They have been acquiring D2C brands right, left and centre.
But, Godrej Consumer Products (GCPL) had a different plan of acquiring a well-established business which could scale in the future.
A few weeks back, the company announced that it would acquire the FMCG business of Raymond Consumer Care. And that too for a whopping Rs 2,825 crore (US$345 million). The move was clear as Godrej also needed to scale up its business, as its competitors were doing the same.
But why did Godrej Consumer set eyes on Raymond Consumer?
Let’s find out.
The Consumer Care business of Raymond has been acquired by Godrej Consumer Products Ltd (GCPL). According to Economic Times, the Singhania family-owned Raymond group has been looking to divest its non-core business for quite some time now.
After this acquisition, GCPL’s existing product portfolio, which includes big names like Cinthol soaps, Good Knight mosquito repellents, and Godrej Expert hair colours, will be expanded to include Park Avenue men’s grooming brand, Kamasutra sexual wellness brand, and deodorant KS Spark.
But, Why Raymonds?
While the FMCG industry has been on an acquisition spree, mostly involving small deals in the D2C space, Godrej Consumer Products Ltd (GCPL) has stepped out of the trend by opting for a well-established company like Raymond, which had an annual turnover of Rs 622 crore in FY22-23, according to Moneycontrol.
But why? Well, the reason might be that most D2C brands are still young and have a specific niche. They don’t have the potential to boost an FMCG company’s revenue, especially in the short term. Also, most D2C brands are solely loss-making, which does not help the acquiring company’s bottom line.
However, most FMCG companies are not giving up on D2C brands just yet. They are still interested in D2C brands because the category in which they operate might be unique, and FMCG leaders might have very little experience setting up a whole new business in the same space. Hence, acquisition becomes a good option considering that these small brands could become sizable in the future.
An example of such a D2C acquisition spree is the acquisition of a 39% stake in Sproutlife Foods Private Limited (SFPL), the company which owns Yoga Bar.
Deodorants Segment of Raymond – A Huge Win for Godrej!
The deodorant segment in India is dominated by big brands like Fogg, Axe, Nivea, Engage, Park Avenue, and Wildstone. HUL’s Axe and ITC’s Engage have captured a significant market share.
According to Moneycontrol, the deodorant market size in India is estimated at a staggering Rs 5,000 crore. Raymond Consumer’s deodorant brands, which include the popular Park Avenue line, accounted for about 60% of its annual turnover of Rs 622 crore in FY 22-23. Hence, Godrej Consumer Products Ltd (GCPL) has projected a growth rate of over 10% YoY after acquiring it from Raymond.
What’s ahead for Godrej Consumer Products? Will the move pay off and lead to exciting growth for Godrej? Only time will tell.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information only. This is not investment advice.