FMCG Companies Eye Bigger Acquisitions In 2025 Acquisitions and strategic investments will continue to be an important part of large conglomerates growth strategy in 2025

It's all about spotting the right opportunity. Well, timing does matter: A right deal at the wrong time or vice-versa can strip companies of their success. So, what makes a difference? Identifying future trends and taking action! One such trend is Mergers and Acquisitions (M&A). Fast-moving consumer goods (FMCG) companies are setting the benchmark. These heavyweights are high on M&As, seeking growth, expanding market share, accessing new technologies, and building stronger portfolios.

With rapid digitalization becoming the future for marketing and distribution, companies expect exponential growth from new-age businesses and channels. Investments in such brands help large companies to be present in categories where it's absent. Through partnerships, companies get a ready presence. For instance, in August 2024, Emami Limited acquired the remaining 49.6 percent stake in Helios Lifestyle, the parent company of the men's grooming brand, The Man Company, making Helios a wholly-owned subsidiary of Emami.

"D2C start-ups are an emerging growth segment in the FMCG space. Building deep relationships with digitally savvy millennials and Genz consumers through contemporary products, categories and brands, helps position Emami well for the future. The promoters of the D2C companies bring in a lot of passion with strong understanding of the online & digital space, which are necessary for growing the business aggressively. We review them quarterly, extend our support in terms of resource, connectivity, and investment as well as help them in achieving operational excellence," said Harsha V Agarwal, vice chairman & MD, Emami Ltd.

Companies always look for targets which are synergistic and make a good strategic fit with their existing business. Dabur's strategic intent to expand its food business to INR 500 crore and grow into new adjacent categories led it to acquire Badshah. This move marked Dabur's entry into the over INR 25,000 crore branded spices and seasoning market in India. "We are quick to assimilate the acquired businesses and grow them, as was visible with the acquisition of Balsara and Fem in the past. We continue to invest in not just expanding the production capacity for the acquired businesses but also in scaling up their reach," said Ankush Jain, CFO, Dabur India Limited.

The recent acquisitions of Capital Foods and Organic India by Tata Consumer Products establish the Tata company's strategy to broaden the product portfolio and enter high-growth, high-margin categories. Capital Foods owns Ching's Secret- a market leader in Desi Chinese across its product categories and Smith & Jones - a fast-growing brand catering to in-home cooking. "This enables us to strengthen our pantry platform in the fast-growing culinary and convenience foods space. Organic India allows us to tap into the increasing consumer demand for organic and wellness products, helping create a strong health & wellness platform. Our aim is to unlock the growth potential for these brands by leveraging our distribution network, scaling their operations, and driving innovation. These acquisitions expand our target addressable market," said Ajit Krishnakumar, executive director & chief operating officer, Tata Consumer Products.

Organic India's product portfolio spans across premium and high growth categories focused on sustainable living - Herbal Supplements, Tea & Infusions and Organic Packaged Foods.

Will There Be More Acquisitions in 2025?

Globally, macroeconomic uncertainties, financing challenges, and misaligned expectations around price between sellers and buyers muted M&A activity in consumer markets in the past two years. According to a Global M&A Trends in Consumer Markets report by PwC, in 2024, consumer markets deal volumes were 16 percent lower than in 2023, but deal values increased 13 percent, highlighting the impact of several larger deals that were announced during the past year. Last year, in the Asia Pacific market, India was an outlier, with deal volumes and values increasing by 11 percent and 40 percent, respectively, over the prior year.

As we begin 2025, some of the negative factors are easing and India's commitment looks promising. Acquire and Grow Approach has always been a long-term strategy of growth for Emami Ltd. "Acquisitions and strategic investments will definitely continue to be an important part of our growth strategy and we are, as always, open to any such opportunity that has some synergy with our core values," said the MD of Emami.

Talking about investments in the acquired brands, he explained, "Though strategic partnerships offer Emami an opportunity to raise stake as well as to acquire them, however, such investments are always need-based. There is no such fixed capex target for the same. Currently, both Brillare and The Man Company have become our fully owned subsidiaries."

In the short term, Tata Consumer Products' growth strategy in 2025, is focused on unlocking value from the recent acquisitions. In the long term, it will rely on both organic and inorganic growth. "We will continue to evaluate and undertake value-accretive inorganic opportunities in line with our growth roadmap. On investments, we have enough capacity in the near term and any further expansion would be in line with our capital-light strategy," explained Krishnakumar of Tata Consumer Products.

For Dabur India, acquisition is a key pillars of future outlook. "We have a war chest ready for future acquisitions. We are open to acquisitions within our categories in India. While we keep evaluating a number of options, we do not have anything on our plate immediately," said the CFO.

The first quarter of 2025 has already seen a wave of acquisitions with leading companies making strategic moves. Taking advantage of subdued market conditions and rational valuations, major players such as HUL, ITC, Reliance Consumer Products, and Adani Wilmar have expanded their portfolios by acquiring emerging and mid-sized brands. HUL acquired Minimalist, a new-age beauty brand, for INR 2,955 crore. ITC strengthened its food portfolio by acquiring Prasuma, a frozen and ready-to-cook food brand. Reliance has also been reviving heritage brands. Adani Wilmar is aggressively expanding in packaged foods and staples with the acquisition of G.D. Foods, a sauces and pickles company, and the owner of the brand Tops.

How To Seal the Deal?

Emami's inorganic growth strategy is based on the objective of being present in sectors that have the potential for good growth opportunities giving it a competitive edge. The company looks for acquisitions that have the potential to complement or supplement its market positions. "Brands that have a unique business model or have a source of sustainable competitive advantage, would fall within our consideration, although within the identified areas of strategic interest. A critical criterion would be whether the business has the potential to enhance shareholder value in the long run. For any possible partnerships, we look for businesses that are intrinsically in line with our investment strategy and can add meaningful value to our market standing," said the vice chairman.

Strategic fit plays a crucial role when it comes to acquisitions. The brand has to align with the company's current portfolio and long-term growth ambition. Another critical aspect is the market potential – is it a category that offers high growth and profitability? "Operational synergies with our front and back-end are also a key factor since this will help scale acquired brands faster and unlock efficiencies across the value chain. Also, brand equity and the USP of the brand are important considerations- is it a product that has a differentiated advantage in the marketplace? Finally, the business needs to tick the boxes when it comes to our financial criteria," said Krishnakumar.

Low volume growth in FMCG is now a matter of past quarters. Phillip Capital report indicates that the FMCG sector is well-prepared for market uncertainties. The area anticipates improvement in upcoming quarters with a positive outlook for fiscal year 2026, particularly in the context of a recovering urban market and a shift towards premium and sustainable products. The impact of high inflation, slow urban demand, and costly raw materials is beginning to ease. Furthermore, rural demand is expected to improve, supported by another good monsoon; this coupled with the tax benefits announced in the recent Union Budget will boost consumption. When consumers are spending more, businesses, especially in consumer goods, experience increased revenue and profitability. This encourages companies to explore opportunities to grow further through M&A, potentially acquiring competitors or expanding into new markets.