Invest in FMCG Sector Stocks in India

FMCG sector or fast moving consumer goods sector is the fourth largest sector in India. To break it down for you, the FMCG sector comprises all the consumer goods, that are durable and not perishable, on a daily basis. Shampoos, soaps, cooking oil and other household and personal care products form a part of the FMCG sector. Companies like P&G, HUL, Patanjali are some of the best FMCG companies in India

Infact, there are two interesting insights regarding the FMCG industry in India

Household and personal care products account for 50% of the FMCG sales in India
Of the total revenue of the FMCG sector, 55% comes from the urban segment

The coronavirus pandemic has impacted the performance of almost all the sectors barring healthcare. FMCG in India has been bitten in the race too. According to a report by Nielsen, the FMCG industry’s sales value fell 34% in April from a year ago. Interestingly hypermarkets and supermarkets registered a 5% growth but the mom-and-pop stores saw a 38% contraction.

But does that mean you cannot invest in FMCG stocks right now? A great stock market investment tip is to invest during the lows. However, there is a catch. During such times when most stocks might be trading near their lower levels, it will be difficult to tell the better ones from low value stocks when all of them are in the red.

The key to any investment is research. If you conduct a bit of research on the big stocks that comprise the index, you will be able to pick some value stocks.

Here are the best FMCG stocks that have returned the most even during this pandemic-induced lockdown.

All these stocks are household names and have shown good growth potential over a period of three years. You might notice that few stocks have grown over 100% in a longer span of three years. Let’s look at the top five stocks in a bit more detail.

Nestle: If you look at Nestle India Share Price, it has shown good growth potential since it was set up in 1959. Nestle is actually a Swiss Multinational company and was first set up in Switzerland in early 1800s before it set foot in India in the 1950s. Nestle definitely tops the list of FMCG stocks in India. Some of the famous brands of Nestle are

Maggi: noodles, sauce, masala, pasta etc.
KitKat
Munch (chocolate)
Nescafe
Milkybar
Milo
Nangrow

among a few others.

Hindustan Unilever: HUL is another household name and is one of the best FMCG stocks in India. It is one of the oldest companies in India. It was founded in 1933. In its long journey it also acquired a few companies to expand its business, one example being GlaxoSmithkline. Some of the famous brands under HUL are

Annapurna Salt and Atta
Bru Coffee
Brooke Bond tea
Lux
Fair and Lovely
Surf Excel
Vaseline
Clinic Plus among others.

HUL has a well spread expansion over different categories: food, personal care, home care, water purifiers.

Godrej Consumer: Godrej Consumer is home to brands like Cinthol in soaps, Hit and Good Knight in mosquito repellant segment, Aer in room fresheners and hair colour brands as well. and more, the company was set up in 2001 and since then the Godrej Consumer share price has spiked quite a bit.
ITC: A lot of times ethical investors refrain from investing in companies that manufacture health impacting products (mainly cigarettes). This is one of the oldest companies and was incorporated in 1910. The company was earlier called Indian Tobacco Company Ltd. and was renamed to ITC Ld. in 1974. Major brands under ITC are Aashirwad Atta, Gold Flake Cigarettes, AIM matchsticks, Bingo chips, Sunfeast biscuits and Classmate range of stationery. The company also businesses outside the FMCG sector: for example hotels division. Even within cigarettes, most of the brands are with ITC: Classic, Goldflake, Navy Cut, Silk cut, Flake etc.
PnG: PnG or Proctar and Gamble is not a homegrown company but an American multinational company. It was founded in America in 1837. It operates through three companies in India: P&G Hygiene and Healthcare Ltd. and Gillette India Ltd. which are listed companies. The company also has a 100% owned subsidiary in India called Procter and Gamble Home Products.

There is a huge range of products that this company manages:

Duracell batteries
Oral b toothpaste
Head and shoulders: shampoo and conditioner range
Olay
Whisper sanitary napkins
Pampers
Gillette
Tide
Vicks
Pantene
Ariel

So if you see Procter and Gamble have products in all categories too: personal care products, home care products, hygiene and more.

Mostly the bigwigs of the FMCG industry, namely HUL and P&G have their product range well spread across categories. The health of the industry speaks a lot about the general affordability level of Indians, if Indians are being able to get access to basic necessities. Many new companies like Ramdev baba-led Patanjali have also come up in the bid to being a home grown FMCG company and to give tough competition to HUL and P&G.