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FMCG majors eye neighbouring countries

Dharini Nagarajan

Similarities in tastes, consumption habits and lifestyles are key factors

New Delhi , April 4

FMCG majors Dabur India Ltd, Godrej Consumer Products Ltd and Marico Industries Ltd, who have been looking at global markets for growth, are increasingly focusing on neighbouring countries such as Nepal, Bangladesh, and Pakistan, and the West Asian region to expand their business. The shift in dynamics is primarily due to the similarities in tastes, consumption habits and lifestyles that they find in these markets. The method adopted, however, varies from company to company, ranging from joint ventures to acquisitions.

Dabur, for instance, through its subsidiary, Dabur International Ltd, has been undertaking joint ventures with foreign companies to establish presence in international markets. Its subsidiary in Bangladesh, Asian Consumer Care Pvt Ltd, recorded sales of Rs 10 crore in 2004-05. Performance of its products in West Asia and Egypt too has been promising, say analysts. On the back of strong demand and consumption, the company is looking to spruce up its international business.

Focus countries

The company has identified 20 "focus" countries, where it is evaluating the need for a manufacturing facility or marketing presence. Pakistan is one of them. A company spokesperson attributed interest in Pakistan and Nepal to "similar taste patterns". It is also scaling up operations at its Nigerian plant and has formulated structured strategies for foray into other markets.

Dabur has increased its shareholding in Dabur Nepal from 80 per cent to 97.5 per cent. It now has about six manufacturing units overseas including in UAE, Nepal, Egypt, Bangladesh and Nigeria, and expects the "focus markets" to contribute around 75-80 per cent to export revenues in the next four years.

Marico too has "developed a significant franchise beyond India".

Encouraging growth

As a result it has garnered a chunky market share in Bangladesh in the coconut oil category with its Parachute brand. The company's Rs 100-crore international business represents almost 10 per cent of the group's turnover.

"There has been 30 per cent growth year-on-year in our international business and that by itself is encouraging enough to explore other options," Mr Vijay Subramaniam, in charge of the International Business Group (IBG), said. Marico Bangladesh Ltd (wholly owned subsidiary of Marico Ltd), which last year acquired toilet soap brands — Camelia and Mangolia, envisages that the acquisition will help the group develop a "broader personal care franchise amongst the Bangladeshi consumers". The company may consider setting up manufacturing units overseas in the future. Godrej Consumer, on the other hand, has adopted a different methodology for overseas expansion. Its Executive Director, Mr H.K. Press, said, "Currently our exports contribute only 1.7 per cent to the total turnover, but we are working towards more organic growth to increase this figure." The company is scouting for acquisitions in the hair colour category in West Asia and Latin America.

According to industry analysts, most companies making a beeline for neighbouring countries understand the opportunity that such markets present. "Companies find that habits of the Indian diaspora in the Gulf or the Nepalese are no different from the Indians here and this provides them a strong platform to expand their presence."

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