Ayaz Motiwala on what is the weak FMCG sector

Even though India’s FMCG companies have bounced back and given modest returns to investors, their volume growth stories have remained muted, according to Ayaz Motiwala, chief fund manager at Nivalis Partners.

Some of these companies have fallen by 10-30%, although they have come back in the last two quarters, Motiwala said. “If you look at Hindustan Unilever Ltd., Asian Paints Ltd., and others, they had definitely corrected quite a bit in the last six to nine months, that’s why they have come back recently.

Sales growth has been muted, according to Motiwala, for a number of reasons.

“New-age challenger companies are using third-party distribution, ie platform companies, to reach consumers. It is an effective method of reaching customers, whether through a website or a marketplace,” Motiwala told BQ Prime’s Niraj Shah.

“So the go-to-market and distribution, which was the strength of the older FMCG companies, is being overcome by these companies,” he said, describing the challenges posed by consumer technology brands like Mamaearth.

“Discretionary spending on paint and home improvement has also taken a hit,” he said. “Regional companies have also become smarter and bigger. They have eaten up the lot.”

“Furthermore, with COVID-19, the daily consumption needs for products such as soaps and shampoos have been challenged. Getting dressed and going out while working from home was a real challenge for the volume increase expected from these companies,” said Motiwala.

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