Fast Moving Consumer Goods (FMCG): Long-term Best Buys?


(Bharat) #189

I don’t think anyone will agree with your point. Everyone has different strategies. Why do you consider yourself a savior. May be Nestle undergoes a time correction and do not give any returns in next 10 Years (As was the case with HUL). May be Hindalco can return 100% returns in one year. These issues are very subjective and everyone will have different glasses to look at the things. I would request you to go to some threads of this forum , read the posts and understand how beautiful this forum is. Follow guys like @hitesh2710 Sir , @ayushmit Sir and do learn how to remain humble and eager to learn despite good success in Markets in past. God Bless


(phreak) #190

@kb_snn has a lot of experience behind him. Request you to go through his thread. I don’t think he needs any protection. This forum can be a big help for someone willing to learn. There is no necessity to “grab attention”. If the point you are trying to make is insightful enough, it will grab attention. Please don’t underestimate people’s intelligence.


(Dinesh Sairam) #191

First, read the forum guidelines: https://forum.valuepickr.com/guidelines

Second, no. You grab attention with a constructive discussion backed by adequate proof and/or data points. Opinions are of course welcome, as long as they obey the community guidelines.

I have flagged your post for violating the community guidelines. For your sake and the sake of maintaining the quality of discussions in VP, request you to keep the guidelines in mind at all times.


(Bheeshma Sanghani, PhD) #193

Hi @amishra

If you take any random large fmcg co and compared it with TCS or an Infy, they operate with a capital employed which is a fraction of that employed by IT cos. TCS operates with a capital base of 75000cr while HUL operates with a capital base of 7000cr.

Its more difficult to deploy 75000cr than it is to deploy 7000cr. That could have a role to play in the elevated valuations.

However that said , one must be selective investing in fmcg as there is valuation risk and everything known is built into the price. Buying at these levels means that you are not getting adequately compensated for the risk you are bearing and when unobservable risk becomes observable one would be better off wearing a crash helmet.


#194

I did go through this article. But I think ITC Munger dairy products are seeing strong demand.

e.g. Their Ghee is costliest in India (costlier than Nestle as well as Amul) often goes out of stock on Amazon. It may be supply issue.

But overall they seem to have got a good grasp on Food biz. They are well connected with farmers due to agri procurement.

Market is still wide open with 78% players in unorganized section.

Their success in aata gives me confidence that they will come out with flying colours. I understand that product research is complete.


(Shailesh) #195

Since this forum is for all of us to learn I will restrict my replies to that

  1. Is business model or nestle and hindalco same … No they are not and points mentioned by you are true to an extent working capital cycle and business ROI are different as accounting of capex has been different . But why that is so you need to ponder and why that may change in future … unless these points are understood you cannot make money from both these sectors

  2. Càn you make money as investor from nestle or hindalco. Yes probably more from stock like hindalco as compared to nestle . Volatile earning gives more opportunities to active investors to make money as people tend to overreact on both sides giving to great entry and exit points

  3. On jockey vs Maggie lasting longer than aluminium demand . I doubt it . No remembers great undergarment brand of 1980s and we are not sure if we will wear smart undergarments made by àpple or google in 2050 . On food brands consumers habits have undergone huge changes in last 100 years . Will people eat unhealthy Maggie in 2050 . I don’t know. But look at commodities like gold silver iron we have been using for 1000 of years . Will we use them in 2050 . I think there is high prob we will .


(Shailesh) #197

It was fun debating, however to avoid clutter my final comments on points raised by you

I have had success and failures in both sectors FMCG and commodities over last 15 years . I made my first big money in FMCG stock ITC . This helped to become financially independent. Post that I have made big money in commodity stocks which helped me to increased my dividend income greater than corporate salary . I quit and become full time investor. From both success and failures I have put following guidelines for my FMCG investment .

FMCG IS good investment only if bought at right price not at current PE.

Even FMCG business can be disrupted so be conservative in future Gr. Projection

FMCG IS good defensive currency foŕ opportunistic investment and hence deserves to be in portfolio for this characteristic.


(Anupam) #199

GSK Consumer is not categorized as pure FMCG. Rather a mix of FMCG & Food & Health. However numbers look attractive. Esp recent quarter has been fantastic ! Sales, profit, GM% all increased.
Valuation wise much cheaper than FMCG stocks. PE of 37 and PEG of 1.06

Exiting Horlicks can complicate matters but right now its attractive.

image


(saumya) #200

Nielsen Expects FMCG To Grow At 13% In FY18, Samer Shukla Neilson South Asia executive director interview


Observation:
1.Regional FMCG player growing faster as a group
2.Entry barriers have reduced e.g… salted snacks category 100s of new entrant each year though same no move out.


(saumya) #201

Nielsen report based on Developed markets



Large brands can absolutely win back share of consumers’ wallets. Here are a few tips for success:

  • Focus on being both fast and smart
  • Prioritize your strongest innovations
  • Understand how every decision you make impacts the size of your revenue
  • Create a compelling retail story so you can gain visibility on shelf and online
  • Experiment and ideate on small number of variables, in small universe

(Ranga Kiran) #202

(saumya) #203

#204

I am trying some lateral thinking and pattern recognition here :thinking::thinking:

Looking at USA share market history, major shifts in styles have happened in last 100 years. Investing in industrial cheap stocks, paying up for brands in fmcg… to now the companies run by Tech Billionaires. Even Warren buffet had started to acknowledge missing out on top 4 valued companies of the world - Apple, Amazon, Microsoft and Google. His aversion to Tech and its longevity are cited as main reasons.

However, looking carefully at top 4 tech companies reveals something amazing…all 4 are actually Consumer Business, albeit driven by tech. They require less capital to grow, asset light, huge runway and are brands. Sounds familiar lines… we read these many times over and over again for Fmcg stocks and their enormous wealth creation capacity.Tech is an enabler, the business is still consumer.

Long live Fmcg stocks


(sachetanbhat) #205

Two central ideas behind FMCG investing is predictability and longevity. Investor believe that these businesses are long lasting and they produce predictable stream of earning. Also many people are familiar with their product. It is not only FMCG, many other businesses like Pidilite, Asian Paints are also commanding FMCG kind of valuation. But what makes Page to command premium ? I have not invested in it because I dont want to get into franchise company. No matter how good it is. Its my personal bias.
However true problem comes when we misfit non FMCG into FMCG. CCL product being one of the classic example. There is lot of excitement on CCL becoming next big thing instant coffee boy. But is it possible for CCL to invest huge amount of capital on building brand name, building supply chain, distribution network ? I dont see that happening in near future. Companies like HUL , Dabur, Nestle, P&G are well established and they give sense of security.


(ranvir dehal) #208

Crude prices have corrected more than 30% since their October highs.

Should be music to the ears of soap and detergent manufacturers… as crude derivatives like Linear Alkyl Benzene ( LAB ) and high density polyethylene ( HDPE ) are major inputs in soap/detergent making.

LAB constitutes aprox 60 % RM costs for detergents. HDPE is used in packaging.

All this should start getting reflected in q4 results ( if crude remains depressed ).

Should be party time for HUL, P&G, GCPL, Jyothy Labs etc ( not sure who took what price action in response to rising prices in Aug, Sep, Oct. Will chk and revert )

Disc: invested in GCPL and Jyothy Labs


(Ranga Kiran) #210

(Shailesh) #212

Tata steel can borrow cheaper than say Bhusan or XYZ steel company and also get better supplier credit & terms - does it make steel a FMCG product … This is wrong analogy …

FMCG is very clearly a category that is

  1. High Frequency Repeat consumption & purchase : Monthly / weekly / daily etc

  2. Low cost to overall perceived benefit - Hence people focus on value rather than price …

  3. Consumer , Influencer , customer converges @ household level ( within Family )

Hence FMCG as category does not include Asian paints ( which is consumer durable category ) , Finance ( which is a service and not goods ) etc … Lets be clear what this thread means …


(shyamutty) #213

Have a doubt regarding Godrej Consumer Products Ltd

Screener shows share capital of 102
https://www.screener.in/company/GODREJCP/consolidated/#balance-sheet

RateStar shows share capital of 68
http://www.ratestar.in/company/godrejcp/532424/Godrej-Consumer-Products-Ltd-132424

Bonus information shows 2017 (1:1) and 2018 (1:2)
https://www.moneycontrol.com/company-facts/godrejconsumerproducts/bonus/GCP

So which share capital is correct? 68 or 102?


(Adiga) #214

@shyamutty 102 is correct
Screener is showing for the month of Sep 18 and Ratestar is March 18


(Shailesh) #215

Interesting take on future of FMCG by Shiv Kumar ex CEO Pepsico India .

Good point for sector level discussions

Wake up call for FMCG.pdf (1.5 MB)