Mukesh Ambani and Gautam Adani
Had anyone ever thought that despite having companies like Hindustan Unilever and ITC, Ambani, Adani and Tata would have to fight the battle of oil, soap and shampoo? Now this is being seen. It is this power of the consumer market that has brought the big corporates of the country to their level. Big corporate giants like Mukesh Ambani’s Reliance Industries, Gautam Adani’s Adani Group and Tata are expanding in the fast moving consumer goods (FMCG) sector. On the other hand, the current leaders of the sector, Hindustan Unilever and ITC are planning to move ahead with new expansion strategies. Let us tell you in detail about this war.
Bets by Tata, Ambani and Adani
To capture a larger share of the Indian consumer goods market, Reliance is preparing to inject a massive capital of up to Rs 3,900 crore into its consumer goods division through equity and debt to enable it to compete with Hindustan Unilever, ITC, Coca-Cola, Adani Wilmar and others.
On the other hand, Adani is also planning to double down on the consumer goods business by increasing capital expenditure. According to recent media reports, Adani Wilmar, the consumer goods company of the Adani Group, could buy at least three spices, packaged food products and ready-to-cook brands to increase its presence in the fast-growing consumer packaged goods market. A $1 billion acquisition fund will fuel this purchase.
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Apart from these businesses, Tata Group’s FMCG business Tata Consumer Products Limited is moving towards becoming a full-fledged FMCG company. At the same time, it has more than doubled its capital expenditure for fiscal 2025 to Rs 785 crore. The company is also looking at acquiring more businesses to accelerate growth. TCPL has recently merged its three subsidiaries Tata Consumer Soulful Private Limited, Nourishco Beverages Limited and Tata Smart Foods Limited.
Why are large groups investing in the FMCG sector?
Why are Indian corporate giants betting on a sector dominated by strong traditional leaders like HUL, ITC, Nestlé India, Britannia Industries, Godrej, Marico and Colgate-Palmolive? As India’s economy continues to grow at a high growth rate, it is projected to become the third largest economy by fiscal 2028, overtaking Japan and Germany. India’s GDP will cross $5 trillion. In which the consumer goods sector will be one of the biggest beneficiaries as the rise in disposable income is boosted. In such a situation, large corporate groups are thinking of cashing in on this opportunity.
India will be the largest market in 2030
Reliance Industries has said in its annual report that the Indian retail market is one of the fastest-growing markets in the world, and is expected to cross $1.4 trillion by 2027. India is poised to become the third-largest retail market by 2030, the report said, adding that factors such as increasing urbanisation, rising income levels, expanding female workforce and an ambitious young population are driving the growth. Apart from this, rising demand for premium and luxury products will further boost this growth.
Continuous increase in the young population.
Tata Consumer Products Limited Chairman N Chandrasekaran recently said that the Indian consumer market represents a long-term structural opportunity, driven by population, a growing middle class, rapid urbanisation, rising disposable incomes and rising aspirations. He said that India’s middle class is expected to increase from around 30 per cent to 50 per cent of the population by the end of this decade. This is about 300 million additional people entering the middle class. Moreover, rapid urbanisation, rising disposable income and rising consumer aspirations augur well for Tata Consumer Products Limited. Despite challenges like inflation and uncertain climate, the large Indian groups expanding in this sector can ignore them.
The consumer goods sector is growing rapidly
Investment bank UBS recently said in a report that India is on track to become the third-largest consumer market after the US and China by 2026, overtaking Germany and Japan, as the number of rich people is continuously increasing. Highlighting the 88 million people with an annual income of more than $10,000 by 2028, UBS said that by 2023, an estimated 40 million people in India would be in the rich category, a figure that is likely to double in the next five years.
Last year, the same prediction was made in a report by Fitch Solutions’ BMI firm. The report says India’s per capita domestic spending will be 7.8 percent higher annually compared to other developing Asian countries like Indonesia, the Philippines and Thailand. According to the report, the difference between total domestic spending in ASEAN and India will also nearly triple.
Expenses are continually increasing.
Domestic consumption has doubled over the past decade. According to the recently released Household Consumption Expenditure Survey data, the average monthly per capita consumption expenditure (MPCE) per household in rural areas increased from Rs 1,430 in 2011-12 to Rs 3,773 in 2022-23, while in urban areas, the average MPCE increased from Rs 2,630 to Rs 6,459 in 2011-12. The share of expenditure on food has declined, while the share of expenditure on non-food items has seen an increase.
This shows that Indian households have more disposable income and are spending more on discretionary goods such as clothing, shoes, transportation, education, health and entertainment. The share of food expenditure in rural India is expected to decline from 52.9 per cent in 2011-12 to 46.38 per cent in 2022-23, while the share of food expenditure in urban India is expected to decline from 42.62 per cent in 2011-12 to 39.17 per cent in 2022-23. This means that consumption of food and non-food items in India is not only increasing but also maturing.
