Human life is dependent on Fast Moving Consumer Goods (FMCG) and it’s an integral part of our day-to-day life. As these products fulfill the daily household requirements, the FMCG companies produce such products in bulk on a mass level. These products have a short shelf-life and are used for rapid consumption. The common products include milk, gum, fruit and vegetables, toilet paper, soda, beer, and over-the-counter drugs like aspirin. These day-to-day products have a large impact on their company portfolios. Thus, it would be better to have some sound knowledge about the best FMCG stocks for the year 2022.
“FMCGs are purchased frequently and consumed rapidly, thus they are priced low but sold in large quantities. Thus, the FMCGs have low-profit margins and high-volume sales”
Many national and international brands produce FMCG products. Whenever a retail investor (usually a 9-5 job holder who does not have time to track the market and learn the technicalities of the stock market), we always suggest going with the FMCG sector. Obviously, our inclination towards the FMCG stock is due to the business type and more importantly, the items that we use every day. These companies are free from the market cycles, ups and downs, and most importantly the rise in demand from the retail household propel the stock prices of the listed companies. And above all these, such companies offer regular dividends and bonuses also.
As an investor, we cannot afford to miss this ever-growing FMCG sector with the fact that the human race is going to survive and consume it. The direct business-to-consumer connection makes this sector a reliable bait even in case of economic crashes and low cycles. So, today in this article of StockTrone, we are going to discuss the best FMCG stocks in India to invest in.
What is FMCG Business?
Daily consumed goods and products like toothpaste, soap, personal care products, package food, salt, potato chips, etc. fall under the FMCG category. Many businesses produce similar products, but every company/stock is not worth investing in. While investing in a company/stock, we work on high probability and nothing is sure, so the real struggle is finding the best from whatever choices we have. To avoid fear, uncertainty, and doubt, let’s get familiar with the listed FMCG companies in the Indian Stock exchange.
The major players involved in FMCG businesses are Colgate, Hindustan Unilever, ITC, Godrej, Nestle, Britannia Marico, Dabur, TATA consumer products, etc. However, India is still a growing economy and there is still time to contribute towards growing the economy. In the last couple of decades, many stocks from the FMCG space have already turned into a multi-bagger. Nevertheless, the industry still has the potential to grow further. In spite of a lot of ups and downs, demonetization, government tax rules and policy changes, global pandemic COVID-19, the FMCG sector has done well in the last five years. Nestle is standing with an overall 211.6% and Hindustan Unilever ticking at 167.54% overall return. FMCG space comes under the business-to-consumer category (B2C) and for a business to survive, it requires customer satisfaction and trust over that company’s product. Eventually, this whole process makes a brand image.
“Colgate is a monopoly stock, ITC owns India’s 75% cigarette market, same way Nestle is serving to our whole family from Maggie to coffee. So in FMCG space the foremost criteria is the brand name itself.”
Why Should You Invest in FMCG Stocks in India?
The main benefit of investing in FMCG stocks is the consistency of the business revenue and steady dividends. Also, these businesses show consistent appreciation in stock price also. These companies maintain rich cash flow and regularly reward their investors. Undoubtedly, the demand for these products will always be there in near future. These already established goods brands like HUL, Britannia, Nestle, etc. are always going to perform in a long run in the Indian market. So before building a portfolio for a retail investor/trader, we should always keep this sector on our priority list. These stocks keep rewarding their investors with steady returns and dividends that are distributed year on year. The key benefits of FMCG stocks in India are:
- Large-cap companies (Low Risk)
- Stable Businesses
- Dividend-paying stocks (Consistent Return)
- Stable revenues year on year
- Potential to become multi-bagger in the future
Best FMCG Stocks in India
As we are looking with an investor’s prospect, the first and foremost criteria for the selected list of stocks is that the stock must be an existing successful business. We must consider following stocks while building a stock portfolio.
- Hindustan Unilever Limited
- TATA Consumer Product
- Nestle India
- Britannia
“Apart from more than 50+ stocks listed on the various stock exchange in India, we have shortlisted 4 stocks looking at current market scenario and their future prospect.”
1. Hindustan Unilever Limited
Hindustan Unilever Limited (HUL) is a large-cap, blue-chip stock with a market cap of ₹5,36,540 cr. It is ranked 6th in the Indian stock market. It was established in 1931 as Hindustan Vanaspati Manufacturing Co. However the company officials renamed it Hindustan Unilever Limited in June 2007. Currently, the company has 35 product brands in 20 categories under its portfolio. More than 21,000 employees of the company are involved in making the products that are leaders in their own segment. The products of the company are never going to be out of date so the revenues will keep on growing. It also has a good dividend payout ratio in the segment.
Famous products such as “Annapurna salt and Atta, Bru coffee, 3 Roses, Taj Mahal, Taaza, Red Label tea, Kissan squashes, ketchup, juices and jams, Lipton ice tea, Knorr soups, meal makers, soupy noodles, Kwality Wall’s frozen dessert, Magnum (ice cream) and many more” are grown under HUL branding.
Why should we consider HUL a good buy?
- Biggest FMCG Company (Low Risk)
- More than 20 products categories with more than 35 brands (Diversity)
- Increasing revenue year on year
- Good dividend paying history
- Good Management record
- Price corrected more than 25% from its high
In our day-to-day life, we are subconsciously using Hindustan Unilever products without even realizing it. And it is untimely boosting the company sales and investors return. So, let’s try being an investor of this gem, and not only its consumer. Follow up here to know the real-time market statistics of this gem.
2. TATA Consumer Products
The second stock on our list is surprisingly TATA Consumer Product. So, why is this stock is even above Nestle and Britannia stocks? In recent times, this stock is turn out to be one of the best performers in the FMCG group with more than 450% return in the last 5 years and almost 300% return in the last 3 years.
The second reason is that it belongs to the “TATA” group. TATA group stocks are one of the most reliable stocks irrespective of their sectors. This company was initially ignored by the TATA group but now they are revamping the company. The focus was shifted here to form “TATA Consumer Product Limited” while merging the consumer product business with TATA Global Beverages (earlier this was in TATA Chemical Ltd.).
The company has generated 11,807.71 cr of revenue in the year 2021, out of which, around 35% of the revenue comes from the consumer beverages business. Around 56% of the total business of TATA consumer products ltd. comes from the Indian market and the rest is from the foreign market, of which, 16% comes from the US and 11% comes from the United Kingdom. With a market cap of ₹66,158 cr, the stock is ranked 75th in the Indian Stock market and it has a lot of potential to grow more.
Why should we consider it a good buy?
- Reliable group (TATA)
- Sector leader in tea and beverages
- A strong performer in recent years
- Increasing growth throughout the years
Follow up here to know the real-time market statistics of TATA Consumer Products.
3. Nestle India
Nestle India is a subsidiary of Nestle, a Swiss global corporation that ranks third on our list. Its Indian affiliate was established on March 28, 1959, through a Nestle Holdings Ltd subsidiary. It currently has 9 production units across India, with the parent company owning 63% of the company.
The stock is a blue-chip, large-cap stock with a market cap of ₹1,77,254 cr. The stock is ranked 31st in the Indian stock market and clearly, a strong candidate to hold your portfolio in the bearish market. Its primary business is food and beverages, and it is India’s undisputed leader in infant food products. In this segment, Cerelac is its leading brand and it covers 96% of the market share of infant baby food in India. Maggi and Nescafe are the other popular products of this company and these two products comprise more than 20% of the revenue for the company.
The stock has also remained a consistent performer with more than 215% return in the last 5 years. Total revenue in 2020 was 13,495.88 cr, which is up by 7% on a yearly basis. The only reason to not invest in this stock is its current market price which is ticking at Rs. 18,384.40 per share, LOL!!.
Why should we consider it a good buy?
- Biggest FMCG company in India
- 9 production units across India
- Market leader in infant food
- Increasing growth
- Monopoly in many segments
Follow up here to know the real-time market statistics of Nestle India.
4. Britannia Industries
Britannia was founded in 1892 and it is the oldest existing company in India. The company is now a part of the Wadia Group and its headquarter is located in Kolkata. It is one of the sector leaders in the food and beverages industry in India. The company’s products are mainly related to biscuits, bread, and dairy products. Its business expands across the globe in 60 countries.
Most of the company’s revenue comes from biscuits (90% of total revenue). Biscuit is a product that is never going to get fed away and the fact that Britannia is the market leader in the biscuit category in India makes it an obvious choice for an investor. One of the studies estimates that more than 50% of Indians are consumers of Britannia products. Also, the company is the largest brand in the organized bread market in India. Britannia is one of the top 100 brands in India with an estimated market share of 38%.
When it comes to the fundamentals, the company is performing well year on year basis. It is a large-cap stock with a market cap of ₹84,536 cr and is ranked 55th in the Indian Market. The total revenue growth is 13.22 % and the sales growth of the company is 27% in the last year. The stock has generated consistent returns over the last 5 years, i.e., 124%.
Why should we consider it a good buy?
- 38% market share in India
- Revenue growth of 27%
- Increasing revenue year on year
- Very good dividend yield
- Stable growth Stock
Follow up here to know the real-time market statistics of Britannia Industries.
Conclusion
FMCG companies are not going anywhere as consumer products will always be in demand in the consumer market., thus the investment in FMCG stocks was, is, and will be the biggest investment of our lives. This article highlights one of the best FMCG stocks, which should be there in your main portfolio for a lifetime. These stocks are the gems that an investor collects continuously to be wealthy. Such FMCG stocks can give higher returns in the long run if one keeps invested for a considerable amount of time. They also have the ability to fetch you higher dividends year on year. These stocks have the potential to generate a better return than bank fixed deposits through the year on year basis and speaking of the icing on the cake would be its dividend payout every year.
Let us know what you think about these FMCG stocks and comment down below your favorite FMCG stock. Subscribe to our trading page on Instagram for daily insights about trading moves.