CREDENCE CAPITAL

(Investment Club of IIM Lucknow)

FMCG Sector report- Jan 24

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 Table of Contents
1. INTRODUCTION AND EXECUTIVE SUMMARY .................................................................................................... 3
2. SEGMENTATION AND VALUE CHAIN ................................................................................................................. 5
Value Chain & its Components .............................................................................................................................. 5
Sales & Distribution Process .................................................................................................................................. 6
3. THE INDIA STORY .............................................................................................................................................. 7
4. MAJOR INDIAN PLAYERS ................................................................................................................................... 8
5. CURRENT SCENARIO AND TRENDS ....................................................................................................................... 9
6. STRATEGIES ADOPTED BY TOP PLAYERS ............................................................................................................ 12
7. RECENT M&A ..................................................................................................................................................... 14
8. POLICY MEASURES UNDERTAKEN BY THE GOVERNMENT .................................................................................. 15
9. SELECT COMMENTARY ON KEY PLAYERS ........................................................................................................... 16
10. SECTOR OUTLOOK ........................................................................................................................................... 19

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 1. Introduction and Executive Summary
FMCG stands for Fast-moving consumer goods and can also be called consumer packaged
goods. This industry covers products and goods that are generally priced at a relatively low
cost and are sold quickly. Products under FMCG includes non-durable household goods such
as packaged foods, beverages, toiletries, candies, cosmetics, over-the-counter drugs, dry
goods, and other consumables.
Multiple players both in unorganised and organised segments operate in FMCG sector in
India. With manifold products manufactured, each product category has several brands and
varieties and low consumer switching cost which leads to intense competition among players
operating in this sector. Therefore, FMCG companies operate on low margin and sales
volume remains the key to survival.
Sector overview
▪ Favorable demographics and rise in income level will boost the FMCG market
▪ By 2027, India is likely to be the third-largest FMCG market globally
▪ FMCG sector is a vital contributor to India’s GDP and 4th largest sector in India
▪ The sector had grown 8.5% in revenues and 2.5% in volumes last fiscal year (FY23)
▪ It’s expected to grow at ~28% CAGR to reach US$ 615 billion by 2027, from
US$ 110 billion in 2020
▪ Price increases across product categories will offset the impact of rising raw material
prices, along with volume growth and resurgence in demand for discretionary items,
are driving growth

Source: World Bank, Emami Reports, Dabur Reports, AC Nielsen, CRISIL, Nielsen Report, Kantar

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 Summary of COVID impact

FMCG faced structural changes due to Covid-19:

▪ Stay-at-home demand for essentials: people restricted to their homes coupled with
limited access to foodservice, consumers are cooking more at home which has
increased the demand for packaged food and home care products
▪ Non-essential spend more cautious: Discretionary categories saw biggest impact
▪ Increased focus on hygiene and personal wellbeing: heightened awareness of
personal hygiene and health, due to fear of the virus, led to surge in sales of personal
and home care products (hand wash and sanitisers, laundry and surface care)
▪ Shift in channel preferences: In the pre-Covid period of 2019-20, online sales used to
account for a meagre 1-3% of total sales and penetration is expected to touch 9-10%
in the next 5 years
▪ Technology transformation: Companies are using tech to improve efficiencies in
production, inventory management, logistics and customer care including marketing
strategies.

The pandemic asked serious questions of yesterday’s supply chain philosophy which
prioritised low-cost production and stretching supplier terms. Today, corporates are
managing disruption risk through localising production whilst supporting liquidity needs of
key suppliers.

Key growth drivers

Shift to organized markets
Growth in modern retail and increased level of brand consciousness to lead to organized
sector growth.

Increase in branded products penetration

Low penetration levels of branded products in categories like instant foods indicating a scope
for volume growth. Sector is lucrative on account of well-established distribution network,
low operating cost, lower per capita consumption, large consumer base and simple
manufacturing processes for most products resulting in fairly low capital investments.

Rural consumption
Untapped market potential and increased disposble income and aspiration levels and
demand for branded products to drive growth.

Easy access
Different sales channels have made the accessibility of desired product to customers more
convenient - online grocery and retail stores like Grofers, Flipkart, and Amazon are making
FMCG products easy to avail.
Source: IBEF, Standard Chartered report
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 2. Segmentation and Value chain
The 3 main segments of FMCG industry are –
• Food and Beverages – Food and beverage sector is one of the essential components of the
FMCG market, which accounts for about 3% of its GDP. Union government has approved a new
PLI scheme for food processing sector with budget outlay of INR 109 Bn.
• Healthcare - Central and State governments’ budgeted expenditure on health sector touches
2.1% of GDP in FY23.Covid-19 pandemic has driven Indian consumers to focus their spending
priorities on healthcare. The Indian health-tech market is expected to grow at a CAGR of 39%
and touch US$ 50 billion by 2033.
• Household and Personal Care - Personal and household care category in FMCG sector grew from
32% in 2019 to 40% in 2020.India’s beauty and personal care market, presently valued at US$ 16.8
billion, is poised to grow at a CAGR of 11%, with cosmetics and perfumes categories growing at a
faster clip.

Market Segmentation (revenue FY22)

▪ Urban segment is the largest
contributor to the overall revenue generated
by the FMCG sector in India accounting for a
revenue share of around 65%.
▪ Rural segment is growing at a
rapid pace and accounted for a revenue share
of 35% in the overall revenues recorded by
FMCG sector in India.
▪ In the last 5 years, the FMCG
market has grown at a faster pace in rural India
compared to urban India. The rural segment is estimated to reach $220 billion by
2025, with modern trade expected to grow at 20-25% per annum
▪ Improved distribution channels of manufacturing and FMCG companies have
increased the demand for quality goods and services in rural areas. Low penetration
levels in the rural market offer room for growth
▪ Good seasonal harvests, resulting in improved liquidity in the hands of farmers,
higher government spending on infra, and the wedding season are aiding consumer
sentiment in India's villages.

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Sales & Distribution Process

Factory

Warehouse /
Exports
Depot

B2B & Direct

Ecommerce
Distribution Modern
General Trade
(mass distribution) Trade

Stockist Super Stockist

(Urban) (Rural)

Rural
Wholesaler Wholesaler
Distributor

Local Stores

Customers /
Consumers

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3. The India Story

Growing demand
▪ The Indian processed food market is projected to expand to US $ 547 billion by 2028,
up from US $ 307 billion in 2022 at a CAGR of ~9.5%
▪ Rural India is witnessing increased demand for quality goods and services driven by
upgraded distribution channels of FMCG companies
▪ Rising digital connectivity in cities and rural areas is driving the demand for FMCG
(through e -commerce portals)

Higher investments
▪ In January 2023, ITC has announced plans to acquire 100% of Sproutlife Foods, a D2C
startup and parent company of health food brand 'Yoga Bar' over a period of 3 to 4
years.
▪ In June 2022, PepsiCo India announced its expansion plans for its largest greenfield
foods manufacturing plant in Uttar Pradesh with an investment of Rs. 186 crore
▪ In July 2022, HUL’s announced set-up of ultra-modern factory in Rajasthan with a total
investment of Rs. 700 crore planned by 2025

Policy support
▪ Investment approval of up to 100 % foreign equity in single brand retail and 51 % in
multi -brand retail
▪ The union government’s production - linked incentive (PLI) scheme gives companies a
major opportunity to boost exports with an outlay of Rs. 10,900 crore (US$ 1.42 billion)
▪ Budget 23-24 has allocated $ 976 mn for PLI Schemes aiming to reduce import costs,
improve the cost competitiveness of domestically produced goods, increase
domestic capacity, and promote exports

Attractive opportunities
▪ Low penetration levels in rural market offers room for growth
▪ Disposable income in rural India has increased because of the direct cash transfer
scheme
▪ Exports is another growing segment
▪ E-commerce segment is forecast to contribute 10 % to the overall FMCG sales by 2027.
▪ Grear opportunity for entrepreneurs interested in setting up food-related FMCG industry can
setup their processing units in the government-designated agro processing clusters, which
help cut down the plant setup costs.

Source: IBEF, Standard Chartered report

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 4. Major Indian Players
Snapshot:

Trading and Operating Comparables:

Source: Jefferies Report

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 5. Current scenario and trends

▪ Hoping for better rural recovery in 2024:

Rural growth has lagged urban for the last few years, which implies a low base given traditionally, rural
FMCG grew faster due to low penetration. There have also been channel issues such as high-priced
inventory and trade de-stocking which should stabilise in FY25 and product price corrections should reflect
fully for the consumer. After sharp declines in CY22, real rural wage growth had started seeing positive
trends in 1HCY23. Albeit, the momentum was halted due to jump in food inflation and weak monsoon.
Recovery here needed to drive consumption uptick.

▪ Construction activity rising

Construction sector is the 2nd largest employer after agriculture of unskilled / low-skilled labor
and thus a major driver of the rural economy. The activity here is now rising as evident in
strong growth in steel consumption (+14% YoY in Nov’23) and cement demand (~10% YoY in
Oct’23). Moreover, the central government's commitment to expenditure and a probable
uptick in private corporate capex both raise the construction activity outlook.

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 ▪ Potential rise in government's social spend
Govt. spending focus may also turn welfare-focused. Some support to the rural / agri economy has
already come through in 2023, wherein govt. gave 5-year high increases in purchase prices (MSP) for both
rice and wheat. 2024 will be the national election year and the trend over the last 3 election cycles suggests
large rural / eco. weaker section supportive schemes see a push.E.g. ahead of the 2019 elections, the govt
had launched the Rs 800bn minimum basic income scheme for small farmers. The 2023 state elections
show again that BJP is not averse to large income transfer schemes such as monthly income transfers for
women, landless laborers etc. Increased govt. support can help improve investor sentiment, albeit the
impact on demand will take some time to reflect.

▪ Further gross margin upside likely in FY25

While 2023 saw a sharp YoY gross margin (GM) expansion, absolute GM for most companies remain below
past peaks which companies expect to re-coup in the year ahead. This means GM expansion would remain
a tailwind even in FY25, albeit to a lesser extent than that seen in FY24.

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▪ FY25 is likely to see a further ramp-up in ad-spends as companies double-down their efforts on
category development, brand investments and premiumization

▪ Increasing online users boosting online FMCG sales

The market has grown exponentially over the past five years due to the surge in internet and
smartphone users, improved policy reforms, and an increase in disposable income. India’s e-commerce
industry recorded a 36.8% year-on-year growth in 2022. India’s e-Commerce market to grow from US$
83 billion to US$ 150 billion in 2026. Indian e-commerce market is anticipated to reach a value of Rs.
26,459.18 billion (US$ 319.3 trillion) by the end of 2027, expanding at a CAGR of ~26.71% during the
2022 - 2027 period.By 2030, it is expected to have an annual gross merchandise valueof US$ 350 billion.
Fuelling e-commerce growth, India is expected to have over 907 million internet users by 2023, which
accounts for ~64% of the total population of the country.

Source: Jefferies Report, IBEF

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 6. Strategies adopted by top players
▪ Strengthen rural network:
▪ Nestle India aims to reach ~1.2 lakh villages(with each having population of
over 5,000) by 2024 .
▪ Other players such as Marico is introducing bottom-of-the-pyramid products to its
portfolio of value-added hair oil, helping the business reach rural markets. Rural
penetration will continue to be important for Godrej ConsumerGoods Ltd. Over the
next three years, the organisation plans to extend its presence to 80,000 villages in
key states
▪ Dabur India targeted of establishing fresh 15 lakh direct outlets in Rural India by
2022.

▪ Direct-to-consumer channels
▪ Since 2016, India has launched 600+ D2C brands and growth momentum
suggests that the total addressable market size will touch US$100 billion by
2025.
▪ Businesses such as Dabur India and Marico Ltd. have introduced retail telephone
services and rolled out a dedicated app that enables orders to be placed by
kiranas.
▪ In January 2021, Tata Consumer Products announced that it is looking forways
to add more of its beverages’ portfolio onto a direct-to- consumer platform to
capture the urban online market.

▪ New market entry

▪ In 2023, BCS Globals, a UAE based food & beverage company, forays into the
Indian energy drink market with the launch of one-of-its kind brand Wox and
plans to introduce a diversified product portfolio.
▪ In 2023, Inspired by Japanese beauty secrets, Keomi Beauty recently kick-started
its journey in the Indian beauty and skincare space
▪ In December 2022, Reliance Group launched its FMCG brand “Independence” in
Gujarat which will bring a wide choice of high quality and affordable products
including edible oils, pulses, grains, packaged foods and other daily need
products

▪ E-commerce
▪ FMCG companies are focusing on strengthening their e-commerce engagement. An
Ayurveda baby care range has been introduced by Dabur, which will be sold only
on e-commerce platforms. FMCG major Emami expects to increase the combined
contribution of its ecommerce and modern trade business to 25% in the next 3-4
years. In 2020, Marico has witnessed healthy growth across core categories as well
as the newer categories such as foods, hygiene and immunity products on e-
commerce platforms.
Why?

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 ▪ The rapid increase in the number of internet users
▪ Companies are creating an omni-channel presence, blending online shoppingand
offline retail to overcome trust issues of customers
▪ Availability of numerous choices in terms of brands, discount offers, reduced delivery
time, personalization, cash on delivery, digital payment infrastructure and easy
returns have been major factors for development of the B2C e- commerce
▪ These companies are forming innovative product bundles aligned with the needs
of customers and thus ensuring greater customer engagement

▪ Green Initiatives
▪ ITC on World Environment Day 2023 reaffirmed its commitment to address the issue of
plastic waste management through its multidimensional initiatives.
▪ Homegrown FMCG and ayurvedic products maker Dabur India announced to be a plastic
waste positive by collecting, processing and recycling more plastic waste than it sold in its
product packaging in FY23.
▪ FMCG companies are looking to invest in energy-efficient plants to benefit society and lower
costs in the long term.
▪ Amazon aims at making all shipments net-zero carbon, with 50% net zero carbon by 2030.
▪ In 2021-22, Dabur India has become a complete plastic waste-neutral firm in the country
after collecting, processing and recycling around 27,000 metric tonnes of post-consumer
plastic waste.

▪ Analytics
▪ Technologies like Artificial intelligence, Big Data and Predictive Analysis are being
increasingly used by FMCG companies to predict customer behaviour accurately, helping
them to understand what actually interests their customers.
▪ ▪ In 2022, ITC launched its super app ITCMAARS, a ‘phygital’ ecosystem that provides farmers
with AI/ML driven value-added personalised and hyperlocal crop advisories.
▪ ▪ Marico is using machine learning, predictive analytics and prescriptive analytics to launch
new offline products, expand categories and create new categories.
Source: IBEF

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 7. Recent M&A

Source: IBEF

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 8. Policy measures undertaken by the
government

New goods and service tax (GST) would simplify tax structure:
▪ Supply chain structure
Introduction of GST as a unified tax regime will lead to re-evaluation of
procurement and distribution arrangements.
▪ Pricing and Profitability
Elimination of tax cascading is expected to lower input costs and improve
profitability.
▪ System change and transaction management
Changes need to be made to accounting and IT systems in order to record
transactions in line with GST requirements.
Source: IBEF

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 9. Select commentary on key players
HUL

▪ HUL underperformed peers in CY23, as volume growth uptick remained elusive and large
categories such as HFD, tea, mass skin care etc.continued to see weak demand trends.
This was further exacerbated by the rise in local/ regional competition and the waning of
price-led growth, as product price hikes came in the base and HUL took price reductions in
soaps and laundry.
▪ On the margin side, while gross margin recovered strongly, flow through to Ebitda margin
was lower due to a jump in ad spends and an increase in royalty rates (+45bps). Put
together, HUL saw 8-10% EPS cuts through the year.
▪ In the near term, channel checks & industry interactions indicate that demand trends
remain muted, especially in rural, and a volume growth uptick should take time.
▪ Margin upside is also capped in the near term, given increased industry-wide media
intensity, a second round of royalty increase from Feb-24 (+25bps), and removal of
income from consignment sales (Rs3.3bn in FY23).

Godrej Consumer Products

▪ Godrej Consumer (GCPL) has faced several headwinds in the last two years, ranging from elevated
input inflation (led by palm, crude etc.) and slowdown in volume growth, to a sharp decline in its
Indonesia business and Naira depreciation in the Africa business.
▪ Despite headwinds, the new CEO has taken several structural initiatives which include a near-
complete management revamp, a renewed focus on access packs (without worrying about potential
cannibalization), inventory correction, a step-up in ad-spends and market development efforts, new
product innovations, business simplification (esp. in Africa) etc. More steps are underway, with
focus on simplification, growing category penetration and better co-ordination across geographies.
▪ These initiatives have started yielding strong results with growth trajectory improving for several
categories (hair care, air care etc.) in the India business. While the India HI portfolio is still a work-in-
progress, mgmt. is planning further steps on product efficacy which should help going forward.
Acquired Raymond portfolio is scaling up as per expectations and should be growth-accretive in
FY25.

Britannia

▪ Britannia has well navigated the headwinds it faced in the last few years, delivering 11%
EPS CAGR over FY20-24E despite rural slowdown and sharp inflation in input costs. This
was partially enabled by a steady distribution expansion, product innovation, and share
gains, especially in its focus states. Further, Britannia has also seen substantial margin
expansion, with Ebitda margin in FY24E at >18.5% vs. 15-16% pre-Covid.
▪ In CY23, the company saw a slowdown in volume growth as it faced increased
competition from local and regional players, which it iscombating through targeted
product price reductions.
▪ Britannia is also renewing its focus on growing the non-biscuit categories (rusk, cakes,
wafers, dairy, croissants, etc.) as it looks to become a total foods company.
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 Nestle

▪ Nestle has been delivering a strong performance in CY23 with 25% EPS growth. This was led by a
~15% topline growth in the domestic business (mainly price-led) and a sharp recovery in Ebitda
margins (~150bps) due to product price hikes and cooling cost inflation. Volume + mix growth
however was at mid-single digits, lower than long-term trends.
▪ In CY24, expect a moderation in topline growth, as product price hikes come in the base. While
Ebitda margins should expand further,earning growth will also moderate to 15% in CY24 and 11% in
CY25.

Varun Beverages

▪ CY23 was another strong year for VBL with double-digit volume growth in India, which is quite
commendable given a weak summer season due to unseasonal rains. International business did
even better, with ~20% YoY volume growth which was broad-based across geographies.Ebitda
margins expanded further and YoY Ebitda growth in CY23 is likely to exceed 25%.
▪ In CY24, expect strong growth momentum to continue with >15% volume growth at a company
level. India business will do even better given a low base in the peak season. Expect limited margin
expansion, despite strong topline growth and likely benefits from operating leverage. Nonetheless,
CY24 should see~17% EPS growth.

Tata Consumer

▪ Tata Consumer Products (TCPL) has transformed in the last few years, pivoting from a 'global
beverages' company to an India-focused F&B franchise, and has emerged as a platform for Tata
Group's FMCG ambitions.
▪ It has focused on capacity building, expanding distribution reach, and entering new categories.
While a lot has been achieved, TCPL's future ambitions remain aggressive. Management's focus is
strongly on growth, both in the core portfolio and in new emerging categories.
▪ It has also been a relatively steady performer with close to mid-single-digit volume growth in the
core business and a strong ramp-up in growth categories, along with improving margins. While
market share loss in tea and salt was an issue in CY23, we see it as a transient challenge, and market
shares have largely stabilised QoQ in the last few quarter

Dabur

▪ Dabur has seen muted volume growth in recent times, impacted by a rural slowdown and a demand
pullback in the healthcare segment,which had benefited during Covid-19 pandemic. This was further
exacerbated by a weak season in beverages and FX depreciation in international markets, which
dented margins despite falling input prices. Consequently, the stock saw significant EPS downgrades
and has underperformed peers in CY23.
▪ Near term headwinds aside, Dabur is a good proxy to play a potential recovery in rural demand in
latter part of the year. The company is also taking several initiatives including rural distribution
expansion, advocacy with allopathic doctors (for healthcare portfolio) among others.Company
continues to expand into new categories which we closely monitor given its already complex
portfolio.
▪ Dabur rides on a long-term theme, given its natural & herbal offerings.

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 Marico

▪ Marico faced several headwinds in the last two years led by volatile raw material prices (sharp
inflation followed by sharp deflation), weak rural demand, and currency depreciation in Bangladesh.
This impacted EPS growth, which grew at only 6% CAGR over FY21-23, underperforming peers.
▪ FY24 saw a slight uptick in volume growth, albeit trends remained muted given an elusive volume
recovery. The company, however, delivered well on margin expansion and hence EPS growth is
likely to be in strong double digits (+15%).
▪ •Expect trends to improve in FY25, as core portfolios of Parachute and VAHO are likely to see a
volume up-tick, on the back of stable input prices, low base, and a gradual recovery in rural demand.

Colgate

▪ Colgate has renewed its focus on driving category growth and premiumisation by sharply ramping
up ad spends, which is being fueled by further product price hikes across the portfolio despite
waning inflation.
▪ While volume growth remained sluggish in CY23, price hikes have helped drive revenue growth
along with margin expansion which in turn drove strong EPS growth.
▪ In FY25, expect an uptick in volume growth to 5% (vs. 2% 3Y avg.) assuming an improved rural
demand and as Colgate's initiatives on category development and premiumization yield results. We
also build-in product price hikes, as Colgate has displayed its priority to drive up margins to support
earning growth. Assume limited margin expansion, as ad-spends inch higher to past peaks.
Nonetheless, Colgate should deliver a 10% EPS CAGR over FY24-26.

Emami

▪ Emami operates in relatively niche categories with a high market shares, where it has demonstrated
good pricing power and an ability to protect margins. Albeit category growth itself has been an issue
in the last few years.
▪ The company has taken several initiatives over the years to improve distribution infrastructure,
reduce wholesale dependence and grow inchannels such as MT and e-commerce. Promoter
leverage issues are also now behind.
▪ Emami could benefit from a potential turnaround in rural demand, which would enable a double-
digit EPS growth over the next two years

Honasa Consumer

▪ Honasa Consumer has emerged as a leading digital-first beauty and personal care (BPC) franchise in
India, ramping up to >Rs18bn of revenue and has expanded from a single brand (Mamaearth) to a
portfolio of six brands (35% of revenue from new brands).
▪ Similarly, the company has also moved beyond its DTC origins, expanding aggressively in the offline
channel, which is now a third of the revenue. Unlike several other DTC brands, the franchise is
profitable with an EBITDA margin of >6% in 1HFY24, which is on an improving trend.
▪ Growth should be accompanied by further improvement in profitability led by scale-benefits over
key cost items notably ad-spends. Expect Honasa to reach double-digit Ebitda margins by FY26e vs.
6-7% levels in 1HFY24. This should enable a strong ramp-up in absolute Ebitda and pre-exceptional
EPS, both rising sharply over FY23 levels.
Source: Jefferies Report

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 10. Sector outlook
Consumer staples had a tough 2023 due to weak rural demand, although margin recovery drove a D/D
earnings growth. Recent checks point to continued pressures into December too, which does not make
start of the year that exciting although Feb Budget may be pro-consumption. Irrespective, a low base,
taming inflation and strong economic activity should drive pick-up through 2024.

Summary of CY 23:
A widely anticipated rural recovery remained elusive in CY23 despite a low base, which was a key
disappointment. This coupled with waning product price hike (incl through grammage increases) resulted in
a muted revenue growth in recent quarters. Volatile monsoon trends along with jump in food prices further
exacerbated pressures, impacting consumer sentiment. Meanwhile, CY23 did bring a relief on RM inflation
which drove up gross & Ebitda margins (despite higher ad-spends) and 12-15% Ebitda/ PAT growth for
coverage, an uptick vs. 8% CAGR in the last few years.

Weak rural demand but expect a momentum:

Recent checks suggest that rural trends remain weak even in December quarter, with industry participants
not expecting a meaningful pick-up in the near term. Of course, upcoming union budget on 1-Feb may
spring some surprise given this is an election year. An undemanding base coupled with continued
momentum in construction activity and taming inflation should support consumption, particularly rural &
BOP through the course of the year.

Margin upside:
Expect further margin upside in FY25, as GMs are yet to reach their preinflation peaks. Part of this would
be re-invested in ad-spends, as we expect companies to double down their focus on volume growth, led by
category development, brand investments and innovation. Despite this, Ebitda margin should still recover
further going into FY25.

Volume uptick critical to meet earnings expectations (for major companies):

While a modest margin expansion should help, earnings growth should turn more volume-led going
forward. Expect a pick-up in volume growth across major companies from low-single-digit trends seen in
FY24 to mid to high, single digits in FY25. This should enable 9-10% revenue growth across major
companies, despite limited product price hikes. This, along with modest margin expansion, should enable a
double-digit EPS growth in FY25.

Stock performance in 2023

Despite tough conditions, several stocks delivered strong returns depending on the company-specific
factors which also drove up valuations (for example, Colgate, Varun Bev & Nestle). Majority of stocks in
FMCG sector outperformed NIFTY.

Sector retains significant valuation premium versus Nifty

As highlighted earlier, despite a weak consumption environment, several staple stocks delivered a strong
performance in CY23 led by company-specific factors. Valuations have also re-rated further in many cases,
notably Nestle, Colgate, Tata Consumer, Britannia, and Varun Beverages, and in many cases
are at a substantial premium to history.

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