Reasons for Inorganic growth by FMCG companies1. Cheap Exercise:
Building a brand from grass-root level asks a lot. Just thinkof small FMCG player who can dare to give a fight or even stand still in front of Home and Personal Care juggernaut, HLL. Do these small players have thefinancial capacity to build a new brand and get a decent market share? It reallyasks a lot. Also, riper is the product category, more it is difficult for other FMCGplayers to enter that space, because of huge competition.Acquiring brands from other companies will not require them to spend exorbitantmoney on brand building to get the space in the mind of the consumer.It’s not only saving money on brand building but cost savings as well.
expected revenue gains and cost savings of $14-16 billion from the merger with
, due to elimination of overlapping functions and a planned 6,000 jobcuts.
2. Time Constraints:
Do you know how much time it takes to launch a newbrand from scratch? Are the FMCG companies ready to afford time to do theinevitable market research, understanding the consumer behavior, pilot testing atselected places etc? Also the market is very dynamic and the needs of theconsumers keep changing. Taking a longer organic route, the fresh innovativebrands initially may get outdated with market needs.
3. Product Related:
Diversification of existing product portfolio andcomplementing current product portfolio are the two reasons to go for inorganicroute. It is the quickest way to increase a company’s basket. It gives a straightlicense to step into new product categories.
3.1 Dabur’s acquisition of 7 brands from Balsara
: DIL's acquisition of thethree Balsara group companies has given them access to seven establishedbrands — toothpastes Promise (unique clove oil positioning), Babool (valuesegment) and Meswak (premium segment), Odonil air freshener, Odopic utensilcleaner, Sanifresh toilet cleaner and Odomos insect repellent. Balsara’s herbaloral care range is a good strategic fit for Dabur, as their products are alsopositioned on the herbal benefits.
3.2 Godrej bought Keyline’s Brands:
The deal gave GCPL an easier route toenter the skincare segment through Keyline brands such as Endocil, Inecto,Skyhydra and Aapri. So now GCPL is not just soap and hair colour. Its kittyinclude Erasmic shaving products, Cuticura talcum powder, Adorn & Nulon. Theyhad been looking at the Nihar brand of hair oil as it fits into Godrej's portfoliosince it is has been marketing the Anoop brand.
acquired skincare company Sundari LLC, two aromatic soap brandsin Bangladesh and Nihar coconut oil from Hindustan Lever.