Fgn buys new mkt trail for domestic FMCG cos

In the last two years, a clutch of home-grown fast-moving consumer goods (FMCG) companies sought growth by acquiring companies overseas.

They went hunting in diverse geographies from the US to the somewhat off-mainstream countries such as Egypt, Poland and South Africa.

After the acquisitions, the companies seem to be living up to the fast-moving nature of their products, making rapid progress in the operations of the acquired companies and using their brands to penetrate new markets.

In February 2000, Tata Tea set off the current overseas-acquisition drive of India Inc by acquiring the UK's iconic tea brand Tetley. This also marked the first leveraged buyout "" which uses the target company's balance sheet to raise debt to fund the acquisition "" by an Indian company.

Tata Tea added Eight O'Clock Coffee to its stable in June 2006 and Good Earth in October 2005. Both these were in the US, but it also went hunting off the road to acquire Jemca in the Czech Republic in May last year, Vitax and Flosana in Poland in April this year and took control of Joekels in South Africa in October last year.

"Each transaction that we do is underlined by the access it gives to new markets. Yet, every transaction has to ensure that there is no conflict of portfolios," said Tata Tea Managing Director Percy Siganporia.

When Tata Tea acquired Eight O'Clock, it was the number one player in the US retail market for whole-beans coffee. It has retained its position as the third-largest brand after Folgers and Maxwell, with an improvement in its share of the market from 4.5 per cent to 4.8 per cent.

Tata Tea's peers joined the fray in 2006-07, with Godrej Consumer acquiring Rapidol in South Africa in July last year to add to Keyline, acquired in October 2005. Marico bought Haircode and Fiancee in Egypt late last year. Cavin Care and Dabur are on the lookout.

Marico has already started generating profits from its operations in Egypt and is planning to market its products in the neighbouring countries using several pre- and post-wash products of Fiancee and Haircode.

"Egypt is a passport to North Africa," said Vijay Subramaniam, chief executive officer, international business, Marico. The two companies in Egypt have begun to account for 12-13 per cent of Marico's turnover.

Rapidol, under Godrej, has set a target to grow 35 per cent in the next few years. Its product Inecto is a brand to reckon with in South Africa, Lesotho, Swaziland, Namibia, Zambia, Zimbabwe, Angola, Mozambique, Congo and Botswana, according to Godrej Consumer Executive Director and President Hoshedar Press. About a quarter of Godrej's turnover is estimated to come from overseas.

Industry analysts say Asia and Africa offer immense opportunity to the domestic companies. They add that Indian FMCG companies have already gained experience of markets around the world and will find it much easier in future to expand their operations. The overriding trend with most of the Indian companies is to spread their presence in the developing markets, they say.

To be sure, the companies seem to be aware of this and are likely to come up with more announcements in the near future.

"The company is still integrating its operations in these countries. Yet, we will be open to further acquisitions irrespective of geographical boundaries," said Siganporia.

Subramaniam says Marico is open to looking at developed markets too. Dabur Director P D Narang says the company has identified South-East Asia, West Asia and Africa as the key overseas markets to scout for acquisition targets. "Our company has the balance sheet to fund a large acquisition even at a short notice," he adds.

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BETTING ABROAD

In February 2000, Tata Tea set off the current overseas acquisition drive of India Inc by acquiring the UK's iconic tea brand Tetley

Tata Tea added Eight O'Clock Coffee to its stable in June 2006 and Good Earth in October 2005

Godrej Consumer acquired Rapidol in South Africa in July last year to add to Keyline, acquired in October 2005

Marico bought Haircode and Fiancee in Egypt last year

Marico has already started generating profits in Egypt and is planning to market products in the neighbouring countries

Rapidol, under Godrej, has set a target to grow 35 per cent in the next few years. Its product Inecto is a brand to reckon with in South Africa, Lesotho, Swaziland, Namibia, Zambia, Zimbabwe, Angola Mozambique, Congo and Botswana

Industry analysts say Asia and Africa offer immense opportunity to Indian companies.