Laggard no more; revenue of Indian consumer product affiliates now growing at double the pace of many MNC parents

This week speaking with analysts during the company's earnings call, Srinivas Phatak, the acting CFO of consumer goods giant Unilever said that India had been a consistent performer and that there was a lot to play for.

 

The Unilever CFO's optimism is not surprising. Over the last few years, India has been the fastest-growing large economy and this has come as a big boost for consumer goods companies. As incomes rise, India is transitioning from a bottom-of-the-pyramid economy to one largely driven by the middle class. Not surprisingly, the revenue of many of the multi-national corporations in the domestic market is now growing far faster than that of their parent. 

 

According to Bain & Co, when looking at those companies with Indian revenue contributions of at least $100 million, 60 per cent of the Indian affiliates’ revenue is now growing at least double their parent companies’ growth rate. For some leading MNCs, India affiliates deliver a total shareholder return of between two and six times that of their global parents.

 

“Companies already investing in India are benefitting from accelerated growth, higher shareholder returns, and opportunities to shape globally relevant products. MNCs that have not entered the market must act now—or risk missing out on a vital growth engine and long-term strategic advantage," said Ravi Swarup, head of Bain’s Consumer Products practice in India. 

 

In the case of Unilever, India is now its second-largest market. In a recent interaction with Barclays, Unilever CEO Fernando Fernandez highlighted that India should be a geographical anchor in the long run.

 

"Our position in India is exceptional. We have great brands; we have a great portfolio. In the last three years, we have gained share," Fernandez had said. Hindustan Unilever has had a strong market share across various categories in India, including tea, coffee and beauty and personal care products.

 

The rise of affluent India has been key and across the consumer goods space, premiumisation is a trend and a major growth driver and that is why the market is becoming more and more attractive for MNCs. Fernandez pointed there are 60 million households out of the 320 million households in India, who have "serious money now."

 

According to Bain, India is a dynamic market, brimming with exciting opportunities. 

"Over the past five years, India’s volume growth contribution outpaced its volume share by 2–8 times across several categories," it said.

 

While, premium consumption is rising and new categories are emerging, in many existing categories the market remains under-penetrated, which is another big draw for companies.

 

As Bain pointed out carbonated soft drinks and chocolate both experienced volume growth of over a 15 per cent CAGR in the past decade, yet penetration remains below 40 per cent as of 2024.

 

India is the third-largest contributor to consumer products growth among emerging markets over the past decade, it says. In the next 5-6 years, it will see the highest increase in the working-age population globally and the fastest growth for income per capita among the top five consumer products emerging markets, which also include China, Brazil, Mexico, and Russia. 

 

India is an MNC-friendly battleground. As of 2024, MNCs are the number one or number two players in more than 20 consumer product categories in India, ranging from soft drinks and spirits to savoury snacks, detergents, and diapers, pointed Bain.

Business