Future consumer limited formerly known as Future Consumer Enterprise limited is engaged in the business of sourcing, manufacturing, branding, marketing and distribution of fast moving consumer goods (FMCG), food and processes food products in urban and rural India. Future Consumer Limited (FCL) is one of the fastest growing FMCG companies in Indian market. FCL is FMCG 2.0 company that is data oriented, led by modern trade and digitally enabled distribution network. FCL is building brands to acquire the lifetime value of today’s FMCG. FCL has a strong portfolio of food, home and personal care brands. The product portfolio comprises over two dozen innovative brands and is well supported by two key pillars viz. strong distribution network for supplies to over 1,20,000 stores across India and expertise in the fields of sourcing and manufacturing. FCL has one of the leading agri-sourcing operations in the country with access to over 88 locations across India and 7000 farmers. FCL has sourcing capacity of around 1.5 lakh tonnes of agricultural products. It has around 11 mechanized processing centers. FCL has one manufacturing facility each for dairy and bakery products near Bangalore. Its dairy business produces around 54,000 litres of milk everyday from a network of over 5,000 farmers and 200 milk traders in Tamil Nadu and Karnataka. It has monthly installed capacities of 450 tonnes of bread and 100 tonnes of cake among other products. FCL’s home, personal care and beauty brands grew by around 37% as compared to last year. In home, personal care and beauty segments, FCL’s leading brands are clean mate and care mate. Clean mate recorded revenues of around Rs 80 crore in FY19 and growth of around 26% as compared to last year. Care mate recorded revenue of around Rs 60 crore in FY19 and growth of around 41% as compared to last year . Clean mate and Care mate are home care brands which consist of liquid detergents required for cleaning floors, utensils etc. The company’s brand TS in the beauty accessories space has recorded great acceptance with customers. TS brand has grown around 52% as compared to last year. Company’s Kara brand which sells premium wet wipes has its presence in around 35,000 general trade stores. Company’s Prim brand which offers products like cleaning sponge, fabric care products, odour/moisture removers has grown around 186% as compared to last year. Besides this brands in home, personal and beauty care, company has its own brands which sells gel freshners, air spray, shoe shine, toilet sanitizer, baby accerssories, baby wipes, body wash, hand wash, hair accessories , bath accessories, agarbatti and puja needs, ear buds and many more. Company’s food business has grown around 20% as compared to last year. FCL has entered mainstream categories such as biscuits, snacking amongst others. Its Tasty Treat brand emerged into the leading snack brand in FCL portfolio with a topline of around Rs 185 crore growing at 68% Y-o-Y. Karmiq, the lifestyle wellness brand, with a premium product range of dry fruits, munchies and flavoured dry fruits nuts reached a new milestone recording sales of over Rs 155 crore in FY19 growing at 120% on Y-o-Y basis. Golden Harvest brand which sells rice, atta, ready to eat food, pulses, cereals and spices is growing at 23% Y-o-Y basis. Fresh and Pure brand which sells tea, coffee, oil and ghee, preserves like honey, ginger paste, coconut water is growing at 49% Y-o-Y basis. Sangi Kitchen brand which sells mayonnaise, all types of global sauces, all types of chutneys, all types of powdered spices, whole spices, oregano, chilli flakes etc is growing at 137% Y-o-Y basis. Dessi Atta brand which sells all types of atta is growing at 22% Y-o-Y basis. Nilgiri brand which sells all types of dairy and bakery products is growing at 6% Y-o-Y basis. Besides this company has its own other brands which sells frozen vegetables, natural juices, all types of carbonated drinks, all types of fruit spreads, all types of mocktails, all types of fruit jams, sweets, frozen snacks, all types of organic pulses, organic spices, organic cereals , sugar, jaggery, olive oil, all types of oats, all types of namkeen, etc. Its joint venture with Hain company sells vegetable chips under terra brand and garden veggie straws under sensible portion brand. Its joint venture with Swiss tempelle sells face wash, shower gels, hand wash, lotion and skin cream, men’s grooming range recorded revenue of around Rs 10 crore in FY19. Its joint venture with Dreamy which is a New Zealand company and one of the world’s largest dairy producers sells milk, milk shakes, flavoured curd, and all other types of dairy products. FCL has its own food park named India Food Park which has end to end food processing facilities along the value chain (grading, sorting, pulping, packaging & distribution) from farm to the market. Equipped with world class food processing units, 22,000 tonne storage capacity, cold storage unit and in house pulping, milling, flouring, spices & dal units, the massive park is spread across 110 acre land in the Tumkur region in Karnataka. In food opportunity lies in branding as food itself is an under-branded category in India. More than 670 million Indians today were born in post-liberalisation era (1990 onwards). Over 65% of the market is unbranded, with 1.3 billion people who are only just beginning to consume. FMCG sector is the fourth largest sector in the Indian economy which includes three main segments: i) Food and Beverages, which accounts for 19% of the sectors, ii) health care , which accounts for 31% of the sector and iii) Household and Personal care, which accounts for 50% of the sector. FMCG market in India is expected to grow at a CAGR of 27.86% and is expected to reach US$ 103.70 billion in 2021 from US$ 52.75 billion in FY19. The retail market in India is estimated to reach US$ 1.1 trillion by 2021 from US$ 840 billion in 2018, with modern trade expected to grow at 20-25% per annum, which is likely to boost revenues of FMCG companies. India’s food and grocery consumption was estimated at Rs 17.5 trillion in 2011-12, which rose to Rs 30.8 trillion in 2016-17 at a CAGR OF 12%. It is anticipated that the India’s consumption will increase at a CAGR of 10% till 2024-2025. The FMCG industry in India is divided into the demographics of rural and urban India. The urban market contributes 60% of the consumption revenue of the FMCG market in India. While urban areas have spearheaded the growth of the FMCG industry in India, semi-urban and rural are growing at a rate that cannot be ignored. Semi-urban and rural segments contribute over 40% of the overall revenues of the FMCG sector in India. With 12.2% of the world’s population living in the villages of India, the Indian rural FMCG market will have a robust growth in future. The rural FMCG market in India is expected to grow to US$ 220 billion by 2025 from US$ 23.63 billion in FY18. Total Rural income in India, which is currently at around US$ 572 billion, is projected to reach around US1.8 trillion by 2022. India’s rural per capita disposable income is estimated to increase at a CAGR of 4.4% to US$ 631 by 2021. Key Factors that can drive the growth for FMCG sector:
1) Favourable demographic dividend to keep deomestic consumption growing at steady rate:
India is world’s second largest largest populated country with around 1.3 billion population. Population growth of 1.1% and is expected to emerge as the most populous country by 2024. Around 36% of India’s population is less than 20 and 70% is less than 40 years. India is expected to have the world’s largest workforce by 2027, with a billion people aged between 15 and 64. In addition to population, India’s affluence level is also rising as the per capita income in India has increased from Rs 1,14,958 in FY18 TO Rs 1,26,669 in FY19. High population coupled with rising affluence level has been one of the key structural drivers contributing to the growth of the FMCG sector.
2) Low per capita consumption and low penetration levels offers huge growth opportunities:
India, despite having strong demographic dividend, which itself offers steady growth opportunity, lags in per capita FMCG consumption as compared to other emerging nations like Indonesia, China, and the Philippines. The per capita FMCG consumption in Indonesia is double than the per capita FMCG consumption in India, while China’s per capita consumption is four times that of India’s consumption. India not only has a low per capita FMCG consumption but many sub categories of FMCG also has very low levels of penetration levels. Some of the categories like men’s fairness, winter lotion, deodorants, face wash and ayurvedic oil etc has only single digit penetration levels.
3) Shift towards premiumisation is rising:
At one hand FMCG companies are constantly endeavoring to improve penetration levels and increase per capita consumption which can translate into their revenue growth. On the other hand, they are also working tirelessly to bring innovative and premium products especially in categories where penetration levels are approaching to their full potential levels. FMCG companies are also increasing spends on R&D to bring new and innovative products.
4) Shift to Organised Market:
Organised sector growth is expected to grow as the share of unorganized market in the FMCG sector will fall with increased level of brand consciousness.
5) Easy access:
Availability of products has become way more easier as internet and different channels of sales has made the accessibility of desired product to customers more convenient at required time and place.
6) E-commerce:
The fast moving consumer goods sales coming from the e-commerce channel is estimated to grow to US$ 4 billion with a CAGR of 44% by 2022. The channel contributes 2% to the current FMCG market. Metros lead the e-commerce FMCG race with a 6% contribution from the channel to total FMCG sales. Amongst these, food is the biggest contributor with 44%, followed by personal care 40% and household care 13%. In terms of the value contribution of e-commerce to metro sales categories with the channel, diapers contribute 26% to the sales, followed by skin cream 12% and shampoo 10%.
7) Big Data: An insight into consumer behavior, an understanding of preferences of different types of consumers and analysis of the footfalls are major elements the FMCG depends on to improve its products and services. Digitization gives organizations easy and quick access to valuable user data on a daily basis.
India will become world’s 3rd largest packaged food market after China and United States in coming years. At present India is one of the top five markets for packaged food in the world, and the second largest in Asia, with the sales volumes of 34 million tonne. The total sales of packaged food will increase by roughly 7% annually within the next five years. In year 2021, packaged food sales will reach 47 million tonne. With a per capita consumption of 24kg per year, the Indian packaged food market is still at an early stage. Due to rising incomes, urban lifestyle changes and modern retail trade, the food packaging market will expand distinctly. As urban regions account for over 80% of the demand for packaged food, there is huge growth potential in semi-urban and rural regions. The main categories of packaged are bakery products, processed food, frozen processed food and meal replacement products. Some emerging categories in this segment are processed dairy products, frozen ready to eat foods and diet snacks. The Indian middle class is growing rapidly and they simply love to buy. They are on the lookout premium brands, especially for products like confectionery products like chocolates. But the premiumisation trend is not only noticeable in Chocolates, but also in biscuits. These trends are expected to continue even years from now. Rural India provides growth opportunities for packaged food and beverages. Almost 65% of the Indian population lives in rural regions. As India’s soft drink market is slowly reaching maturity in urban India, rural India is the new target for most of the manufacturers of soft drinks. More working women and smaller families will drive consumption of packaged food in India. Improving cold storages due to better power supply, affordability and investments are other factors than increases the consumption of packaged food. The packaged market in India is expected to grow fivefold to US$ 200 billion over the next decade. As nations such as China, India, Brazil and Russia become wealthier, they are changing their eating habits. In particular, they are buying more packaged foods. The Indian packaged processes food industry is estimated at US$ 10.87 billion – US$13.05 billion, including biscuits, chocolates, ice-cream, snacks, cheese and butter. The packaged food industry in India is growing at healthy 14-15% over the past two three years. Consumption slowdown appears to have not impacted the packaged food market like it has other segments of FMCG sector. There is double digit growth in manufacturing activity of food products in first six months of the 2019-20 financial year . This growth comes at time when the overall market remains somber. Branded packaged food market crossed Rs 5 trillion mark for the first time in India in 2019 from Rs 4.3 trillion in 2017. The Indian food processing market was worth Rs 24,665 billion in 2018. The market is projected to reach Rs 50,571 billion by 2024, exhibiting a CAGR of 12.4% during 2019-2024. India’s consumption expenditure is expected increase from US$ 1,453 billion in FY2017 to US$2,062 billion in 2022 and will surpass the consumption expenditure of developed economies like Italy, France and UK. The annual consumption growth in rural India stood at 9.7% while in urban consumption grew at 8.6%. The economy is driven by rural demand due to rising incomes, changing lifestyles, habits, taste, increasing literacy level and increasing expectation of rural consumers. Total consumption spends in India would rise three fold to Rs 4 lakh crore by 2025. Key factors for growth of consumption in India by 2030:
1) Rising incomes and the expansion of the middle class and high-income segment will reshape future consumption:
Middle-income and high-income households will drive nearly $4 trillion of incremental consumption spend by 2030. Overall, there will be nearly $2 trillion of incremental spend on affordable, mid-priced offerings, in parallel with $2 trillion incremental spend led by consumer upgrading to premium offerings or adding new categories of consumption. Households moving up an income level will spend two to two-and-a-half times more on essential categories such as food, housing, transport and communication and also on apparel and personal care. By 2030, 80% of incremental spend will be led by middle-income consumers.
2) India will drive consumption growth and the urban-rural divide will diminish significantly:
While India’s top 40 cities will form a $1.5 trillion opportunity by 2030, many thousands of small urban towns will also drive an equally large spend in aggregate. In parallel, there will be an opportunity to unlock nearly $1.2 trillion of spend in developed rural areas by improving infrastructure and providing access to organized and online retail. With nearly 240 million consumers in 2030, developed rural towns will represent a large but dispersed $1.2 trillion consumption opportunity (~20% of total).
3) Liberalization’s children – India’s millennials and Generation Z will become a major consumption pool and spend more than their predecessors:
Millennials and Generation Z will form 77% of India’s population by 2030. They will be more willing to spend, be more brand-aware and informed than India’s previous generation of consumers. Mass marketing to this generation will be less effective, as they seek more genuine feedback from family and influencers. The India of 2030 will have 90 million new millennialled households and nearly 370 million14 Generation Z consumers (10-25 years old) shaping the future of consumption.
4) Indian peculiarities will shape future opportunities for indigenous offerings, e-commerce and value-for-money brands:
Future consumption patterns will be shaped by uniquely Indian characteristics such as preference for very “Indian” offerings in food, beverages and personal care, adoption of e-commerce in a dispersed market and a shift towards private labels led by the intrinsically value-conscious Indian consumer. Food and beverages will translate into Indian and local cuisines and snacks retaining mainstay position, even as consumers experiment with global tastes. Personal care will witness widening appeal of Ayurveda based and herbal products that are considered best in class by an equal share of consumers in both the middle-income as well as the high-income segment.
5) Many consumer archetypes will persist as age, education, occupation and connectedness begin to strongly influence preferences within each income segment:
In 2030, India will continue to have very distinct consumer archetypes, with the more digitally connected consumers within each income segment creating significant consumption and business opportunities.
India’s future consumer behaviours can be explained by seven key consumer archetypes (below), that businesses must keep in mind while evaluating growth opportunities in India over the next decade.
i) Sophisticated Rich: 30% share of consumption today. High-income, well-educated, tech-savvy millennials who are heavily influenced by online media and are premiumizing rapidly. They have clear brand preferences and aspire to spend more on themselves. Their consumption behaviour is similar to their global counterparts.
ii) Conservative Rich: 18% share of consumption today. Older, less educated and more traditionally employed though with high incomes. Despite income, they remain largely offline, buy more of the same (than premiumize), own fewer durables and have lower preferences for brands. They also save more than other archetypes.
iii) Connected Aspirants: 12% share of consumption today. Low-middle income but online and well educated; 40% search online and 25% purchase online already, and more will do so in future; 80% of them know of, and 15% use, technology-enabled services such as online food delivery and ride sharing. These consumers have clear brand preferences.
iv) Young and Savvy: 7% of total consumption today. 1990s millennials, of which nearly 7 of 10 are already online, are willing to spend on themselves; 50% own brand apparel and more than 50% own high-end cell phones; 60% know of technology-enabled consumption models, 10%-15% use them. Adoption of such models will increase in future.
v) Middle India: 15% share of total consumption today. Older and less educated than Connected Aspirants, though in the same income segment. Largely offline and conservative in their spending – not upgrading to premium products, they have low durable ownership, a high preference for Indian brands and rely on a network of influencers.
vi) Poor Dreamers: 8% share of total consumption today. Nearly all are offline today and are relatively uneducated. They aspire to behave like the Young and Savvy but are constrained by their income – 60%-80% of them express preference for established or global brands over small or Indian ones, but, in reality, they spend on less aspirational brands. They have the most materialistic aspirations but do not expect to increase spending in future.
vii) Poor Rural: 11% share of total consumption today though forming 29% of the population. Lowest stated improvement in income and assets over the past few years. They spend the most on food, own few durables, rely on friends and family for recommendations, and aspire for good health and peace of mind for self and family, as opposed to more material ambitions.
6) Connected India, with 1 billion-plus internet users, will have significantly more informed consumers who will demand greater transparency from brands:
India’s consumers will be more informed about consumption options than ever before. Connected consumers, mostly accessing the internet through mobiles, will give instant feedback at scale, demand transparency and tilt the balance of power from brands to consumers.
| Consumer Archetype | Average Annual household Income ($) | Average Age (Years) | Highest level of Education and current occupation | Access to Smart phones | Share of Population 2018 to 2030 |
| Poor Rural | 2,800 | 43 | >70% below grade 10. 70% informally/non employed | 5% | 29% to9% |
| Poor Dreamers | 5,200 | 41 | >70% below grade 10. 70%informally Non employed | 10% | 14%to11% |
| Young And Savvy | 5,200 | 21 (all born post-1990) | 50% till grade 10. 20% bachelors/ masters. 25% employed, 40% students | 65% | 11%to15% |
| Middle India | 6,800 | 47% | >70% below grade 10. 70% informally non employed | 10% | 19% to21% |
| Connected Aspirants | 6,800 | 39% | 45% till gade 10. 25% bachelors/ Masters.60% employed | 95% | 15% to19% |
| Conserva-tive rich | 40,000 | 49 | 65% below grade 10. 30% passed grade 10 | 95% | 15% to19% |
| Sophisticate-d Rich | 40,000 | 35(35% born post 1990) | 40% till grade 10. 45% bachelors. 55% employed | 95% | 7% to17 % |
Around 70% of FCL sales comes from Future Retail which is groups highest revenue generator firm. Out of this 70%, Big bazaar consist 52%, easyday, easy fresh, nilgiris consist 24%, star bazaar, nature basket, haiku, booker wholesale, nykaa, amazon, spencer’s retail, general trade and other consist 22%. Aadhar wholesale consist 2%. Big bazaar currently fulfills 300 to 1,000 orders daily for amazon in New Delhi, Mumbai and Bangalore and the company plans to expand this service to 12 cities. Future group’s Big Bazaar may soon become the largest grocery seller on Amazon India, taking rivals grofers and big basket. The integration of Big Bazaar inventories on the Amazon app will also help FCL, which has a 30% share in the hypermarket chain. FCL brands such as Tasty Treat, Dreamery, voom and Golden Harvest already contribute to a large share of amazon prime now deliveries. All FCL brands are presently listed on the delivery service. CCI has approved Amazon’s proposes acquisition of minority stake in Future group, paving the way for a closer integration of one of countries leading retail chain into the Amazon India online marketplace. Amazon and future group are now rolling out a joint business plan that will help the Kishore Biyani owned retailer to achieve $1 billion of incremental in group’s revenue by 2021. Amazon wants to expand its hyper local platform, Amazon now, into newer cities in India riding on the Future Group’s store network and sell Future Group’s FMCG brands through its India e-commerce market place. This will be highly beneficial to FCL. The city of Mumbai will see the roll out of the first of the global 7-eleven store in march this year. The 7-Eleven that future Retail, which is the master franchisee of the brand in India, is putting together will be mainly eating joints, providing hygienic food for consumers in high traffic areas such as offices, business parks and colleges. Joint venture aims to serve breakfast, lunch, dinner and packaged food in an organized manner. The group is looking at 5-7 stores in the first spaces and is expected to monitor the stores carefully. The stores will also keep stock of fruits, juices, snacks and condiments for those who want to consume on the go. Franchise deal with 7-Eleven would give future Group an additional revenue basket. Products of Future Consumer Ltd will also have a wider and longer touch points in 7-Eleven Franchise stores. Future consumer is set to take its portfolio of over two dozen personal care, snack and homecare products to general stores across the country, competing with consumer goods giants Hindustan Unilever, Reckitt Benckiser and PepsiCo . The portfolio including Tasty Treat snacks, Voom Fabric care, Dreamery dairy items, mother earth organic staples and Kara personal care products are sold mainly in Future Group’s retail chains such as Big Bazaar and Easy Day. Recently management of FCL said that building a strong distribution network beyond Future Group is its next growth frontier to win. Company will focus on building robust distribution and create the right go-to-market strategy as it distribute in general trade. At a time when FMCG sector is facing a slowdown , Future consumer has carved out a new strategy to overcome this by to start selling its products in general trade. FCL has achieved more than 50% category share within future group’s retail network in at least 30 categories. Groceries like pulses, dry fruits, cereals, wafer biscuits, agarbathis, aluminium foils & wraps, Chinese noodles, cooking pasta, face tissues & wipes, frozen vegetables, manicure & pedicure, phenyls are the among the major categories where FCL brands have a lion’s share. Indian Online food and grocery retail, which currently accounts for just 0.2% of the overall market, is expected to touch US$ 10.5 billion or 1.2% of the overall market by 2023. The future consumer has target to have five Rs 1,000 crore plus food brands in its stable in next five years. The food business of India has now revenue around 3,600 crore. FCL has one Rs 1,000 crore brand in the food segment, golden harvest. Other four brands that can achieve the distinction are: tasty treat, karmiq, cleanMate and Dreamery. Food is almost 90% of the business of Future consumer while remaining 10% is from home and personal care. Management said in five year down the line, it should be 80% foods and the remaining should be from home and personal care. FCL has mission to earn Rs 20,000 crore in revenue by 2022. In organized retail, future consumer is second to Britannia in biscuit category. FCL has recorded consolidated turnover of Rs 3,88,064.97 lakhs in the fiscal year 2019 as against Rs 3,00,746.50 lakhs in last fiscal, a growth of 29%. FCL turned profitable at profit before tax with a profit of Rs 574.37 lakhs for the fiscal year 2019 vs a loss of Rs 1,151.77 lakhs for the fiscal year 2018. Loss for fiscal year 2019 was Rs 638.76 lakhs, an improvement of 75.4% over fiscal year 2018. FCL incurred interest and financing charges of Rs 7,347.73 lakhs in fiscal year 2019 an increase of Rs 2,090.94 lakhs over the previous fiscal year. The increase was on account of increased working capital requirements, capital expenditure and funding for expansion plans of joint ventures. The net working capital of FCL stood at Rs 62,116.25 lakhs as compared to Rs 47,679.03 lakhs in 2018. This include Rs 24,684.80 lakhs of inventories compared to Rs 22,424.31 lakhs in 2018. Rs 67,466.28 lakhs of trade receivables compared to Rs 49,284.46 lakhs. Rs 30,034.84 lakhs of trade payables compared to Rs 24,029.75 lakhs in 2018. Company’s gross debt stood at Rs 81,366.81 lakhs. EBITDA of FCL improved from 2.2% in 2018 to 3% in 2019. Net profit margin improved from -0.9% in 2018 to -0.2% in 2019. Return on net worth improved from -2.7% in 2018 to 0.7% in 2019 as net losses shrunk significantly from Rs 2,598.42 lakhs in 2018 to Rs 638.75 lakhs in 2019. On consolidated basis company’s income from operation grew to Rs 3,880.65 crore in 2019 from Rs 547.16 crore in 2011.In September 2019 company’s net sales was Rs 1,120.84 crore up 10.85% from Rs 1,011.15 crore in September 2018. EBITDA stands at Rs 45.31 crore in September 2019 up 33.66% from Rs 33.90 crore in September 2018. Around 91% of promoters shares are pledge because of high expansion plans and joint venture of company done in past 3-4 years. Since all expansion work and joint ventures are completed company now plans for profitability of company and to receive good ROCE in coming years. No new money will be used in expansion because already great expansion work is has been done in past so company waits to get good ROCE in coming years. There are high changes of company to come in profits from next year and to turnaround. Recently company appointed FMCG veteran Rajnikant Sabnavis as its CEO. Rajnikant was also an executive at Hindustan Unilever Ltd for 23 years. He was also chief Operating officer Of Jyothi Laboratories. By all this I prefer buy call on Future consumer Ltd at CMP of Rs 23.90 on 2 January, 2020.