ICICI Securities: Digitally Enabled Kiranas, Consolidation Of Modern Trade And E-Commerce Hurt Consumer Companies’ Margins
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ICICI Securities Report
We believe that consolidation of general trade channel (wholesale), modern trade and e-commerce is unlikely to impact consumer companies’ operating margins.
We draw parallel from Procter and Gamble Hygiene and Healthcare Ltd.’s global partnership with Walmart, a renowned global case study in partnerships.
Though Walmart accounts for one-third of P&G U.S.’ sales, it’s margins in this channel is likely higher (our view) thanks to consumer behavior data sharing and supply chain collaboration.
Furthermore, high Herfindahl-Hirschman Index (greater concentration of market shares with few brands) in most consumer categories in India allows strong negotiation power for the brands/market leaders.
That said, markets like simple narratives and that’s the risk to FMCG stock multiples.
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