Consumer goods sector expecting more investment from PE/VC firms

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In the last few years, Consumer packed goods have got a good amount of investment from Private Equity and Venture Capital firms. But the COVID-19 pandemic had adversely affected the funding activities. But the change in consumer preferences due to the coronavirus outbreak might give golden opportunities to consumer packed goods in terms of funding.

Consumer goods, household and consumer products, as well as FMCG companies, should see favor amongst PE/VC investors. In February 2020, Avenue Supermarts Ltd. (D-Mart) raised $4.86 million in and Ador Multi products Ltd. raised $0.29 million in July 2020. The FMCG sector also witnessed a big deal that is Hindustan Unilever Ltd. acquired the Horlicks Brand for India for $415.3 million in April 2020. An average deal worth rupees $5.07 million recorded in the household and consumer product sector. A firm called Honasa Consumer Pvt. Ltd also raised $ 18.22 million this year.

The pandemic resulted in a change in consumer preference. Online delivery platforms such as Milkbasket, Big basket, Swiggy, and Zomato has been witnessed an average increase of 2.3x in income. Milkbasket allowed customers to order products till 8 pm during the time of pandemic with guaranteed delivery the next morning itself. This facility attracted more customers and it resulted in an increase in income for the company by 2.8 x. This result may certainly impress PE/VC investors looking at the sector as going forward customers are likely to prefer the online model over traditional models for convenience, distancing & health above all else. For the last four to five months, food and essential products showing a higher demand.

The impact on economic activity caused by lockdowns and social distancing adversely affected the funding activities and it is expected to hit more and not recover easily as compared to last year’s economic slowdown. The consumer goods sector witnessed a drop of 50% in terms of volume and 82% in terms of value. Once the market starts recovering it, the sectors such as consumer goods might see golden opportunities in the future due to changing consumer preferences.

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