Why Operational Inefficiencies Arise After FMCG Mergers & Acquisitions

India’s Fast-Moving Consumer Goods (FMCG) sector, valued at USD 200 billion in 2025 and projected to reach USD 220 billion by year-end, is a powerhouse employing three million people and serving diverse urban and rural markets. Mergers and acquisitions (M&A) are critical for FMCG companies to achieve scale, consolidate brands, expand market access, diversify product portfolios, and accelerate digital transformation. In 2024, India recorded 2,186 M&A deals worth USD 116 billion, with FMCG as a key sector alongside technology and healthcare. Transaction types include horisontal mergers (e.g., Tata Consumer Products’ acquisition of Capital Foods), vertical integration (e.g., securing supply chains), and strategic acquisitions (e.g., entering health and wellness). Despite these opportunities, operational inefficiencies often erode synergies, diminish value, and disrupt momentum. This article, supported by LawCrust’s hybrid consulting expertise, explores why operational inefficiencies arise post-merger and how to mitigate them.

Why Operational Inefficiencies Emerge Post-Merger in FMCG M&A

Operational inefficiencies in FMCG mergers stem from complex integration challenges. Below are the key reasons:

• Cultural Clashes and Incompatible Management Styles

Merging organisations with distinct cultures such as a hierarchical FMCG giant and an agile D2C brand creates friction. For example, the Zomato-Blinkit merger faced initial cultural misalignment, impacting productivity. Without deliberate integration, operational inefficiencies arise in workflows and decision-making.

• Misaligned KPIs Across Legacy Teams

Differing Key Performance Indicators (KPIs) across legacy teams hinder collaboration. For instance, one company’s sales team may prioritise volume, while another focuses on premium pricing. This misalignment causes duplicated efforts and operational inefficiencies in performance tracking and accountability.

• Technology and Systems Integration Challenges

Disparate IT systems (e.g., SAP vs. Oracle ERP) complicate data migration and interoperability. With India’s 900 million internet users in 2025 driving digital adoption, integrating CRM, ERP, and DMS is critical. Failure to do so creates operational inefficiencies in forecasting, procurement, and reporting.

• Overlapping Distribution Channels and Inventory Mismanagement

Mergers often result in redundant distribution networks, increasing logistics costs and inventory mismanagement (e.g., stock-outs or overstocking). Integrating modern trade (MT) and general trade (GT) channels is complex, as GT relies on relationships while MT demands data-driven efficiency, leading to operational inefficiencies.

• Redundancies in Supply Chain or Procurement Functions

Duplicate suppliers, warehouses, or logistics providers drive up costs. Rising raw material prices (e.g., palm oil, sugar) and freight costs exacerbate these issues. Without swift consolidation, operational inefficiencies persist in procurement and transportation.

• Conflicting Branding and Go-to-Market Strategies

Merging diverse brand portfolios risks market confusion if go-to-market (GTM) strategies conflict. For example, a premium brand acquired by a mass-market player may lose equity, causing operational inefficiencies in sales and marketing due to inconsistent messaging.

1. June 2025 Market Dynamics Influencing FMCG M&A Operational Inefficiencies

• Recent market dynamics amplify the risk of operational inefficiencies in FMCG M&As:

1. PLI Expansions for Packaged Goods and Processing: The USD 976 million allocated in the 2023–24 Union Budget for PLI schemes encourages domestic manufacturing. However, integrating new production capacities post-merger requires careful planning to avoid Operational hurdles in facility alignment.
2. ESG-Linked Mandates for Logistics and Packaging: ESG compliance, emphasised by companies like Adani Green, demands sustainable packaging and logistics. Reconciling differing ESG practices can introduce Operational hurdles if legacy systems or suppliers are non-compliant.
3. Digital Infrastructure Upgrades: With e-commerce projected to account for 11% of FMCG sales by 2030, investments in IoT, CRM, and ERP are essential. Mergers involving digital-first brands (e.g., HUL’s acquisition of Minimalist) require unified tech stacks to prevent operational inefficiencies in inventory and customer engagement.
4. Funding Environment Post-IPO Correction: A weaker IPO market in 2025, with 903 PE exits in Q1, pressures merged entities to demonstrate quick synergies. Operational inefficiencies can hinder financial performance and investor confidence.
5. Cost Fluctuations: Volatile raw material, freight, and ad-tech costs squeese margins, making efficient integration critical to avoid Operational hurdles that erode profitability.

2. Consulting Analysis: Mitigating Post-M&A Operational Inefficiencies in FMCG

LawCrust’s hybrid consulting approach, blending management, finance, legal, and technology expertise, offers strategies to minimise operational inefficiencies:

• Conduct Integration Due Diligence Beyond Financials

Extend due diligence to culture, technology, supply chain, and legal frameworks. Assess leadership styles, system compatibility, and ESG compliance to identify risks early. Tax due diligence ensures GST and BEPS 2.0 compliance, reducing Operational hurdles.

• Build a Day 1 and Day 100 Operational Integration Playbook

Create a playbook for Day 1 (stabilising operations, ensuring customer continuity) and Day 100 (capturing synergies). Outline tasks, teams, and KPIs to minimise disruption and address operational inefficiencies, following BCG’s three-phase PMI framework.

• Restructure Teams Around Unified Performance KPIs

Align KPIs across sales, marketing, and supply chain to unify goals. For example, harmonising sales KPIs for MT and GT channels prevents conflicts and reduces operational inefficiencies in execution.

• Harmonise Supply Chain Workflows and Procurement Strategy

Centralise procurement, optimise logistics, and leverage PLI schemes for local sourcing. Use IoT for demand forecasting and inventory management to eliminate redundancies and operational inefficiencies.

• Upgrade Shared Tech Infrastructure

Integrate DMS, ERP, and CRM into a unified platform (e.g., SAP S/4HANA). Generative AI can optimise product development and market research, as seen with Nestlé’s AI platform, reducing technology-driven Operational hurdles.

• Ensure Legal Compliance

Adhere to FSSAI, GST, ESG, and IP laws. Legal due diligence under the DPDP Act and labour laws ensures smooth employee transitions and compliance, preventing Operational hurdles from regulatory missteps.

Illustrative Case Examples of Operational Inefficiencies in FMCG M&A

• Merger Pitfall

A food and beverage giant acquired a regional snack brand to expand its savoury segment. However, operational inefficiencies in warehousing (incompatible systems causing spoilage) and sales team alignment (conflicting incentives) led to a 12% revenue dip in the first two quarters, underscoring the need for pre-merger planning.

• Turnaround Success

A personal care conglomerate merged with a D2C challenger brand. A hybrid integration team aligned digital and retail channels, unified the tech stack with a shared CRM, and established a shared service centre. This mitigated operational inefficiencies, improving margins by 300 basis points within 18 months.

Conclusion: Tackling Operational Inefficiencies for M&A Success

FMCG M&As in India offer immense growth potential but are fraught with challenges. Operational inefficiencies can undermine synergies if not addressed proactively. Strategic planning, robust tech integration, cultural alignment, and legal compliance, guided by LawCrust’s expertise, are essential to ensure seamless business consolidation and sustainable value creation.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

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