Thorough Due Diligence: Mastering Mergers in India’s Consumer Goods Sector

India’s consumer goods sector is a vibrant engine of growth. It offers vast opportunities for strategic consolidation through mergers and acquisitions (M&A). For senior leaders navigating this dynamic landscape, thorough due diligence is the foundation. It unlocks value, reduces risk, and enables smooth integration. This article serves as a complete guide to M&A in the consumer goods sector. It blends management, finance, legal, and technology insights to support key decision-makers.

Thorough Due Diligence Begins with Understanding the Sector

India’s consumer goods sector was valued at USD 245.39 billion in 2024. It is projected to reach USD 1,108.48 billion by 2033, growing at a CAGR of 17.33%. As India’s fourth-largest sector, it contributes about 5% to GDP. It also employs more than 3 million people.

Key sub-segments include FMCG, D2C brands, personal care, packaged foods, home care, and consumer durables. The value chain includes manufacturers, distributors, kiranas, modern trade outlets, e-commerce platforms, logistics players, and regulators. These include the Food Safety and Standards Authority of India (FSSAI) and the Central Pollution Control Board (CPCB).

Structural trends are reshaping the sector:

• Urbanisation and Changing Preferences: Rising incomes and city expansion are driving demand for premium and convenient products.
• Rural Demand Revival: Rural areas host 60% of India’s population. Programmes like rural electrification and MSP hikes are fuelling a USD 220 billion rural FMCG market by 2025.
• D2C and Omnichannel Growth: E-commerce is expected to contribute 11% of FMCG sales by 2030. D2C players like Mamaearth are reshaping distribution and marketing models.
• Strategic Consolidation: Firms are seeking scale and innovation through M&A. This makes thorough due diligence essential in assessing risks and integration fit.

1. Recent Developments Emphasising Thorough Due Diligence (June 2025)

• Several 2025 events have made thorough due diligence more critical:

1. PLI Scheme Expansion: The PLI scheme now covers food processing and household essentials. It offers USD 1.42 billion in incentives. Due diligence must assess eligibility and cost optimisation.
2. Retail Inflation and Input Volatility: CPI inflation eased in May 2025. Yet, raw materials like palm oil and wheat remain volatile. Financial checks must include margin stress tests and price elasticity reviews.
3. ESG and Packaging Rules: New CPCB and FSSAI norms on Extended Producer Responsibility (EPR) raise compliance needs. Legal due diligence must verify adherence to labelling and packaging rules.
4. IPO and Funding Trends: Brands such as Yoga Bar (acquired by ITC) are using mergers as growth or exit routes. Diligence must align target performance with investor expectations.
5. Technology Integration: AI and ML tools now help forecast demand and analyse consumer behaviour. Diligence must assess the digital maturity of merger candidates.
6. Budget 2025 and GST Updates: The budget reduced GST on processed foods (to 5%) and personal care (to 18%). It also introduced MSME support and eased import duties. These changes affect financial modelling and merger feasibility.

2. Key Challenges Addressed by Thorough Due Diligence in FMCG Mergers

• FMCG mergers pose unique integration and compliance risks. Thorough due diligence helps manage these challenges:

1. Cultural Mismatch: Merging legacy FMCG players with agile D2C startups may result in workforce misalignment. Culture audits and integration plans are critical.
2. Legal Ambiguity: Conflicts over licences, IP rights, and vendor contracts may arise. Legal due diligence must resolve such issues early.
3. Working Capital Strain: High raw material costs and tight pricing hurt cash flows. Finance teams must analyse liquidity and vendor payables.
4. Brand Equity Risk: Consumer loyalty may weaken if brand identities merge poorly. Brand valuation and perception studies are vital.
5. Tech Integration Gaps: ERP and DMS mismatches, and varied compliance levels (e.g., GST, labour laws), increase integration complexity. Technology audits must be part of due diligence.

3. Strategic Implications of Thorough Due Diligence Using a Hybrid Consulting Lens

A hybrid approach, combining multiple disciplines, strengthens thorough due diligence.

• Go-to-Market (GTM) and Growth Strategy

1. Portfolio Alignment: Eliminate SKU overlap and focus on high-margin categories like health foods.
2. Distribution Optimisation: Use AI tools to map retail footprints and consolidate networks for efficiency.
3. Brand Strategy: Align branding for better market appeal. Use data to target shared consumer segments across geographies.

• M&A Structuring Strategy

1. Legal Reviews: Assess FSSAI compliance, IP ownership, ESG readiness, and Legal Metrology documentation.
2. Valuation Adjustments: Factor in synergy potential, brand value, and compliance gaps when pricing the deal.
3. Financial Planning: Analyse working capital needs and model cash flow under various demand scenarios.

• Turnaround Opportunities

1. Vendor and SKU Rationalisation: Streamline suppliers and cut procurement costs by up to 15%.
2. Marketing ROI: Use digital-first and performance marketing to reduce spend and improve returns.
3. Logistics and SCM Automation: Deploy IoT and AI to improve delivery efficiency and track product movement in real time.

• Tech and Legal Enablement

1. System Integration: Map out ERP/DMS compatibility and create an integration roadmap post-merger.
2. Compliance Setup: Prepare frameworks to manage GST filings, labour codes, packaging, and EPR norms.

Illustrative Examples of Thorough Due Diligence in Action

• Merger Synergy Case: A national food company merged with a regional dairy brand. Thorough due diligence uncovered overlapping distributors and inefficiencies. Post-deal, the team implemented AI-driven route optimisation. Logistics costs fell by 18%, and fulfilment rates improved.

• Compliance Case: Two home care brands merged in 2024. Legal due diligence flagged outdated licences and packaging issues. A single EPR compliance dashboard was created. The team redesigned SKUs and relaunched the brand within three months, avoiding regulatory penalties.

Conclusion: Thorough Due Diligence as a Strategic Imperative

M&A remains a key growth lever in India’s consumer goods market. But success depends on more than financial metrics. Thorough due diligence must span legal, digital, operational, and strategic dimensions. Leaders who adopt a hybrid consulting lens can reduce risks, capture synergies, and lead successful integrations. In a competitive and evolving sector, due diligence isn’t just a check—it’s a strategic advantage.

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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