Hindustan Unilever (HUL) selling its Pureit water filter business highlights how fast-moving consumer goods (FMCG) companies often fail in the service sector.
Pureit, a product requiring after-sales service, was launched nationwide in 2008. However, HUL later decided it wasn’t a core part of their business.
Other FMCG companies have also struggled with service businesses. For example, in 2009, Jyothy Labs started a laundry chain called Fabricspa, but it grew slowly and only made up 2% of their revenue in FY24.
Marico, known for Parachute, started Kaya skincare clinics in 2002. In 2013, Kaya was separated and listed on the stock market, but its value dropped by 57% since 2015.
Godrej Consumer Products bought a stake in the salon business BBlunt in 2013 and launched hair care products under the same brand. In 2022, they sold BBlunt to Honasa Consumer, the company behind Mamaearth.
FMCG companies usually focus on high-volume, low-margin products, while services are low-volume, high-margin and need more customer engagement. This makes it difficult for FMCG companies to succeed in the service sector.
Most of these ventures by FMCG companies in India have been small and experimental, allowing them to cut losses without major impact.
There are some exceptions, like HUL’s successful Lakme salons, mostly run by franchisees, and ITC, which manages its FMCG and hotel businesses with separate teams.
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