Fmcg Firms Prepare For Brand Wars
The fast-moving consumer goods (FMCG) industry anticipates pitched brand battles following the governments decision to free imports of personal care and processed food items.
The Export-Import (Exim) policy for 1997-2002, which was unveiled on Monday, has freed imports of several items like chocolates; cocoa products; chewing gum; corn flakes; ice cream; juices made of grapes, lemons, citrus, pineapples and tomatoes; tomato ketchup and soya. These items have been moved from the restricted list to the open general licence list.
Other items such as processed cheese, medicated and toilet soaps, sanitary towels and napkins, pickles, chutneys, prepared and processed fruits, vegetables, soups, fruit squashes and sauces have been shifted from the restricted list to the special import licence list.
Admits Cadbury spokesperson and marketing director D Sethi, If the current duty structure, which is around 65 per cent, is changed, we will be exposed. Chocolates abroad are cheaper by between 10 and 20 per cent.
Although the government has not notified the tariff structure on these items, FMCG companies feel that the removal of bureaucratic hassles would allow many foreign companies to start exporting their brands to India as an initial market development exercise.
The ice-cream industry is one of the most likely candidates for such a development. Several foreign brands like Haagen Daaz which is owned by British major Grand Metropolitan Plc could opt for exports as opposed to the expensive and time-consuming process of setting up manufacturing facilities.
Points out N K Seth, executive director, Kwality Frozen Foods, which has a marketing venture with Hindustan Lever: Global ice-cream companies operate on large volumes of eight to 10 million litres per annum, which they cant do in India initially because of the smaller market size. But they can have a distribution arrangement with an Indian partner, and export their products to build demand. When the volumes justify it, they can enter India.
If that happens, smaller Indian ice-cream brands could begin to feel the heat as the global cost of production is about 30 to 40 per cent lower than Indias, due to the low domestic economies of scale.
The Indian ice cream market is dominated by Hindustan Lever, which has a 50 per cent share of the market through its tie-up with Kwality. Apart from Grand Met, other multinationals like Nestle are also eyeing the market.
Grand Met has already entered a tie-up with Godrej Foods for its Pillsbury foods division. Godrej-Pillsbury chief executive Samir Behl hailed the freeing of ice cream imports as a potential investment opportunity.
Whether we will invest in a new unit or import ice creams has not been decided yet. We will take a closer look at the tariff structure and then decide, he said.
The Exim policy could also hit established brands like Nestles Maggi ketchups, Warner-Lamberts Chiclets and Clorets and Cadburys chocolates. The freeing of ketchup imports is expected to clear the way for Heinz India Pvt Ltd, the 100 per cent subsidiary of the $10-billion Heinz Corporation, to launch its ketchup range in the country.