FMCG sector growing
Rising household incomes, per capita consumption, increased Foreign investments and growing demand from rural markets have allowed the sector to grow at a steady 12-13 per cent in 2007.
The FMCG sector accounted for 5 per cent of the total factory employment and created employment for over 3 million people in downstream activities in 2007.
The sector also witnessed a spate of outbound M&A activities such as United Breweries buying out Whyte & Mackay for $1.2 billion (Rs 4,800 crore), and Wipro making its biggest acquisition of Singapore-based consumer good company Unza Holding for $250 million (Rs 1,000 crore).
Foreign investments in the industry are expected to reach $3 billion (Rs 12,000 crore), as multinational companies (MNCs) are making their presence felt in India due to the country’s broad consumer base.
While rigid mindsets in rural areas remain the key challenge for companies to overcome in 2008, the key drivers for growth are changing demographic profiles, modern retailing and newer products, deeper rural area penetration, government policy initiatives, i.e., new VAT (value added tax) structure in 2008 and higher consumer spending.
Corporate impact | | “The decision to put agriculture and farm sector on the centrestage will surely boost the rural economy and improve demand, which will foster faster growth for FMCG companies”
— Sunil Duggal |
Hindustan Unilever: The company will benefit from the overall excise duty cut on packaging materials from 16 to 8 per cent, as this will reduce the raw material cost for the company
- ITC: Excise duty on both filter and non-filter cigarettes brought on par by applying higher rates on non-filter cigarettes. This will not affect the company, as it does not have a presence in non-filter cigarettes. The company will benefit from the other positives announced such as excise duty cuts
- Godrej Consumer Products: Excise duty reduction on packaging materials should benefit the company. Economic boom will benefit the company and reduction in tax slabs will leave more money with consumers for consumption. A positive for all FMCG companies
- Dabur India: The cut in excise duty from 16 per cent to 14 per cent will result in overall cost efficiencies and savings for Dabur India. (This is also valid for the other FMCG companies)
- Marico: Excise duty reduction on packaging materials should be beneficial for the company
Sectoral impact - Excise duty exemption on specified refrigeration equipment for the installation of cold storage, etc. on end-use basis
- Reduction in excise duty from 16 per cent to 8 per cent on specified packaging material and prepared food items will act as a booster for FMCG players
- Section 35D, preliminary expenses benefit extended to FMCG companies
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