From ITC to Dabur, plastic waste control top priority for FMCG firms

If demonetisation and goods and services tax (GST) gave sleepless nights to consumer goods makers till early-2018, for the past few months it has been plastic packaging materials that are ringing alarm bells for these firms. 

The issue of pollution caused due to the non-degradable material is keeping consumer goods majors — from ITC and Dabur to Nestlé and PepsiCo — on their toes. While the matter had been flagged by environmentalists years ago, the Centre is now scurrying to put curbs on untreated plastic waste — most of which is produced by organised fast moving consumer good players (FMCGs). 

The governments in at least five states — Tamil Nadu, Maharashtra, Uttarakhand, Punjab and Gujarat — have declared a ban on single-use plastic materials with varying timelines. And at the central level, a joint body — comprising the urban development ministry and ministry of environment and forest — is acting fast to finalise the extent of responsibility manufacturers would have to take based on the extent of plastic they use in packaging. 

Is Patanjali's FY18 Rs 20,000 crore revenue target realistic?

With a reported turnover of Rs 10,561 crore in financial year 2017 (FY17), Baba Ramdev and Acharya Balkrisha - led Patanjali Ayurved Limited (PAL) expects its revenue to hit Rs 20,000 crore mark in financial year 2017-18 (FY18).

Analysts, however, are sceptical and are of the view that Patanjali may not be able to achieve this steep revenue target in FY18 purely on the basis of growth in the FMCG segment given the current industry growth rates and that the revival in rural demand is still some time away.

"One must be mindful that this Rs 20,000 crore will also include commodity related products such as rice, wheat, edible oil, milk etc. Growth rates for pure FMCG products are likely to slow down. Patajnali is now quite big in products like honey, toothpaste, shampoos and hair oil. So from the base these pure FMCG products has created, doubling of revenue looks very difficult. The category growth rates will be around 13% at best. Though penetration into newer markets will help, doubling still seems a farfetched idea as of now," says Abneesh Roy, an analyst tracking the sector with Edelweiss Securities.
For the rural demand to kick in, analysts say the monsoon season this year will also be a crucial. That apart, companies are now in the process of catching up with Patanjali in terms of ayurvedic products. In this backdrop, Patanjali will find it difficult to double this huge revenue base it has already created.

"I have doubts whether Patanjali can achieve the Rs 20,000 crore revenue target it has set for itself. Volume-wise, the FMCG industry is growing in single digits (between 4% - 6%) for most players. For FMCG players, we need a good monsoon to act as a catalyst to trigger a demand revival. Even one good monsoon (last year) was not enough to revive the rural demand," explains G Chokkalingam, founder and managing director of Equinomics Research & Advisory.
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