 "New plastic management rules will impact FMCG companies: Analysts")
New mandatory norms for plastic recycling and reuse of plastic packaging will impact consumer goods companies like Nestle India, Britannia, and Colgate, according to analysts at brokerage firm Kotak Institutional Equities.
Under the new Plastic Waste Management rules, India will implement mandatory norms for the recycling and reuse of plastic content for producers, importers, and brand owners of plastic packaging (excluding micro, small and medium enterprises, or MSMEs) in a phased manner starting from FY25.
India is the third-largest plastic producer globally. While these new norms will put India ahead in the global league, they will also impact packaging costs for consumer companies.
The brokerage said that consumer companies, on average, spend 5-8 per cent of their revenues on packaging, while still heavily relying on plastics.
“We believe that Britannia, Colgate, and Nestle will be the most impacted, while Godrej Consumer Products, ITC, Jyothy Labs, and Varun Beverages will remain the least impacted by the new PWM rules,” the brokerage said in its note.
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“Our assessment is based on relative overall revenue-based exposure of companies to five key variables: plastic, transparent plastic, food-grade plastic, flexible plastic, and multi-layered plastic (MLP),” it added.
Consumer companies are already working to reduce plastic packaging.
“Packaging is one of the key focus areas. We have undertaken several measures on this front, including optimising current packaging by reducing size, initiating the use of recycled content in secondary packaging, and moving towards easy-to-recycle packaging material,” said a Nestle India spokesperson. The company has stopped using plastic for all promotional material since 2020.
Meanwhile, “plastic recyclers such as Ganesha Ecosphere and innovative packaging companies such as EPL, Uflex, and ITC, which can provide solutions for making plastic recyclable, will be the key beneficiaries of the rollout of the new PWM rules,” analysts added.