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"Time to Go Past Conventional Approach"
Sanjay Trivedi, Founder/Director, The Indian Home & Personal Care Industry Association (IHPCIA) Increasing Indian populace globally, has given significant thrust to the demand of Indian FMCG goods across various global markets and there are many brands that are thriving in markets outside India. Inorganic growth is a combination of factors and completely depends on how the companies wish to address these says Sanjay Trivedi, Founder/Director, The Indian Home & Personal Care Industry Association (IHPCIA) in an exclusive interview with Mittravinda Ranjan.

A recent industry report has projected the Indian Personal care market to touch USD 20 billion in India by 2025 from the current USD 6.5 billion. In your view, what will be the key growth drivers for changing market dynamics?
Indian home and personal care market has been witnessing double digit growth and is one of the most buoyant and dynamic markets. Personal care is growing faster where skin care products are growing at around 16 per cent followed by the shampoos that are clocking growth rate of 12- 13 per cent. It is interesting to see the paradigm shift that is taking place in the segment of grooming products for men and is one of the key growth drivers of industry.

Indian FMCG market are changing significantly with the entry of homegrown players in the market like Patanjali, which has introduced the products based on traditional Ayurveda and NIRMA and RSPL who have introduced products which are accepted by an immensely wide consumer base.

Another significant contributing factor is the advent of e-commerce in the emerging global markets which the industry believes as a strong opportunity to reach out the products to wider consumer market. E-commerce is one of the key business enablers and home & personal care industry will be able to achieve the targeted growth of 10 billion plus in near future.

How is the popularity of Indian home and personal care products growing in other international markets and how can the companies leverage on this opportunity?
Increasing Indian populace globally, has given significant thrust to the demand of Indian FMCG goods across various global markets and there are many brands that are thriving in markets outside India. Inorganic growth is a combination of factors and completely depends on how the companies wish to address these. Every market offers opportunity for direct sale but it does require setting up of efficient marketing network for the business to reach out to the consumers.

Though there are number of ways to achieve it, but in my view, business acquisition is the simplest and most efficient way to strengthen geographical presence.Acquisitions enable the companies to leverage on the existing marketing network of acquired businesses in the new geographies and reach the consumers faster and easily. This growth model has been demonstrated by many FMCG companies like Godrej Consumer Products Ltd, Nirma, Dabur and Emami who have consolidated their presence in many international markets.

Please share some insights into some of the biggest challenges that the FMCG manufacturers continue to face in India despite the fact that India is one of the fastest growing consumer market?
The demonetization of currency and impact of GST are the biggest challenges that the FMCG manufacturing face in the short term

In the long term, managing the supply chain should be the key growth driver. Like any other industry the FMCG sector is growing in India and has its own sets of challenges; but at the same time, we also see certain criteria that can be met for the growth of this sector. Growth through digital marketing will have sustainable benefits.

Raw materials like soda ash, alkyl benzene; natural & synthetic alcohol and olefins are the building blocks for the industry. Unfortunately, we do not have sufficient indigenous capacities to produce synthetic alcohol and olefins which are some of the basic requirement for manufacturing. As a country, we need to set up capacities to produce these chemicals which are the building blocks to secure supplies and reduce dependence on imports.

As India is a large ethylene producer, going downstream to olefins to alcohols will be a logical approach. China has already demonstrated this with plants that produce higher chain synthetic alcohol parallel to natural alcohol and I think taking step in this direction will be a good move for the industry.

Specialty chemical companies have constantly been challenged and industry has taken steps to address the concerns and India has emerged as one of the very few countries globally which uses entire spectrum of anionic surfactants. Today, the products offered in the market include alkyl benzene sulfonates, olefin sulfonate, alcohol sulphate, ether sulphates, methyl ester sulfonate, and specialities like APG, sulfo succinates etc.

Linear Alkyl Benzene industry in India is relatively small and under invested. A simple calculation based on the growth rate of the industry indicates that we need an alkyl benzene plant of 100 KTPA every two to three years to offer intermediates at competitive prices. LAB is the main workhorse for downstream homecare products and at present produced only by four chemical companies, viz. Indian Oil Corporation Ltd & Reliance Industries Ltd, who are merchant producers and Tamilnadu Petroproducts and Nirma Ltd. who have captive use. Though the world has focused on LAB route for producing intermediates, but the industry is now looking at alternative routes to use intermediates like palm stearin and palm fatty acids from natural ingredients derived from palm.

It is an interesting scenario since Indian industry imports LAB from the Middle East and China and exports products to other international markets. At the same time we continue to depend on imports of palm oil from Indonesia and Malaysia.

Availability of raw materials is very important for sustained business; however there is a lack of investments from the Indian companies for meeting of the growing demands. Imbalances through bilateral and regional treaties also add to the uncertainties and complexities for the HPC business.

What are your thoughts on the Make in India initiative for the stakeholders of FMCG industry and can quality be a constraint for the manufacturers?
Make in India initiative is an excellent idea, yet nothing substantial has been done for the Home & Personal Care sector. I feel that the Government should provide a level playing field for the local producers through providing some kind of incentives to grow and also needs to revisit various treaties with the countries in MENA and ASEAN regions.

This campaign has definitely caught interest of major chemical players like BASF, Clariant, and Huntsman, to name a few who are already present in Indian market and trying to consolidate their presence in Indian market and there are many others who are looking at establishing their presence in India for revenue generation. Especially, leading intermediate players are paying attention to India for India’s huge domestic consumption potential and emergence as the cost-effective intermediate processors of key primary materials based on crude oil and palm oil.

Today, major palm plantation owners are diversifying and integrating downstream and gradually the plantation owners are getting into manufacturing of alcohol and surfactants which challenges the earlier ethos of manufacturers who are already in the business. Eventually, this will impact the return on investments for the standalone intermediate processors and the economic strain may lead to consolidation. This is where Make in India initiative will also bring in major players who matter in this whole scenario. I strongly feel that there is a need to give a rationale thought in the direction to address these shortcomings through properly structured bilateral and multilateral agreements. Then the Indian industry will have the key raw materials to use as building blocks for future intermediates.

India is a segmented and diversified market which offers ample opportunities for different products and taking different approaches towards the customers. Small scale manufacturers who are innovative and have a good share could be targets for acquisition as the industry consolidates.

There is a huge demand across the consumer sector. At the same time the consumer is very cost conscious and wants delivery of efficient products and are willing to experiment with something new. Manufacturer's commitment to make quality product will sustain in growth. Products of quality and manufactured in India are accepted across various international markets. The recent acquisition of Dermalogica Skincare by Unilever is an indication of Indian manufacturers' commitment towards high-end quality for the consumers.

What does innovation mean today for FMCG companies to succeed?
Today, innovation is not about only making huge R&D spend upstream in formulating the products but coming up with innovative ideas in packaging to reach out good quality products to the bottom of the pyramid across different income brackets. Formulation modifications to offer customised products coupled with aggressive pricing strategies is the mantra to success. Look at Patanjali and Ghari - these brands have been able to drive their growth with strong customer centric strategies.

One very interesting example of phenomenal growth led by product innovation is the detergent industry in USA which has spread to consumer markets. This industry has observed shift from powders to liquids to concentrates to unit wash which signifies the availability of option to use a product which can save water, energy, be affordable & provides convenience. A very easy way to move forward with available technology is to go straight down to a concentrated liquid form. Unit dose with soluble polymer film is another product innovation which will soon be available in open market since its patent will expire soon. I think this is a very interesting trend that can be easily emulated in India which is still dominated by detergent powders and bars.

While formulating the products, the manufacturers also need to look at the key attributes like smaller environmental footprint, lesser energy and water consumption etc. because of the increasing awareness across consumers and their willingness to try new products.

Your thoughts on Goods & Service Tax Bill
The GST bill will certainly lead to rationalization in pricing since it will differentiate products by raw materials, intermediates and finished products. There is no inverse duty structure which will simplify the processes and add to the competition. It is an excellent way forward in terms of what the industry has got now and was much needed in terms of rationalization of business processes in India. It will drive and maintain the growth that the industry envisages.

Final thoughts on the outlook for FMCG sector
China and India have been growth drivers in terms of volumes, but for a while China has slowed down owing to different reasons though it continues to be ahead of India. In terms of growth and new projects, Vietnam, Indonesia, South Africa and Turkey are the developing markets. The reason being China’s per capital consumption of Personal & Home Care products have almost doubled. India is around 3.8 kg per capita, while China has already reached 7 kg per capita. The change of form and innovation has bought the change in the dynamics. So, there is a need and we have been actively promoting it within the IHPCIA and the industry to think out-of-the-box to drive innovation. It’s time to go past the conventional approach.