FMCG majors Marico and Dabur India have temporarily suspended their operations in Egypt following the political instability in the Arab nation. These are seen as safety measures to protect their interests in that country. Meanwhile, Emami is closely monitoring the situation in Egypt before taking a final call on suspending its operation there.
When contacted by FE, Sunil Duggal, CEO of Dabur said, ?We have temporarily shut down our manufacturing operations in Egypt. We plan to resume it when the situation improves there.? Currently, Egypt accounts for about 2.5% of Dabur?s consolidated turnover, which was about Rs 3,400 crore in 2009-10.
Like Dabur, Marico is also hoping for the return of normalcy in Egypt. ?Egypt and other parts of North Africa and the Middle East (MENA) is an important market for Marico. In view of the current situation, our factories have been temporarily closed as a safety measure.We hope the normalcy returns soon to Egypt,? said a spokesperson from Marico. At present, the region accounts for about 7%-8% of the company?s revenues, which stood at Rs 2,660 crore in 2009-10.
According to the spokesperson from Marico, Egypt has over the years moved to become Marico?s manufacturing hub for MENA and prolonged closure of production facilities in Egypt would, therefore, cause a progressive drying up of the supply pipeline for the MENA region. ?We have initiated, as a back up measure, plans to supplement the MENA supply chain with supplies from India.We hope that there will be an early resolution and business will return to normal. If our hopes are belied, we will redraw our strategies,? he added.
Industry analysts point out that the impact of Egypt crisis on FMCG players in India is minimal. ?If the crisis in Egypt is resolved in the next few weeks, we would see a minor impact on business on the supply side. However, the impact will increase if an uncertainty around crude is prolonged,? said Nitin Mathur from Edelweiss Capital.
Over the years, Indian FMCG players found Egypt quite an attractive proposition as it offers tax cuts, preferential trade treaties, and speedy approvals for business, in addition to high growth. ?But if this crisis continues, then the slowdown in Egypt and the neighbouring economies could impact FMCG demand,? according to industry analysts.