Slowdown fails to stall FMCGs' capex drive

Written by Lalitha Srinivasan | Mumbai | Updated: Dec 26 2013, 15:49pm hrs
Even as Marico and Asian Paints are consolidating their manufacturing operations, other FMCG companies are setting up new plants or expanding the manufacturing capacity at their existing units.

"Theres no dip in consumer demand in the Indian FMCG sector despite the economic slowdown. To cut costs, some companies are closing down manufacturing units while others are expanding their production facilities to stay ahead of the demand curve, an industry analyst with a domestic brokerage firm in Mumbai said.

The Rs 1,85,000-crore Indian FMCG industry is currently growing at the rate of 15% despite the economic downturn. Realising the potential, firms such as Dabur India, Godrej Consumer Products (GCPL), PepsiCo India and Coca-Cola India, among others, are setting up or expanding their manufacturing plants.

While Dabur India is planning to expand its production facility to sustain its growth momentum in competitive markets, while GCPL is setting up new manufacturing plants in the next few months.

Our business is growing well. We are planning expand the capacity at our manufacturing plants. We will continue to increase capacities to ensure that there are no supply-side disruption, Dabur India chief executive Sunil Duggal said. At present, the company has 24 production units in India.

GCPL chairman Adi Godrej said the company will be putting up new manufacturing plants in 2014. New plans are needed as our business is growing. In addition, we are also investing in our existing facilities, Godrej said.

Realising the growth prospects in India, Coca Cola India set up a new state-of-art bottling facility at Chatta, Uttar Pradesh, in October this year. Incidentally, this plant is Coca-Cola systems 58 th manufacturing plant in India.

Cokes arch rival PepsiCo India also has plans to tap into Indias FMCG growth story and will build a new beverage manufacturing plant in Sri City, Andhra Pradesh. Upon completion, the plant at Sri City will be PepsiCos largest beverage plant in India. PepsiCo intends to invest more than R1,200 crore in the project, according to a spokesperson from PepsiCo.

Meanwhile, to cut costs, Asian Paints closed the operations of its powder coatings plant at Baddi last month and Marico stopped manufacturing activities at its Dehradun plant. Jyothy Laboratories (JLL) has also closed down its manufacturing capacity for Ujala in Chennai and has shifted Ujalas production to its Pondicherry plant.

On the companys strategic move, Asian Paints chairman and managing director KBS Anand said, We had set up the capacity for high growth in powder coatings at Baddi, which was not realised. We have enough capacity at our Sarigam plant to take care of our plans for the next five years. We have eight paint factories in India.

According to a spokesperson from Marico, the companys plant in Dehradun was set up in 2003 for manufacturing of cosmetics. Marico believes that this closure has no significant bearing on the performance of the company, he added.

For JLL, meanwhile, the shifting of production of Ujala from Chennai the Pondicherry plant means rationalisation. The company is chalking out expansion plans for its other manufacturing units, too.

We will expand production capacity in our existing plants. We closed down our Chennai plant for Ujala as it was a rented property. There is no dip in consumption in this sector, JLL managing director MP Ramachandran said. Currently, the company has 29 plants across the country.