Foreign investors pressure and the urge to outwit competition will drive Indian consumer goods and pharma companies to change product packing to more environmentally sustainable alternatives in two years, says a report.
The mandated changes in local laws like Maharashtras plastic ban have raised awareness in the few years and we can also look at a pressure from consumers in future, Bank of America Merrill Lynch said in a weekend report.
Plastic is a big issue for FMCG (fast moving consumer goods) and pharma sectors as they depend on it for packaging, and will only get bigger in the couple of years, the American brokerages research analyst Sameer Chopra told PTI .
He explained that as per global norms, many funds are mandated to invest 25 per cent of their funds in companies which are sensitive to the needs of the planet and also confirm with the best norms on corporate governance.
Citing the case of plastic ban in Maharashtra, he said more such regulatory or government actions can be in the offing which will lead companies to have some alternatives in place ahead of any actual action.
Such an advance movement will help the companies in getting a competitive advantage over competition were any ban to be implemented, he said, pointing out that it takes months of preparations to change packaging processes.
In a report, Chopra pointed out that India has taken many actions including banning the use of plastic packing for tobacco products and added that it has also announced to eliminate single use plastic from 2022.
When asked about the alternatives which a company may look at, Chopra said the only ones which exists include recycling plastic, avoiding single use plastic and also using plastic only when it is absolutely required.
A shift to the newer processes will lead to an increase in low single digits for the companies, he said, adding how this gets passed on in a competitive industry with thin margins is a big question mark.
Companies like Dabur, which is working to reduce weight of bottles by 20 per cent and has recently formed a consortium to collect waste, or ITC which collected over 50,000 MT of dry waste in 2017 or Nestle India which uses 35 per cent of recycled material, are already gearing up towards the change.
He said the parentage of many of the players, like Hindustan Unilever being headquartered in Europe which is very concerned about the environmental damage, will also lead their local units to opt for changes.
India and China are the markets which are witnessing the fastest growth in plastic consumption at over 30 per cent per annum, and the damage done by it is there for everyone to see in the rivers, lakes and seas, he said.
The reason plastic has become popular in such a short span of time for such FMCG and pharma players is the utility it offers and hence, alternatives will have to be found, he said.