As per the analysts at brokerage firm Kotak Institutional Equities, new mandatory norms related to plastic packaging recycling as well as its reuse are going to impact the consumer goods companies like Nestle India, Britannia, and Colgate.
Impact of India’s New Plastic Waste Management Rules on Consumer Companies
Starting from FY25, India shall implement mandatory norms for the recycling and reuse of plastic content under the new Plastic Waste Management rules for producers, importers, and brand owners of plastic packaging (excluding micro, small and medium enterprises, or MSMEs) in a phased manner.
Standing at the third position in the world’s largest plastic producer list, when India will implement these changes, these will definitely put India ahead in the global league but on the other end the same shall also see an impact in the packaging costs for consumer companies.
As per the analyst, consumer companies spend on an average 5-8% of their revenues on packaging, while still heavily relying on plastics. In its note, the brokerage said that “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”. While adding more, it said that “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)”.
Amid all this, consumer companies are already doing their share to find ways to reduce plastic packaging.
Plastic Reduction Efforts and Key Beneficiaries of New Plastic Waste Management Rules
Nestle India has stopped using plastic for all promotional material since 2020. One of the Nestle India spokesperson said that “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”.
Speaking about the key beneficiaries of this government move, Analysts added that “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”.
