Kundaim, Goa: Packaging material maker Essel Propack Ltd has signed a long-term agreement with Colgate-Palmolive India to set up a unit in Goa to cater to the oral-care firm’s needs, a senior official told Reuters on Friday.
The unit will come up near Essel’s existing facility in Goa at a total investment of Rs40 crore.
“It’s an exclusive long-term agreement. This will help us manufacture packaging products for our anchor customer based on the committed volume,” Ashok Goel, vice-chairman and managing director, Essel Propack, said.
Rising packaging product costs have been impacting consumer products makers like Colgate, Hindustan Unilever , Godrej Consumer , Marico and Emami .
“Inflation is a concern and industry-wide we are seeing packaging costs rising. This plant is located very close to our plant in Goa, so it is a win-win situation,” a senior Colgate official, who cannot be named due to company policy, said.
He, however, did not reveal the total volume the plant will contribute to Colgate, citing a confidentiality agreement.
The new unit will help Essel boost its overall Goa manufacturing capacity by 150%. Its capacity in Goa is currently around 1.5 billion tubes per year.
In the quarter-ending March 2011, Colgate saw its EBITDA margins impacted by 287 basis points to 24% due to higher packaging costs and rising prices of key inputs such as mint and menthol, it said.
Colgate posted an almost flat net profit of Rs114 crore on a 13% jump in net sales to Rs582 crore rupees for the quarter ending March
Essel Propack, which is part of the $2.4 billion Essel Group, which runs companies such as Zee Entertainment, Zee News, Zee Learn, Dish TV, Wire & Wireless India amongst others, has a manufacturing capacity of 2 billion tubes per annum.