Mumbai: Companies providing packaging or intermediary services to large consumer packaged goods firms are stepping up their investments in the country even as India remains a key market for their customers such as Hindustan Unilever Ltd and PepsiCo India Holdings Pvt. Ltd.
US-based MeadWestvaco Corp., a packaging firm, announced a Rs.1,000 crore investment in India over the next three-five years on Monday. Likewise, McCain Foods (India) Pvt. Ltd, the Indian subsidiary of McCain Foods, Canada, a supplier to McDonald’s Corp. and manufacturer of packaged ready-to-eat food under the McCain brand, announced a $69 million (around Rs.376 crore today) investment in its potato processing plant in Mehsana, Gujarat.
MeadWestvaco’s investment includes the purchase of Vapi-based Ruby Macons Ltd that was announced in November as well as additional plans to expand current production at the facility.
“We see significant opportunities for higher quality and more innovative packaging solutions...as well as (in) many consumer categories such as food, beverage, healthcare and personal care—largely due to the emergence of modern retail and a fast-growing middle class in India,” said John Luke, Jr., chairman and chief executive officer, MeadWestvaco.
The investment comes despite the slowdown in India.
“On a relative basis versus the other markets that we are investing in, India is still one of the most rapidly growing markets in the world,” said Peter Durette, senior vice-president and chief strategy officer, MeadWestvaco.
“The Indian consumer packaged goods industry grew 20-25% in 2011-12 and is currently growing at close to 15%,” said Santosh Verma, director, investment banking, IDFC Capital Ltd, adding that even though the growth rate has come down, it is still high when compared to most other sectors.
To be sure, weak consumer sentiments saw volumes drop in the second quarter of fiscal 2013. Analysts expect discretionary spends on packaged foods to remain subdued even in the December quarter.
In the past year, Vivimed Labs Ltd, a supplier to Unilever Plc., L’Oreal SA, and Colgate-Palmolive Co. for oral care, skincare, haircare and sun care products also announced investment of $60-70 million. And Galaxy Surfactants Ltd, which caters to requirements of surfactants and speciality chemicals required by personal care, soaps and detergent companies, said in September that it planned to invest Rs.300 crore on expanding its presence in India and elsewhere.
In September 2012, US private equity firm Blackstone Group Lp invested Rs.243 crore in Indian fragrance and flavour maker SH Kelkar and Co. Pvt. Ltd whose products are used by consumer packaged goods, pharmaceutical products and dairy products companies.
For Kelkar, though, growth is coming from the mid-market brands as opposed to premium ones that drove growth over the past few years, said a company executive. “The slowdown has impacted the premium and super-premium markets but the mid-market is growing,” said Kedar Vaze, director of SH Kelkar and Co.