admin
June 29, 2023
Dia Rekhi & Faizan Haidar, Economic Times
New Delhi, June 29, 2023
Fast Retailing, the parent company of Uniqlo, is looking to set up a significant manufacturing presence in India through about 20 ‘production partners’, multiple people aware of the development told ET.
One of the world’s most valuable clothing retailers, Uniqlo already has a cluster of production partners in India and is looking to expand this network through a significantly large investment, they said without sharing any estimated amount.
“The investment amount will be significant because Uniqlo is serious about India and views it as an important market,” one of the persons said. “Unlike the existing facilities in India, which cater more towards exports, the production partners that Uniqlo will bring to India will be specifically meant for the domestic market.”
One of the company’s production partners that ET spoke to confirmed that their current mandate is to produce only for exports.
Uniqlo, which is Asia’s biggest clothing brand, had said India is one of the top priority markets for them where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear.
The company’s ambitions for India are considerable with its CEO Tadashi Yanai indicating that he wants Uniqlo to become the “best-selling retailer in India”.
The Japanese brand opened its first door in September 2019, but stringent lockdown measures announced to contain the outbreak of the pandemic in March 2020 delayed the expansion plan.
The brand is now planning to enter Mumbai and Bangalore. It has already opened stores in Lucknow and Chandigarh after Delhi.
Uniqlo does not own any factories. Instead, it outsources production of almost all its products to factories outside Japan.
As per a report titled ‘The Uniqlo case: fast retailing recipe for attaining market leadership position in casual clothing’, this model allows Uniqlo to keep its breakeven point low and improve return on investment.
“As we expand our global sales, we continue to grow our partner factory network in countries like Vietnam, Bangladesh, Indonesia, and India,” the company has stated on its website.
As per its list of garment factories, as on March 1, 2023, Uniqlo has 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia, and 16 factories in India and Japan among several other locations.
As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.
Over the past decade, global brands Zara and H&M became market leaders in the fast fashion segment in India.
“For global brands, India should be one of the most logical sourcing hubs given its large vertically integrated manufacturing sector on the one hand and the large, growing domestic market driving demand on the other hand,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, told ET. “However, its weight in the sourcing baskets has historically been low due to several reasons, in spite of China being visible for decades to the management teams of brands and retailers as a concentrated sourcing risk,” he said.
Uniqlo’s existing production partners in the country include Shahi Exports, Brandix Lanka, Tangerine Design, Maral Overseas, Shingora Textiles, Silver Spark Apparel, SM Lulla Industries Worldwide and Penguin Apparels.
As per Fast Retailing’s first-half results, the company said its revenue was 1.4672 trillion yen, or around $10.2 billion, and that its operating profit had risen to 220.2 billion yen ($1.53 billion), bolstered by strong performances from operations in several regions, including India where it said it generated significant increases in both revenue and profit.
With regard to Uniqlo International, in particular, it said revenue stood at 755.2 billion yen ($5.25 billion), while operating profit was 122.6 billion yen ($852.93 million).
The company said regions like India “reported significant revenue and profit gains as they enter a full-fledged growth phase”.
(Published in Economic Times)
admin
June 28, 2022
June 28, 2022
Edited by Surabhi Shaurya, India.com
The blanket ban on single-use plastic items from next month poses a challenge to cool beverages such as Frooti, Real, Tropicana and Maaza. Earlier, beverage company Parle Agro, which owns Frooti and Appy had also urged the government to extend the deadline to implement the ban on plastic straws by six months. For the unversed, the government’s ban on single-use plastics, including plastic straw, is going to be effective from July 1, 2022.
Calling the government’s decision a ‘hasty ban’, Parle Agro had said it will ‘negatively impact’ overall businesses of the industry players in the FMCG (Fast Moving Consumer Goods) and beverage segment. “While Parle Agro endorses the government-led ban on the use of plastic straws, our plea is to postpone the implementation of the injunction by six months,” the company had said in a statement.
Amul Urges Environment Ministry to Postpone Ban
Besides, leading dairy firm Amul has urged the environment ministry to postpone the ban imposed on plastic straw by one year due to lack of adequate availability of paper straws in the domestic as well as international markets. “We have written a letter to Environment Secretary on the proposed ban on single use plastic straw,” Gujarat Cooperative Milk Marketing Federation (GCMMF) MD R S Sodhi had said last month.
GCMMF markets its milk and other dairy products under Amul brand. “The plastic straw in our butter milk and lassi is attached to tetra pack. It is part of primary packaging. So we have urged the Environment Ministry to include it as part of Extended Producer Responsibility (EPR) and recycling,” Sodhi said.
Amul needs 10-12 lakh plastic straws daily. Besides, Sodhi said, the company has urged the ministry to provide local industry one year to set up dedicated facilities for producing paper straws. “Paper straws are not available in domestic market. We don’t have capacity. We are not getting paper straws in international market,” he added.
Why Are Beverage Makers Worried?
To ensure a smooth transition to environment-friendly options like the paper of PLA straws, non-alcoholic beverage makers would require at least 6-8 months.
Parle Agro said that India produces and sells around 6 billion packs of paper-based beverage cartons with integrated plastic straws per annum. The available capacity to provide alternatives like biodegradable PLA straws or paper straws by a local Indian manufacturer is 1.3 million units per day, which is much less than the actual requirement.
“Packaging companies will need to invest in the right infrastructure to accommodate the changes which will require time to ensure the alternative is appropriate and cost-effective, especially during inflationary times,” the company said in a statement, adding that currently, there is no local manufacturer who can accommodate the demand.”
How Will Ban Impact The Sale Of Cold Beverages
The supply chain of beverages sold in small tetra packs will be disrupted with the blanket ban. Moreover, the beverage makers might have to incur heavy import and logistics costs as they import paper straws to replace plastic straws.
Speaking to Moneycontrol, Devangshu Dutta, CEO of retail consulting firm Third Eyesight said, “The companies have to look at alternative solutions, which may increase the costs. It will be challenging for the companies to pass on the increase in cost to the consumer as it may dampen demand, especially given the fact that these products are priced at low price points to target a certain consumer cohort.”
Full list of items to be banned from July 1:
admin
June 10, 2022
Devika Singh, Moneycontrol
June 10, 2022
As the threat of a plastic straw ban looms, dairy products giant Amul has written to the Prime Minister’s Office, urging a delay of its implementation by up to one year.
Amul makes products such as flavoured milk, lassi and spiced butter milk that come in small cartons packed with plastic straws for on-the-go consumption.
The letter to the PMO, sent ahead of the proposed July 1 start of the ban on single-use plastic products, said the move may have a “negative impact” on farmers and milk consumption.
“We agree it is a positive step to reduce plastic usage,” R.S. Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns the Amul brand, told Moneycontrol.
“However, we have requested the government to delay the implementation by six months to a year so that we utilize this time to gradually shift from plastic straws to paper straws,” Sodhi said.
The government earlier this year issued a notification banning several single-use plastic products. The ban has the potential to affect the sales of beverages sold in small tetra packs.
Here’s a rundown on all the products that are proposed to be banned, why beverage makers are pushing for a delay in its implementation and how it will affect them.
What does the government notification say?
The Ministry of Environment, Forest and Climate Change released a notification in March banning single-use plastic items.
Such products include plastic plates, cups, glasses, forks, spoons, knives, straws, trays, swizzle sticks, wrapping or packing film, invitation cards, and cigarette packets and plastic or PVC banners of less than 100 microns from July 1.
Other products such as earbuds with plastic sticks, plastic sticks for balloons, plastic flags, wrappers for candy sticks and ice-cream sticks, and polystyrene (thermocol) for decoration also come under the ambit of the ban.
In February, the government had notified guidelines on the extended producer responsibility for plastic packaging under the Plastic Waste Management Amendment Rules, 2022.
“Directions have been issued to e-commerce companies, leading single-use plastic sellers/users, and plastic raw material manufacturers with respect to phasing out of identified single-use plastic items,” the notification said.
Why are beverage makers worried?
Non-alcoholic beverage makers like Amul; Parle Agro, maker of Frooti; and Dabur, which sells a range of fruit-based drinks under the Real brand, have a significant share of their revenue coming from low-unit packs priced at Rs 10.
These packs, which come with a plastic straw for consumers to drink the beverages, are meant for on-the-consumption and are mainly sold in rural areas. According to industry estimates, packaged consumer goods makers derive 25-40 percent of sales from low-unit packs priced at Rs 2-Rs 15.
The only replacement to the plastic straws available in the market are paper straws that are produced in a very limited quantity in India.
Plastic vs. paper
Sample this. According to the industry, about 6 billion packs of paper-based beverage cartons with integrated plastic straws are sold annually in the country.
The capacity to produce paper straws is only 1.3 million straws per day against a requirement of 6 million/day.
Paper straws are also an expensive alternative to plastic straws given their limited availability.
According to Schauna Chauhan, CEO of Parle Agro, although the company started importing paper straws to adhere to the new rules by the given deadline, it is not a sustainable solution.
“The percentage increase in the cost for importing PLA straws and paper straws goes up by 259 percent and 278 percent respectively. The economics just does not match up for a Rs.10 product,” she said.
While a plastic straw costs 10 paise and accounts for 1 percent of a Rs 10 beverage carton, a paper straw costs 40-45 paise and would account for 4-4.5 percent of the cost.
Besides paper straws, beverage makers have found another alternative in PLA straws that are made of corn starch and biodegradable.
In-house production of paper straws
Beverage companies are urging the government to delay the ban so that they can build adequate capacity for producing paper straws in the country.
Amul plans to import paper straw-making machines and start production in-house. Parle Agro, too, has similar plans.
“We have already begun work on developing many local MSMEs {micro, small and medium enterprises} to be able to cater to our volume of biodegradable straws,” said Chauhan of Parle Agro.
“A six-month extension will help straw manufacturers in India build adequate capacity to manufacture and supply biodegradable straws to beverage companies in India,” she said.
These companies source plastic straws from third-party manufacturers.
Potential impact of the ban
The ban, if it comes into effect on July 1, will disrupt the supply chain of beverages sold in small tetra packs such as Frooti, Appy Fizz, Real Fruit Juice, Amul Lassi and similar products.
The companies are also expected to incur heavy import and logistics costs as they import paper straws to replace plastic straws.
“The companies have to look at alternative solutions, which may increase the costs. It will be challenging for the companies to pass on the increase in cost to the consumer as it may dampen demand, especially given the fact that these products are priced at low price points to target a certain consumer cohort,” said Devangshu Dutta, CEO of retail consulting firm Third Eyesight.
To tackle the challenge, Amul plans to sell its products without straws until the company builds the capacity to produce paper straws in India.
“However, this impacts the on-the-go consumption of our products,” said Sodhi.
Sales in the hinterland
A majority of the sales of these low-unit packs come from rural India, and could hurt the earnings of packaged consumer goods makers. Parle Agro, for instance, derives about 50 percent of its sales from rural India.
“The increase in the product cost will lead to a fall in demand and affect sales significantly. The hasty ban will negatively impact the industry and overall businesses of numerous players in the FMCG and beverage segment.,” said Chauhan.
Experts say growth in the non-alcoholic beverages segment has been driven by tetra packs, and while plastic packaging and straws do have an adverse impact on the environment, the switchover is set to disrupt the industry in the short and medium terms.
(Published in Moneycontrol)
admin
February 9, 2017
This is a recording of a short, candid talk by Devangshu Dutta (chief executive, Third Eyesight) at the ASSOCHAM’s 8th Global Food Processing Summit in New Delhi, India.
He touched upon the inherent conflicts in the food supply chain we need to be aware of before formulating policies and practices, and strongly urged everyone to look at food security from the point of view of sustainability and risk-management. (Transcript below.)
TRANSCRIPT:
I’ll just take just few minutes to share a few thoughts with you on the sector.
The session was titled “Make in India: Platform for investment opportunity in food processing sector and 100 percent FDI in food retail”.
As we all know, whoever’s been following the news, there’s all this buzz around FDI into retail being allowed, not only for physical retail but also for e-commerce companies, and there are two very strong sets of drivers. On the one hand is the likes of Walmart and Tesco and people who want to actually set up food retail. and you know food is the largest consumption in our basket of consumer products, so they obviously want to tap into that demand. The second side is Amazon and the likes of it where again you know there are no barriers in terms of location, you are buying on the net, tapping into a consumer who’s looking for convenience, and there you need to actually service that demand with food and grocery which is packaged, so there is obviously a very strong push a very strong lobby for that to happen. At the same time there’s a very strong lobby against that because there are domestic retailers who invested a lot of money over the last maybe 10-15 years in setting up a lot of retail stores. In the recent years there have been a few e-commerce companies that have come up as well with domestic and foreign capital. So there is this conflict.
In this whole ecosystem of food production and supply and retail there are some fundamental conflicts that we need to be aware of, before we get into any kind of thinking about what should be done with the sector.
First of all is foreign vs. Indian; this is a conflict which is there the world over, and I think we will see that increase in Europe, in the US, and in other places. You know, “local versus foreign” is a conflict which we will keep seeing. I think we have moved a little bit away from that within, not only this government’s regime but also the earlier government’s regime, where we started to welcome foreigners back into the country and said, “let’s do trade together”. I think it’s important to keep it in mind that local interests will always always be take predominance over foreign interests. If any government comes in and says, “I will give foreign interests precedence”, it’s going to not be there in power the next time, so that’s something which is to be kept in mind.
The second is this is a conflict between large and small…large retailers versus small retailers. A Reliance had to close shops in Uttar Pradesh, had to close shops in Kerala because they were impacting small retailers. So it’s not just about Walmart impacting small retailers, it’s also about the large Indian companies impacting smaller companies.
The third conflict is between traditional and modern, and this is happening again even in farming. Indian farmers tend to follow traditional practices, there are fragmented land holdings, and then you have modern entrepreneurial farmers, you have cooperatives which are adopting different techniques, and there is a conflict which happens at that level as well. At the local level it can get hugely political and then it starts raising barriers. So if you talk about the food supply chain, it’s not a simple thing to deal with.
Fourthly, the biggest biggest conflict – and that’s not really a conflict outright because these are people who are working together – but there are differences of interests and, therefore, there are conflicts…that is between retailer, supplier and the farmer, the interests are not aligned. A retailer wants lower prices, a supplier wants even lower prices, but the farmer wants higher yield and higher prices, so that conflict, just something on account of price and commercial terms and various other things, is bound to create friction in that supply chain.
Having understood that, I think we need to also acknowledge the fact that retailers are unlikely to invest in the supply chain and in farming. Amazon is not going to set up food processing. Amazon is not going to set up farms which are contract farming. Let’s face it, even Future Group hasn’t. Future Group has set up a food park. Future Group has taken over companies which are in food production companies but Future Group has has not set up, ground-up, contract farming. They’ve tried but it’s not their core competence, it’s not even their core interest. Reliance has done a little bit, ITC has done a few things but it’s not something which is fundamentally their business. They’re retailers, that’s what drives them, so what they can do is they can create an ecosystem.
Let’s take the example of McDonald’s or a Pizza Hut or say a Domino’s. These are foreign quick service restaurants which have come into the country. A McDonald’s had to actually build its supply chain from scratch to get the potato fries, to get the burgers done, to get the patties done and they created an ecosystem, in some cases they invested or co-invested with Indian partners, but in most cases they encouraged Indian partners to talk to their partners from Europe, US etc.
When we talk about people like Future Group, it has done a lot in being a platform for Indian companies to come on board and sometimes international companies as well. They’re a platform for them to launch and grow their business. So what the retailer can do is create the ecosystem, create the demand pipeline. Beyond that it is up to the food producer, it is up to the farmer, to take that opportunity and move on. It’s not for the retailer to handhold from scratch all the way to selling on the shelves.
In terms of the practices that we need to adopt I’d like to say this, that while we keep talking about international standards, food is a very local thing. We may be going into a world where 50 years down the line all of us will be having a white-gray powder which has no flavour and that’s what the future of food…I hope not!…The fact is the food is a very local thing because of tastes, because of cultures, because of the environment that you are in. And we are actually losing a lot. People who are here from farming, if you look back not, even very far – maybe 20-25 years – certainly, if you look back 50 years, what was being farmed we’ve lost probably 30-40 percent of that produce, because there is no demand, because it is difficult to grow, because it’s seasonal, because it is difficult to process, difficult to sell. If you go to the sabziwala today versus if we went to the sabziwala 10 years ago, you will find that the variety of produce has actually diminished. So while we are talking about food processing, what is happening is…and I’d like to mention this…You know, sometimes we come to conferences like this and we run our businesses, we run with a split personality. We do what is convenient for the business, we do what is good for the business in terms of cost, in terms of ease of processing, in terms of ease of selling etc. When it comes to us as consumers, we want fresh, we want variety, we want flavor, we want colour, we want all of it. Why do we have the split personality? Why can’t we actually combine the two and do what is right for us as consumers, our children as consumers, the environment, and the future as well?
Sustainability is should be a big driver and we forget that the kind of food processing which is going on right now, by and large the kind of plants which are being put up, are based on technology which was developed in North America and Europe between 1900 and say 1960-70. That’s been the most wasteful part of the last century in terms of energy, in terms of water, in terms of labour, in terms of anything. It’s resource intensive. Now imagine even if 20% of India – over 200 million people – started to live and depend on that kind of a lifestyle and that kind of an industrial structure! This country will be finished, certainly! The world would be finished! We cannot do that, so we’ve got to do stuff which is good for us as consumers, the environment as a whole, and good for the business. It can’t just be one. We cannot be uni-dimensional in our thinking.
Last point: I think diversity is a very, very important part of the food supply chain and diversity means that there are “many”. We tend to look at large companies as being the standard and, therefore, large being good. But the fact is that if you take food which is an integral part of our lives…You cannot live without air, you can live without food and water for a few days, you can’t survive. You can live without clothes for your entire life.
If let’s say the food supply chain and even the processing, the acquisition and everything else, if it gets consolidated beyond a certain point it becomes extremely vulnerable. Anybody who’s looked at financial services risk management or any any kind of risk assessment, you would know that it is good to have a diversified basket. From the point-of-view of farming, from the point-of-view of manufacturing, from the point-of-view of retail, consolidation beyond a certain point is actually detrimental to quality and to safety. So if you’re looking at food safety, if you’re looking at sustainability, we need to actually encourage many, many, many entrepreneurs, many small businesses.
For that…I don’t know if anybody is there from the government sitting in this audience…but Make in India will only happen if we make it easier. Today all of us who are in business know that India is one of the most hostile environments to do business of any sort. It does not matter whether you are in manufacturing, whether you’re a truck driver, whether you are running a consulting business. With all the regulations…we don’t lack regulation, there’s too much regulation…we don’t have an environment where it is easy to do business. If that can happen we will find that we will have an extremely diverse and vibrant ecosystem which will grow and we can actually be the standard, the international standard which can be followed by everybody else. I think what we should do is try and get the government to work in that direction. If we can do that, if that’s one outcome we can achieve out of this conference I’ll be really, really, really happy.
Thank you so much!
Devangshu Dutta
October 25, 2014
These are thoughts shared in an emailed interview with the AgriBusiness and Food Industry magazine (published in the November 2014 issue.)
A Perspective on the Indian market:
Our first word of advice to companies that are looking at India as an evolving and large market, is to acknowledge the fact that that it has very diverse cuisines and food cultures.
Both Indian and international companies wishing to enter this market for the first time need to understand and acknowledge that one-size certainly does not fit everyone.
The variety of finished products needed requires food companies to address smaller quantities and to have flexible production.
Therefore, suppliers of capital equipment and technology also need to be able to think about how they can make their solutions more flexible to adapt to changing market needs, and also to price them appropriately for the Indian market. Simply extending solutions that work in large, developed markets such as Western Europe and North America is not the best approach.
I would use the example of one of our clients, a manufacturer of bakery automation equipment, who have approached the market with an open mind. After initial investigations they have gone back to the drawing board and created production lines that have smaller capacity, can produce multiple products including Indian specialities, and which are techno-commercially more feasible for an Indian customer to adopt.
There is no reason to think that India’s food industry should follow exactly the same development curve as the west. The population is much larger, with significantly lower income, and needs that are far more diverse and changing far more rapidly than in most other economies. The technical and technological models for India need to be strongly focussed on four major attributes:
Agricultural, horticultural and animal husbandry practices and technologies, as well as those in the downstream sectors such as food processing, need to perhaps even look at setting new benchmarks for accessibility and long-term sustainability.
Food processing and the Indian consumer market:
Food processing has been part of human history since we learned to transform hunted, gathered and farmed raw products into new foods through curing, cooking, culturing etc. This processing has been driven by mainly two major factors: to make the raw material into a product that is more palatable and easily consumed (for example, from raw grains to bread), or to extend the storage life of the raw material (for example, in the form of cheese, pickles, or sweets, or using cooling and freezing).
However, during the last century, processing has been driven mostly by “convenience” by providing partly or fully cooked options, to reduce the time spent by individuals in cooking and to instead apply that time to activities outside home. Social structures in India are changing, as individuals are migrating out of their home-towns to other locations within the country. The number of households is increasing dramatically, while cooking time and cooking skills are both declining. With this, out-of-home consumption as well as partially or fully-cooked packaged foods are bound to rise, leading to greater need of food processing capacities.
Also, with increasing industrialisation of food manufacturing, standards have become important both for efficiency and for safety. We’re seeing signs of such development happening in recent years in India as well – expectations of both consumers as well as regulatory authorities are higher with each passing year. The industry needs to invest proactively in better technology and processes in all areas – cultivation, handling, processing, packaging, storage and transportation – to raise the standards of hygiene, safety, traceability etc.
Food productivity needs urgent attention:
India is among the largest producers of many agricultural products. However, our yields per head of workforce, per animal, per hectare, or per litre of water consumed can be improved significantly. Not only is the population growing, but per capita consumption of most products will rise as the economic situation of each family unit changes. Better practices, technologies and know-how need to be acquired and applied to dramatically improve Indian agricultural productivity.
An interesting model of development to look at is the “golden triangle” approach followed by the Netherlands – active and intensive cooperation between the government, academic institutions and the private sector.
So far, by and large, academic institutions in India have limited themselves to “teaching” and have stayed away from actively collaborating with industry. Academic institutions and the industry typically connect only for the occasional “lecture” by senior individual from industry, or during the time of recruitment of fresh talent. Government largely limits itself to creating macro-level policies. More effective communication and coordination between these three legs could help to dramatically improve the standards in the agricultural and food sector in India and make the nation not just self-sufficient but significantly more competitive in both cost and quality of the final products.
Similarly, active collaboration within the industry itself is important to achieve combined growth, which can only happen if companies step beyond the usual industry association framework.
Local production and service of food processing equipment is an important factor:
In cases where the market is large enough, local production of the equipment should certainly be investigated because it can help to bring down the initial capital cost for customers, and also provide a quicker service and support base.
A first step that a company takes is to create a local presence, either through a distributor or agent, or by directly opening a sales and service office of its own. However, most international companies need to gain a certain degree of confidence in the market, both in terms of sustained demand and in terms of operating conditions, before they would invest in manufacturing in India, since it takes a whole different level of management commitment as well as financial involvement.
With the announcement of the government’s “Make in India” initiative, hopefully more international companies will come forward to take advantage of the changing operating environment in the country.
