1) Colgate-Palmolive cuts prices of toothpaste, toothbrush by 9 per cent
· Colgate cut prices by 8-9% to pass on GST benefits: FMCG major Colgate-Palmolive (India) today said it has reduced prices of toothpastes and toothbrushes by 8-9 per cent to pass on the GST benefits to consumers. The revised prices are effective for all shipments from July 1, the Colgate-Palmolive (India) Ltd (CPIL) said in a statement. "GST has enabled Colgate-Palmolive (India) Ltd to extend to its consumers the benefits of reduction in MRPs by 8 to 9 per cent, for the key categories of toothpastes and toothbrushes," the company said in a statement. CPIL is working with its trade partners to facilitate an orderly transition in prices. "The revised prices are effective for all shipments starting the 1st of July, 2017," it added. FMCG firms are extending the tax benefits under the new GST regime to customers either by reducing the prices or by increasing the weight of the product while keeping the price unchanged. The GST council has put daily usage goods as bathing soap, hair oil, detergent powder, soap, tissue papers and napkins under 18 per cent tax slab, while detergents and fizzy beverages like coke and Pepsi are placed under 28 per cent tax bracket.
2) Emami to explore new overseas manufacturing units to meet demand
· Emami exploring new overseas manufacturing units to meet demand: Emami Limited is exploring options to set up new manufacturing units in international markets to meet growing demand. The company, which now has a single manufacturing unit in Bangladesh, is also stepping into the African markets of Nigeria and Ghana by launching products, it said in its annual report. Director of Emami Prashant Goenka said “Emami will strengthen its position in the existing markets and also simplify logistics in Russia, where the demand is expected to rebound. Emami is evaluating manufacturing options in other international markets”, he said. The company said that it expected to consolidate its position in the Gulf Cooperation Council (GCC) countries as it had offices in the UAE.
· Expects domestic market to grow by 14.7% CAGR with rural market CAGR of 17.7%: Regarding the outlook of the fast-moving consumer goods (FMCG) sector in the country, the company said that consumer demand was expected to increase and the overall market was likely to grow at 14.7% compound annual growth rate (CAGR). The rural FMCG market was expected to grow at 17.7 CAGR, it said. With the implementation of goods and services tax (GST), the company was ready to take full benefit of the emerging opportunity, the report said.
1) GST: Strains in supply chain even as soap makers slash prices
· Strains in supply chain showing up post GST: A week after India embraced goods and services tax (GST), strains in the supply chain are showing up. Soap and detergent firms have cut prices of bar soaps to pass on the benefit of GST rates, but dealers who supply stocks to retail outlets complain they are struggling to get sufficient stocks. With soap and detergent bars now taxed at 18%, manufacturers including Hindustan Unilever Ltd (HUL), India’s largest consumer packaged goods firm, cut prices on key products last week, including Rs3 on a 250g bar of Rin detergent. HUL has also increased the weight of certain other products including Surf Excel bar, Dove bathing soap and Pears bathing soap. “We have not received much stock as of yet; it will probably take another month for things to settle,” said a dealer of soaps and detergents in Mumbai. “The worst hit are small scale industries and the local brands (that they make),” the dealer said, asking not to be identified. “There is no clarity on what is going on with GST and stocks,” said Jeetu Arora, proprietor of Arora Soap Depot in Shalimar Village near the northwestern border of Delhi. “Distributors are afraid to take stocks out, and whatever is coming in is on kachcha bills (temporary invoices, usually without taxes added),” he said. “Stocks have not been coming, though manufacturing units have been working,” said another soap and detergent dealer in Mumbai, who did not wish to be identified. “Some (dealers and distributors) have problem with the (GST invoicing) software; some just do not have the GST (registration) number.” “There is a lot of confusion and stock has not been coming,” said a fourth soap and detergent dealer in Mumbai who too did not wish to be named. “For instance, Himalaya stocks have come, but my order with Hindustan Lever is pending. The bigger problem is, even if I get stock, if the guy ahead of me (small retailer) doesn’t have GST (registration), how will I move goods ahead?”
· No manufacturer has raised prices while Patanjali has cut retailers margin to 8% from 12.5%: Meanwhile, products that have been rolling in have mostly seen a marginal drop of Rs1-3, said the dealers quoted above. No manufacturer has raised prices on any of the products, they said. “But Patanjali has reduced its margins (it offers to retailers) from 12.5% to 8%,” said the third dealer quoted above.
· FMCG companies aware of supply chain issues: Fast-moving consumer goodsmanufacturers say they are aware of problems among wholesalers and retailers. “Our distributors are all GST-ready. We don’t fully know about wholesaler readiness,” said Vivek Gambhir, managing director of Godrej Consumer Products Ltd (GCPL), in an email. “Some of them along with some retailers are still in the process of getting ready. Given the complexity of the change, it will take a few weeks for things to get back to normal. However, the trends are positive—our system migration has gone without hitch and billing for new orders has commenced.” GCPL makes Cinthol and No. 1 soap brands.
· Dealers bracing for increase in prices of powder and liquid detergent as it is placed under 28% GST slab: Meanwhile, dealers are bracing for an increase in prices of powder and liquid detergents placed in the highest GST tax bracket of 28%. The move is likely to hit HUL as it makes nearly 18.72% of the company’s turnover from selling bar, powder and liquid detergents, shows HUL’s annual report the fiscal year 2017. “The rates are broadly in line with what we expected basis the strategy outlined by the government barring in laundry detergents and household care products where the rate is at 28% which is in contrast to other daily necessity products such as soaps and toothpastes which are at lower slab,” a company spokesperson had said in an email on 19 May, a day after the GST Council announced the goods in different tax slabs in Srinagar. “The laundry detergents and dish washing bars are daily necessity products used by families for cleaning purposes hence in the interest of consumers and to maintain basic hygiene & cleanliness it is important that they get the same treatment as other daily necessity products.” The company declined to comment on its plans for prices of its detergent portfolio which includes Wheel, Rin, Vim, and Surf Excel. “We have not yet been informed (from distributors and the manufacturers) on the prices of detergents and washing powders,” said the first dealer quoted above. “But they (manufacturers) will have to increase prices, probably by 2-5%. Before GST, they had been increasing prices steadily but now everyone is watching carefully.” Some manufacturers have decided to wait and absorb lower margins from the higher taxes on detergents. “In line with our intent to pass on the benefits of lower rates of the GST to consumers, we have reduced prices and/or increased grammage of various soaps,” Gambhir said in the email. “On detergents, we are not planning any price increases in the immediate term and intend to absorb the GST increase for the time being,” he said. GCPL sells the Ezee brand of liquid detergent.
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