I read that article and was counting how many times “Having said that” was written 
Having said that, on one side he says FMCG will be last leg to be impacted and they have just 2 more quarters of volume growth left…and on other side he says in the end that government will bring measures for optimism.
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Amit Burman is an entrepreneur within Dabur. I have high hopes from him.
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The government is looking to cap products that essentially fall in the FMCG basket of products. What next toothpaste? That is one of the most important personal hygiene product used in a day!!!
I wonder how would someone like Warren Buffett invest in a country like India? I always felt products within FMCG probably would be the last ones to be price regulated (if at all). Here goes that assumption down the drain. How will some of these companies now maintain their pricing power? One thing that WB harps upon so much.
Sorry, I’m invested in PGHH and I’m now wary of the adverse reaction that the business may experience due to this. Low penetration levels even in urban areas of a product that is so essential to women with almost limited chance of tech disruption was the reason I invested here. I clearly didn’t think the govt will mess with it either as for me it falls in the FMCG basket of products. I was wrong.
In all honesty, I intend do nothing in the light of these new developments. Acting on every news item, new piece of info and policy flip flop I’ve realized is very hazardous to one’s holdings / pf. I’d let the company figure this out, adapt as needed whilst doing the best they can for me as a minority shareholder. That’s the plan.
Cheers!
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Good for the consumers though. 
I think Sanitary Napkin will now become a volume play, rather than a margin game. So, this segment will become unattractive for newer & smaller players like Unicharm (Sofy) etc., because churning profits via high volume requires greater distribution reach what the older players like P&G, J&J and Kimberly-Clark have. Smaller budget players like Amrutanjan will stay. However, FMCG biggies like HUL may enter the segment.
But P&G Hygiene because of reduced margin in Sanitary Napkins might not retain its inflated PE going forward.
Disc. I was evaluating P&G Hygiene but will wait & watch for a while.
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Sanitary Napkin, Diaper are like OTC product, so falls between Pharma & FMCG. Regulation risks are always present in OTC. 
I wish P&G merges the unlisted arm of Pampers with P&G Hygiene now.
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Mate, the article even mentions hand wash. Seriously? Soaps, toothpaste etc. are also personal hygiene products. I think with hand wash they maybe going too far. Well that’s my opinion. Anyways, it is what it is.
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OMG! didn’t see that. 
But I guess, that’s a mistake. It must be sanitizers as mentioned elsewhere in that article.
many of these products, including sanitary napkins, sanitisers and diapers, are exorbitantly priced with soaring trade margins.
Because Hand Wash, Toothpastes, Soaps etc. are not exorbitantly priced nowadays.
Anyways, if that still happens with these products, FMCG segment as a whole will react adversely. 
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Even I too was a bit surprised seeing this news . However these MNC’s historically adapted well to such situations . In 1966 vicks was bought under price control . They innovated and converted it into ayurvedic product . This has made it reach almost every nook and corner in the country . Similarly this may in fact help pghh although no one can be sure of the future . After Maggi issue, Nestle has become even better . I believe MNC though not completely antifragile are less prone to disruption than other companies . And these companies adapt pretty fast . India is a pretty important market for them . Would love to know your views . These companies are resilient for a reason . Eg pghh , gillette , marico, Pidilite , Asian paints , Berger , Nestle . These adapt to regulation or competition or disruption pretty well generally . Anti fragile as per Taleb s a thing that becomes more stronger in adversity . Same thing has happened to Nestle as it introduced newer categories under the leadership of Mr Suresh Narayanan who was initially in Nestle Turkey and was given CEO role here after the maggi issue I guess .
Disc - invested in some of the names mentioned . These are not recommendations and I am not a sebi registered analyst . Pls do your own due diligence .
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Capitalism cannot go out of hand in country like india, where the population is huge. if the capitalism goes out of hand then the distance between poor and rich gets bigger… I really support the government to bring a cap on essential FMCG… Government’s job is not to look at us (in stock market) but who are not here…
MNCs are good at bringing price down through volume. they throw the money are operational excellence. but indian companies are great in bringing the price down by developing a basic product… Indian companies will survive at any cost…
i never said i dont support the move, even i agree with the move , however was surprised as it wasnt anticipated. My point was about the resilience shown by these MNC.
“For advertising spends, new launches and even innovation, we need profitability,” said a senior executive at a multinational consumer goods company. “The margin for us and trade is not very high since they are nascent categories and we are focussing on increasing usage by squeezing margins already. Also, it is still not clear whether all price points will be covered.”
“Prices of adult diapers or feminine hygiene in India are among the lowest in the world. And there is no question of making super-profit in an open market. However, we feel the government must be referring to products and prices that consumers have to pay at institutions and hospitals, where such products can be classified as essentials,” said Kamal Johari, founder of Nobel Hygiene, which is a leader in the adult diaper category with their brand, Friends. “Patients end up paying more due to monopoly of these hospitals which dictate prices by marking them up several times over retail prices.”
Lower prices typically lead to a rise in sales but not necessarily in discretionary segments. About six years ago, the government included condoms in the list of essential medicines and fixed their ceiling price in the Drug Pricing Control Order (DPCO). This in turn led to sales of the contraceptive declining a year ago for the first time as companies lowered marketing spends and halted innovations.
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Price cap is neither good for consumer nor producers. It may benefit bureaucrats though. The reason is simple: no producer will spend money to develop, innovate, and distribute a product if it results in loss. There may be consumers demanding products which break even above the price cap. Their demand will be unmet. Usually these premium products will become affordable with innovation and scale, but this will not happen now. As you yourself mentioned, new smaller but innovative players may now shun this area now, and large older players will no longer feel competitive pressure to innovate, they will become complacent and consumers will suffer in the long. Venezuela is a good present day example of how price caps destroy industries.
It is government control of economic resources which introduces problems of crony capitalism and creates gap between rich and poor. The gap widens because crony capitalism does not provide equal opportunity to rich and poor. That is the prime reason why India’s richest like Ambani, Tata, Birla are their because of their inheritance whereas America’s richest like Bezos, Gates, Buffet have earned most of their wealth themselves.
Unfortunately capitalism is misunderstood by those it benefits the most.
Sorry for deviating from the thread’s topic. If anyone is interested, they may read Austrian economists like Mises and Hayek, who have done a better job explaining misconceptions around price cap and income disparity.
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I completely agree @Divyanshu_Bagga . Once the incentive to produce goes away, then cost too gets affected . Could you pls recommend the book names of above economist that you mentioned as it would be an interesting read .
Interesting discussion by @Sanjay_Bakshi sir on Twitter.
It is in FMEG (Fast Moving Electrical Goods) / ECD (Electrical Consumer Durables) though.
#TTKPrestige #CromptonGreaves #V-Guard #OrientElectric #Havells
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Nice post by @Sanjay_Bakshi sir .
Amazon has launched dishwashing liquid , toilet cleaner and battery too . It indeed is a threat to existing players. However I dont think it will be able to impact market that greatly
1 Some brands have a mind share in the minds of consumers . Most would not want to try new things for homes . The threat , if at all , especially may be for higher ticket items but for things like fans , dishwash liquid etc , no one would want to try new products in low ticket size by saving few bucks . Such products Amazon has launched abroad too but that doesnt affect a Unilever or any other similar brand
Eg Vim dishwash bar , Harpic
2 Moreover the companies may strengthen their marketing and advertisement through celebrity as they are solely into these products as opposed to Amazon which sells many items
Eg Astral has not been able to make a dent into Pidilite
3 The market size in consumer durables just like in nbfc is pretty large . So there is significant room for expansion for all players . This is all the more so after the rural electrification push and many households in the country are yet to have a ceiling fan or light . So scope seems tremendous
4 Entry barriers are low in these markets but distribution channel is the distinguishing factor. Undergarments industry too has low entry barriers but Page ind achieved a lot due to distribution network despite competition.
Similarly Asian paints hasn’t been moved from its position by Akzo Nobel which is a world leader otherwise, also primarily due to distribution network .
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Amazon being a tech based company and having presence in digital products like Kindle, Tablets, Alexa etc., means people already has considerable faith on Amazon as a digital product maker. This in addition to the fact that they garnered significant presence in electronics accessories market via its Amazon Basics brand means that it can make shortcut entry to segments with less entry barrier like consumer durable.
So far they are playing price game only and carefully featuring their products when people search by generic keywords. However I will be fearful if they starts spending considerable sum on A&P, i.e. branding. Nevertheless, as the consumer durable market is large enough there are enough space for many players.
Another space where Amazon is making a dent via private lebels is budget garments via its Symbol brand.
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Yes possible. However I really doubt if they would try to have so much focus and ad budget on such products as it’s a multi product company while the individual players would be more focused in their ad spend and would fiercely guard their market share in their niche areas . Moreover still a large number of people like to buy certain products through stores only although that may change . And consumer durables market similar to NBFC sector has large enough room to accommodate more players . Size of opportunity is also another critical factor . May be Amazon might expand the market size itself . However disruption does remain a risk however remote
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In fact, private labels are very much significant in retailing parlance. If Amazon feels that they can make a dent here given the large untapped opportunity combined with less entry barrier they will certainly spend enough efforts and money.
And don’t underestimate Amazon. It is run globally by highly shrewd Jeff Bezos, and they know very well how to keep focus on multi-segment. I am very much certain that they have individual heads to look after various segments. Globally Amazon is growing very fast even on a high face and so we need to be mindful of its capability.
True. This is why I am not too much concerned. 
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