Leading consumer product companies such as Hindustan Unilever, Dabur and Godrej Consumer Products have started replacing raw materials from China with local indigenous ones, as part of their strategy to either reduce or completely eliminate sourcing from the neighbouring country.
Sunil Kataria, CEO – India & SAARC at Godrej Consumer Products said, “We are developing local sources for these imports. Since the world supplies are dominated by China, it will take some time for alternates to develop.”
For decades, China has been a key source of ingredients such as glycerine, colouring agents, herbal extracts as well as packaging formats including dispensing pumps and acrylic glass jars used for skin care, bath and body products. After a border clash about two months ago, anti-China sentiment has been running high with calls to boycott Chinese products.
In July, Hindustan Unilever, India’s biggest consumer goods firm, said it will reduce dependence on China.
“We do have imports from China worth Rs 429 crore, including raw material and part packing material. And we have an absolute clear strategy, and have started working on what would be the possible alternatives,” the company’s Chairman, Sanjiv Mehta, told investors at its 87th annual general meeting.
Homegrown FMCG major Dabur India, which makes Vatika shampoo and Odomos, has begun identifying local substitutes in response to PM Modi’s recent call for Atmanirbhar Bharat Mission.
Mohit Malhotra, CEO of Dabur India said, “China accounts for under 1% of our raw material and packing material procurement, and action has already been initiated for their replacement.”
Consumer product companies have been heavily dependent on China for raw and packing material due to scale and pricing advantage it brings over Korea, Europe and US. Dispensing pumps cost about 50% cheaper to buy from China and is produced in a capacity of millions per day as compared to a few thousand units in India, according to Ador Group, a third party manufacturer for companies such as Himalaya, Wipro Consumer Care, TTK and VLCC.
While the supply chain is stabilising, Ador stated that as an industry India does not want to depend on China now. “There is a lot of talk, initiative and investment going into localising packaging. By November, many local players will get involved in the ecosystem,” said Deep Lalvani, founder-chairperson of Ador Group.
Unlike electronics and clothing, personal and home care products will not have a significant consumer impact as the final production process typically takes place within the country, said industry experts. However, establishing a manufacturing hub in India is the need of the hour due to unpredictability in the supply chain amid the pandemic.
“Every other manufactured product in India has a footprint in China in the form of an ingredient or an intermediate material. We have ignored local manufacturing for the last 30-40 years. We need it to generate employment now,” said Devangshu Dutta, founder of strategy consulting firm Third Eyesight.
The Indian government has been actively looking for ways to diminish the presence of Chinese firms in the market due to cross-border conflict. About 59 Chinese apps, including Tik Tok, were banned citing security threats. Ecommerce firms including Flipkart, Snapdeal and Amazon India have been mandated to add the ‘country of origin’ tag across products on its platforms.