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Manjushree Technopak acquires Varahi Polymers; deal estimated at Rs 350 crore

NEW DELHI: Packaging firm Manjushree Technopack has bought out mid-sized Delhi-based Varahi Polymers, which packs for a slew of consumer products makers including Reckitt Benckiser,

Dabur

, Patanjali and Perfetti Van Melle, in a Rs 350 crore deal, an official in knowledge of the development said.

This is Manjushree Technopack’s first acquisition and will pit it directly against multinational packaging company Tetrapak. Manjushree currently packs for Coca-Cola,

Nestle

, Mondelez, GlaxoSmithKline Consumer and Heinz, among others.

“This acquisition gives us scale of operations, a pan India presence and manufacturing capacity all over the country,” Manjushree Technopack Managing Director Vimal Kedia told ET. He declined to comment on the deal size.

The deal gives Manjushree access to all three factories of the Rs 225-crore Varahi Polymers in Noida, Baddi and Pantnagar, its assets and intellectual property rights.

“This is a complete buy out of all manufacturing assets of the packaging pision of Varahi, in addition to access to its R&D and patents, which we will leverage for growth. The acquisition gives us a strong foothold in north India and brings us closer to customers in the region,” said Kedia. The deal will give Manjushree a combined footprint of over 200 customers, six manufacturing bases and 300 patented and registered packaging designs.

Manjushree has a 20% market share of the Rs 4,000 crore organised PET (plastic bottles) and rigid packaging industry. And with sales of Rs 540 crore, Manjushree says it is the largest PET bottles maker in South Asia. The company delisted from the stock exchange last year and raised private equity funding from Kedara Capital.

The per capita consumption of PET bottles in India is 0.6 kilo against the world average of 2.9 kilos. PET, primarily used for food and beverage packaging, has been growing at 10-12% CAGR, fuelled by consumer companies foraying into multiple packs and formats ranging from entry-level single-serve packs popular in rural and tier-two and three markets to large economy packs commonly sold in organised trade.

Will increase investments in recycling in collaboration with industry, governments: Tetra Pak

New Delhi: Tetra Pak will continue to invest in strengthening collection and recycling in collaboration with industry, central and state governments, the packaging company said in its sustainability report released on Wednesday.

The report said over 80% of Tetra Pak packages sold in India now display the FSC logo indicating that paperboard used in them is made from “responsibly sourced wood”. Tetra Pak, which works with Amul,

Nestle

and Coca-Cola among various other consumer goods companies within foods and beverages, said in the report it has aligned with 16 companies across juices, dairy, pharma, liquor and packaging to double collection and recycling of used paper cartons by 2025.

The report said Tetra Pak has invested 23 million euros between 2012 and 2019, and increased its facilities from 40 in 2002 to more than 170 now.

Nestle India chief says 2022 going to be difficult year on higher commodity prices

Nestle India

chief Suresh Narayanan on Monday said that 2022 will likely be a “difficult year” as commodity prices are expected to rise and result in the spectre of food inflation for the manufacturers.

In the last six to eight months, Narayanan said Nestle has seen an average price hike of 1-3 per cent. According to him, the first half of 2021 was relatively more secured and subdued in terms of commodity pricing as except packing materials and crude oil, by and large, prices of milk and wheat have been broadly stable. “Going forward, 2022 clearly looks to be promising to be a difficult year.

There is clearly an uptick as far as milk prices are concerned,” Narayanan told reporters during a virtual media roundtable. Apart from disruptions caused by the coronavirus pandemic and non-replacement of milch herd on-time across the country has also resulted in a depleted supply base. Similarly, globally coffee prices are also going up “quite significantly” as there have been adverse impacts in Vietnam, which is the largest grower of coffee, due to the pandemic and disruptions there, Narayanan said.

“So, there is going to be the spectre of food inflation that will be staring at us,” he said, adding that there will put pressure on raw material supplies going forward as large economies are opening up quite strongly. Globally, there is around 5 per cent of uptick in commodity prices, he added. “I think, the forward pressures are likely to be more acute than what we have been through at the moment,” he said. Though Nestle India is largely a locally-sourced economy in terms of raw materials, Narayanan said there will “definitely” be an impact and this is an area that the company is watching out for.

“There would be no immediate kind of reactions that we have, except for, of course, ensuring that our pencils are sharpened as far as coverage of commodities are concerned, locking in positions are concerned to ensure the best, the best prices are brought to the table with sustainable sourcing practices,” he said. With commodities likely to become more expensive, Nestle India expects to mitigate some of the effects by using its scale as a large player in the industry. “The only silver lining that I see in the context of India is that the rabi crop will be decent because the monsoons have been fairly robust across the country… as far as the agricultural sector is concerned, there might be some mitigation that we have as far as this inflation is concerned”.

About demand, Narayanan said there are three big trends seen in the market — the middle class and the urban consumers are sticking to trusted brands, products which offer some benefit in terms of nutrition and immunity, and there is also pressure on the overall household budgets. “There is an unleashing of exuberance that is happening. The last festive season was kind of rooted for many of the other players. Going forward, there is a strong expectation that this Diwali will be definitely much better than the last Diwali,” he said. Nestle India is also expanding its rural coverage and targets to cover 1.2 lakh villages, which has a population of 5,000. Presently, it covers around 90,000 villages and around 25 per cent of its total sales come from rural markets.

There will be a fairly reasonably strong comeback of consumption in mega metros and metros. Even if there is a complete normalcy in the urban market, “rural markets are not going to meltdown in a hurry, there could be some growth”, he said. Nestle India witnessed strong growth in the e-commerce segment during the pandemic and the segment contributed nearly 6 per cent of the company”s total sales.

Narayanan noted sales through other channels are also expected to stabilise but e-commerce would still remain relevant to a lot of consumers who now got into the habit of buying online. Nestle India, which plans to invest around Rs 2,600 crore in India in the next 3-4 years, has also applied for the government”s production-linked incentive scheme for the food processing sector.

Expect double-digit revenue growth in FMCG pack; margins to be lower: Kaustubh Pawaskar

Earning growth visibility is there. Balance sheets are strong. So valuation will continue to remain firm. However, we have to be selective in the FMCG space, says Kaustubh Pawaskar, AVP, Fundamental Research, Sharekhan.

What is your expectation from the FMCG pack?
For the FMCG pack, we are expecting a double digit revenue growth largely made by the improvement in the sales volume. The margins are expected to be lower due to the increase in commodity prices. So starting with

HUL

we are expecting around 11% growth in the revenues to Rs 12,741 crore. We are expecting domestic volume growth to be around 6-7%. Both home care and personal care are expected to do at around 10-11%.

Also the foods business with nutrition business scaling up we are expecting around 12-13% growth in the foods business.

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In terms of the operating margins, we are expecting operating margins to be lower by 90 bps to 24.2% and we are expecting PAT to grow by around 5% to around Rs 2.167 crore.

In terms of Nestle, we are expecting revenues to grow by around 10% largely driven by a volume-led growth, volume growth is expected to be in the high single digit for the domestic business. We are expecting Maggi and the chocolate business to grow in double digits. We are expecting because of the recovery in the out of home consumption the beverages should see a sequential improvement in revenues. For

Nestle

also we are expecting around 50 bps decline in the operating margins and we are expecting a single digit growth in PAT.

How are you looking at valuations? Is there a re-rating and what is the outlook from this point on?
The sector’s valuations are currently at a premium and we need to understand that FMCG was a relatively less impacted sector compared to the other sectors. It was considered as the safest bet and in that context we have seen most of the companies recovering. During the first wave, from Q2 we saw the recovery started but from the second wave also, things were much better from the supply and distribution point of view.

The sector recovery was much faster. Rural came back on track and in FY21 we have seen that most of the companies saw strong improvement in the rural growth and that is expected to continue in the quarters ahead and also with receding cases, urban recovery would be there especially in the out of home categories.

So growth would continue. We expect a double digit kind of revenue growth to sustain. Near term margins pressure will be there but from the longer term view, the scale up in the margins would continue for the companies, considering the premiumisation strategy, considering the supply efficiencies the companies are focussing on.

The earning growth visibility is there. Balance sheets are strong. So valuation will continue to remain firm. However, we have to be selective in this space and considering our stance of selective companies we like

Britannia

Industries, Godrej Consumer, Marico and Tata Consumer Products in the largecap and among the midcaps, we like Indigo Paints and

Radico Khaitan

where the room for earning growth is much higher than their peers in the space.

Adults replace children in food MNCs’ ads

NEW DELHI: The latest Maggi noodles TV commercial features two wrinkled old men, with hearing aids, flying kites on a roof as they argue in trembling voices about the flavour of instant noodles. The commercial comes as a surprise to viewers used to watching kids shout “Mummy bhookh lagi” (Mom I’m hungry), with the mother replying, two minutes.

And Nestle’s Maggi is not alone. In the food and beverages sector, top companies such as Pepsico (Frito-Lay ), Kraft Foods (Cadbury) and Hindustan Unilever (Kwality Walls) too are now using adults for TV commercials . So, where have all the kids vanished and why? The answer to that query lies in a European Union Pledge undertaken by 11 food industry giants such as

Nestle

, Unilever, Coca Cola, Pepsico way back in 2007. Under that oath, the MNCs agreed not to use children under the age of 12 in advertisements shown in the European Union countries.

“Post these discussions, we joined a group of global food and beverage manufacturers to adopt a worldwide voluntary commitment to advertise to children under 12 only products that meet specific nutrition criteria ,” said a PepsiCo India spokesperson via email.

In May last year, eight food MNCs such as Nestle, Hindustan Unilever, Pepsico, Kellogg’s extended that oath to India in what was called the India Pledge. They, however, had missed their December 31, 2010 deadline to put up the details of their new child-friendly policy online for review. What we are witnessing now are the first steps of putting that pledge into practice.

The move has made wideranging impact in the advertising industry. Media planners feel that with persification in the product lineup, it makes sense to steer the conversation away from children. “Every category is trying to expand market share by reaching out to a wider range of consumers, like whole wheat noodles for adults, or ‘dahi’ for kids as flavoured yoghurt ,” says advertising copywriter Sudhir Das.

Pepsico’s Frito-Lay , once marketed aggressively with the children’s toy “tazos” , has now signed up Saif Ali Khan, a 41-year old father of two, as brand ambassador. The “Meethe mein kya hai?” campaign from Cadbury’s Dairy Milk does feature children, but tries to position the product as something of a family dessert. Even Kwality Walls products like Cornettto feature youth in their television commercials.

There is also the feeling that the client has finally loosened up enough to consider creative solutions that go beyond what marketing research dictates. Copywriter Utsav Khare thinks it makes sense to reach out to a wider demographic. Nestle spokesperson Himanshu Manglik agrees when he talks of the recent Maggi campaigns. “The storyline consciously reflects the very strong connect of the product with consumers across all age groups in the family,” he says.

However, not all signatories have made a complete transition. HUL’s Knorr, with its “khao piyo” campaign for noodle soups with Kajol can still be seen on air. But as most adults would agree, children today are not what children once used to be. You don’t necessarily need to spin fantastic tales around a creature who can stretch its limbs for kilometers to sell them gum, as in the case of Big Babool. For Center Fresh, also from Perfetti (not a signatory to the pledge), a grown man telling his father that he has failed his exams yet again did just as well. “A 12-year old is really 18 today. You don’t need to speak to them in a different language. If an ad can entertain them or make them laugh, it works,” says Khare.

Adman and Hindi film songwriter Prasoon Joshi too points out the difference between selling to children and using children to sell a product . He cites the example his Alpenlibe commercial starring Kajol and a crocodile. “Children loved it! It’s a very adult view, that children would like different things. They like the same actors as the adults, for example,” says Joshi. So the next time you see middle-aged men and women trying to sell you the latest brand of candy, you can rest assured they’re not kidding you.

Brands queue up for ad spots on royal wedding

NEW DELHI: The much-awaited royal wedding of Prince William and Kate Middleton on April 29, has become an attractive media property for broadcaster TLC, which has roped in a host of big names as sponsors and advertisers in India.

The Discovery Network‘s travel and lifestyle channel TLC has already signed up with Tanishq, Volkswagen,

Nestle

, Ponds, Make My Trip, Pepsi, Yardley as sponsors for the high profile event to air ads starting April 24, which marks the beginning of the ‘Royal Wedding Week‘.

In addition, Lotus Herbal, Platinum Guild of India, Elite Matrimony and Raymonds have bought ad spots during live telecast of the royal wedding on TLC from 2.30 pm to 6.30 pm on April 29, followed by a repeat till 10.30 pm. “We expect this event to be the biggest in terms of viewership in the life of TLC.

The wedding of Prince Charles and Diana was the most watched event in the television history. So if you go by the past record, the upcoming wedding will be big,” said Discovery Networks Asia-Pacific senior vice-president and general manager Rahul Johri.

Although, reports said TLC has charged around Rs 25 lakh for the entire show from sponsors and about 15,000 per 10 seconds from advertisers, about 10 times more than the usual rates, he declined to comment on the rates. He, however, said, the company has already sold out ad spots and sponsorships for the event.

Nestle replaces Maggi ads with Nescafe and KitKat commercials, to lose about Rs 10 crore

MUMBAI | AHMEDABAD:

Nestle India

stands to lose advertising inventory of about Rs 10 crore due to Maggi recall despite its move to air commercials of Nescafe or KitKat in all advertisement slots booked for the instant noodles brand, broadcasters and media planners say.

“The channels have been told to subtly replace Maggi ads with Nescafe and KitKat commercials,” a senior media planner said. “But despite this attempt to recover as much inventory possible, Nestle will have to let go of advertising inventory worth Rs 8-10 crore,” the person said on the condition of anonymity.

On Saturday, Nestle notified broadcasters and other media houses in India to stop publishing Maggi ads from Sunday. While the Swiss company has stopped digital advertising for the brand as well, it is using various social media platforms liberally to sell its side of the story to Indian consumers.

A Nestle India spokesperson said that while the firm has taken action to stop Maggi ads, “you may see a few since changing the programming pipeline could take a little longer”.

Nestle is one of the biggest advertisers in India, spending over Rs 400 crore on advertising a year. Its ad spend on Maggi brand alone is estimated at over Rs 150 crore, according to industry insiders.

Publicis Worldwide is Maggi’s creative agency, while Zenith-Optimedia handles the brand’s media buying and selling activities. The digital mandate of Maggi is handled by GroupM’s Maxus. Sources in these agencies said that Nestle stopped airing Maggi Oat Masala noodle commercial featuring actor Madhuri Dixit right after the scandal broke.

In February, Maggi had launched a campaign, ‘Khushiyon Ki Recipe’, which was on air till Saturday despite Food Safety and Standards Authority of India (FSSAI) dismissal of Nestle’s defence about the brand embroiled in controversy over excessive lead content and mislabelling on MSG.

Nestle has now instructed channels to take these commercials off air.

Meanwhile, Ahmedabadbased Consumer Education Research Centre (CERC) is contemplating legal action to push Nestle to do corrective advertising across print and television space.

“Considering Nestle advertisements have been misleading the consumers, they ought to engage in corrective advertising to tell the consumer in as many words about what is factually correct,” said Pritee Shah, chief general manager at CERC and a member of an inter-ministerial monitoring committee for misleading advertisements under the ministry of consumer affairs.

G Gurucharan, additional secretary (consumer affairs), too, had recently stated that Nestle could be asked to put out corrective advertisements.

Shah said that considering Nestle has been misleading the consumer about the health aspect of Maggi, it should redo its commercials. In addition to lead and MSG, the firm needs to clarify that one helping of Maggi is not equivalent to three chapatis as claimed by one of its ads, he said.

Prasoon Joshi likely to create re-launch campaign for Maggi

MUMBAI: Advertising veteran Prasoon Joshi is likely to create the re-launch campaign for Maggi. While Publicis Worldwide remains Maggi’s advertising agency, manufacturer

Nestle

India has hired McCann World Group to manage the new project as the noodle brand tries to make a reentry into the market four months after the company recalled it, senior industry executives said.

Joshi is chief executive of McCann World Group India, a unit of global marketing firm McCann Erickson. This decision, the executives said, comes on the heels of the 100-year corporate campaign that McCann created for Nestle this year.

Joshi had penned it. The local unit of the Swiss company stopped all forms of advertising for the brand in June after the product was pulled out of retail. Maggi was also missing from its 100-year corporate campaign, though the brand name was visible in the ad film through the Maggi ketchup and magic masala range. While ET could not ascertain if Nestle had roped in any celebrity to be part of the campaign, the new advertising will revolve around two propositions – trust and safety.

Prior to the ban, Amitabh Bachchan, Madhuri Dixit and Preity Zinta were the brand ambassadors of Maggi. After the scandal broke out, a district court in Bihar directed police to register an FIR against two Nestle executives, Bachchan, Dixit and Zinta.

“Since the advertising of Maggi stopped, the contracts with these actors also stands canceled. When the product returns to the market, Nestle will have to revise its contracts with the former brand ambassadors if they are willing to come onboard,” one executive said. When contacted for comment, Joshi directed ET to a Nestle spokesperson.

“While Publicis India is the agency on record for Maggi Noodles in India, we have been working with McCann India for some recent corporate projects,” said the spokesperson without indicating if the agency will also handle the re-launch campaign.

According to another industry executive who spoke on conditions of anonymity, ZenithOptimedia, the media planning and buying agency for Maggi, was earlier told to be ready with a relaunch strategy by December 2015 as Nestle was confident that the product would be back on the shelves by then. Executives of the media agency will meet the Nestle team text week where they are expecting to get a new brief on the media strategies around the new campaign. On Friday, Nestle said its Maggi noodles cleared tests mandated by the Bombay High Court and that the company will restart production of the snack within two-three weeks. Interestingly, one of Maggi’s brand ambassadors, Bachchan, was roped in by Cadbury in 2004 to endorse its Dairy Milk brand after a massive scandal broke out over finding of worms in the chocolate.

Bheegi Billi, Betel Nuts now endorse top brands like HUL, Nestle, Coca Cola, Dabur

NEW DELHI: When music channel network 9XMedia chose to replace video jockeys with animated characters such as Bheegi Billi, Betel Nuts and Bade-Chote in some shows, the idea was just to entertain viewers. Today, these cartoon VJs account for more than one-fifth of the network’s revenues, with many marketers including Hindustan Unilever,

Nestle

, Coca-Cola and

Dabur

using them to promote their products.

“The animated characters became so popular that some of the leading brands in the country wanted to use them for promoting their products,” Pawan Jailkhani, chief revenue officer at 9X Media, said.

Many top brands now subscribe to what the network calls brand integration with its animated VJs. 9X Media operates five music channels — 9XM, 9XO, 9X Jalwa, 9X Tashan and 9X Jhakaas. Each of these channels, except 9XO, is interspersed with short format animated shows done by their respective toon characters.

The network currently has 13 such characters across its channels. Bade-Chote, Bheegi Billi, Betel Nuts, Bhabhi and Silly Chicken are the most popular and frequently used for brand integration.

9X Media plans to introduce two to three more animated characters in three-four months to add to its shows and increase brand integration opportunities.

“The animated characters are not used for regular advertisements,” Jailkhani said. “We integrate the benefits of the products that are being endorsed in our short format animated shows while keeping the essence of the show intact.”

In a recent product integration to promote Nissan Motors’ multipurpose vehicle Evalia, Bheegi Billi, Betel Nuts and Bade-Chote go on a test drive of the vehicle. A Nissan Motors spokesperson said, “One of the key features of Evalia is its good music system. So it made sense for us to promote it on the music channel with its animated characters.” GM Pens, makers of Reynolds pens, too, recently used 9X Media’s popular characters for a promotion.

“While viewers might change the channel during a commercial break, chances are that they might wait and watch what characters such as these have to say,” Karthi B, marketing head at GM Pens, said. For such brand integrations, the network charges a premium of 50%-75% over the normal ad rates on its channels.

The brands also pay for the production costs. These episodes, however, are usually longer than regular television commercials, going up to 40-50 seconds. The network has a separate team to works on this stream of revenue.

Officials said that there is rising demand for brand integration for its Punjabi channel 9X Tashan and Maahi channel 9X Jhakaas.

Success has not come easily for McCann, we worked for years to groom talent: Prasoon Joshi

Mumbai: The Effie Awards is a classic example of how advertising awards shows have always changed over the years. In the past, typically, it was a battle between top contenders Ogilvy and Lowe Lintas, particularly for the Agency of the Year title.

But the results at last year and this year’s Effie Awards, that took place on Friday, surprised many in the industry. McCann Worldgroup India came out on top after it won the Agency of the Year title — that’s twice in a row. In an exclusive chat with BE, Prasoon Joshi, CEO & CCO of McCann Worldgroup India, and chairman McCann Asia Pacific, shares what his team has been doing right to grab attention, awards and new business.

“WE ARE NOT CONSUMED WITH ADVERTISING”

While his agency has a strong roster of multinational clients such as Coca-Cola,

Nestle

, Mastercard, among others, McCann is now also making an effort to work with new-age brands like Paytm and Ikea, says Joshi. “We are not consumed with advertising. The way we look at redefining ourselves is by working with brands that would need solutions that are experimentative. Having said that, we also keep doing conventional communication, that’s essential, too,” he says.

The agency has been winning awards for its work in healthcare space, experiential marketing, and a lot of other social-based campaigns.

Joshi believes that it is ‘McCanness’ that has helped his team grow stronger over the years. “Success hasn’t come easily to us. We have worked for years to groom talent, which is all homegrown. Today, agencies want remade solutions. The reason why people stay with us is because of the cultural fit — it is created collectively in our agency. That’s why people return to us.” Recently, Ashish Chakravarty returned to McCann as executive director and head of creative, India.

“ELECTIONS ARE A GREAT WAY TO STUDY CONSUMER BEHAVIOUR”
As far as 2019 is concerned, Prasoon Joshi is banking on the general elections.

He says, “In my opinion, you learn a lot about what people are thinking, their ambitions, their beliefs, during the election season. It’s a great way to study consumer behaviour. Working with clients who want to engage with consumers during this season is an opportunity that we are looking forward to.”