Why Analysts See Trouble Ahead For Britannia, Colgate, Nestle When New Plastic Waste Norms Kick In

Analysts see India’s upcoming plastic waste management (PWM) norms as poised to hurt the toplines of consumer staple giants like Britannia, Nestle and Colgate in FY25.

What Happened: Analysts from Kotak Institutional Equities predict that the implementation of these norms, which focus on recycling and reuse of plastic packaging material, will lead to a rise in packaging costs for these companies, which heavily rely on plastics for their packaging needs.

The analysts note that while consumer staple companies have previously optimised packaging costs by reducing plastic usage, they have made limited progress in recycling or using recycled content for packaging. As a result, higher costs are expected in the future.

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Britannia, Colgate and Nestle are anticipated to be the most vulnerable to these changes due to their higher exposure to flexible or multi-layered plastic (MLP) and food-grade plastic packaging. Colgate, for instance, predominantly uses nonrecyclable laminate tubes for its toothpaste packaging, resulting in a high exposure to MLP.

However, companies like Godrej Consumer Products, ITC, Jyothy Labs and Varun Beverages, which have adopted certain sustainable practices, are expected to face less impact.

On the flip side, plastic recyclers such as Ganesha Ecosphere and innovative packaging companies like EPL, Uflex and ITC are anticipated to benefit from the new PWM rules. These companies can offer solutions to make plastics recyclable, utilise post-consumer recycled materials and provide cost-effective alternatives to plastics.

Kotak Institutional Equities also expects the plastic recycling industry to experience a consolidation, with a few large players emerging. Chemical recycling, although currently uneconomical, is likely to become the end-of-life solution for plastics in the long run, the brokerage said.

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