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August 2017 Cover Story

Published on: 2017-08-21 10:44:25     391 times read    0  Comments

“We are trying to expand our market to every continent”​​

GP Sah, Vice President, Global Business Head, FMCG Division, Chaudary GroupGP Sah
Vice President, Global Business Head, FMCG Division, Chaudary Group

How is CG performing in different FMCG segments?
We are doing exceedingly well in FMCG. The previous two years were pretty bad due to the earthquake and Tarai unrest and their effects on business. The market has recovered since then and the growth rate is good.

Wai Wai instant noodles is the most popular product of CG Food in the FMCG category. What is the market share of Wai Wai? What is the annual turnover from Wai Wai?
We command almost 50 percent share in the domestic noodles market. The annual turnover from Wai Wai roughly stands at Rs 6 billion at present.

Binod Chaudhary, Chairman of CG, said the company is trying to expand Wai Wai's market to the US. What's the progress in this regard? 
We are trying to expand our products in the global market. So the idea is to take our products to every continent. We will be starting the production of noodles in Serbia from the next month. We are in an advanced stage in Africa. We are exporting our products to the US. 

Beside noodles, what are the other FMCGs that you are exporting to other countries? How is the demand for the products in the international market?
Apart from noodles, we are exporting beer and some snacks. There is a good demand for the products.

What is the market share of CG's FMCG in different segments?
There are various categories under the snacks segment like cheese balls, potato chips. We command more than 40 percent market share and we are the largest market player in this category. Our market share in the beer category is somewhere around 25 percent at present. We are not a significant player in tobacco but we are trying to make headway.  

Are there any plans to enter new FMCG segments? Is there any plan to open new factory unit inside the country?
Yes there are plans to enter some other categories as well particularly under food and beverage categories. Our Chairman has already announced that a new factory unit will be set up in Koshi. 

How is the market competition?
Competition is not an issue for us. So long as there are stable government policies and an environment conducive for export, we will have a healthy growth. FMCG is a big category and it is growing worldwide. As a company, we have the infrastructure and the know-how. We have the capability to compete with any multinational. With the local elections held, I hope that the country is headed for political stability which will be better for every business.

How do you evaluate the market for FMCG products in Nepal? What is the growth rate of overall FMCG market?
With the growing income of the lower and middle class people, the market is growing. Many FMCG products are somewhat essential in nature, particularly the products with market brands. All FNCG companies in the country are doing very well. The growth rate of the overall FMCG market is in double digits. 

What new trends do you observe in the domestic FMCG market?
As civilization progresses, people become more educated and aware and their needs and aspirations change. Earlier, the premium products were not getting the attention of Nepali consumer but right now I can see that the premium category products are doing well. People want to look different with the changes in their lifestyles and this aspiration is creating premium segments of FMCG.   

Are the raw materials used to produce FMCG imported or produced in the country?
We use the raw materials that are available domestically such as white flour, spices while some spices are not available in the country and we import such ingredients. We import only those raw materials which are not available in the country. 

How many people are employed in CG's FMCG segment? What is the situation of availability of human resource?
Around 3,000 people are engaged with CG's FMCG segment. We have started feeling some constraints in finding skilled human resource. If you go to the rural areas, it is hard to find male workers as most of them have gone abroad for employment. 

What kind of problems you see in FMCG business in the country? What are your expectations from the government?
We all are fed up with the political instability in our country. Political parties fight over petty things and that has divided the people. Prolonged political instability and unstable government have hampered the overall business environment. The government has to focus and revive the manufacturing sector. The import-based economy will go down the day. The inflow of workers remittance goes down. The government has to provide political stability. Similarly, political parties should resolve their differences and sort out the problems with maturity. 

CG also has an importing unit, CG Exim. What kinds of FMCG products are you importing?
We use our importing arm more to learn about new businesses in new categories. Our ultimate aim is to import some products, observe the market, learn from it and set up a factory for its production domestically. That is why we created an arm which studies new categories of products and helps us produce them domestically. 

How are you strengthening your Wai Wai brand?
Wai Wai is available even in the remote parts of the country. You can find our noodles in Karnali even when there is no rice available. We go close to the people and it touches the hearts of the consumers. In last 10 years, we are the first company to start fortification in noodles. We are the pioneers in that. We thought that we should add essential ingredients as it is consumed by people of all ages. We carried out a research in Nepal that showed the children in the country are deficient in Vitamin A. So we added Vitamin A in Wai Wai. Then we came out with a scholarship scheme which was widely admired. Recently, we came up with the campaign called ‘Banau Adarsha Nagarik’ through which we are trying to propagate the idea of becoming ideal citizens. We don’t need to say that Wai Wai is good; it has become a brand. 

 

“The FMCG market in Nepal is growing at five to 10 percent annually”​​​

Parash Shakya, Executive Director, Bhuramal Lunkarandas Congolmerate (BLC)Parash Shakya
Executive Director, Bhuramal Lunkarandas Congolmerate (BLC)

What are the most selling FMCG products of BLC?
BLC is a part of Chaudhary Group. We are mainly dealing in three products - biscuits, Sarvottam Lito (nutritious baby food) and dairy products. We are manufacturing pasturised milk, ghee, butter, cheese, curd - both normal and sugar free - from our Hetauda-based dairy factory, Hetauda Dairy Industry (HDI). There is a demand for our products across the country and very soon we will bring our products to Kathmandu as well. Pashupati Biscuit Industry is the oldest biscuit manufacturing company in Nepal carrying 40 years of history in manufacturing biscuits such as Soaltee and Cream Crackers. We hope to introduce some new varieties in the market soon. 

What is the market share of BLC's FMCG products?
Currently, we are trying to reposition our products in the market. The market share of Pashupati Biscuits is around 10 percent whereas we have five to seven percent market share in the dairy products. Sarvottam Lito's market is very small. 

How is the overall growth of the FMCG market?
I think the FMCG market in Nepal is growing at five to 10 percent annually. The dairy market size is of about Rs 18 billion which is quite a good amount and it is growing every year. The market size of biscuits is about Rs 8.5 billion which is also quite good for the country like ours. However, I feel there has been a slight decline in the market of biscuits in Nepal because of a lot of competitors in different segments. The decreasing market of biscuits might be also due to the shift in the consumers' choices. 

How do you evaluate Nepal's FMCG market?
The market is somehow related with the country's political and business environment. At present, the condition of the manufacturing sector is relatively better than what it was three years back and I hope that it will improve further. Kathmandu is a major market for FMCG as it consumes about 50 percent of the FMCG products. The reason is Kathmandu is a place where people pay for good quality premium products and the same cannot be said about the rural parts though the market is slowly growing there too. There is a need for market growth throughout the country. 

What are the problems you see in the FMCG sector? What are your expectations from the government?
There is the lack of road infrastructure and transportation facilities in the country. For instance, dairy products have a shorter life compared to other products. So, dairy products are damaged when there is disruption in road transportation. With the recent elections, people's representatives have been elected in local units across the country except for Province 2. We hope that this decentralisation of the government will make things faster. The VAT or tax waiver on machinery for farmers will encourage them to start their own business which will ultimately contribute to the country's economy. Similarly, we all wish for a stable government. No strikes and no labour problems will definitely boost the industry and the country's economic growth.

Are you exporting your products?
At present, we are not exporting any of our FMCG products. We have plans to export our products and we are doing R&D for it. We are planning to introduce some products which include herbs and Himalayan products and are high on demand these days. We are thinking about tie-ups with international companies for dairy products. We are also planning to come up with Lito (nutritional diet) for old age people.  

What about the market competition? 
The competition is very fair. There is already a government-run dairy corporation in the country and we have to compete with it. Similarly, there are many biscuit manufacturing companies in the market. I feel that competition gives us the chance to improve, innovate and be alert continuously to stay on top and that is why we are relocating our position in the market.     

How many people are employed in BLC's FMCG segment? What is the situation of availability of human resource?
There are about 1,000 people employed in BLC's FMCG segment. Finding the required human resource is difficult. Sometimes, it takes many months. Also, semi-skilled human resources take time to learn the nature of the work and I think other companies are facing the same situation. 

What about the availability of the raw materials?
We try to get domestic product as much as possible. But at the time of shortage, we also import the raw materials. 

 

“Dabur Nepal is the biggest supply source for the parent company in India in juice category”​

Abhaya Prasad Gorkhaly, Senior Manager - Marketing Dabur NepalAbhaya Prasad Gorkhaly
Senior Manager - Marketing
Dabur Nepal

What are the most selling FMCGs of Dabur Nepal?
We are largely into the FMCG business as most of our products fall under the FMCG category. Dabur Real juice is the fastest selling product among our FMCGs. Dabur Nepal is the biggest supply source for the parent company in India in juice category.

What is Dabur Nepal’s share in the country’s FMCG market?
With 50 percent share in the packaged juice category, we are the market leader in this category. We operate in five / 10 percent of FMCG domain.   

What is the annual turnover of Dabur Nepal?
We are an Rs 10 billion company that includes our export to India as well. 

Dabur Nepal has been producing a range of FMCG products from fruit juice to Ayurvedic proprietary health care items to different sanitary/toiletry goods. How much is the company’s production capacity in different segments?
Our production capacity is sufficient to cater to the market demand. 

How do you evaluate the market for FMCG products in Nepal? What is the growth rate of the overall FMCG market?
The FMCG market is relatively stable unlike the gadgets, consumer durables, automobiles, real estate which are dependent on the macro-economic indicators. Consumers will use the necessary FMCG products regularly. The income fluctuation does not matter on buying necessary FMCG products. 

There is a stable and steady growth in the FMCG market. There is no high fluctuation. Introduction of any new provision or law by the government for durable goods can impact and affect their business. 

Having said that, I do not say the micro-economic indicators do not affect our business. Different FMCGs have different growth rates based on their market demand.    

What new trends do you observe in the domestic FMCG market? 
Today, the consumers have become smarter, aware, and quality-, price- and brand-conscious. This has increased the market competition. So, we have to keep the consumers happy if we are to remain in the game. Similarly, the diversity in demand has also intensified and we need to take care of individual interests. If we look 30 years back, there were only mango, orange, apple or pineapple flavoured juice available in the market. However, now the demand has become more diversified as some consumers want sugar free juices, some want added fibers, and others want light and refreshing juices. Besides this, the consumers are shifting to natural and herbal products and our products are natural.   

How is the market competition for Dabur Nepal?
Competition is something that we love as it keeps us awake and encourages us for betterment in terms of product quality and consumer insights so that we can deliver more attractive and functionally better products. If there is no competition, then there will be no qualitative, innovative, reasonable goods in the market. Brand building is all about delighting the consumers and understanding consumer insights and developing products to cater to their needs so that they become loyal to your products. Dabur has become a household name in this region because of the consumers’ trust on our products. 

Any plans for new products? 
Introducing new products is part of Dabur’s strategy. We launched two variants of Burrst - Burrst Mixed Fruit and Burrst Pineapple - in one liter and 200ml packs in May 2017. We constantly try to innovate and launch new products in the market. There are few more products in the pipeline.  Out of the 10 new product development (NPD) projects which we are working on right now, one will be launched soon.     

Do you import the raw materials? 
We have certain quality parameters to meet and whoever can meet our quality, norms, and can supply us consistently and commercially, we purchase from them. So, it could be from third countries, from China or India or domestic raw material as well. We have a stringent quality assurance process department where the raw materials from ingredients for production to packaging are required to meet the quality standard. 

How many people are employed by Dabur Nepal? What is the situation of availability of human resource?
We are providing direct employment to 1,000 people. We are providing indirect employment to nearly 20,000 people as there are so many dealers, vendors and suppliers. Getting skilled manpower has always been a challenge for us. 

What kinds of problems so you see in the country’s FMCG business?
The FMCG business is not an exceptional industry. The business is facing the common problems that are being faced by other industries. Nepal being a small market, we sometimes face problems while introducing new products in the market. New products need new investment and plants. So the commercial viability of such products sometimes creates a dilemma. 

 

“FMCG sector contributes 50 percent of advertising spending in Nepal”​

Ujaya Shakya Vice, President, Advertising Association of Nepal (AAN) Managing Director, Outreach NepalUjaya Shakya
Vice President,
Advertising Association of Nepal (AAN)
Managing Director, Outreach Nepal

What is the marketing and promotion of the FMCG sector like compared to other sectors?
Globally, FMCG has always been the most advertised sector. In Nepal, FMCG products are also at the top of the promotion and marketing list. Despite all the odds and challenges, this sector has sustained a steady growth in our country. Besides FMCG, sectors such as infrastructure and consumer electronics are also having impactful growth in terms of their spending in marketing and promotion. 

How much market shares does the sector hold in the Nepali advertisement industry?
We don’t have any organised data but our in-house study shows that the FMCG sector contributes 50 percent of advertising spending in Nepal. This might be true in similar volume in other South Asian countries as well. 

What are the major FMCG products being promoted in Nepal?
In Nepal, the major FMCG product categories that advertised are soap, shampoo, toothpaste, facial creams, body lotions, beverages, etc. FMCG also includes some impulsive product categories like confectionaries, biscuits and noodles that are also aggressively promoted in the Nepali market. 

How are FMCG products promoted?
FMCG products are always promoted with two different objectives. The first strategy is the thematic approach where we try to establish the brand story for the product so we are able to attract certain types of target groups to be the loyal consumers of our brands. The second strategy is to conduct the tactical campaigns where the objective is to have aggressive sales programmes like consumer schemes, price discounts or lucky draw coupons etc. 

In recent times, there have also been trends towards using experience marketing where the objective is to bring behaviour change among the consumers.

 

“Nepalis are choosing premium brands more and spending more money in buying FMCGs”​

Rahul Bagga,  General Counsel  Unilever Nepal Limited (UNL)Rahul Bagga
 General Counsel 
Unilever Nepal Limited (UNL)

How do you view the market for FMCG products in Nepal? How is the market growing?
Nepal is a market of high potential for FMCGs. However, the market is not growing in full swing currently. But as the country progresses economically, the full potential of the growth of the FMCG market will be definitely realised.

What factors do you see are behind the growth of the market at present?
Right set of distribution and increasing market penetration of FMCGs, growing economy of the country and rising purchasing power of the consumers are the key factors for market growth. 

How is the market for Unilever Nepal?
Nepal presents a unique opportunity for Unilever because having present in the country for over 23 years we understand what lies beneath. We see a huge potential for expansion of UNL here. 

How much share of the market does Unilever Nepal commands across various FMCG segments?
 Our share of the market is 58 percent in the domestic FMCG market. UNL is leading in almost every category in FMCG. 

Unilever Nepal has a wide range of product lineup from personal care to cleaning products. What are the areas of focus in terms of product lineup for Unilever Nepal?
We value our consumers and therefore our primary focus is to serve them. In terms of product lineup, food category is an additional area of focus for us at present.

What are the new trends in the FMCG market?
The behavior of consumers is shifting rapidly and as a result the market is also observing various changes. The information and digital revolution is happening very fast which has been aiding to decision making capacity of the consumers. The purchasing capacity of consumers has increased notably. They are choosing premium brands more and spending more money in buying FMCGs. 

Fierce competition is being observed in the FMCG sector at present with the presence of various domestic and foreign brands in the market. How is the competition for Unilever Nepal?
The market competition is quite aggressive. Unilever values fair competition. Only two MNCs (UNL and Dabur Nepal) have their manufacturing units set up in Nepal. Other foreign FMCG brands only have supply chain set up for delivery. We are competing across all categories. 

How many people are employed at Unilever Nepal? What is the situation of availability of human resource?
Presently, there are 235 employees working for UNL. It is easy to get manpower in Nepal but it’s very difficult to get human resources as desired by the jobs. However, UNL has an effective framework to train the human resource to meet the expectation of the company. 

What problems do you see in FMCG business in the country?
Nepal is a highly regulated country where restrictions on investment in retail segment by foreign companies like ours which includes imports have been imposed. It has resulted in constraint in terms of introducing new categories and products. Also, the labour situation is quite challenging and prohibitive for business. Inefficient bureaucracy, unstable government, frequents strikes are among the factors that ultimately result in the market instability. Similarly, laws and policies are not up to the mark and can be manipulated easily by the bureaucrats. 

What kind of government support do you expect for the development of the market?
Investment friendly atmosphere is a must for the market to get fully developed. Likewise, the attention and support of the government is very much required in multiple areas including strict and tough approach towards the spurious products, allowing foreign investment in trading segment by the MNCs having local manufacturing units like ours which includes imports and promoting fair competition by taking strict approach against unfair competition activities. Similarly, there should be industrial sector friendly labour laws along with tax regime and customs tariff. Likewise, the government also needs to formulate and implement a comprehensive IPR law to protect the property rights of the internationally recognised brands. 

 

“Nepali market is very dynamic in terms of what is consumes and when”​

Gaurav Sharda, Managing Director, Sharda GroupGaurav Sharda
Managing Director, Sharda Group

Sharda Group is one of the country's major groups trading and manufacturing liquor. What are the liquor brands that you are importing and manufacturing currently?
We are importing liquor brands such as Pernod Ricard, Chivas Regal, Absolut Vodka, Jacob’s Creek Wine, Beefeater Gin among other brands. Besides this, we have our own alcohol manufacturing unit. We are producing Royal Regal whisky, Xing vodka, and we have a new brand Black Stallion in the 40 (UP)  category. We are also manufacturing Indian franchise brand Old Monk. We are producing four brands domestically and importing 43 brands. 

What are most selling liquor brands in Nepal?
Scotch whisky is the most selling brand in the imported segment. It is also more popular than vodka. The domestic products are seasonal. The Nepali market is very dynamic in terms of what is consumes and when. Predominantly, the sale of imported liquor brands is almost the same throughout the year.    

How is the availability of your products across the country? Are you exporting any of your brands?
We are pretty much available across Nepal and hotels and restaurants. We are not exporting any of our liquor products manufactured domestically.

Any plans to introduce new products?
We have recently launched the Black Stallion whiskey in the 40 (UP) category and we have not expanded our market for the product yet. The newly launched product is available in only some parts of the country. So we will be increasing our market penetration for the product in the upcoming days. 

How do you evaluate the liquor market in Nepal? 
The liquor market of Nepal is stable. There is no dramatic increase but as an industry there is a stagnated growth. Similarly, the consumption of wine has been increasing due to the increase in the number of female drinkers and wine companies are doing a good business. A new market has been created as women have started drinking. Due to the drink and drive prohibition, the market has slightly gone down. So, people have started drinking at home and when they drink at home, the family members tend to drink the same brand and this also has increased the consumption of wine. With the increase in duty on liquor year on year, the import of alcohol has decreased. I think the government revenue has not decreased as the government increased the duty on liquor by around 20 percent last year. Due to the increase in the duty, there has been a decline of roughly around eight percent in imported alcohol for the first time in the last five years. 

The government has increased the tax on liquor products in this year's budget as well. How is it going to impact the liquor business and what kind of support do you expect from the government?
The government should be rational. All its revenue is not going to come from liquor. We share open borders with India on three sides. So the government should consider the liquor price in India. Blindly increasing the taxes on imported liquor will ultimately hamper the government's revenue collection. It will affect the industry and encourage smuggling. In most of the bordering areas, we will be unable to sell our products because our products have to compete with illegally imported products which are cheaper.  So, the government needs to rationalise the taxes. Simultaneously, there is a huge market of country liquor which needs to be controlled. The government does not get any tax from the consumption of homemade liquor which is consumed widely in Nepal. Also, the quality of homemade liquor is questionable as it does not pass through any lab test. The government should investigate and control the homemade liquor. When the government increases the taxes on legally-produced liquor, it creates market for homemade liquor. 

 

“Nepal-made biscuits are of good quality”​

Tikendra Shivakoti, Sales Manager Asian Biscuit & ConfectioneryTikendra Shivakoti
Sales Manager
Asian Biscuit & Confectionery

What are the most selling FMCGs of Asian Biscuit and Confectionary (ABC) Nepal?
The most selling biscuits from our company are Rum Pum, Digestive, New Top, Crackies, Treat Cream Marie and Magic Cream. Similarly, the most selling confectionaries are Choco Luv, Honey Ball, Double Break, Eclairs, Lot Pot, Pop Rock, Frutica, and Goodlife Dairy Milk.    

What’s the share of ABC products in the Nepali FMCG market?
ABC products command around 12 percent of market share among Nepali FMCGs and five to six percent of total market volume.

What is the annual turnover of ABC? 
The company has an annual turnover of Rs 8.5 million.

What is the company’s production capacity in different FMCG segments?  
In the biscuit segment, the company has a production capacity of 7,500 metric tonnes. Likewise, we have a production capacity of 1,200 metric tonnes each in wafer and candy/toffee. Similarly, our production capacity of treat roll segment is 1,100 metric tonnes and Dairy Milk is 1,000 metric tonnes.

Are you exporting any of your products?
We are exporting noodles to the US, Middle East countries and SAARC countries. Our noodle is popular in North India. We are not exporting any of our biscuit and confectionery products. 

Are you planning to introduce any new FMCG? 
We are planning to introduce juice in the market this year. Besides this, we are focusing on our existing products for now as we have more than 30 varieties in the biscuit segment and 25 varieties in confectionaries. 

How is the market competition?
Market competition is high and will be even tougher as Britannia and Patanjali are going to establish their manufacturing units in Nepal. However, Nepal made biscuits are of good quality, compared to those of other countries. We are using the latest baking technology to manufacture biscuits. We are the largest biscuit manufacturer in the country. At present, there is no other company in the country with a higher production capacity than ours.  

Do you import your raw materials? 
We use the raw materials which are available domestically and import those raw materials which are not available locally.

How many people are employed by ABC? What is the situation of availability of human resource?
There are 400 people working with ABC. We are getting the required human resource. However, due to people going for foreign employment, there is shortage of labour. 

What kinds of problems do you see in the FMCG business in the country?
We talk about nationalism a lot but when it comes to using Nepali products, most consumers choose imported brands. India has been exporting biscuits of the dog food category to Nepal. Some people are taking the advantage of the weak government policy which is creating problems in the domestic industry. Due to the open border, biscuits from India and third countries are coming in through illegal channels. 

What kind of support do you expect from the government?
The government should control the import of biscuits entering the market through illegal channels. We can export our products and can compete with foreign brands. But this is possible only through the support of the government. The government should encourage the manufacturing industry as it contributes to the economy and generates employment. Likewise, being Nepalis, we should encourage our domestic industry. When people start consuming domestically produced items, it encourages the industry and generates employment. The people need to understand this. 


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