With the announcement by the Indian government that retail foreign direct investment (FDI) will finally be allowed in the country, the doors might soon open to the last great consumer market in the world still closed to the major global retailer groups.
Currently in India these companies can only sell their own private label products and cannot sell the global brands they stock in every other major consumer market in the world. This has had the effect of closing off avenues of choice to consumers and limits the penetration of the global FMCG brands. It is no coincidence that the major European and North American-based label and packaging converting groups – CCL, Rako and Chesapeake, for example – have invested in China rather than India, and for this simple reason: in China the government has actively encouraged Walmart, Carrefours and the rest to invest in the country with wholly-owned operations. And they have bought with them their entire global supply chain. The major converting groups have come in on the back of supporting products from P&G, Unilever, L’Oreal and so on, where the run lengths are generally longer and the quality of materials used and complexity of converting techniques are up to global standards.
The second effect of the global retailers entering China has been that local brands have been forced to respond with new product formulations and packaging, including labels, which reflects a more upmarket positioning. This in turn is creating value throughout the supply chain. I write this column from Labelexpo Asia in Shanghai, and it is clear that this is now being reflected in Chinese converters buying new kit and new quality control equipment for their presses and rewinders.
It is not only Western converting groups which have entered China on the back on this value chain. A small, elite group of converters, companies like the mighty Starlight, are now buying right at the top of the Western press market and servicing the multi-nationals to the same quality standards as their Western competitors.
So if retail FDI does go through in India, I predict we will see a similar, rapid uplift in the value throughout the retail and supply chain, feeding through to the label converting industry.
Group managing editor
Labels & Labeling