Indian consumer goods companies – Dabur, Britannia Industries, Tata Consumer Products and Emami – are shifting their manufacturing and sourcing from West Asia. The reason for this is that the ongoing conflict in Iran and the blockade of the Strait of Hormuz has hindered his business. Dabur, whose regional supply chain was mostly based in Ras Al Khaimah in UAE, has shifted some of its production from there to India, Egypt and Turkey. Doing this will cost more, which will affect the company’s profits, yet it has taken this step. The company has also created new routes for exports from these alternative manufacturing locations.
Britannia made this big change
Britannia has shifted its manufacturing for the West Asia and North American markets from Oman to its factory in Mundra, Gujarat. From here the products are being sent by sea route. The company’s Chief Executive Officer (CEO) Rakshit Hargave recently told analysts that we have taken these steps so that our existing supply chain does not depend on the Strait of Hormuz. Hargave said that therefore, we are confident that our performance (in terms of exports) will be better in this quarter. Britannia’s international manufacturing factories were mostly located in Oman and Dubai. Prior to the recent disruptions, the company had shifted its production from Mundra to Oman for North America to take advantage of lower tariffs, but these disruptions have now forced it to rethink its strategy.
Tata Consumer Products diversified its sources
Tata Consumer Products has also changed its sourcing strategy. The company previously imported plastic lids and PET materials for its domestic operations, but has diversified its sources of supply since the beginning of the Gulf War. The company’s ‘Capital Foods’ business (which includes brands like ‘Ching’s Secret’ and ‘Smith & Jones’) also faced disruptions in exports to the US via West Asia during the March quarter. However, company MD Sunil D’Souza recently told analysts that the shipping situation has now improved.
Emami also changed strategy
Nearly half of the products Emami sells in West Asia were manufactured within the UAE. For this, raw materials and packaging materials were procured from different markets of the world. About 30 percent of the supplies for this sector came from Europe, while the remaining 20 products were exported from India. This conflict had a negative impact on the functioning of the company, due to which a decline of 5 percent was recorded in its international business in the March quarter as compared to the previous year.
Vivek Dheer, chief executive of Emami’s international business, said that due to this decision the company also had to cut down its local production there (in West Asia). We are back on track with 2 percent growth in April. We hope that the situation will stabilize by June. And from the second quarter, we will be able to deliver double-digit growth. They expect single-digit year-on-year growth in the April-June quarter. These companies have shifted their production bases, changed shipping routes and diversified supplier networks to reduce risks.
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