Britannia To HUL: Single-Use Plastic Ban Won’t Hurt Large FMCG Firms, Says Morgan Stanley

Large consumer goods makers won’t be affected in general by India’s decision to ban single-use plastics, according to Morgan Stanley.

That’s because sachet packs, tetra packs, and other forms of packaging are not classified under single-use plastic, the financial services provider said in a June 28 report.

“Nevertheless, plastic remains an important area of focus. All companies in our coverage are taking measures to reduce, reuse, recycle, and replace their packaging material,” it said. “Companies are using either reusable or recyclable plastic, reducing plastic usage, collecting and disposing of/recycling plastic, and using recycled plastic.”

Nestle India Ltd. and Dabur India Ltd., according to the report, have replaced plastic straws used for beverages with paper straws, while Tata Consumer Products Ltd.—that operates Starbucks cafes in India—has switched from plastic cups to paper cups.

India has banned the manufacture, import, stocking, distribution, sale, and use of single-use plastic items, including polystyrene and expanded polystyrene commodities, from July 1, 2022, according to a notification from the Ministry of Environment, Forest and Climate Change.

Other prohibited items include plastic sticks for balloons, earbuds, ice-cream, candy, plastic cups, plastic glasses, plastic or PVC banners less than 100 microns in thickness, stirrers, plastic spoons, forks, knives, and straws.

“We estimate the transition to sustainable packaging will be a gradual and ongoing process, increasing packaging costs (by 20-30% eventually,” Morgan Stanley said.

Shares of the fast-moving consumer goods stocks in Morgan Stanley’s coverage, barring Nestle India and ITC, declined in Wednesday’s session. Hindustan Unilever Ltd. fell the most, losing more than 3.6%. HUL’s stock also contributed the most to the Nifty 50’s decline.