India’s FDI policy to benefit contract manufacturers in cosmetics industry

With the Indian government’s latest decision to allow 100% FDI (Foreign Direct Investment) in both single brand and multi brand retail, the contract manufacturing industry in the FMCG (fast moving consumer goods) sector is all set to be the biggest gainer, with cosmetics to benefit more.

According to a recent study revealed by the Associated Chambers of Commerce and Industry of India (Assocham), the Indian perfumes and deodorants segment is attracting European and American companies to step into the country, reported cosmeticsdesign-asia.com.

India is considered as second most important country after China among the largest markets in the FMCG sector today.

Assocham stated that the Indian deodorant and roll-on market is currently estimated at Rs18bn ($327.3m), and is growing at about 55% annually.

The perfume market is also growing at a whopping 30% with a current market size, estimated at Rs15bn ($272.8m).

The study has revealed that the fragrance industry too is poised to reach the Rs 100bn ($1.88bn) mark by 2015.

In India, many cosmetic companies have had a presence for longer periods including L’Oreal and Beiersdorf.

One of the chief concerns among the companies that come to India is of locating contract manufacturers, advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region.

While price will also play a factor, affecting consumer demand in India and with the 100% policy in place, cosmetic companies should remain competitive as costs should now be lowered.

Image: Indian government’s decision on 100% FDI policy gives new opportunities to the contract manufacturing industry in the FMCG sector, with cosmetics to benefit more. Photo: Anomie.