FMCGsmay feel pinch of paan-plus ban

More states ruled by the Bharatiya Janata Party (BJP) are likely to follow Maharashtra in imposing a ban on paan shops selling food and allied consumer products.

On Wednesday, Maharashtra became the first state in the country to impose the ban, four months after the health ministry first mooted the proposal to prevent children from being exposed to tobacco-related products. Companies in categories such as biscuits, confectionery and snacks that

BusinessStandard spoke to said they expected an impact on their business as more states adopted this measure.

Analysts say that a crossspectrum of companies from ITC to Britannia, Parle Products, Perfetti Van Melle, DS Group, PepsiCo, Haldiram’s as well as mosquito-coil and agarbatti makers could be hit by this move. “There will be an impact, but companies will have to live with this and will find a way out by stocking more at regular grocery and kirana shops,” Mayank Shah, category head, Parle Products, said.

Confectionery makers, in particular, are expected to be hit hard because 25-30 per cent of their sales come from these ‘paan-plus’ outlets. “Not only is a paan-plus shop convenient, but toffees and sweets act as an exchange settlement in the absence of coins,” said A Mahendran, chairman and managing director, Global Consumer Products, a consumer goods start-up. The company has a presence in household insecticides, confectionary, juices, and personal care.

“In recent years, these shops have become important points of convenience for a number of consumers. And an impact is bound to be there given that people found it easy to buy daily-use items from these outlets,” he added.

Almost 15-20 per cent of the industry’s sales come from these paan-plus shops, which, in the past few years, have emerged as convenient outlets, competing with the likes of larger kirana stores. Almost everything from shampoo sachets to hair oil, agarbatti and mosquito coils besides food and beverage items are stocked by these stores in addition to cigarettes and other tobacco-related products. The view of the health ministry is that children and adults who are non-smokers should be prevented from being exposed to products such as paan masala, cigarettes and bidis when buying non-tobacco items from these stores.

According to industry estimates, paan shops constitute around 25 per cent of the nearly 10 million retail universe in India. Over the last few years, most of these paan shops have become paan-plus as they seek to maximise sales and look to take advantage of changing consumer lifestyles.

“People do not have the time. So yes, these stores were convenient in that sense. But impulse buying may take a hit with this ban,” said Arvind Singhal, chairman of retail consultancy Technopak.