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Will the 100% FDI move in Food Processing Sector translate into big ad revenues?

Will the 100% FDI move in Food Processing Sector translate into big ad revenues?

Author | Abid Hasan | Tuesday, Mar 15,2016 8:08 AM

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Will the 100% FDI move in Food Processing Sector translate into big ad revenues?

In the Union Budget this year the Government of India announced 100 % Foreign Direct Investment in Food Processing Sector. With this step giants like Walmart, Tesco, IKEA will gain more share in the market as long they offer multi-brand food products manufactured in India.

Harsimrat Kaur Badal, Minister of Food Processing Industries is a staunch advocate of the 100% FDI in the sector and believes it could lead to the upliftment of farmers, infrastructure and revenue.

This move will also open the gate for food processing giants like Walmart, IKEA, Tesco and others, and apart from upliftment of farmers, there is an opportunity for the media players to add some extra revenues on their balance sheets as these companies are big advertisers too.

Speaking about the impact of such a move, Pradeep Dwivedi, Chief Corporate Sales and Marketing Officer, Dainik Bhaskar, said “It not only benefits local farmers, by allowing produce to be marketed effectively, it will have a cascading impact on transportation, industrial refrigeration and packaging industries as well, apart from significantly reducing wastage in food processing and agricultural sector. Hence, the impact on advertising industry, though definitely positive, cannot be quantified in direct terms alone. This is all positive news and in tandem with other economy and trade initiatives which drives consumption, it shall definitely help the advertising industry grow at a quicker pace."

Even the latest Pitch Madison Media Advertising Outlook (PMAO) report for 2016 predicts that advertising industry will grow 16.8 per cent to reach Rs 51,365 crore. In 2016, PMAO forecasts that print will grow by 10 per cent to reach Rs 18,629 crore, TV will grow by 20 per cent to reach Rs 20,713 crore.

Media Veteran, Paritosh Joshi and CEO, India TV feels that there are no material impacts as far as the fiscal year 2016-17 is a concerned. He said, “I don't see any material impacts in fiscal 16-17. There is a long regulatory process that begins with the passage of the finance bill. Once it becomes an Act, it must be gazetted and rules framed under it. Only when these rules are published and gazetted that potential player can actively pursue their launch plans.”

He added “We would be lucky to see this happening before the middle of the fiscal year. That pushes actual launches into the 3rd or possibly even 4th quarter. However, the imminent arrival of competition may spur local players; Future Group, Reliance Retail, Aditya Birla Retail as well as e-commerce players like Big Basket will get more aggressive on the marketing and advertising front and that may have a limited impact in the fiscal. Fiscal 17-18 spends, however, might benefit substantially.”

Varghese Chandy, Senior General Manager, Malayala Manorama feels raising FDI for this sector will be positive for big retailers. He said, “Raising the FDI for multi-brand processed food retailing from 51 percent to 100 percent in the budget will have positive impact on big retailers like Walmart, in India. The condition that the processed foods have to be sourced and produced in India will encourage local production and farm diversification. The policy change should encourage more retailers to enter India. This will intensify competition which would be good for the ad market since they would be advertising for brand building as well as for announcing offers to increase footfall - akin to something like a big billion day from Flipkart. All this should translate to higher volumes for the ad industry.”

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