FMCGs on toes to keep manufacturing on track

Source: Business Standard, Mar 24, 2020

Mumbai/Chennai: The lockdown in several Indian cities to tackle the COVID-19 outbreak has had an unintended consequence: Manufacturing of essential items has been hit hard.

State governments on Sunday and Monday had exempted makers of groceries and staples from its list of manufacturers included in the lockdown to ensure supply of essential goods and services wasn’t hampered.

But with people unable to move around and strict enforcement of section 144 in many places, chief executive officers of fast moving consumer goods (FMCG) companies admit that running factories has been a challenge.

Workforce is down to 25 per cent in many units. Some are even thinner at 15 per cent attendance only. While some others have had to shut their units down temporarily simply because workers have been unable to report to work as transportation grinds to a halt.

“We are thinly staffed across our plants due to the lockdown,” Mohit Malhotra, chief executive officer, Dabur India, said. “Some units like in Ghaziabad, Alwar and Kolkata are shut.This is a tough time. But having said that, the first priority for us is the safety of our people. The workers who are reporting for duty are doing so in batches and there is rotation of staff that is happening,” he said.

MR Jyothy, managing director, Jyothy Laboratories, said that only five of her company’s factories were operational on Monday out of a total of 25 units. “We will see how to get the twenty units up and running in the coming days. The situation is fairly unpredictable currently and we will have to wait and watch how it unfolds,” she said.

Given the uncertainty and the likelihood the lockdown stretching beyond March into the first week of April, CEOs said that they were in constant communication with their people to avoid confusion and panic on the factory floor.

“We are communicating closely with our team members across regions and functions to ensure business continuity and the movement of our products into the market. Our biggest priority is to ensure that sufficient supplies of high demand items like sanitisers, hand washes and soaps are replenished across channels,” Vivek Gambhir, managing director and chief executive officer, Godrej Consumer (GCPL) said.

Most hygiene makers including Hindustan Unilever, GCPL and ITC have ramped up production and distribution of hygiene products as demand surges. For this, they are talking to local authorities to allow production to continue at their factories, creating buffer stocks of inventory and managing staff movement around their plants.

“We have sought clearance from the authorities in the notified locations to continue manufacturing essential items like Savlon hygiene products and food products like Aashirvaad Atta,” an ITC spokesperson said.

Gambhir said that his company was working closely with raw and packaging material suppliers to facilitate their timely and uninterrupted supplies.

” To manage contingencies, we are building stocks to prepare for longer periods of disruption and are providing extra stock to our distributors, along with short term credit to help them during these uncertain times,” he said.

A V Anoop, managing director, AVA Group, which manufactures the Medimix brand of soaps, said it was impossible to match demand and supply given the strictures around the lockdown. “Soap making is a laborious and time-consuming process and we rely heavily on our workers, who’ve been with us for over 25 years. But with the stay-at-home directive, they are unable to make it to work,” he said.

FMCG companies ramp up manufacturing and distribution to meet demand for hygiene products

Source: The Hindu Business Line, Mar 04, 2020

New Delhi: FMCG companies are either ramping up production or doubling down on distribution efforts to ensure availability of hygiene products such as handwash and hand sanitisers on retail shelves to meet the massive spike in demand, as India begins reporting an increase in the number of coronavirus cases.

 

Consumers in certain regions took to social media to report shortage of products such as hand sanitisers. But key FMCG players on Wednesday stated they have adequate stocks available for such products.

FMCGs scale-up rural distribution networks to combat economic slowdown

Source: Business Standard, Jan 30, 2019

Kolkata: Fast-moving consumer goods (FMCG) majors like ITC and Emami are scaling up their direct reach in rural areas to combat subdued consumer sentiment in these pockets. They hope such a move — backed by consumer connect initiatives — can help push sales.

In view of the ongoing slowdown, which has impacted demand in rural India, ITC doubled its rural stockist network in the current financial year, with significant increase in coverage across low population group markets.

“We have actively increased our direct reach in rural India by adding more than 25 per cent new markets to the existing large serviced base,” said an ITC spokesperson.

ITC’s handler base currently stands at 6.2 million outlets and it continued to deploy resources to augment the outlet coverage aggressively, with nearly 80 per cent of new handlers added in the current year coming from a rural base.

In case of Emami, which has one of the highest exposures in rural areas among its peers, the company is banking on its Project Dhanush initiative, which it undertook three years ago.

In the past three years under this initiative, aimed at reaching the deepest and remotest of geographies, Emami expanded its footprint to more than 20,000 towns with a population of around 3,000.

“Van branding and visual merchandising at outlets through point-of-purchase visibility has proved to be an effective consumer influencer fuelling rural channel growth,” said Mohan Goenka, director at Emami.

With more than 3,000 distributors and 600,000-plus square feet of trade assets, which incidentally is the largest in store merchandising in the country, Hindustan Unilever (HUL) also has prioritised increasing its direct distribution reach.

According to an open access journal, International Journal of Research — Granthaalayah, over the decades since its launch in 1997, HUL has appointed 6,000 sub-stockists, because of which its distribution network directly covered about 50,000 villages and is reaching 250 million consumers. This translates into reaching 37 per cent of rural consumers directly. The rural distributor has a set of stockists attached to it that drives distribution in villages using unconventional transport like tractors, bullock carts and others.

FMCG likely to grow 9-10 per cent in 2020: Nielsen

Source: IBEF.org, Jan 23, 2019

According to market researcher Nielsen report, India’s fast-moving consumer goods (FMCG) market is expected to grow 9-10 per cent in the January-December period, matching the expansion rate in 2019. Since the rural slowdown has bottomed out, demand is expected to stabilise.

The growth witnessed a slow down to 9.7 per cent growth last year from 13.5 per cent in 2018. The growth was slowest in at least three years to 6.6 per cent in the December quarter from 15.7 per cent a year ago.

“A mix of macroeconomic factors and channel and zone factors driven by manufacturers, coupled with consolidation of smaller players, have been instrumental in the slowdown,” said Mr Prasun Basu, South Asia zone president, Nielsen Global Connect.

In 2019, the growth was slow for more than a dozen categories within daily household, personal and food products from 2018 with many segments witnessing growth rates reducing to half. This indicates that the consumer demand was weak despite price cuts to increase growth. The growth rates of the soaps, shampoos, biscuits, tea, hair oil, skin cream and toothpaste, among other categories, fall to low single digits in 2019 as compared with double digits in the previous year, industry executives said.

“The year 2019 was a difficult one when value and volume were both compromised,” said Mr Mayank Shah, category head at Parle Products.

Consumers were cautious to spend as the economy slowed, limiting themselves to spending on essential purchases only, he said. The rural demand which accounts for about a third of the market and had been outperforming urban sales, witnessed a slow-down. It was majorly affected because of lower farm incomes and liquidity constraints, squeezing the wholesale channel.

Nielsen report also stated that the stable consumption was on the back of the final tranche of Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) payments, improved ease of doing business ranking to 63 from 77, expectations of budget tax measures and a steady exchange rate.
 
“There has been a slowdown in consumer demand, more so in the second half of 2019. We expect a gradual recovery over the next three to six months,” said Mr Sameer Shah, head of finance at Godrej Consumer Products.

FMCG industry will grow at 9-10% this year

Source: The Hindu Business Line, Jan 21, 2019

New Delhi: The FMCG industry, which has seen a challenging year especially due to sharp decline in rural consumption, is projected to grow at 9-10 per cent in 2020 in terms of value growth, according to market research and insights firm Nielsen.

The firm’s projection of “stable” outlook comes on the back of expectations of declining trend in inflation trajectory besides other macro-economic factors, including government’s measures to boost consumption.

After two years of double digit growth, the FMCG industry’s growth has slowed down to single digit in 2019. However, the sharp decline in growth seen in the past few quarters seems to have been arrested in the fourth quarter of the calendar year. According to the eight edition of the “India FMCG Growth Snapshot report” by Nielsen, the FMCG sector’s value growth stood at 9.2 per cent in 2019 as compared to 13.5 per cent in 2018, led by massive drop in rural consumption levels. With the inclusion of the e-commerce channel, the overall sector value growth has been pegged slightly higher at 9.7 per cent for 2019.

Value growth

Meanwhile, in the October-December period, FMCG value growth stood at 6.6 per cent (7.3 per cent with e-commerce), indicating that the sharp decline witnessed in the previous quarters has stabilised.

Value growth for FMCG industry in Q3 stood at 7.3 per cent (7.9 per cent with e-commerce).

Prasun Basu, South Asia Zone President, Nielsen Global Connect, said, “2019 has been a tough year for the FMCG industry with over four-point decline, but we do see it stabilising in the last quarter of the year. A mix of macro-economic factors, and channel and zone factors driven by manufacturers, coupled with consolidation of smaller players have been instrumental in the slowdown. However, 2020 offers a stable outlook for the industry arresting the 2019 decline.”

He added, “2019 was an election year and for a couple of months in the year the overall positive public thrust was in a bit of a standstill mode. We have seen in the past too, that in election years growth rates do come down.”

FMCG firms tap overseas business to boost growth

Source: LiveMint.com, Dec 05, 2019

Overseas business, led by better performance in markets such as Bangladesh and Indonesia, helped fast-moving consumer goods (FMCG) makers tide over weak demand in the domestic market, with Marico Ltd, Godrej Consumer Products Ltd (GCPL) and Emami Ltd posting 7-20% growth in their international business.

International markets contribute between 20% and 50% of sales for some domestic FMCG companies that have over the last decade bolstered their presence in West Asia, Africa, Latin America and south-east Asia, catering to increased demand for packaged consumer goods.

Companies such as Marico and GCPL have stepped up launches and product innovations in international markets, especially Bangladesh and parts of Asia, over the last one year. This, executives said, helped them hedge weak demand on their home turf.

GCPL, which draws over 46% of sales from international business, said it launched more products in key global markets in the last year than in India. “If you see the last year, the number of new launches in markets such as Indonesia, as well as in parts of Africa, have been higher compared to what they have been in India,” said Sameer Shah, head, finance (India and Saarc), at the Mumbai-based firm.

Ecommerce to contribute 5% or $4 billion to FMCG sales by 2022 – Nielsen

Source: ETRetail.com, Dec 04, 2019

Mumbai: Nielsen expect ecommerce to contribute about 5% to overall fast moving goods market, and treble sales to reach $4 billion sales by 2022. At present, online account for 2% of FMCG sales at $1.2 billion and while the market researcher anticipates all channels to grow, general trade contribution could shrink by 400 basis points, almost entirely taken by online sales.

“This is in half the time that brick and mortar retail took to evolve. That said, these channels are not cannibalizing each other, and all continue to grow with e-comm outpacing modern trade and traditional trade,” said Sharang Pant, Head-Retail Measurement Services and Retailer Vertical, South Asia, Nielsen Global Connect said

Consumers are also buying more of higher-priced groceries online in metros now. For instance, one in four rupee spent on diapers is online while it controls 12% of skin cream spends. Within consumer basket, food accounts for 44% of online sales followed by personal care at 40%. Interestingly, the study shows that market leaders in toothpaste, utensil cleaners and packaged tea segments saw their share fall online during April-August compared to a year ago, indicating opportunity for challenger brands in the ecommerce space.

“In this rapidly evolving world of commerce, India’s FMCG industry is now making its presence felt in the e-comm channel – appealing to consumers’ need for convenience, and in sync with increasing smartphone and internet penetration,” said Prasun Basu, South Asia Zone President, Nielsen Global Connect.

While India emulates contributions from developed markets like Canada, Scandinavia and Western Europe where online account for just 1-3% to sales, markets such as China and South Korea have a significantly higher ecommerce contribution of 17% and 20% each.