FMCG cos cut production amid packed retail shelves | Economic Times

Several large fast-moving consumer goods (FMCG) companies are cutting production, including that of essentials, after orders from large retail chains, ecommerce firms and even distributors have dried up due to operational issues such as last-mile workers getting infected and restricted store timings, apart from low demand.While online retailers and large chains have been forced to delay replenishment of inventory as several employees are off work due to Covid, leading to stock-piling, supermarkets said demand has also been hit due to truncated store timings. In anticipation of sustained demand as business revived in the last few quarters, these retailers and ecommerce firms had placed a higher volume of orders in the April-June period compared with the year earlier.India’s largest biscuit maker Parle Products has already stopped production for a few clients and has cut it by 35-40% for the modern retail and ecommerce channels. “Orders were 50-60% more than last year. We expect this is a temporary phenomenon and the situation will improve as infection rate dips,” said Krishnarao Buddha, senior category head at Parle Products. 82850030 Emami director Harsha V Agarwal said the second Covid wave’s impact has been felt in various categories, excluding health and hygiene, even in rural areas. “We are readjusting production to that extent though hope things should improve soon,” he said.‘4-5% Impact on Dairy Sales’While the HoReCa (hotels, restaurants, catering) channel continues to be hit, summer products are also seeing tepid demand due to lockdowns amid supply chain constraints. Gujarat Cooperative Milk Marketing Federation Ltd (GCMMFL) has slashed production of Amul ice-creams and dairy products sold to HoReCa by 50%, while for beverages it’s down by 20-25%.GCMMFL managing director RS Sodhi said there is a 4-5% impact on dairy sales due to the closure of hotels and restaurants, which contribute a tenth to its overall business.Nearly a dozen states, including Maharashtra, Karnataka, Rajasthan, Chhattisgarh, West Bengal, Madhya Pradesh and Odisha have restricted timings of shops selling essential goods to four-five hours.Avenue Supermarts, which runs the DMart chain, said longer operating hours with strict social distancing will help minimise inventory build-up, sustain demand and keep production lines active.“Demand has collapsed for modern trade mainly due to a restricted window of operations of just four hours per day of store opening in most locations,” said Avenue Supermarts managing director Neville Noronha. “Any product category having a discretionary aspect to it, even within the essential sector, is having an adverse negative impact on demand due to limited operating hours.”‘Eye on Ground Situation’Overall, sales of daily household products and groceries dipped 16% in India in April from March, according to a report by Bizom. “If the situation doesn’t improve, we may have to slash production,” said Angshu Mallick, chief executive of Adani Wilmar, owner of the Fortune and Aadhar brands.Dabur said it’s not felt the need to curtail production yet.“Ecommerce has emerged as the preferred non-contact mode for making purchases among consumers,” said Shahrukh Khan, executive director, operations. “We are watching the ground situation in modern trade channels very closely and are prepared to take calibrated action wherever the situation demands.”