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TREND: Consumer goods supply may hit logistic hurdles amid lockdown

Cogencis, Friday, Mar 27

By Surbhi Prasad and Yaruqhullah Khan

BENGALURU/NEW DELHI – Despite the Centre and state governments assuring stable supply of essential commodities during the 21-day nationwide lockdown to contain the spread of COVID-19, logistic hiccups have emerged as a nightmare for fast-moving consumer goods companies.

The lockdown has led to sealing of state borders, which has not only hit smooth movement of essential services, but also disrupted supply chains of companies because of curbs on movement.

While automakers have had to suspend production, the common plot point for manufacturers of essential food products and other consumer goods is a scaledown of operations.

At the same time, for fast-moving consumer goods, inventory is a very volatile issue. 

"There is no limit to how many products a local kirana shop will need. For now, inventory levels are at a good level but that can change in two-three days. Also, products expire, things get spoilt or rodents. So inventory of FMCG products is not like cars or electronic, these are very delicate products," said an official from the Federation of All India Distributors Association.

Analysts say since it is an unprecedented situation and as India is a vast country, there could be issues in the near term.

"Necessity items are placed well, but supply of discretionary items like juices and grooming will be slow in the market. There will be a stock-out situation in one or two days and, hopefully, by the weekend things will ease," said a Mumbai-based analyst, adding that the priority is availability of essential products and staying at home.

Hindustan Unilever Ltd, the country's largest listed fast-moving consumer goods company, said it was working with authorities to enable continuity of operations at its manufacturing and distribution locations. 

Dabur India has shut over 60% of its manufacturing units, but continued the production of essential items such as sanitisers and ayurvedic products.

Mumbai-based Godrej Consumer Products Ltd and packaged-food maker Nestle India Ltd said they have either scaled down or suspended operations at manufacturing and warehousing locations. As a manufacturer of food and beverage products, Nestle India was in talks with authorities to continue operations, it said.

ITC Ltd said it was in talks with authorities to ensure the manufacture and distribution of essential products is streamlined.

"A few select factories that manufacture essential products have been operational with bare minimum people. We have redoubled our efforts to ensure a heightened level of precaution and have implemented strict protocols for personal hygiene and sanitation in these factories," the company said.

Jyothy Laboratories Ltd, which sells soaps and detergents, has said operations at most of its locations have been hit.

Tamil Nadu-based Lawrencedale Agro Processing India said movement of essential commodities–fresh fruits and vegetables–by organised supply chains, has been hit due to lack of clarity among officials manning borders between the five states in southern India.

Dairy major Gujarat Cooperative Milk Marketing Federation, which makes Amul-branded products, said it has seen some problems in movement of delivery of vehicles, manpower and labour in pockets of Delhi, Mumbai, and Thane.

According to Nielsen India, it is also important for manufacturers to understand the new buying behaviour of consumers in this "difficult time".

"We have seen a stockpiling behaviour in the last few days and it is natural that there will be a supply chain constraint," said Sameer Shukla, west market leader, Nielsen Global Connect, South Asia.

However, some believe the supply crunch may ease if companies ramp up production of essential commodities, along with soaps, sanitisers and floor cleaners. Further, with the existing inventories with dealers, there might not be any hiccups in supplies.

Gujarat Cooperative Milk Marketing Federation's Managing Director R.S Sodhi has assured consumers that procurement and supply of its packaged foods and beverages, especially packaged milk, will continue despite the lockdown.

Parle Ltd's Category Head Mayank Shah said, "I think in most places there are no issues and with government coming up with clarifications. Hopefully, in a day or two everything might get sorted… There are inventories across the pipeline at the same time there are places where it is difficult to move the stocks." 

Meanwhile, challenges at the retail level continue, with e-commerce platforms and retail chains, too, trying to keep up with demand.

According to Nirmal Bang, the current crisis has resulted in testing times for the industry, but he sees e-commerce gaining prominence, which he expects will grow even more. There is general acceptance that e-commerce is going to help the country tide over the situation by enabling people to stay at home and procure essentials.

Albinder Dhindsa, co-founder and chief executive officer of online grocery delivery platform Grofers, said the company was taking every measure to ensure delivery of essential supplies.

"Under the directive of the Ministry of Consumer Affairs, grocery delivery is acknowledged as an essential services. Over the last few days, we faced a few hiccups in our operations which led to a backlog of around 400,000 orders. However, the local authorities are helping us resume our operations. We are closely working with them, and with their support, we will soon start accepting orders on our platform," he said.

While e-commerce platform Flipkart has temporarily suspended its services, its rival Amazon is prioritising delivery of essential products such as packaged foods and health care products.  End

Edited by Mainak Moitra

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