Covid-19: Kirana stores would see a resurgence, says Godrej Consumer CEO

Topics Coronavirus | FMCG | Lockdown

The big challenge is labour shortage, some of which was driven by fear and social pressure, and some of it by migrants moving back, says Gambhir
The Covid-19 pandemic has upended the fast-moving consumer goods (FMCG) market, prompting firms to redraw business strategies. Godrej Consumer Products' (GCPL’s) Managing Director and Chief Executive Vivek Gambhir talks to about the change in consumption habits and what lies ahead. Edited excerpts:

GCPL recently said that the March quarter would be impacted due to the pandemic and lockdown. How fast do you see the situation improving?

We are trying to be as agile as possible and are adapting to the evolving situation. Both distribution and production have been significantly disrupted over the last couple of weeks, and our operations have been curtailed. This is not surprising given the unprecedented nature of the lockdown. The government is aware of the challenges and is working closely with the industry to get the supply chain back on track.

Over the past few days, we have been ramping up production of essential items, but this ramp-up is at a reduced capacity. Our factories are at 20-25 per cent production levels. 60-70 per cent of our depots are open and about 25-30 per cent distributors have the permission to operate. The big challenge is labour shortage, some of which was driven by fear and social pressure, and some of it by migrants moving back. While permissions are gradually being given, adequate workforce is not available yet.
With the lockdown now likely to be extended, do you see the pain getting worse for the industry?

There has to be a balance between containing the spread of the virus, providing safety across the supply chain and reviving economic activity. We will need to approach the re-opening (of plants) post lockdown in a staggered manner, given how important social distancing is. Our hope is that we could start with 50 per cent capacity ramp-up, thereafter, in 2-4 weeks get to 75 per cent and 100 per cent in 8 weeks, if the pandemic is under control.

The fast-moving consumer goods (FMCG) industry is working closely with the government on establishing standards for each node in the supply chain. These include hygiene protocols, social distancing norms, sanitisation and deep cleaning, along with awareness sessions with workers.

How far away is recovery of the market?

This could be a story of two halves, depending on how long the crisis lasts. Even if the lockdown is lifted, it doesn’t mean the crisis is over. The pandemic could last much longer. From a planning point of view, what we are assuming at GCPL is that the impact of the virus will be acutely felt in Q1 FY21 and there could also be some impact in Q2. But if the crisis subsides then you could see the second half being very different from the first.
What shifts in consumption are you seeing in the wake of the crisis?

The industry will see structural changes. Certain consumer habits could shift quite significantly. Trust will become an important currency. And consumers will pay a lot of attention to health and hygiene. Typically, younger people were buying more online. Now, even the older generation will accelerate adoption of online purchasing. Kirana stores will see a resurgence as they have been the shoulder for many neighbourhoods to rely on during the lockdown for their daily essentials. Also, we will see more polarisation in the market with demand rising for both sachets and large packs.

How is GCPL preparing for this shift?

There’s a significant opportunity to reimagine our business and re-look our portfolios to innovate and take bigger bets. This journey has been an ongoing one for us — it will now accelerate as we seek newer avenues of growth. We are looking at broadening our portfolio – whether it is in male grooming, air fresheners or liquid detergents. Our go-to-market strategy will see a shift. We've also created a separate business unit focused on e-commerce.

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