FMCG leaders mark down overall growth to 3% amid coronavirus outbreak

Topics FMCG | Dabur India | Coronavirus

However, companies argue the spike will not compensate for the fall in the overall growth rate during the quarter due to the virus.
The Rs 4.3-trillion fast-moving consumer goods (FMCG) market may see its overall growth rate decline to 3 per cent in the January-March period as measures to contain the impact of Covid-19 intensify, top companies have told Business Standard. The gloomy industry projection is in sharp contrast to the forecast by research agency Nielsen, which has maintained its 5-6 per cent quarterly growth outlook.

The assessment by companies is based on the lockdown and supply crunch that most of them are facing. “There is no denying that there is an impact on business because of the virus scare,” said Mayank Shah, senior category head, Parle Products. 

“March has been challenging and the growth rate in biscuits has fallen to 3 per cent this month versus 7 per cent we saw in January and February. April will also be no better as the lockdown will continue for half the month, impacting business,” Shah said.

According to Nielsen, the panic buying of food items and hygiene products in the recent weeks has pushed up growth rates of food and non-food categories by 300 and 400 basis points respectively, compared to the numbers in January. 

However, companies argue the spike will not compensate for the fall in the overall growth rate during the quarter due to the virus.

“As of now, there is panic buying and pantry loading, which are indicators of a deferred demand impact in the coming months. On top of this is the sheer magnitude of the economic impact of this crisis. The market will not be the same again,” Suresh Narayanan, chairman and managing director, Nestle India, said. 

Mohit Malhotra, chief executive officer, Dabur India, said the lockdown had pushed back market revival by several quarters as the immediate priority for most companies would be to restore the supply chain and get labour back into the factories. “The virus scare has exacerbated the situation. The FMCG market was grappling with an overall consumption slowdown, which has now turned worse because of the need for social distancing,” he said.

 “We are only carrying out production of essential items such as Chawanprash, ayurvedic medicines, hand sanitisers and hand wash. Production of the rest has been temporarily suspended till March 31, which will impact sales,” Malhotra added.

Besides Dabur, Nestle and Coca-Cola have temporarily suspended operations at most of their plants, while companies such as Britannia, Hindustan Unilever and Godrej Consumer are notifying local authorities to allow them to continue carrying out production and transportation during the lockdown period.

Varun Berry, managing director, Britannia Industries, said, "Our factories are primed to manufacture products at this time with all due hygiene and social distancing protocols in place.’’ But, companies need support from district authorities in allowing workers to travel to the factory premises with appropriate safeguards, he added.

According to Nielsen, the buying behaviour could change in future as people opt to shop online rather than crowding kiranas and supermarkets. "The e-commerce channel has been growing at around 40-50 per cent per annum for a couple of years now. This will now shoot up as consumers adopt better hygiene standards following the outbreak," said Prasun Basu, president, South Asia, Nielsen.

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