21-day lockdown to impact FMCG industry Q1 numbers: Godrej Consumer

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Published: April 5, 2020 5:33:56 PM

GCPL said it is gradually ramping up our manufacturing and distribution again for essential items but with a reduced capacity to ensure compliance of safety guidelines and social distancing norms.

GCPL’s about 60 to 70 per cent depots are open and 20 to 25 per cent of the distributors have received permissions to operate.

The three-week long lockdown will impact earnings of FMCG sector in Q1 (April-June quarter), and it is not clear if it will linger to the second quarter, according to a Godrej Consumer top official. Though Godrej Consumer Product Ltd (GCPL) is ramping up its manufacturing and distribution network for the essential items, but it is still facing “bottle neck” in logistics and transportation along with availability of man power.

The Godrej Group firm, operating at about 20-25 per cent of production levels of essential items, is working along with the government on the issue and witnessing improvements with each passing day. Presently, GCPL’s about 60 to 70 per cent depots are open and 20 to 25 per cent of the distributors have received permissions to operate, though delivery to retailers is still a challenge.

“I do not know how long it would take the situation to get normal, because even if the lockdown gets lifted on April 15, it does not mean that the situation would get back to normal because it is not as if the country would have gotten rid of the pandemic by then.

“So in that sense, I definitely see the situation impacting all of Q1 at least. We are not sure if there would be an impact on Q2 at this stage. It’s very challenging for us to get a true sense of what the impact would be because it all depends on how long it will take for the country to open up and get back to normal,” GCPL MD & CEO Vivek Gambhir told PTI.

However, he also said that FMCG will be more resilient than other sectors and should bounce back faster, and within this segment, consumer staples should recover faster than discretionary items. According to Gambhir, GCPL’s first priority is to tide over the situation and recover once the phase of lockdown is over.

“For us, the number one priority is to figure out how to tide over the current crisis and number two is to start developing recovery plans to bounce back when situation normalises. At this stage, it is difficult and too early to actually get a good sense of what the impact would be, because, again it depends on how long the crisis lasts for,” he said, adding that the immediate focus is to get the production of essential items back on track along with ensuring the safety of its employees.

Citing China, where there was lockdown for two months – January and February, Gambhir said markets have recovered there in March despite a decline of 20 per cent in retail sales and over 50 per cent of discretionary items.
“FMCG will be more resilient than other sectors and should bounce back faster. And within FMCG, consumer staples should recover faster than discretionary items,” he added.

GCPL, which gets around half of its revenue from the foreign markets, sees a greater impact in the domestic side due to the pandemic. “While all countries have been adversely impacted, the spread of the pandemic and the nature of government responses varies by country. Since India has implemented a complete lockdown, this will have a greater impact on our overall business, given that India comprises more than half of our business.

“While Indonesia has implemented extreme social distancing guidelines, retail shops are open and factories are also functioning at reduced capacity. Across Africa, some countries are in full lockdown mode while other are at differing levels of restrictions,” he said.

GCPL said it is gradually ramping up our manufacturing and distribution again for essential items but with a reduced capacity to ensure compliance of safety guidelines and social distancing norms. “Both production and distribution has been significantly disrupted for the last 10 days. What is comforting is that the government is well aware of the challenges. In line with its commitment to ensure uninterrupted supply essential items, it is working closely with the industry,” Gambhir said.

Besides, the company is expecting to improve shortage of manpower in coming days. “The big challenge now is labour shortage. Because of safety and social pressures, some migrants have gone back to their towns and villages. Availability of labour now is the biggest challenge, but we are hoping the situation will gradually improve.

“Once there are adequate supplies available, we can ramp up production gradually. The challenge is really getting the products in retail outlets. That is the big problem. The other parts of the supply chain will fall in place if we can fix the distribution bit. The government is working with various industry partners to help. We have seen improvements in last one week,” he noted.

India is presently going through an unprecedented lockdown of three weeks, ending on April 14, to prevent the spread of the virus.  According to the latest report from the Union Health Ministry, the total number of COVID-19 cases crossed the 3,300-mark.

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