Bengaluru: Food processing and distribution company Del Monte India is expanding the credit offerings it usually gives to distributors in a bid to help them tide over the liquidity crunch post demonetisation.
“Generally what we’re doing is extending the credit limit, or the time limit, for existing and especially long-time distributors,” said Yogesh Bellani, the chief executive officer of FieldFresh Foods, which is a joint venture between Bharti Enterprises and Del Monte Pacific Ltd.
The number of distributors that credit is being extended to has also increased, and in some cases credit is even being extended to new distributors after assessing their worthiness, said Bellani, adding that ‘we’re all in this together so we have to do this.’
Del Monte—which sells packaged fruits and vegetables, sauces, dips, spreads and olive oil among other things —is not alone in taking this approach. Biscuit maker Britannia Industries Ltd also said it has extended credit to distributors in the hope that their distributors will do the same for their retail partners so that they won’t hesitate to stock up.
For instance, many retail stores inside apartment compounds are selling their products to residents on credit, explained Bellani. But that only solves the problem of demand by making it easy for the end consumer to buy.
And while that is a necessary step for the retailer to take in order to retain customers and keep business going, it throws up another problem.
It affects replenishment since the retailer then has limited to no cash to restock. That then becomes a bit of a vicious cycle because the retailer can only restock from distributors who offer credit, which means replenishments of some not all brands.
Other companies like Walmart India, a subsidiary of the US retail behemoth Walmart Stores Inc, have also tried to ease their clients’ pain.
“We’ve given the facility of ‘payment by cheques’ to our members besides the existing options of using debitscredit cards, using net-banking and digital wallets,” said Krish Iyer, president and CEO of Walmart India.
Walmart runs cash and carry stores in India that cater to small traders and businesses, or wholesalers, who traditionally do business only in cash.
The company extended the option of cheque payments to its clients only after demonetisation and has also extensively communicated information on non-cash payment options to members.
The liquidity crunch India is grappling with after the government announced its demonetisation plan has hurt the lower rungs of supply chains at packaged consumer goods companies, beginning with farmers. But that impact is now rippling through the upper echelons of the supply chain, Mint reported about two weeks ago based on interactions with retailers, distributors and stockists.
“A lot of the loss that any of us FMCGs (fast-moving consumer goods) companies are going to report is not so much because of consumer demand but also because of de-stocking. So both are playing out – there’s demand which has gone down and de-stocking,” said Bellani.
“Jury’s out on whether the impact is going to be long-lasting or just a quarter. It’s difficult to see where the dust will settle. It could take a quarter, it could take more–we just have to wait and see,” he added.