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India’s fast-moving consumer goods firms are sharpening their focus on stocking high-selling essential items and in large packs while ensuring an unbroken supply chain as the second wave of the pandemic restricts mobility and dampens consumer appetite for discretionary products.

“Last year, covid taught us the hidden cost of complexity and the beauty of simplicity. So, last year itself, we reduced our stock-keeping units (SKUs) by 26% without any decline in revenues, which has helped us," Saugata Gupta, managing director and chief executive officer Marico Ltd, said in an interview. “This year, we’ve ensured we do only 90% of our portfolio very well, which is the essentials part of it, and anything which is discretionary, we are not focusing (on it)," he added. Discretionary products for Marico include male grooming and skincare.

Gupta said male grooming and hairstyling is linked to people venturing outside and, given the current situation, their inventory has taken a back seat.

“As a result, within our existing brands, obviously there’s a focus driving the larger pack sizes, ensuring first to fulfil the larger pack sizes than the smaller pack sizes because that has better productivity," he said.

With the pandemic still raging, consumers will likely shun discretionary purchases such as ice creams, laundry detergents and beauty products and, instead, stock up on staples, healthcare brands, packaged snacks and cleaning products, according to companies.

Mayank Shah, senior category head at Parle Products, said that various on-ground restrictions have also led to companies sending only high-selling and fast-moving packs into the market.

This means newer launches and slow-moving items could remain off the shelf for some time. This has led to a limited assortment in stores, he said. “In old days, the salesman would go and retail the product and take the order. Today, the retailer tells you what all needs to be sent to them, and we just fulfil or service the demand. New or slow-moving products don’t go. Typically, only a few fast-moving items and SKUs are sold because of the lack of bandwidth in terms of time, manpower, investment. So there’s an impact," he said.

Gujarat Cooperative Milk Marketing Federation (GCMMF), which sells a vast range of dairy products under the Amul brand, is also focusing on relevant SKUs. “We are reducing the production of some stock-keeping units while increasing the same for some others because of the market demand," said R.S. Sodhi, managing director of GCMMF.

However, in the case of Amul, the company is seeing a better offtake of smaller packs. Consumers, said Sodhi, are spending the bare minimum and are largely buying essentials amid a surge in covid infections. “They are buying smaller packs; sales of 1-2kg packs are down," he said.

While Amul’s plants are working mostly to capacity, it is facing some disruptions on the ground because of a manpower shortage.

For Amul, sales of ice cream and products sold through the hospitality and restaurant industry, such as sliced cheese and cream and beverages have declined in May. Meanwhile, its packaged milk sales have risen sharply. “We are also making more of milk-based commodities such as milk powder and white butter as milk procurement has been strong," Sodhi said. In 2019-20, the consolidated revenue of Amul branded products exceeded 52,000 crore, according to GCMMF.

In a recent report, market researcher Nielsen said now is the right time for companies to cull non-performing brands or variants. In India, categories such as carbonated soft drinks, chocolates, biscuits, shampoos and sanitary napkins have the highest number of low-selling or underperforming SKUs, Nielsen said. Roughly 77% of SKUs in the carbonated soft drinks category contribute to less than 2% of overall category sales. Among categories such as sanitary napkins, 76% of variants are underperforming, while for chocolates, it is at 75%. “The case for assortment rationalization is extremely strong. A recent NielsenIQ study showed that an average of 1,059 SKUs are launched monthly in India, with only 10% of those items getting sufficient distribution to survive," the researcher said.

Dabur India Ltd expects demand for its discretionary products to stay tepid in the near term. “Our factories continue to operate on a relatively normal basis. Going forward, we anticipate that there may be an impact on the discretionary product portfolio as people are staying home and outdoor activity is restricted. However, our healthcare portfolio, especially the immunity building Ayurvedic products, is already witnessing an uptick in the second part of April and should make up for any loss in the discretionary product business," chief executive officer Mohit Malhotra said in post-earnings call with investors on Friday.

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