Supply crunch likely as FMCG firms scale down operations2 min read . Updated: 24 Mar 2020, 11:52 PM IST
- Unprecedented move to enforce lockdown across nation may lead to a shortage of discretionary goods
- Nestle, Godrej told exchanges they had trimmed or stopped operations at various locations
NEW DELHII : The decision by fast-moving consumer goods (FMCG) companies to scale down operations at plants and warehouses, with the government announcing a further three-week lockdown, could lead to a temporary shortage of certain non-essential products of daily use.
In a filing to the stock exchanges on Tuesday, Mumbai-based Godrej Consumer Products Ltd and packaged food maker Nestle India Ltd said they have either scaled down or suspended operations at manufacturing and warehousing locations.
Biscuit maker Parle Products Pvt. Ltd, too, is not operating some of its plants: those owned by the company and those where it manufactures on a contract basis.
Capital Foods Pvt. Ltd, which makes the Ching’s Chinese brand of noodles, shuttered seven factories late on Monday, following orders from local authorities across states.
On Monday, Dabur said it would shut over 60% of its manufacturing units, but continue production of essential items such as sanitizers and its ayurvedic line of products.
Jyothy Laboratories Ltd, which sells soaps and detergents, has shut 25 plants in India till 31 March. Beverage maker Cola-Cola announced a temporary suspension of its production facilities.
The move is unprecedented and could lead to a shortage of non-essential goods, said analysts tracking the sector. “Necessity items are placed well, but supply of discretionary items like juices and grooming will be slow in the market," said Nitin Gupta, an analyst at SBI Caps. “A stock-out situation will be there in one or two days and, hopefully, by the weekend things will ease. At this point, the government wants everyone to be home."
Makers and distributors of essential goods, too, said that strict lockdowns across states over the past two days have disrupted the supply chain and movement of goods. Consequently, stocks are not reaching grocery stores on time.
In a filing to BSE, Nestle India, which makes Maggi Noodles and packaged milk, said that due to the lockdown, operations in certain locations, including manufacturing and distribution centres, and warehouses, offices and suppliers have been scaled down or suspended. It, however, added that as a manufacturer of food and beverage products, it was in discussion with the authorities to continue operations.
FMCG firms that rely on a steady supply of input material are cutting back on production as strict curbs on consumer movement may impact demand for non-essentials and discretionary products. Moreover, companies are taking firm measures to safeguard their employees and cut costs, said industry insiders. Those with sufficient stocks said movement of goods was becoming an issue due to the strict lockdowns.
Jyothy Laboratories, which sells Margo soaps and Henko washing powder, has inventory for two weeks. “But even if we have that stock, we are not able to reach markets, because most towns are under lockdown and we are finding it hard to procure raw materials," said managing director M.R. Jyothy.
A Coca-Cola India spokesperson said it has temporarily suspended production at its more than 50 bottling plants in India, some of which are company-owned. However, the company is “operating its manufacturing facilities in very small number complying with the local government’s regulations and safety of all our employees".
A chief executive of a large packaged foods company said its plants and depots have been shut since Monday night.