Emami sees recovery in trade channels post GST roll-out

Home-grown FMCG firm Emami Ltd is witnessing a recovery in trade channels post GST roll out.

According to NH Bhansali, CEO-Finance, Strategy & Business Development & CFO, Emami Ltd, the wholesale trade channel has been amongst the worst-affected post demonetisation and roll-out of GST.

“In the wholesale channel, normalcy is coming in. Much of the ground has been covered,” he said post the inauguration of the company’s new plant at Pacharia in Kamrup district of Assam. The facility, built at a cost of over ₹300 crore, was inaugurated by the Chief Minister, Sarbananda Sonowal, on Tuesday.

Power brands Market sources say that FMCG majors have witnessed some recovery in Q2 (July to September period) over the preceding quarter (April-June), while concerns still remain. Emami was no exception.

For instance, a report by Edelweiss Securities points out that Kesh King, one of Emami’s power brands saw a 16 per cent Y-o-Y revenue decline primarily due to the challenging trade sentiment in wholesale channel and rural markets.

Kesh King continues to be a wholesale channel dominated product.

For Kesh King, only 25 per cent of its revenues come from direct distribution, with the balance accounted by wholesale.

“Emami expects wholesale channel to fully recover by March 2018. Kesh King has not lost any market share to Patanjali as the management feels the revenue decline is more of a distribution than a consumer issue. Kesh King sells more in rural than urban areas,” the report stated, adding that the management expects wholesale contribution to recover by March 2018 and revenue decline to stymie in the next two quarters.

The company is also ramping up its round-the-year offerings by expanding into categories such as facewash and hair colors across brands like Boroplus and He; and Emami Diamond Shine. The idea is to de-risk its portfolio from seasonal demand items.

Price cuts, refunds Incidentally, Bhansali ruled out any immediate price cuts post the GST Council reducing tax rates on a variety of daily use items, including shampoos.

Some of these items have been brought down to the 18 per cent tax slab from the previous 28 per cent.

According to him, clarity on a variety of issues like refunds are yet to be put out. Call on price reduction can be taken after that.

“We have to evaluate the situation in totality before taking a call on reducing prices. There is still no clarity on refunds. Refunds are either not coming or have been halved in some cases. There is also an issue on absorption of costs,” he said.

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