FMCG firms swing into action with measures to banish slowdown blues

Meenakshi Verma Ambwani New Delhi | Updated on September 11, 2019 Published on September 11, 2019

To focus on consumer promotions, offer higher margins to trade channels

FMCG companies are taking a host of measures to increase sales as well as help the trade channel tackle the liquidity crunch, in a bid to tide over the current slowdown. Depending on their product portfolio, industry players have intensified consumer promotion offers, are giving higher margins to the trade channel and have also stepped up strategic in-store marketing spends especially for the festival season which starts with Onam.

Mohan Goenka, Director, Emami Group, told BusinessLine, “We are focusing on consumer promotions and offering higher margins to the trade channels for the two months of festival period. While margins vary depending on the type of channels — general, wholesale, retail or modern trade — on an average we are offering 1-2 per cent higher margin compared to last year. Depending on the results, we may look at extending it beyond this two-month period.”

“Given the current macro-economic conditions, we are postponing some of our new launches as the market is not conducive and launching only those which are absolutely necessary. While our ad spends are in line with last year, we are undertaking other cost reduction measures,” he added.

Rural footprint

Industry players have also intensified efforts to increase direct distribution and focus more on lower-priced packs to boost demand. Dabur India’s management told analysts earlier this week, that it is increasing production of Low Unit Price Packs (LUPs) and is focussing on widening its rural footprint besides expanding the overall direct distribution to 1.2 million outlets by the end of this fiscal year. In a bid to help the trade channel tackle liquidity crunch, the company is also extending credit for a longer period of 30-40 days from the usual period of 15 days.

A spokesperson for ITC too said it has introduced Low Unit Price Packs (LUPs) in multiple categories to make its products affordable to a much larger audience and induce trials.

“ITC has also introduced bulk packs, especially on e-commerce platforms, to drive demand. The company’s direct distribution reach and supply chain have been strengthened to ensure efficiency, availability and freshness of products. We are also working closely with our trade partners on inventory and credit management,” the spokesperson added.

In July, market research firm Nielsen had cut its growth forecast for the FMCG sector to 9-10 per cent in 2019 from the previous forecast of 11-12 per cent. The outlook for the July-September quarter stands at 7-8 per cent, it added.

Expand reach

Mayank Shah, Senior Category Head, Parle Products, said at a time when consumer offtake is low due to the ongoing slowdown, companies need to take steps to expand their reach to new consumers. He said consumer promotional offers help increase consumption by giving more value for money.

Ullas Kamath, Joint Managing Director, Jyothy Labs, said, “Given high competitive intensity, we support distributors through more local in-store marketing efforts at the retailer level so sales churn is high and inventory levels are reduced. Thereby, distributors can rotate the same amount of money and earn more margins.” He said the company has also stepped up marketing spends for the festival period.

“There is a clear focus on innovation and brand building going forward despite challenging market environment,” Kamath said.

Published on September 11, 2019
This article is closed for comments.
Please Email the Editor