FMCG majors eye capacity ramp-up as ground situation improves

Abhishek Law Kolkata | Updated on April 13, 2020

Overall slowdown in the past quarters has impacted consumer demand for FMCG products

It could be between 35 and 50 per cent depending on product lines

Now into the third week of a coronavirus-induced lockdown and still struggling with supply disruptions and manpower shortages, FMCG majors are hopeful of ramping up capacities this week onwards.

The capacity ramp-up they expect could vary between 35 and 50 per cent depending on product lines.

Over the last two weeks, FMCG companies operated anywhere in the range of 25-30 per cent or approximately at one-fourth to one-third of their capacities, say market sources.

The numbers improved significantly over the first week of the lockdown when clarity over rules and State or region-specific permissions took centre stage. The first week saw capacity utilisation stand at 15 per cent, on average, with many FMCG majors still working to get permissions going and restart operations.

According to Abneesh Ray, Executive Vice-President – Institutional Equities, Edelweiss Securities, a lot depends on the partial relaxation of lockdown rules that the Centre and State governments will frame and implement. It should help boost up manufacturing activities and also availability, especially that of essentials.

“From the third week, there is expected to be further improvement in capacity utilisation. It could be between 35 and 50 per cent across the industry. In fact, it can go actually up to 70-80 per cent depending on how the lockdown rules are framed and enforced at a local administration level,” he told BusinessLine.

Diversified conglomerate ITC Ltd said it has received approvals from a number of State authorities to manufacture essential commodities.

“These factories have been operating with restricted number of hours and reduced workforce in line with approval from local authorities,” a company spokesperson said, adding that “efforts are being made to ensure that the supply chain functions smoothly despite the challenges of manpower shortages and availability of trucks”.

Improvement on ground

According to Sunil Kataria, CEO – India & SAARC, Godrej Consumer Products Ltd, there has been “some improvement on ground in the last few days”. The government is working hand-in-hand with the industry to “help clear obstacles in running the supply chains”.

“Our factories are manufacturing only essential products, operating at 30-35 per cent capacity due to some manpower and logistical challenges. Efforts are on to ramp up production in line with the government guidelines,” he said.

Nobel Hygiene, makers-of adult diapers brand, Friends, said the company has been operating at 25 per cent capacity for quite some time. According to Kartik Johari, Vice-President, Nobel Hygiene, there are plans to ramp up production too. “Ramp up, absolutely. (We intend) to take it up to at least 50 per cent of workforce. As an essential we need to be prepared for the incoming demand,” he said.

Other companies like Jyothy Labs, which had, till last week, not received permission for resumption of operations, told BusinessLine that operations have resumed across some factories and in select product lines that manufacture essentials.

“Three of our factories have reopened this week,” MR Jyothy, Managing Director, Jyothy Labs, said.

Published on April 13, 2020

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