Fast-moving consumer goods (FMCG) companies such as Nestle, HUL, P&G, Godrej Consumer, Dabur and Jyothy Laboratories have either cut down or suspended production after Centre's lockdown order. Many of them have notified stock exchanges that while they would continue to produce handwash, sanitisers and essential food items, several of their manufacturing units would be shut down.
At a time when there is a huge surge in demand for essentials and humungous supply-chain issues, won't a slowdown in production lead to further disruption in supplies? FMCG experts say that most companies have 30-60 days of finished goods inventory.
"But the problem is that it is not evenly distributed, so I see a shortage scenario even after 10-14 days. Also, the fact that people are hoarding essential foods, this is leading to further depletion of finished goods pipeline," points out Harsha Razdan, Partner & Head, Life Sciences, Consumer Markets and Internet Business, KPMG India.
However, the bigger problem for FMCG manufacturers in the last few days has been the lack of clarity in COVID-19 regulations laid down by the government. While the government on one hand has allowed sale of essential products, their ruling of a complete lockdown has resulted in shortage of manpower, forcing them to cut down on production.
"Food and other FMCG companies are facing production and supply chain challenges to make their product available at the shelf. For example, most production units and warehouses are trying to deal with low labour availability, which is as low as 30-40 per cent of normal levels in certain cases. While the inventory with the companies and in the channel could serve few weeks of demand for long shelf life products, short shelf life products could potentially witness availability challenges," says Rishav Jain, Senior Director and Consumer & Retail sector lead, Alvarez & Marsal.
FMCG companies claim that they are doing their best to meet the demand despite having to work with a skeletal staff. "While the lockdown is indeed a welcome step to contain the spread of the virus, it would be critical during these challenging times to ensure that the production and supply chain for essential items is not disrupted so that items such food and hygiene products can reach consumers across the country. We are in constant dialogue with relevant state government authorities to seek permission and clearance for the manufacture of essential products in select factories with bare minimum people," says a senior ITC spokesperson.
Similarly, a HUL spokesperson says that despite the challenging circumstances, the company is doing its best to meet with the surge in demand for essential products such as soaps, hand sanitisers, laundry products and disinfectants. "We are making every effort to produce and bring to the market these products in an uninterrupted manner. In the last couple of days there has been a significant amount of difficulty in running the factories and transportation of goods."
Amul MD & Chairman, R S Sodhi, says that the challenge has been more acute at the dairy company's warehouses across the country. "The staff hasn't been able to travel to work due to the shutdown. We are in talks with the local authorities to allow our people to travel. We are also trying to find a way to offer our workers accommodation and food closer to the warehouse."