FMCG companies limit production to essential products only

“Last year, covid taught us the hidden cost of complexity and the beauty of simplicity. So last year itself we reduced our Inventory Management Units (SKUs) by 26% without any drop in revenue, which helped us, ”said Saugata Gupta, Managing Director and CEO of Marico Ltd, in an interview. year, we made sure to only do 90% of our portfolio very well, which is the gist of it, and all that is discretionary, we don’t focus (on), ”he said. he adds. Discretionary products for Marico include male grooming and skin care.

Gupta said male grooming and hairdressing has been linked to people venturing outside, and given the current situation, their inventory has taken a back seat.

“As a result, within our existing brands it is evident that the focus is on larger package sizes, making sure to fill larger package sizes rather than smaller package sizes first. , because it has better productivity, ”he said.

With the pandemic still raging, consumers will likely avoid discretionary purchases such as ice cream, laundry detergents, and beauty products and instead stock up on basic products, healthcare brands, packaged snacks and cleaning products, depending on the company.

Mayank Shah, senior category manager at Parle Products, said various restrictions in the field have also led companies to only send packaging that sells well and that is fast moving into the market.

This means that newer launches and slow items could stay on sale for a while. This led to a limited assortment in stores, he said. “It used to be that the seller would retail the product and take the order. Today the retailer tells you everything that needs to be sent to them, and we respond or simply respond to the request. New or slow products don’t work. Typically, only a few fast-moving items and SKUs are sold due to lack of bandwidth in terms of time, manpower, and investment. So there is an impact, ”he said.

The Gujarat Milk Marketing Cooperative Federation (GCMMF), which sells a wide range of dairy products under the Amul brand, is also focusing on relevant SKUs. “We are reducing the production of some SKUs while increasing the same for others due to market demand,” said RS Sodhi, General Manager of GCMMF.

However, in Amul’s case, the company sees better distribution of small packs. Consumers, Sodhi said, are spending the bare minimum and largely buying essentials amid a surge in covid infections. “They buy smaller packages; sales of 1 to 2 kg packs are down, ”he said.

While Amul’s factories are mostly operating at full capacity, they face disruption in the field due to a labor shortage.

For Amul, sales of ice cream and products sold in the hotel and restaurant industry, such as sliced ​​cheese and cream and beverages, declined in May. Meanwhile, its sales of packaged milk have risen sharply. “We are also making more milk products such as powdered milk and white butter because the milk supply has been strong,” Sodhi said. In 2019-2020, the consolidated sales of Amul brand products exceeded 52,000 crore, according to GCMMF.

In a recent report, market researcher Nielsen said now is the time for companies to eliminate underperforming brands or variants. In India, categories such as soft drinks, chocolates, cookies, shampoos and sanitary napkins have the most under-selling or underperforming SKUs, Nielsen said. About 77% of the SKUs in the soft drink category contribute less than 2% of the category’s overall sales. Among categories such as sanitary napkins, 76% of the variants are underperforming, while for chocolates it is at 75%. “The case for rationalizing the assortment is extremely strong. A recent study by NielsenIQ showed that an average of 1,059 SKUs are launched each month in India, with only 10% of these items getting enough distribution to survive, ”the researcher said.

Dabur India Ltd expects demand for its discretionary products to remain lukewarm in the near term. “Our factories continue to operate relatively normally. Going forward, we anticipate that there may be an impact on the discretionary product portfolio as people stay home and outdoor activities are restricted. However, our healthcare portfolio, particularly Ayurvedic immunity boosting products, is already on the rise during the second part of April and is expected to make up for any loss in the discretionary sector, ”said the CEO Mohit Malhotra in a post-benefit call with investors on Friday.

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