Consumer Goods Makers Offer Higher Incentives To Retailers As Demand Stagnates

0
29

Makers of soaps to deodorants are offering retailers incentives to push products as the demand has tapered off following an initial burst after India eased lockdown restrictions.

Companies have increased margins by 3-4% for soaps and 4-5% on other personal care categories such as hair oils and body lotions, according to distributors that BloombergQuint spoke to. Typically, they offer from 6-7% to as high as 18% in the category.

India announced one of the harshest curbs to contain the Covid-19 pandemic. As the government eased restrictions, demand spiked because of pent-up consumption. That has now fallen. Moreover, demand for personal care categories suffered during the lockdown as only essentials were allowed and people stocked up staples and cut consumption amid pay cuts, job losses, and business shutdowns.

The nation’s GDP contracted the most among major economies in the quarter ended June and on track for first full-fiscal contraction in more than four decades. Nielsen India has pegged demand for FMCG goods to remain flat in 2020. It said consumers are opting for more affordable packs as they remain tight-fisted.

Two large distributors for multiple companies told BloombergQuint—speaking on the condition of anonymity out of business concerns—that some companies offered higher margins on goods sold, while others offer incentives in the form of promotions to boost volumes.

For example, a retailer will get benefits on placing a bigger order than usual. According to the distributors:

  • Godrej Consumer Products Ltd. has increased margins on soaps to the tune of 3-4%
  • Hindustan Unilever Ltd. increased margins up by to 4% on its some stock-keeping units of Surf easy wash in certain markets.
  • Marico Ltd., the maker of Parachute coconut oil, is offering higher incentives to retailers.

HUL, India’s largest consumer goods maker, and Marico did not respond to BloombergQuint’s queries citing silent period ahead of their earnings.

“Trade spends is a function of both competitive intensity and demand. We keep fine-tuning the same accordingly,” Sunil Kataria, chief executive officer, India and SAARC at Godrej Consumer Products, said in an emailed response. “We have optimised our trade spends and are operating below pre-Covid levels.”

The company’s focus is on ensuring timely supplies, managing optimal assortment and creating demand for its brands and categories. The company, he said, continues to witness robust demand in rural areas, while urban India is showing slower recovery due to intermittent lockdowns and higher outbreak intensity.

Nielsen India, in a recent report, corroborated the trend. Fast-moving consumer goods companies are focusing on middle–towns with a population of 1-10 lakh–and rural India as they have bounced back to pre-Covid levels, it said, while demand from urban India continues to lag.

Continue Reading. Read more on BQ Blue Exclusive by BloombergQuint.

Leave a Reply