FMCG companies production sees a spike for food & hygiene goods in Covid times

While major businesses of the world are facing the brunt of the pandemic, production at FMCG companies is witnessing a spurt in demand for essential commodities like food & hygiene products. Large consumer goods companies like HUL, ITC, Britannia, Parle, Marico, and Dabur are expanding their production beyond pre-COVID levels.

Owing to the lockdown panic, consumers rushed to stock up food and hygiene products like staples, soaps, and sanitizers. As a result, companies like Amul, Parle, and Godrej saw a 10-15% surge in demand for food & hygiene products.

As the virus isn’t showing signs of abating anytime soon, FMCG companies are ramping up production by over 15% while working closely with the government to address logistics issues. Parle Products, one of India’s largest food companies, said it will expand its capacity by 25% over normal.

Capacity Expansion Issues

With the ramped up production capacity, FMCG companies are also facing the problem of labour shortage.  They will not only have to invest in adding assembly lines but also will have to run more shifts and increase automation.

HUL, India’s biggest FMCG company, has ramped up production to 80%-90% of normal levels and is building resilience in their supply chain by operating with shorter planning cycles, stepping up agility and working long shifts.

Impact on volume growth

The outbreak of Covid-19 initially led to a downfall in the net profits of many FMCG companies. FMCG giant Dabur saw a 12% decline in its year-on-year consolidated revenue for the March quarter. With no COVID impact, it was poised to a 4.5% growth. Dabur’s domestic volume declined by 14.6%, Godrej’s volume decline was 15% and HUL volume fell by 7%.

However, overall sales growth of health & hygiene products leapfrogged in the first 2 weeks of March as hand sanitizers alone showed 144% growth in traditional channels and 1,425% growth in the e-commerce sector. After observing such an increase in demand for health and hygiene products, HUL committed Rs. 100 Crore while ITC announced 150 Crore contingency fund to fight the pandemic in India.

A surge in online business

In a fresh turn of events, as online shopping became more popular, many FMCG companies see their e-commerce sales jump manifolds. FMCG company Parle Agro reported that their sales on e-commerce platforms increased by a whopping 300%. This has increased the contribution of online sales to 15% from 2.8% to the overall sales for FMCG companies.

Lockdown is touted to be the new normal. With endeavours such as Unlock 1.0 and other measures to re-start the struggling economy, we are bound so see trends that deviate from the normal that we know of. During these unpredictable times, all eyes are on giants on how they forecast demand and ramp up or scale up production accordingly. This is the time to be vigilant, use automation and methodologies are more efficient.