Retailers and distributors within the fast-moving consumer goods (FMCG) sector are grappling with an unforeseen challenge—piling inventory and sluggish sales, resulting in a choked supply chain across stores and warehouses.
Dhairyashil Patil, president of All India Consumer Products Distributors’ Federation, pointed out the underwhelming trend, noting that the anticipated festive season sales did not come to fruition. He mentioned that there was subdued enthusiasm during Diwali, and sales post-Diwali, especially in categories such as biscuits, chocolates, and confectionery, were historically low. Patil observed the accumulation of unsold festive gift packs in stores, indicating the subdued consumer demand.
The downturn extends beyond food products, affecting non-food categories such as beauty, cosmetics, soaps, and detergents. Despite price rollbacks, these segments face a significant downturn, prompting a pile-up of unsold stock, which poses financial challenges for retailers. The overflow of excess inventory has led to substantial investments, amplifying financial pressure compounded by companies’ demands for primary sales, resulting in retailers extending distributors’ credit days by up to 50 days.
AICPDF reported a notable surge in average inventory holding days, now standing at 25-30 days compared to the earlier 7-15 days. Additionally, the credit period for fast-moving stock-keeping units has escalated to 25–26 days, causing a credit squeeze, compelling some retailers to halt receiving new products.
Consumer goods companies like Marico Ltd. expressed concerns over subdued demand and the shift towards modern and e-commerce channels impacting general trade. Saugata Gupta, Marico’s managing director, highlighted a negative revenue growth trend in general trade distribution, attributing it to increased costs and credit constraints affecting retailers. He also stated the need to reinvest in general trade to rekindle growth, outlining plans to address this issue systematically over the coming quarters. Dabur India Ltd. also aims to bolster sales by launching more affordable packs in kirana stores and expanding its direct reach.
