Due to low demand during the festive period, FMCG companies faced difficulties

Supply chains of fast-moving consumer goods (FMCG) companies are beginning to falter as demand remains under pressure. This has led to increased stock of unsold goods with distributors and forced them to extend more credit to retailers. Distributors said that in some cases the stock of goods available has doubled compared to normal days (inventory days) and due to lack of customers they have to give merchandise credit to retailers for up to 45 days. The companies are continuously stocking the goods with the distributors but in some cases the distributors have sent some stock to the retailers. Although this was done before Diwali, it will be difficult for sellers to ship more goods after the festival as demand will remain low.

A distributor in the western region of the country said that the stock of unsold goods has doubled compared to normal consumption in cities that have depots and retailers are demanding more time to pay for supplied goods. In some cases sellers are taking up to 45 days to get paid. The situation is similar in the eastern part of the country and distributors are delaying payments to companies as retailers are also not able to pay them on time.

Distributors of some companies involved in the food products business have unsold stock of goods as per requirement of 45 days, while in some cases it has reached 60 days. There is no respite from the festive demand this year and the summer wedding season has also seen no pick-up in demand, leading to stockpiles of unsold goods for a few months.

The situation was almost the same in Central India as the stock there has increased to such an extent that it will take about 20 days to exhaust it. Earlier the stock level was lower than this. Another distributor in central India said demand for food and beverages remained almost flat ahead of the festive season but demand for non-food items showed pressure.

In the non-food category, the stock level has increased to such an extent that it will take around 30 days to be exhausted as against 20 to 22 days earlier. The situation is almost similar in North India where the stock level has almost doubled. The stock there has increased to such an extent that it will take about 40 days to get exhausted when it normally takes 15 days. Credit to retailers has also increased to 25 to 26 days for high-selling products, while they usually pay distributors in 7 to 8 days. The credit period for low selling products has also increased from 15 to 20 days to 35 to 40 days.

Demand was 30 to 35 percent weaker this festive season. The demand for gift packets was high during Diwali but this time sales have not been good. Sales of beverages and salty products have also been weak. Demand increased during the July to September quarter. In the second quarter of the current financial year, the FMCG industry registered a growth of 9 percent in terms of value. During this period, an increase of 8.6 percent was recorded in sales. The demand in the rural market increased by 6.4 percent during this period, the sources said.