Consumer MNCs point to lockdown blues in India

Mumbai | New Delhi: Chief executives of leading global consumer goods companies such as Unilever, Procter & Gamble, Coca-Cola and Kimberly-Clark said India’s Covid-19 lockdown protocols had led to severe supply chain disruptions and labour shortages, hurting business in a key market.“When countries go through that initial government overreaction, we go and tell them, you don’t want to (cut) back on supplies of hygiene products—and then they are relaxed,” Unilever CEO Alan Jope told investors on an earnings call Thursday. “In northern Italy, there was a shutdown and within four hours, we got a relaxation order for the essential goods that we make. In India, it is taking us about four or five days to get that relaxation.”Hindustan Unilever (HUL), the local unit of the Anglo-Dutch conglomerate, has seen production halts and transport holdups as have by most of its peers. India’s biggest consumer goods maker HUL is regarded as a proxy for consumer sentiment across the socio-economic spectrum. 75338639Smaller Suppliers Hit TooA three-week lockdown imposed across the country on March 25 was extended to May 3 to contain the spread of Covid-19.“India is a big deal for us right now, which as a country (went) to a complete standstill in the last week of March. We are back selling and manufacturing in India, not at full strength, but at some good strength in a context where many are still unable to operate the business,” Jope said, echoing the sentiment of other consumer-facing firms in India that are struggling with the sporadic supply of raw materials and uncertainty over last-mile delivery.Out of 157 units owned by listed fast-moving consumer goods (FMCG) companies, 68 facilities, or 43%, are in Covid-19 red zone districts, which means no activities barring essential services are allowed as they seek to curb the outbreak. This, in turn, has hurt smaller suppliers of products such as packaging materials and chemicals.“In some markets like India, the severity of social distancing measures has negatively impacted consumption simply due to the significant reduction in shopping trips,” beverage maker Coca-Cola’s chief executive James Quincey said in a post-earnings call on Tuesday. The maker of Coca-Cola, Thums Up and Minute Maid juices said unit case volume across its bottling investment ecosystem fell 5%, which it attributed to the lockdown in India. ET reported April 23 that Coca-Cola India, the country’s largest beverage maker, will write off the value of surplus inventory at bottling partners, with large quantities of soft drinks and juices left unsold during the lockdown as the company braces for its worst quarter ever.“The more recent emphasis with Covid-19 now is making sure that we can maintain operational supply in India, and that's been a big focus. We were down for a period of time, while we were getting the right permits to operate as an essential business,” said Michael Hsu, chairman of Kimberly-Clark, the maker of Kleenex tissues, on an analyst call on Wednesday.While the situation has eased significantly after factories were closed in several places by law-enforcement authorities initially, many employees, especially at these units, refused to come to work for fear of catching the disease or have gone back home to their villages.“Once we establish our ability to operate, we then have to source materials and we have to ensure that employees can get to work, which sounds simple, but is anything but,” Procter & Gamble vice chairman Jon Moeller told investors last week, referring to the Indian market.

from Economic Times https://ift.tt/2Kv8wVn