Discounts to be taken off retail shelves
3 min read . Updated: 15 May 2020, 01:41 AM ISTFirms say they find little merit in promotions, especially as they are struggling to meet existing demand for goods
Consumers shopping for packaged foods may find fewer promotional offers such as free samples and extra grammage for at least three months as companies try to fix supply chain issues and ensure their products reach shop shelves.
Fresh offers, which form a large part of consumer promotions at fast-moving consumer goods (FMCG) firms, might be off the shelves for now, several industry executives said.
“The intensity of promotions—typically what it was prior to the lockdown—will take three to four months before they come back, at least in categories that are currently in demand like staples and packaged foods," said Mayank Shah, category head at biscuit maker Parle Products Ltd. Like everyone else, Parle is not running any major promotions for most of its packaged foods, he added.
Companies often cut prices, offer extra grammage and make some products free with other purchases from the same brand to lure value-hunters and fight competition. However, these offers work best at times of low demand, said executives from the FMCG industry. At a time when the coronavirus lockdown has choked output, companies find little merit in continuing with such promotions, focusing instead on meeting existing demand.
“Right now, the focus is primarily on ensuring the production and supply chain and getting the right product in the right place. The best trade lubrication at the moment is to increase the service level," said Subhashis Basu, chief operating officer of Prataap Snacks, which makes Yellow Diamond brand of salty snacks and chips.
Dhairyashil Patil, national president, All India Consumer Products Distributors Federation (AICF) said promotions targeting consumers and trade channels have vanished. Consumer promotions, he added, are down across categories including packaged foods as well as home care products, as companies struggle to meet existing demand.
“The focus is on ensuring retail coverage goes up and basic supplies are met. Once normalcy returns, these offers will come back as they will be required to generate demand," said Sunay Bhasin, chief marketing officer, MTR Foods.
Parle’s Shah added since most FMCG firms are operating with half of their manpower, there will be a demand-supply gap." However, as you fill the channel pipeline and as stocks increase in the market, you may see a bit of promotional intensity come back, but not in the near term," he said.
While companies try to improve product availability, the categories witnessing a slump in demand, that is, non-essentials or premium products, could see promotions as firms try to liquidate stocks, Parle’s Shah said.
Companies are also feeling the strain on their finances since production and movement of goods are constrained.
Market researcher Nielsen has slashed its annual outlook for the FMCG sector to 5-6% down from its previous estimates of 9-10%, as it expects the pandemic to leave a far-reaching impact on the sector.
“The dumping of offers that was happening pre-covid won’t happen at this point when finances are under pressure. Margins are required not just to recover from losses but also to survive," said an executive at a packaged foods company who did not want to be named.
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