The lockdown towards the end of March prompted several FMCG companies to temporarily halt production as well as shut their warehouses and distribution centres
India’s top packaged consumer goods firm, Hindustan Unilever Ltd (HUL), on Tuesday said it has ramped up production to 80-90% of normative levels and majority of its suppliers in India, who were unoperational in the initial phase of the lockdown, have now resumed business.
“All our factories and all of our warehouses except one in Assam are open with the requisite government permissions and adherence to highest safety standards. Almost all our suppliers in India, who were not operating at all in the initial period of the lockdown, are now operational. All our office-based employees have continued to work-from-home with effect from 17th March, 2020," the maker of Kissan jams and Dove soaps said in a filing to the exchanges on Tuesday.
Workmen at the company’s Nabha plant, that it acquired as part of GSK Consumer Healthcare India Limited's merger with HUL, are currently on a strike, it said.
“We are working with all stakeholders to find a resolution and will take appropriate steps as required," HUL said in its update.
The lockdown towards the end of March prompted several FMCG companies to temporarily halt production as well as shut their warehouses and distribution centres.
As the country has moved to ease the lockdown, movement of people and vehicles has helped HUL reach more outlets and households.
However, HUL said it cannot with predict with certainty when demand in the certain categories will rebound, especially as companies deal with restoring their supplies in the market and service consumers who are struggling with financial uncertainty brought about by the lockdown.
This is likely to have a bearing on demand among Indian households.
“Lockdown has severely impacted the Fast Moving Consumer Goods (FMCG) market and the loss of livelihoods has taken a substantial toll on consumer demand," it said.
As a result, impact on discretionary categories like skin and hair care, and especially color cosmetics could could be more pronounced.
“With mobility restrictions, lockdown of retail spaces and fear of loss of income, the impact on discretionary categories like hair care, skin care and colour cosmetics is more accentuated. While we are seeing some demand revival in these categories, the exact time which these categories will take to recover fully remains to be seen," it added in its update.
Moreover, its out of home businesses comprising of ice creams and foods solutions and its consumer durables business of water “have been most severely impacted by the lockdown".
The lockdown announced in March had significantly shrunk HUL’s ability to manufacture goods as operations were down to just 5% of pre-covid normative levels.
However, things have subsequently improved in the months of April and May.
“The company has been working very closely with the government at different levels to ensure policy and permit compliances and reboot the supply line. We were able to gradually improve the operations to ~70% in the month of April and have now been able to ramp-up our production to 80-90% of normative levels," HUL said in its update.
The pandemic has also ushered several changes in consumer behavior—that HUL said it is responding to.
“We are staying close to our consumers with frequent digital interactions and through social listening. We are seeing heightened consumer focus on health, hygiene, and nutritional needs. Our portfolio comprising of categories like skin cleansing, home & hygiene, nutrition, tea, coffee and foods is well positioned to cater to these consumer demand spaces," it said.
Moreover, HUL said it is “operating with shorter planning cycles, stepping up agility, reducing complexity and working longer shifts to build resilience in our supply chain," in response to disruption in trade channels in the market.
The company has also collaborated, unlocked partnerships and implemented innovative delivery models.
In fact, the company’s B2B sales ordering app "Shikar" and its hyperlocal ordering platform of "Humara Shop" have witnessed increased adoption and usage by trade and consumers under the lockdown, it said.
The pandemic has also imposed incremental operating costs, on its business, HUL said.
“The pandemic has imposed incremental operating costs on the business. While there will be some impact on our profitability in the short term; however, it is difficult to assess the exact quantum at this stage," HUL said in its update
Moreover, the company is "reviewing all areas of cash generation and usage and re-evaluating all costs in the prevailing circumstances, so that we can continue to invest towards the best opportunities."
At the same time, we continue to judiciously deploy credit in order to support our partners and bring back normalcy in extended supply chain, it added.
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