MUMBAI: FMCG companies are on their toes, putting in place strategies so that benefits of the GST cuts can be passed on to consumers from Day 1 (Sept 22) even as they await clarity from govt on labelling and packaging issues.
Firms are fast shifting their production to new MRPs and streamlining dispatches, which essentially means that they are holding back production of any old stock unless necessary and prioritising dispatches of the new stock to locations where inventories are low.
"We are shifting our production to new MRPs but the challenge will be to deliver the same to consumers in the fastest possible way," Tarun Arora, CEO and whole-time director at Zydus Wellness, maker of Complan and Glucon-D, told TOI.
Kellanova has fast-tracked packaging changes, planned production runs and streamlined dispatches with its distributor network so that the revised MRPs start reaching shelves as soon as possible after Sept 22, said Prashant Peres, MD at Kellanova South Asia.
The challenge to tackle the old stock in the pipeline with higher MRPs can be managed through restickering, but companies will need govt approval for the same. "Alternatively, we will work with our retail partners to sell the products at lower prices," Arora said. "By early or mid-next month, consumers will start seeing reduced prices on FMCG products. Sept may therefore be somewhat choppy with pipeline changes and stock adjustments," said Sudhir Sitapati, MD & CEO, Godrej Consumer Products and chairman, CII National Committee on FMCG.
Already, distributors are indicating that retailers have slowed purchases from manufacturers to avoid sitting on old stock for long. "The main concern is how will manufacturers reimburse retailer on the price differential. There's still no clarity on that," said Dhairyashil Patil, national president at The All India Consumer Products Distributors Federation. The industry has made representations to govt detailing their concerns.
In small packs, benefits will have to be passed by grammage addition, which means changes in packaging, more so in the case of items such as biscuits and chocolates, which are tightly packed. For namkeens, adding grammage in small packs is not a problem as there's always space to make 5-10% additions, said Manoj Verma, COO at Bikaji Foods. " Changing artwork, and other technicalities can take four to six weeks. Also, if re-stickering is not granted, packaging needs to be changed for new MRPs too," said Jeevaraj G Pillai, whole-time director at packaging firm UFlex, which caters to large consumer brands.
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