The national federation of fast-moving consumer goods distributors has reported that subdued demand during the festive season has resulted in distributors struggling with surplus stocks.
“Contrary to expectations, Diwali witnessed subdued enthusiasm for the FMCG sector. Post-Diwali sales have historically been low. Particularly hard-hit segments are chocolates, confectionery and biscuits, followed by beauty, and cosmetics,” said Dhairyashil Patil, national president of All India Consumer Products Distributors Federation (AICPDF).
The majority, accounting for 90%, of total FMCG sales is comprised of general trade.
The federation, representing over four hundred thousand distributors nationwide, stated that the supply chain is currently dealing with an abundance of surplus stocks, requiring distributors to make substantial investments.
“Managing these funds has become increasingly difficult, exacerbated by mounting pressure from companies for primary sales. Distributors, in turn, have stocked up the retail trade, but low offtake during the festive season has left retailers distressed,” Patil said.
Distributors noted that the gift pack segment within these categories has experienced the greatest impact, resulting in an excess inventory overflow among retailers.
The sales of soaps and detergents have also been subdued, and distributors report that the beauty and cosmetic sector is undergoing its most severe downturn.
This trend is causing a significant rise in the average closing stocks for distributors, reaching 25 to 30 days, in contrast to the previous average of 7 to 15 days, as reported by the distributors federation. Additionally, the average market credit period is expanding to a range of 15 to 25 days, compared to the earlier 7 to 15 days.
Patil mentioned that these factors have added to the complexity of the market situation during a period that is conventionally viewed as a profitable season.