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    As demand rises, FMCG companies spring into action

    Synopsis

    Demand has picked up across categories, not only within health and hygiene, but also discretionary and non-essential products in general trade, supermarkets, standalone modern trade outlets and ecommerce. Companies have reported an overall demand increase of over 15% in the first two weeks of June from the month earlier.

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    "While our new manufacturing unit is large enough to meet current demand, the market is growing and we will have to put additional capacities accordingly," said Saugata Gupta, managing director at Marico.
    India’s leading fast-moving consumer goods companies including Hindustan Unilever, Dabur, PepsiCo, Marico, Parle, Britannia, ITC, Wipro Consumer and Emami said they are making fresh investments, adding capacity or accelerating manufacturing. That comes on the back of demand picking up, Covid-19 cases trending lower, state-level curbs on operating hours being eased and vaccination gathering pace.

    Dabur India is setting up its single biggest manufacturing facility in India with a fresh investment of Rs 550 crore, it announced on Wednesday.

    “This facility will provide us the space needed to rapidly expand capacity for ayurvedic products, medicines and foods," CEO Mohit Malhotra said.

    Demand has picked up across categories, not only within health and hygiene, but also discretionary and non-essential products in general trade, supermarkets, standalone modern trade outlets and ecommerce. Companies have reported an overall demand increase of over 15% in the first two weeks of June from the month earlier.

    PepsiCo, maker of Kurkure and Lays snacks, will invest more than Rs 800 crore to set up its largest greenfield snacks plant in Uttar Pradesh, and another greenfield foods plant in Assam, a company spokesperson said. "With Covid cases declining steadily, we are witnessing an uptick in consumer sentiment leading to higher demand," the spokesperson said.

    Besides fresh investments, many large companies said they are adding capacities in anticipation of higher demand over the next three quarters, with the second wave ebbing.

    "While our new manufacturing unit is large enough to meet current demand, the market is growing and we will have to put additional capacities accordingly," said Saugata Gupta, managing director at Marico. The maker of Saffola edible oils had built a new manufacturing plant in Gujarat last year in January but operations had been restricted due to Covid-led lockdowns.

    Similarly, biscuits and confectionery maker Parle said it is resuming scale expansion, with a steady pickup in demand.

    As Demand Rises, FMCG Cos Spring into Action


    "The second wave had interrupted our manufacturing capacity expansion plans, which we will resume now," said Krishnarao Buddha, senior category head at Parle Products. "Also, most machines are being imported from other countries and assembled and fitted by their engineers now, which was not possible due to travel restrictions earlier."

    In its latest annual report, Hindustan Unilever said it’s in the process of setting up a manufacturing facility at Sumerpur, Uttar Pradesh, though a new fully-owned subsidiary. "It is proposed to manufacture spray drying washing powders at this factory. The company is in the process of issuing shares of Rs 300 crore by preferential allotment," the report added.

    Moody’s Investor Service said in a report on Wednesday that the economic impact of the second wave of Covid-19 is likely to be restricted to the June quarter. The Centre’s new vaccination policy will support recovery, Moody’s said in the report, adding that it expects economic activity to accelerate in the second half of the year.

    Britannia Industries managing director Varun Berry said on a fourth-quarter earnings call that the company is committed to putting up new factories and adding capacities.

    "We underspent last year because of uncertain circumstances," he said. "We are definitely going to put up a factory in UP where we have already contracted the land, in Tamil Nadu where we have signed an agreement with the state government, and similarly Bihar, and expansion in Orissa is on the cards."

    Wipro Consumer Care & Lighting, maker of Santoor soap, expects its largest facility in Hyderabad to be fully operational by year-end. "Our factory in Hyderabad became partly operational in June 2020 and construction was slow due to the pandemic," chief executive Vineet Agrawal said. "It will be our largest factory and we hope to be fully operational by 2021 end."

    A spokesperson for soaps to noodles maker ITC said it is scaling up manufacturing in line with market demand with sufficient capacity. "We have been investing in consumer goods manufacturing and logistics facilities across the country," the spokesperson said.

    States began lifting restrictions in the first week of June, after two months of lockdowns when companies were grappling with last-mile logistics hurdles, limited operating hours and the steep rise in infections impacting deliveries across trade channels including ecommerce, leading to companies reducing focus on discretionary categories. Since then, the assortment at grocery stores too has risen to about 65% of pre-pandemic levels.



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