Thread by @marginalideas

Impact on FMCG sector –

Continuing with Retail thread, Constraints on goods movement and shortage of packaging material have crippled downstream processes.

1/n

For Procurement and manufacturing, there are issued with fresh produce procurement since local mandis are shut. There is excess of milk and some players are increasing their use by 20%, but price crash has started happening across states.

2/n

However, an even bigger issue is that there is a complete shortage of packaging material – While agri-commodities have inventory of 75-90 days, PM has only ~20 days of inventory. Labels, BOPP, cartons, ink not allowed to cross borders. See this -

3/n

economictimes.indiatimes.com/industry/indl-…

Most non-agriculture raw material is available but transportation is constrained. Contract manufacturing is largely shut down. Non-food & non pharma businesses could remain at standstill in near future.

4/n

In terms of regulatory/labor, things are becoming better. Accelerated decision making at local levels are being seen

Factories are operating at ~15% capacity with migrants labor moving back. A fallout is that companies with onsite workers are less impacted (~60% attendance)

5/n

Labor wages have gone up by 2x for those still working &Food/Medical facilities are being provided by most.

There has been realignment to basic products by most FMCG players - E.g. packaged water, liquid soaps, some OTC. For eg. Beverage companies are now producing water.

6/n

A common thread coming up is that tie ups across large organizations are happening – ITC with Jubilant.

Combined with issues in logistics, last mile delivery has been facing issues.

Loading / unloading labour is not available for last mile.

7/n

Distributors are worst affected due to lack of manpower and there is a shift happening to e-commerce in essentials. Cash crunch will be there in the value chain.

Overall, an opportunity for some players if done well.

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