Consumers Turn Tight-Fisted Even As India Looks Beyond Lockdown
An employee wearing a protective mask sprays a customer’s hands with sanitizer as she enters a pharmacy during the coronavirus lockdown in Mumbai, India, on June 1, 2020. (Photographer: Dhiraj Singh/Bloomberg)

Consumers Turn Tight-Fisted Even As India Looks Beyond Lockdown

It’s playing out as expected. As the national lockdown wore on in April and May, Indians stocked up on everything from staples to biscuits and ready-to-cook items. There was also a burst of pent-up demand when economic activity resumed slowly June onwards. Now, both those effects are wearing off, as many economists had warned would happen.

Consumption in rural India, which was strong in the initial phases of the lockdown when the Covid-19 infection and fatality counts were much lower, has declined by nearly 10%, according to Dhairyashil Patil, president of All India Consumer Products Distributors Association.

Demand for essential and non-essential items declined, other distributors told BloombergQuint on the condition of anonymity out of business concerns.

Distributors constitute nearly 90% of the sales channel for makers of staples to soaps. A decline in demand through this channel is due to a mix of factors.

Emerging from one of the harshest lockdowns in the world, Indians were faced with a severe GDP contraction, salary cuts and job losses. Spooked, people have cut back on spending even as the virus takes its toll.

Although manufacturing and supply chain activities have resumed in most parts of the country since June, localised lockdowns in places where viral infections have increased unabated is disrupting distribution of items and leading to logistical challenges.

Also Indians had stocked up supplies in the initial phases of the lockdown, and may not have exhausted them completely.

Hindustan Unilever Ltd., Britannia Industries Ltd. and Godrej Consumer Products Ltd. and Dabur India Ltd. some of India’s biggest consumer goods makers, have yet to respond on why demand through the general trade has fallen.

BloombergQuint spoke with the distributors of consumer goods in Telangana, Punjab, Maharashtra, Uttar Pradesh, Gujarat and Odisha. Here's what they had to say about consumption.

Rural Demand Hit

  • While consumption of essentials has declined, demand for non-essential items like personal care products has fallen by a larger extent.
  • A distributor from Uttar Pradesh, India’s most populous state, said demand for food items after witnessing a huge spike during April and May, has more than halved since then.
  • Rural consumers are still opting for smaller-sized packs, while consumers in larger towns and urban areas buy larger packs to reduce the number of visits to stores.
  • A Gujarat-based distributor said demand from smaller towns and rural areas is impacted as consumers are being extremely judicious with spending.
  • An Odisha-based distributor said gauging demand is difficult as markets were forced to remain shut for a long time. Pent-up demand is still pouring in, this distributor said.

Telangana

  • A distributor from Telangana said while demand for essentials increased during the lockdown, consumers could be sitting on stocks procured in the earlier months. Demand for larger stock-keeping units rose during the lockdown as consumers preferred to stock up on essential items.
  • This distributor said consumers resorted to bulk-buying till July, implying consumers are still sitting using unused stock.
  • Demand for products like biscuits and edible oils has fallen 20-50%, while those for non-essentials like floor and toilet cleaners have dropped by at least 40%.

Mumbai

  • A Mumbai-based distributor said he has witnessed a 100% increase in products that get sold online amid a demand slump through the traditional channels of distribution. Demand for smaller packs, usually from migrant workers, has fallen as most of them have gone back to their hometowns, the distributor said.
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