Demonetisation has impacted Marico Ltd’s sales in November by 20-25 percent due to a hit to wholesale trade, Harsh Mariwala, chairman of the coconut oil major told BloombergQuint on the sidelines of an event in Mumbai. However, the government’s decision to ban old Rs 500 and Rs 1,000 notes has not had an impact on modern trade, Mariwala said.
I think it has had an impact on Marico. If you look at the segments we are serving in terms of trade channels, modern trade is ok. In fact, modern trade and chemists are doing well. But other channels which are wholesale dependent, like the smaller retailer and the grocer, I think there has been an impact.Harsh Mariwala, Chairman, Marico
Marico sees around 30-35 percent of its sales come from segments dependent on the wholesale channel.
According to Mariwala, the short-term pain of demonetisation has been much higher that what was initially anticipated. To tackle this, Marico has offered extra credit to its distributors and has also been working closely with modern trade to ensure there are no glitches in the supply chain, Mariwala said.
Despite this, November has been a bad month and Marico expects a hit to its margins.
To be sure, Marico will not be alone in feeling the pinch of the government’s demonetisation move. According to Nielsen report dated November 17, demonetisation is expected to impact the fast moving consumer goods sector negatively in the short term.
It is too early for empirical data to be available with us to conclusively substantiate consumer response, but based on a large number of field visits, external interactions and industry experience, it is our measured opinion that demonetisation of high value currency could impact fast moving consumer goods companies in the short term and may change dynamically depending on how fast the monetary system settles.Nielsen Report On Demonetisation (November 17)
In a subsequent report issued on November 24, Nielsen added that while modern trade had withstood the pressure of demonetisation, general trade has seen a negative impact. General trade typically includes wholesalers and smaller stores.
In terms of product categories, the pace of growth across food and impulse categories has seen a decline. These segments, however, are still growing. The personal care category has seen a decline in the general trade category. The hair oil segment in general trade witnessed a nine percent decline due to demonetisation, said Nielsen.