Consumer Goods Sector’s Rural Cushion Is Depleted In Second Covid Surge: BQ Exclusive
Rural India partly cushioned the consumer goods sector during the first wave of the pandemic last year. During a severe second surge of the virus this time, that may be unlikely.
Demand has dropped because of local lockdowns and lack of workers for last-mile delivery in rural areas. Moreover, distributors and companies told BloombergQuint, that villages in various parts of the country have enforced strict measures to restrict the entry of outsiders, making it even more difficult to supply goods.
That's likely to impact rural-focused firms more than others. And also the ones with a substantial share of food, personal and home care in their portfolios.
Record daily cases and deaths mean the new virus mutants have spread to towns and villages while overwhelming hospitals. Local curbs have stalled demand for consumer goods to farm equipment, an indicator of the rural economy. Tractor sales plunged the most among other automobile categories in April, highlighting falling purchasing power in the rural market.
Last year, as the first wave ravaged bigger cities, India’s hinterland was spared. Farm activity and demand for staples to soaps continued. The second wave of Covid-19 is far more contagious and severe. And with hospitals in cities overwhelmed, people are worried.
Villagers have taken it upon themselves to restrict contact with outsiders, said a distributor from Maharashtra, speaking on the condition of anonymity out of business concerns. Supplies are dropped at the border of a village and local shopkeepers collect it themselves, he said.
Moreover, they are only accepting essential goods at the moment, said a distributor from Odisha. Sale of even discretionary food items such as cold drinks and ice cream has been impacted, he said.
“We’ve noticed that this issue has cropped up,” Mayank Shah, category head at Parle Products Pvt., told BloombergQuint over the phone. “But we have not seen it become a big issue for us as our products still fall under essentials.”
According to a distributor of consumer goods in eastern India, supply may completely dry up in the next few days as Covid-19 cases peak.
Consumer demand has fallen in general. According to a Credit Suisse report, retail and grocery activities have dropped to levels seen during the lockdown last April. According to Google's latest data, mobility contracted 14% between March 22 to May 3 compared to the baseline period of Jan. 3 to Feb. 6.
Last-mile delivery has also been disrupted because there aren’t enough people available.
“There are villages that have put up boundaries but the bigger issue is that the spread of the virus has also made it impossible for companies to put a team together to deliver goods to villages,” Angshu Mallick, deputy chief executive officer at Adani Wilmar Ltd., told BloombergQuint.
It is impossible to get a full team together to go and deliver goods and return the same day, he said. Many people are not able to report to work as they have contracted the virus or have infected family members, forcing them to stay under quarantine.
The impact has been more pronounced in the last 10 days of April, Saugata Gupta, managing director and chief executive officer at Marico Ltd., said in a recent interview.
During the period India reported more than three lakh confirmed cases and over 3,000 deaths daily. And that’s after large-scale underreporting.
“We were better prepared from the logistics and the supply chain point of view,” Gupta said. “We believe things should start improving sometime in the next three-four weeks, and there will be a catch-up. At this point in time, we are trying our best in terms of ensuring availability."