The liquidity crunch following the recent demonetisation of higher value currency notes has hit retail at kirana stores and the sale of FMCG products sold there, and startups in the space are facing a heavy brunt. Bengaluru-based iD Fresh Foods, which sells ready-to-cook products which sells ready-to-cook products in more than 10 cities, has seen almost 26% drop in sales in the last two weeks at corner stores and about 12% in modern trade stores such as supermarkets.

“Revenue from sales may not meet the average monthly figure of Rs 14.5 crore this month, and we are expecting it to be around Rs 12 crore this time,” said iD CEO Musthafa PC. “In some cities, our sales are down by as much as 40% since small retailers and end-consumers are not ready to part with their cash. We are evaluating online payment options and have also started extending credit to some retailers.”

Cold-pressed juice brand Raw Pressery saw a minor slowdown in retail in the ten days since the announcement, said Anuj Rakyan, MD, Rakyan Beverages, which makes the juices. However, he said that direct sales through subscriptions had spiked since customers made large cash payments in the 4-hour window as well as because of the option for digital payments. “Our sales in first tier stores such as Nature’s Basket and Hypercity slowed down by 4%, while in the standalone modern trade stores, it dropped almost 10%,” Rakyan said, adding that the value of transactions in the first tier stores was higher.

Baba Ramdev’s Patanjali Group, which makes several FMCG products, saw a drop in sales in the first week, said Patanjali spokesperson SK Tijariwala. “Sales had dropped by about 1020% in the first week, but now it has normalised,” he said.

Neeraj Kakkar, CEO of Hector Beverages, which puts out traditional beverages through its Paper Boat brand, said it was too early to analyse the impact, but said the company’s business was not impacted much since most of its distribution channels are through modern trade stores. “We are not seeing a major decrease in sales in modern trade stores. For the first few days, there was a bit of a shock in the system.We are still evaluating how much sales have been impacted in smaller stores,” Kakkar said.

Industry experts say sales in the FMCG space have been hit, but said there were no clear figures to estimate the impact so far. “There has been a negative impact, especially on discretionary purchase items that are consumable in nature. But there is currently no data to understand how much the impact has been,” said Arvind Singhal, Chairman of Technopak, a consultancy firm for retail and consumer products.

Singhal said companies in the sector will need to adopt strategies such as promotional offers to push volumes, once liquidity normalises, to kick-start the consumption cycle more aggressively.

Source: Economic Times