Coronavirus effect: Distributors see 60-70% dip in revenues, many fear closure

The nationwide lockdown to contain the coronavirus pandemic has adversely impacted India's FMCG distributors' community. Issues surrounding supply chain, logistics and goods procurement has led to a 60-70 percent drop in revenues for the FMCG distributors.

The high cost of transporting and distributing a very small quantity of goods to retailers is making business unsustainable for them. "During the initial phase of the lockdown we had issues related to the shortage of manpower. Now a lot of people in the essentials chain are coming back to work. The issue now is the low volume of goods," said a biscuits distributor.

Factories of most FMCG companies have been operating at about 40-50 percent capacity. Over the last month, FMCG companies have been facing labour, logistics and local authorities-related challenges.

Distributors are facing pressure from retailers to deliver whatever quantity of goods available with them. "This is unsustainable for us because transport costs are high. There needs to be a minimum quantity of goods for the business to be profitable," said a distributor. Owing to the shortage in demand, several distributors have asked retailers to pick up goods directly from the depot.

Due to the ongoing issues, 20-25 percent of the FMCG distributors are likely to wind up business post lockdown, said sources.

Distributors claim that FMCG companies as refusing to extend credit facilities to them. "This is making life very difficult for us. We are paying companies in cash to purchase products and retailers are buying via credit," said CH Krishna, president, Federation of All India Distributors Association.