Mumbai: Fast-moving consumer goods companies are expecting a sharp rebound in distributor and retailer orders starting Monday, reversing the trend over the past two weeks when changes in GST slabs prompted them to cut back on orders, some down to about 40% of typical volumes as they awaited clarity on pricing.
"The trade pipeline had virtually dried up as trade partners did not want to block their working capital by ordering and getting credit for the price difference later," said Mayank Shah, vice-president at Parle Products, India's biggest food firm. "With the new MRP rates effective Monday, we expect a surge in orders for the next few days."
The government on September 3 announced a simplified tax rate structure following the recommendations of the GST Council.
While companies expect retailers and distributors to replenish inventories, they do not anticipate an immediate spike in consumer demand as these price cuts are not time-bound and will not trigger any pantry loading.
"A lot of consumers are expected to come out if they have held back purchases but it may not happen on Monday because it's a weekday. But everybody will be preparing and hoping for a good, decent surge in consumer demand as it's a good 11% off on many categories, which is great," said Prashant Peres, managing director at Kellanova India and South Asia, the maker of Pringles snack chips and Kellogg's corn flakes.
Companies also said some products already in the market carry older, higher maximum retail prices, but retailers have been advised they can offer discounts to reflect the revised GST rates, a move communicated to both trade partners and consumers through advertisements.
Most companies will begin invoicing distributors at the revised tax rates and in some cases, they plan to temporarily increase pack sizes and grammage instead of lowering prices to maintain key price points. However, companies said they have been on a "firefighting" mode almost every day, reaching thousands of distributors and a retail network of 12 million kirana outlets.
"The trade pipeline had virtually dried up as trade partners did not want to block their working capital by ordering and getting credit for the price difference later," said Mayank Shah, vice-president at Parle Products, India's biggest food firm. "With the new MRP rates effective Monday, we expect a surge in orders for the next few days."
The government on September 3 announced a simplified tax rate structure following the recommendations of the GST Council.
While companies expect retailers and distributors to replenish inventories, they do not anticipate an immediate spike in consumer demand as these price cuts are not time-bound and will not trigger any pantry loading.
"A lot of consumers are expected to come out if they have held back purchases but it may not happen on Monday because it's a weekday. But everybody will be preparing and hoping for a good, decent surge in consumer demand as it's a good 11% off on many categories, which is great," said Prashant Peres, managing director at Kellanova India and South Asia, the maker of Pringles snack chips and Kellogg's corn flakes.
Companies also said some products already in the market carry older, higher maximum retail prices, but retailers have been advised they can offer discounts to reflect the revised GST rates, a move communicated to both trade partners and consumers through advertisements.
Most companies will begin invoicing distributors at the revised tax rates and in some cases, they plan to temporarily increase pack sizes and grammage instead of lowering prices to maintain key price points. However, companies said they have been on a "firefighting" mode almost every day, reaching thousands of distributors and a retail network of 12 million kirana outlets.
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