FMCG firms expect full recovery from the pangs of implementation of GST

As the GST completes 100 days, major FMCG firms, including Dabur and Godrej Consumer, expect full recovery from the pangs of implementation of the new tax regime by the end of the third quarter with clear signs of demand picking up in the horizon.
According to a PTI report: Most FMCG firms were hit by de-stocking by channel partners ahead of the implementation of the Goods and Services Tax (GST) in July this year due to uncertainties of transition to the new system.
Dabur India and Godrej Consumer Products Ltd (GCPL) said they have adapted well to the transition and are hopeful of the situation to completely improve by this quarter considering the stable market sentiments.
“With the market sentiments showing signs of improvement and stability returning post-GST implementation, we expect the demand scenario to move up, both in rural and urban markets,” Chief Financial Officer, Dabur India, Lalit Malik told PTI.
On completion of 100 days of GST implementation on October 8, Malik said the company has seen a marked improvement in consumer sentiments and demand with the new indirect tax regime now settling down.
Expressing similar views, Business Head – India and SAARC, GCPL, Sunil Kataria told PTI: “Overall the massive destocking seen in June has been sufficiently refilled and we are seeing a clear recovery.”
He further said although the wholesale channel has taken a bit longer to adapt to the new tax regime the retail channel recovered much faster and quite smoothly in the July-August period.
When asked about the recovery, Kataria was quoted by PTI as saying: “By the end of quarter three, we will see a full recovery in the wholesale channel and are optimistic for a stronger performance in the coming quarters.”
An official of another major FMCG firm said the problem of destocking has been almost over and the channel partners have gone back to normal.
“By this quarter or probably the next one, the sector will emerge positively with a much better position,” said the official asking not to be identified due to silent period ahead of the company’s quarterly earnings.
Major FMCG companies including Hindustan Unilever Ltd (HUL), Marico and Dabur India had witnessed dip in sales and lower volumes impacted by de-stocking by trade partners due to transition in the run up to GST implementation.
Under the GST, commonly used products like hair oil, soaps and toothpaste are charged at 18 per cent rate. These items had earlier attracted 22-24 per cent tax incidence through a combination of central and state government levies.
The companies had revised prices of their products after the implementation of GST to extend the tax benefits to the consumers.
Patanjali, ITC, HUL and Marico had said they are either slashing the prices of goods or increasing the grammage of the product on dispatches made from July 1 onwards.