Cos cautious about launches

Mumbai: While the impact of demonetisation on consumer demand seems largely over in urban areas, firms are still cautious in launching new products, which are high risk and involve high cost.

Large firms have shifted their focus towards lower end of consumption basket where they are seeing potential for further growth.

According to Nitin Mathur, equity analysts at Jefferies, the consumer goods companies are little apprehensive about discretionary consumption taking a hit if the unorganised sector isn’t able to recover quickly and unemployment situation worsens.

“Acceleration in low end of consumption is witnessed across categories (Dosa chains are growing faster than burger chains and they have a bigger addressable market) and companies are trying to capture that through lower priced stock keeping units (SKUs) to increase penetration and drive volume growth, especially in rural markets,” he said.

Mr Mathur added that the innovation rates have come down from 16,000 launches per annum to 8,000 launches per annum.

In its earlier assessment in January, Jefferies had highlighted that staples like soaps and detergents would see limited impact due to their need-based demand while the discretionary items like liquor and jewellery among others would take a structural hit due to the ripple effects of cash crunch.

Another interesting trend seen among large companies with regards to their operational strategy post demonetisation is the increased focus on investment in technology to monitor inventories both in primary and secondary channels.

“Most of the large companies have invested in handheld devices for sales teams in the past to monitor real time sales data that would help in demand planning.

“The companies are now embracing Big Data to get consumer insights from the point of sale (PoS),” he noted.