FMCG companies to speed up hiring to meet market demand post demonetization.

Post demonetizations when all industries struggled in severe cash scarcity in the market, good news are once again back with consumers back with cash or alternatives in the markets. ‘Good days’ are back in sight for consumer goods companies, with the industry expecting consumption to bounce back from as early as next quarter as the impact of demonetization fades away.

The cash crunch post demonetization did hurt the FMCG industry but the impact wasn’t expected to last long or cause job losses. In fact, some of top FMCG companies have even started stepping up hiring in anticipation of a demand revival.

According to various FMCG giants, the industry has seen headwinds on demand, but there is no freeze on hiring or bonuses as growth will be back in the second and third quarters (of calendar 2017) and industry has to be ready for that. Industry acknowledges the impact of demonetization on the consumer goods industry but industry continues with hiring in expectations of a consumption revival.

Nestle, Procter & Gamble, Pepsi Co, Britania and Dabur also made similar views. Hindustan Unilever said it is business as usual for the company. There was a slowdown in hiring at junior or middle levels in the FMCG sector after the November 8 demonetization announcement, but that has changed now. In senior positions, there wasn’t any impact.

Neighbourhood stores that transact mostly in cash were among the biggest casualties of demonetization, even as consumers visited modern retail outlets more frequently and paid electronically, cushioning the impact for the FMCG industry, company executives said. Across channels, the hit was mostly on non-premium categories targeting consumers with least purchasing power, but the higher margin premium products remained mostly insulated from the demand slowdown.

While the situation is improving for both small grocery stores and the organized ones in cities and big towns with easing money supply, rural markets remain a concern. There was impact on demand and it was severe across consumer staples, considering that almost 90% of the sales traditionally happen across mom-and-pop stores. But a demand and consumption recovery phase is kicking in and banks are returning to a level of normalcy. However, demand recovery in rural markets will take more time as transactions have been almost entirely cash dependent.

Even December was looking up in terms of demand, though the challenges on rural markets persisted. Market researcher Nielsen confirmed the increasing consumer preference towards modern retail. With uncertainty over the availability of cash during November-December, modern trade shoppers took the opportunity to stock up, encouraged also by promotions and discounts from retailers and FMCG companies.