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“FMCG brands facing challenges as a result of inflation”
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Monday, 26 December, 2022, 08 : 00 AM [IST]
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 With a product range focused on consumer holistic health and well-being, Pansari Group offers a range of edible oils, specialty rice & flour products and instant Indian mixes in North India. Founded in 1940, from the start, they wanted to make cooking a seamless and easy process for everyone. Recently, the brand has started working to build a totally new business model by getting into the HoReCa (Hotel, Restaurant, Cafe) segment and currently the company is focusing on diversifying geographically to build a network for their HoReCa products.
In an email interaction with Ashwani Maindola, Shammi Agarwal, director, Pansari Group details out the plans for the company. Excerpts:
What are the Inflation struggles in the FMCG business in the HoReCa sector? How are they affecting your company?
Inflation has always been a subject of concern, and FMGG business is the fourth prominent sector of the economy, so it's evident that in some way it's going to be negatively impacted. Furthermore, in the past few months, the cost of FMCG at retail in India has been increasing at an astonishing scale. Due to rising food and energy prices, retail inflation in India reached a 17-month high of 6.95% in March 2022. In April 2022, it increased to an even higher 7.8%. The Consumer Food Price Index (CFPI) has dramatically increased as a result of rising food prices. Due to the continuous global rally in energy, fuel, and food prices brought on by the conflict in Ukraine, the problem with Indonesian palm oil, and the subprime wheat production in India's wheat belt, the markets are unable to forecast stability in these statistics. In order to stop the nation's grain costs from soaring, the Union government just announced a complete exporting restriction.
FMCG brands are facing challenges as a result of inflation. As the price hikes due to inflation, the demand and supply for the product surge in the same volume, which negatively impacts the working capital. Thus, it's difficult to predict the next five years. We need to concentrate on growth this time and redesign models by customer demands. At the same time, it's fascinating to observe how the digital explosion has shaped consumer behaviour patterns.
How has HoReCa's increased raw material and procurement cost impacted the business?
Due to inflation, the current market conditions are increasing the cost of a wide variety of raw materials; as a result, purchasers are being inundated with price hikes for a variety of different products. The cost of raw materials is going higher, putting manufacturers in a difficult position that will have repercussions throughout their supply chains.
Albeit the situation was volatile and challenging, assembling information from forecasting with a chosen hedging strategy, we diminished the risk of unfavourable price changes.
Forecasting and hedging are required based on variable demand and permanent demand. We hedge in seasons in order to maintain the supply chain and by blocking the permanent demand we lower the procurement cost.
Thus, we adopted strategies to make it less jarring, such as procuring raw materials from local vendors that helped us keep the supply chain in motion, which resulted in a reduction in the procurement cost of raw materials.
With the high consumption pattern in the HoReCa sector, how are you managing the supply chain and inventory management?
If we want to have a larger consumer play, which necessitates that we enter numerous categories, we will need a lot of SKUs and market segments. The branded game presents a chance for financial gain even though bulk commerce is dependent on volume. We would prefer to concentrate on dry spices for at least the next six months before adding wet gravies, syrups, and the like. Our research and development (R&D) staff, hedging and forecasting, on the other hand, is ready to offer solutions in response to demand.
In R&D we are working on customised solutions and our R&D staff is supporting the HoReCa sector to maintain the inventory, for instance. Since HoReCa requires four courses to maintain an inventory instead, our R&D team is generating four courses for the HoReCa sector in order to sustain their inventory.
By combining forecasting data with a hedging strategy, we reduced the chance of unfavourable price fluctuations and sustain the supply-demand.
How do you keep up with the changing policies that have come into place after Covid-19?
During Covid-19, we all witnessed an alarming shortage of medicine and other healthcare paraphernalia, and doctors stressed eating healthily and maintaining an active lifestyle in the comfort of our homes. Taking care of our eating habits and transforming our sedentary lifestyle was the only hope at that time, and post-Covid-19 people actively started to look for healthy food alternatives, by keeping that in mind we provide substitutes for health-conscious consumers who want to eat quality health food which consume less time to prepare in the kitchen as they would if they cooked from scratch. We are becoming the preferred alternative for many Indian families as a result of the pandemic's increased focus on health. For decades, we have provided consumers with a wide variety of healthier options, from edible oils to fast mixes of ragi and multigrain.
What are your expansion plans and what will be your marketing strategies to support this expansion?
Our main goal will be to set one of our branded products apart from the competition. At first, refined vegetable oil, rice, flour, spices, and cereals were all sold under the Pansari brand. Consumers were enticed by a wider selection of high-quality products offered at prices that were lower than those offered by competitors, while retailers were lured by large profits. In terms of our plans' expansion, we are focusing on North India, which involves the states of Delhi and the National Capital Region (NCR), Punjab, Uttar Pradesh, and Uttarakhand. To better serve the demands of our HoReCa consumers, we are currently establishing a hybrid channel of distribution and are seriously considering expanding into the South. We recently commenced our business in Mumbai, targeting different geographical areas. We will have a well-established supply chain network for our retail operations across India.
We aim to expand our business globally and have our name known all over the world. Overall performance-wise, our company is expanding at a very good rate.
With location-based services on the rise, will your business adjust to the changing industry trend? (B2C to B2B)
With the multitude of location-based services in the retail industry, and the growing significance of location-based services, we are planning to open depots in Gujarat and Mumbai in order to sustain the supply-chain.
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