HUL sales to canteen stores drop post GST rollout

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Hindustan Unilever (HUL) has reduced its dependence on the canteen stores department (CSD) channel, which was among the major contributors to the overall revenues of the fast moving consumer goods (FMCG) company. The CSD channel, it is understood, has been facing operational challenges post the roll out of goods and services tax (GST) and hasn’t been regular in bulk buying from FMCG companies like it used to during the pre-GST days. Responding to a DNA Money query on the current scenario in the CSD channel, Sanjiv Mehta, chairman and managing director, Hindustan Unilever Ltd (HUL), said, “I don’t think we can say that it has stabilised. That’s because sometimes you see a high offtake of stocks and then the growth rate falls down. Our dependence on CSD has come down significantly in the last couple of years. It used to be earlier at 6.5% and has now come down to about 5%,” said Mehta.

For the full year i.e. fiscal ending March 31, 2019, HUL recorded net sales of Rs 37,660 crore. At 5%, the CSD channel has contributed to the tune of Rs 1,883 crore compared to Rs 2,447.9 crore when it accounted for 6.5% earlier, as stated by the HUL management. The single largest client for India’s consumer goods companies, CSD or Army Canteen has close to 600 business partners in the FMCG space and contributes between 5% and 7% to FMCG industry sales. The not-for-profit organisation currently owns more than 34 depots across India and sells about 5,000 stock keeping units of goods. According to reports, CSD clocked about Rs 9,500 crore in revenues in the first half of 2018-19 and is expecting to close the year with revenues exceeding Rs 18,000 crore.

The CSD channel, Mehta said, is an important client and will always remain so. The decline in sales is for various reasons including the fact that they (CSD management) would have put in more controls, or it could be related to the overall government budget allocation to the CSD. “What I’m saying is that those consumers have not vanished in thin air. Those sales would have shifted from CSD to other modern trade channels,” said Mehta.

Read More at: https://www.dnaindia.com/business/report-hul-sales-to-canteen-stores-drop-post-gst-rollout-2746375