India’s big industries holding Coca-cola, Colgate and Unilever claimed demonetization for declining their sales that might take time to rebound before the intended benefits of the federal move that is appearing to the global consumer goods giants operating in the world’s fast expanding major economy.
The demonetization drive towards a less-cash economy will undoubtedly help organized-sector in the long term but companies recognized the decline in sales to the provisional loss of purchasing power in a country where 86 percent of the circulated cash ceased to be legal tender.
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CEO of GlaxoSmithKline, Andrew Witty said, “The demonetisation issue certainly affected us very significantly toward the end of the year.
We would expect that to probably take a couple more months to play through. We think in the long run, it’s a positive for India. But it’s definitely disruptive in the short run.
And no question, we’ve seen that effect. A lot of our Horlicks business is distributed and consumed at a very low level of the income pyramid, which essentially don’t have bank accounts or credit cards, and they don’t historically deal in big high-value rupee notes.” Consumer goods’ demand declined by a third in the subsequent two months after revival in the sales during October.
The transitory loss in purchasing power has caused consumer companies to book fall between 1 percent and 9 percent in December quarter sales in India where more than 98 percent transactions were in form of cash before scrapping of the currencies at November 8.
As per the Nielsen, about 1.5 percent of net sales could be affected fast moving consumer goods of the Rs 2.5 lakh-crore market which exercises to Rs 3,840 crore.
James Quincey, CEO of Coca-Cola said, “Demonetization effectively drained liquidity. I don’t think that’s about price elasticity, I think that’s about the current shock to the circulation and liquidity.”