The company said the distribution value chain, consisting of direct distributors, super-stockists, and sub-distributors, carried a total inventory of Rs 40.69 crore, as per data from its distribution management system. This is against the quoted figure of Rs 300 crore of near-expiry inventory by the body.
“As part of the General Trade Distribution transition under Project Neev, we have removed the 2-layered channel partner structure of super-stockists and sub-distributors from Top-50 cities, and are setting up a single-layered distributor structure. We have implemented this single-layered structure across 70% of these cities, through the appointment of new direct distributors,” the company clarified in a filing.
The company undertook a massive transition exercise for its general trade strategy—through which it is moving away from the super-stockist model it has currently deployed to direct distributors. Due to this, the company took a beating in the September quarter, reporting a net loss of Rs 19 crore and a 7% on-year drop in operating revenue.
“The impact (of the restructuring) was higher than what we had planned and expected. We initially had certain assumptions in place, which were based on a certain level of inventory but as we reached the execution stage, it turned out to be relatively higher,” chief executive officer Varun Alagh had told ET in an interaction.
Honasa Consumer’s stock has since fallen over 30%, wiping off over $400 million of its market capitalisation.
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