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Pandemic Challenges : Effect on Henna Industry due to COVID-19

Updated: Jan 31, 2022

Overview


RKS Henna Export House is an Indian-based company that are the manufacturers and exporters of Henna Powder, Henna Based Dyes, Indigo Powder, and various other herbal products. They manufacture henna products and then sell them in the domestic market as well export to around 40 countries worldwide. (RKS, 2020)


It is a company that comes under MSME category. MSME is one of the classifications by the Govt. of India for Businesses and the abbreviation stands for Micro, Small, and Medium Enterprises.


1. Nature of Impact

After the commencement of COVID-19 first wave in India, the country went under full lock-down and severely affected all the businesses including RKS Henna. In the first half of 2020, the company was not allowed to operate because the product did not come under the essential services as defined by the Government of India.


Slowly after the first wave, when the factory resumed its operations, the number of workers was allowed but only at 50% of the capacity. Although the production capacity had decreased surprisingly the demand for the products from the market had surged. (Gupta, 2022)


2. Impact of External Forces


i. Global Forces

After the disruption of the supply chain, post-pandemic, the availability of Cargo-containers had declined thus increasing the prices of sea freight by up to 443%. (UNCTAD, 2021). Due to these increased prices, the export orders with the company saw a huge fall leading to almost 10% of actual revenue as compared to the pre-COVID financial year i.e., 2019. (Gupta, 2022)


ii. Competitive Forces

Henna is a niche industry with not much competition. This acted as an advantage for RKS Henna. As an FMCG product, even when the customers were stranded in their homes because of restrictions and lockdowns, they still wanted to use henna to dye their hands or make henna tattoos. It is speculated to be the reason of the sudden surge in demand for Henna as soon as there were some relaxations post the first wave.


iii. Technological Forces

Ecommerce giants were still operating during the pandemic. Due to not keeping up with the digital world, RKS Henna Export House had to face the consequences of losing its loyal customers. Not all their products were readily available to the customers via eCommerce websites such as Amazon or Flipkart. This led to the customer to shift to other brands of the competitors. Although their major revenue is B2B driven, i.e. selling the products to wholesalers, they still had to incur minor losses. (Gupta, 2022)


iv. Political Forces

“India launched a new incentive scheme - compliant with World Trade Organization rules - to boost exports that will enable exporters to get a refund of taxes paid to the federal and state governments.” (Reuters, 2021) The crashing economy compelled the Government to increase the export-related subsidies and incentives in order to maximise exports. Increased exports can help boost the economy of any country, reducing trade deficits and strengthening the foreign reserve of the nation. The increased subsidies helped the exporters, including RKS Henna to great extent.


v. Economical Forces

As per a McKinsey report, Retailers and brands turned to promotions to bring in consumers and clear inventory. In an uncharacteristic move, several prestige brands offered discounts online of up to 40 percent, competing with specialty beauty-product and department stores to capture promotion-oriented consumers. (McKinsey, 2020) However, even after a great economic crash in a country like India, the henna industry fell moderately and fully bounced back by the end of 2021. (Gupta, 2022)



3. Handling COVID-19 Pandemic Differently


Beauty may be in the eye of the beholder, but there is little debate when it comes to the long-term attractiveness of the global beauty industry. Not only has it grown steadily, but it has also created generations of loyal consumers. (McKinsey, 2020) If given a chance, RKS Henna Export House could handle the consequences of COVID-19 related disruptions more effectively. Here are some key takeaways:



o Digital Presence: Depending on a single type of supply chain could be dangerous for small businesses. With the easy merchant onboarding process, any business could go live within minutes and start selling online.


o Stock Estimation: Having an idea of the future needs of required raw material for a business could help cut down the manufacturing. Pre-booking the raw material with the supplier when the prices are reasonable could avoid sudden fluctuations in the market. In the case of RKS Henna, examples of raw material include packing material, henna leaves, preservatives, etc.

o Government Relief Programs: Businesses should constantly monitor the governments' official websites and announcements during unprecedented times such as the COVID-19 pandemic. The support could be provided to the affected businesses in the form of relief grants, incentives, or subsidies, by their respective government bodies.




Bibliography

1. RKS. (2020). About Us. Retrieved 2022 January, from RKS Henna Export House: https://www.rkshenna.com

2. Gupta, N. (2022, January 26). General Interview Re: Affects of Pandemic on RKS Henna. (P. Jaswal, Interviewer)

3. UNCTAD. (2021, April 23). Shipping during COVID-19: Why container freight rates have surged. Retrieved from UNCTAD: https://unctad.org/news/shipping-during-covid-19-why-container-freight-rates-have-surged

4. Reuters. (2021, August 17). India to offer incentives to boost exports. Retrieved from Reuters: https://www.reuters.com/world/india/india-offer-incentives-boost-exports-2021-08-17/


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