With India and Indians opening up, food companies see demand drop

Leading food companies ITC, Britannia and Parle are facing a reversal of the record high demand between April and June when most Indians hunkered down in their homes due to coronavirus-related restrictions as sales growth tapered from August.

Since April, there has been a surge in demand as consumers filled their grocery carts with many companies ramping up production capacities to meet increased sales. However, marketers said consumers who recoiled from restaurant food earlier have increasingly started ordering on food delivery apps such as Swiggy and Zomato. Also, hotels, restaurants and caterers, popularly called HoReCa, that account for a large chunk of sales for food and beverages companies that were shut earlier are now opening up.

"People are fed up with cooking now. Constrained by time, they are going back with a vengeance to their usual self of ordering food,” said Krishnarao Buddha, senior category head at Parle Products, the country's biggest food company.
While demand for their products - biscuits, noodles, snacks and ready to eat products - are still higher than non-food categories such as personal and home products, companies said growth has nearly halved, as consumers no longer load their pantries with food brands.

“While there was an unprecedented surge in demand during the lockdown, the demand for biscuits has moderated over time to pre lockdown days with availability expanding, shops reopening as well as supply chain disruptions getting resolved.” said Hemant Malik, divisional chief executive - foods division, ITC Ltd. The FMCG major added that demand for food brands like Sunfeast biscuits however, continues to be at elevated levels.

In the June quarter, Britannia Industries posted its highest growth in eight years. The maker of Good Day and Tiger biscuits said it's difficult to gauge demand now.

“The trend of increased in-home consumption will certainly taper down over the coming months as things start to come back to normal,” Varun Berry, managing director of Wadia Group’s Britannia, told ET early in September. “No one can predict with any level of accuracy on the demand situation beyond a point, as the soft economy will result in overall softening in demand parameters,” Berry had said.

Retailers said segments such as frozen food and hot beverages continue to do well, but staples including atta, rice, dal, ghee and spices have come down to pre-Covid level.

“The hoarding mind-set we saw between April-June is disappearing in the second quarter,” said Arvind Mediratta, managing director, Metro Cash & Carry India. “When the Horeca sector shuts down, there is a big demand in in-home consumption. As Horeca is reopening in the country, consumption of these categories is slowing down.”

The growth in packaged food is still significantly higher, especially for online grocers, who are seeing a widening of the consumer basket as more Indians take up home cooking. “The average bill value has been increasing with customers expanding the range of products from basic essentials. Our assortment size was also restricted to essentials of 3000 products in April, which has now increased ten times,” said Seshu Kumar, national head - buying and merchandising, BigBasket.

Albinder Dhindsa, cofounder of Grofers, said high demand of the last quarter has now stabilised at 30% higher than pre-Covid levels.