India is among the countries worst hit by Covid-19 and trading in a market where retail remains dominated by traditional outlets remains challenging. Raghavendra Verma spoke to four food companies to get a flavour of the business environment.
Gujarat Cooperative Milk Marketing Federation
Gujarat Cooperative Milk Marketing Federation (GCMMF), the Indian food giant that owns the Amul dairy brand is to invest INR10bn over the next two years in new dairy plants and bakeries, indicating optimism about Indian post-Covid 19 food markets. Rupinder Singh Sodhi, GCMMF’s MD, tells just-food throughout the pandemic, the company’s sales have been growing consistently – and he expects a similar level of growth to continue.
“In the last six months, our consumer products [sales] have grown by 12-15% [year-on-year] and we foresee similar growth in next three to six months.
“This is despite the closure of India’s horeca sector [until June], which consumes 10-12% of our products. Household consumption has increased and there has been a shift towards Amul from other brands, as well as from unbranded products. For home cooking, people like to buy original products of good brands.
“Most of the Indian food market is unbranded and unpacked and, due to the safety issues [especially related to Covid-19], consumers have shifted to trustworthy and affordable brands.
Gujarat Cooperative Milk Marketing Federation MD Rupinder Singh Sodhi
“Recently [in August], we launched varieties of packaged fresh milk-based sweets, [competing with unbranded sweets] most of which are sold loose in small shops.
“Sales of cheese, paneer, ghee, chocolates and condensed milk have grown 30-40% during the lockdown. Two years ago, we opened a chocolate factory in Anand [in Gujarat state], which was supposed to take five years to reach full capacity, but we are already there and are now doubling its capacity. The market share we have gained in these items will be retained. We have also opened up new [retail] branches and have added more distributors in the small towns and villages with just five to 10,000 population.
“Ice cream sales suffered during the past six months as people were not often going out of their homes and were only buying essential products. But sales have started to rise again.
“A very strong horeca product, Amul fresh cream sales, also suffered badly. It is used in many north Indian dishes’ gravy and when the [horeca] sector re-opens fully there will definitely be a big increase in demand. This may include for paneer – vegetable variants have been widely used in restaurants, but we think some will choose quality dairy ingredients in future.
“Overall, our biggest advantage was we could make our products available without a single day of disruption. We got all the necessary permissions [to continue operating during lockdown from 24 March] on the same day.
“And in the last six months our [media] visibility has almost doubled as advertisement rates have fallen drastically and due to our increasing sales, our advertisement budget has gone up by 20%.”
Haldiram’s, a major north Indian packaged food manufacturer and restaurant chain offering over 700 vegetarian products, including snacks, still hopes to achieve some growth in sales in 2020 over the previous year, despite the Covid-19 epidemic. However, Gaurav Mahajan, head of marketing and sales for New Delhi-based Haldiram Snacks Pvt Ltd (a key company within the group, which also sells organic foods, ready-made-meals and runs restaurants), said the company was banking on the festival session in November to push its year-on-year turnover into positive territory, and was not sure it will deliver.
Gaurav Mahajan, head of marketing and sales for Haldiram Snacks
“The Diwali [festival] contributes to 13-14% of our volumes for the entire year. If it doesn’t go well, it will be very difficult to recover in the next six months.
“The winter months [that follow the festival] are anyway a lean period for most packaged food manufacturers. In north India, people shift from chips to piping hot and spicy snacks. With beer, you prefer hot chicken instead of nuts.
“The rising number of coronavirus cases [since early September] is affecting our supply chains. If one of our delivery boys gets infected, [related] distributors shut down their whole service for four to five days. Our sourcing [of raw materials] also got affected, though we are following very thorough testing and sampling procedures.
“Since early April, we [the Haldiram’s group] have registered slightly negative growth [year-on-year] and our restaurant business has been worst affected with a fall [in sales] of more than 50%. People [consumers] still don’t want to take chances and are therefore not visiting markets frequently enough.
“The home delivery orders [of prepared ready-made meals and packaged retail lines] have gone up but not managed [to compensate] the volumes that we used to get from our restaurants, which was huge. Before, we did not favour home deliveries of hot meals because our dishes taste best when they are consumed right away. But now we don’t have a choice.
“Snacking products are showing good demand but there has been a big dent in sales of small on-the-go packs that contributed 60% of sales volumes [before the pandemic]. The road-side shops, tourism spot stores and shops serving school and colleges are all still deserted. As this is going to continue for some time, we had to tweak the production lines to make more bigger pack sizes.
“The sales of ready-to-eat, premixes and microwavable products have grown 75%. Earlier they were used by travelling customers, but now people have also started consuming them at home. However, these products constitute not even 1% of our sales.
“The scenarios are very uncertain. At the end of the day it is people’s sentiments and their financial well-being that decide the market, and we don’t know how that will develop.”
Oliver Mirza, company managing director and CEO of Dr Oetker’s Indian arm
The popularity of sandwiches, burgers, pizzas and pasta during the Covid-19 lockdown in India has boosted local demand for German multinational Dr Oetker’s mayonnaise, sauces and spreads sold across the country since 1983. Oliver Mirza, managing director and CEO of Dr Oetker India told just-food in comparison to pre-Covid-19, demand for the company’s pizza sauces has doubled and for mayonnaise, it has increased by 65%.
“In June, we launched a 400 gramme mayonnaise pack exclusively for mom-and-pop-stores at an affordable price point [of INR99] to enable consumers to upgrade to a larger pack. We have also benefited from being an inventor of vegetarian mayonnaise [around 30% of Indians are vegetarian, with many avoiding eggs].
“This July, we invested US$1m in new machinery at our factory in Rajasthan to increase the overall production capacity from 35,000 tonnes to 50,000 annually. The capacity increase will mainly be used for pizza sauces. With consumers experimenting with food during the lockdown, the market for western food is expected to grow faster, and crisis situations always strengthen market shares of reputed brands.
“During the lockdown [which was eased in June] the difficulty in transporting goods, the prevailing mood of panic and conflicting government regulations were major challenges. Some of our planned launches were put on hold as our immediate objective was to normalise the supply chain and focus on the availability of key SKUs.
“The phased opening up of the economy has allowed for better stability in production, supply chain and sales distribution. We are optimistic that now we will be in a position to launch the new products.
“Our existing peanut butter has 91% peanuts and we will be launching an all-natural peanut butter with no additives [although no launch date has been released]. It will be purchased by the health-conscious consumers, like gym goers. As the gyms are now opening up, there will be demand for this product.
“[Looking ahead] during the lockdown, bakers sometimes forgot about pizza toppings, they focused only on the essentials and their essential is bread. Now bakeries have been selling pizza toppings again and we are looking for one or two new launches in the pizza pasta sauce category…they are still under development.
“While we are seeing growth in retail with our products available at 100,000 outlets, our professional business witnessed zero revenues during the lockdown as the horeca channel was non-functional.
“[With food services restarting work from June] we are supplying pizza sauces to companies including Pizza Hut and to Domino’s, but they need six months to recover to where they were before the lockdown.
“Due to the pandemic, e-commerce and e-grocers have emerged as a force to reckon with. We are working on expanding our presence there and in the next one year we plan to double our sales from e-commerce. However, we foresee a single-digit growth in 2020 overall.”
Rasna chairman Piruz Khambatta
Surging 300% to 400% year-on-year growth in e-commerce sales and the manufacturing of non-food products respectively is helping Ahmedabad, Gujarat-based juices, snacks and pickle manufacturer Rasna, to overcome the present crisis. However, Piruz Khambatta, chairman of the company – and the Confederation of Indian Industry’s national committee on food processing – says amid a slowdown in physical retail food sales, Rasna is watching and waiting, holding off from new investment or significant recruitment.
“We had been hoping that by Diwali [the Hindu festival on 14 November] things would light up with increased consumer confidence, but now that seems unlikely. The biggest challenge is consumers are only buying minimum essential products. There are also continuing problems relating to supply chain – transportation and distribution.
“There are many branded food companies that are functioning only at 30-40% of their production capacity as the sales of premium products are down. These days, who wants to buy jelly candy products or a chocolate with a toy inside?
“Imported [food] products are also not coming to the market as people [retailers] are hesitant to make new investments. We don’t believe business will be back to normal in next six months or at least until there is a medical solution for Covid-19, which is basically a vaccine.
“During the lockdown, we, as well as many other food companies started making [hand] sanitisers just to keep our supply chain active. We had to cover the logistics cost of [distribution] depots, transportation and labour. The crisis has taught us companies should diversify their product range, but unless you have some core competence or bring some added-value proposition to the market, this would not work. Already [before Covid-19], nine out of ten new product launches in the food industry fail, so there is no confidence to invest now.
“In the long term, there is going to be [sales] growth in the wellness category products. So, after Covid-19 [is over], we will forget about sanitisers but other new strategic launches like honey. Rasna Native Haat Honey Vita – a malt-based beverage food mix and glucose power [launched in 2018] – is going to stay with us forever. We have 64 SKUs, so we can play around and juggle here and there, adjusting sales strategies depending on the new market.
“Furthermore, recently the government has opened up huge avenues for the food processing companies through the new farming laws, which allow us to procure directly from the farmers. It can give us better produce, better realisation [of resources] and more importantly better and cheaper products for the customers.
“A lot of companies will now be putting up new [food] processing facilities and looking at introducing new farm-oriented products such as frozen peas. We are also developing a separate vertical [department] on that and working on something new [on direct farm procurement and food processing]. We have to imagine that Covid-19 will go away one day and plan accordingly.”