FMCG firms wait for small shops in cities to get back into business

Street sales and consumption of chocolates, ice-creams, cold beverages, chips and candies have slumped even as their in-house consumption picked up, as small shops remain closed and travel curbs continue amid a phased exit from the lockdown, fast-moving consumer goods (FMCG) industry executives said.

With kiosks and panwallahs still shut in several cities and schools and colleges closed for longer periods, purchases in these on-the-go categories will take some time to rebound, the executives said. For some food categories, out-of-home consumption in the country is 30-50%.

“About 30-40% of small shops remain shut in some cities. These are typically shops that sell candies, cigarettes, small packs of chips, and beverages. The demand for impulse categories will only come back to pre-covid levels once such shops resume business,” said Subhashis Basu, chief operating officer at Indore-based Prataap Snacks. Sales at the company, which sells the popular Yellow Diamond brand of chips, is back to 80-85% of pre-covid sales in June. A large part of this is the sales channels filling up with stocks after three months.

Prataap Snacks’ small packs of ₹5 and ₹10 chips sell heavily through small shops and are linked to impulse purchases or consumed out of home. However, in-home consumption of the company’s ₹20 and above price packs has picked up, Basu said.

Travel, an important sales channel, continues to be restricted despite the gradual reopening. Bars and pubs remain shut too. Schools and colleges will remain shut till the end of this month.

While on-the-go consumption saw a significant drop during the lockdown for beverage maker Parle Agro, which sells Frooti and Appy Fizz, the company expects the trend to continue into July. “The out of home or on-the-go consumption segment has seen a significant drop during the months of the lockdown. Similar patterns were seen among all consumer segments and not simply due to the closures of schools and colleges. The biggest drop was seen in April and May, when the strictest lockdown was imposed,” said Nadia Chauhan, joint managing director and CMO, Parle Agro.

She said that despite the easing of restrictions in June, consumers remained cautious. “Indicators imply there is a strong possibility of this trend continuing into July, thereby seeing a continued impact on impulse categories,” she said.

The company is now back to 60% of pre-covid retail coverage. “During the lockdown, we drove an aggressive strategy with our e-commerce partners, which resulted in us gaining a large market share on these platforms for our categories, especially for Frooti,” said Chauhan.

April to May sales at Perfetti Van Melle, the maker of Alpenliebe candies, were “adversely impacted”, though things are getting back on track as the country began unlocking in June.

“The footfall on the streets has been adversely impacted by the lockdown and this has a direct bearing on out-of-home consumption, especially for impulse categories. It is difficult to put a number to this, but during the lockdown period of March-end to May, many of the smaller shops and kiosks selling impulse categories were closed,” said Rajesh Ramakrishnan, managing director, Perfetti Van Melle India.

Rural markets were less impacted, Ramakrishnan said. As a result, sales were impacted, like any other impulse category, during April and May. “However, with the unlocking that started in early June, we have seen our business getting back on track,” he said.

Companies have quickly moved to fulfil demand for in-home pack sizes or family packs as demand for snacks, chocolates and beverages moves indoors. “One of our strategic intents has been to drive in-home stocking and in-home consumption. This is reflected in the launch of large pack sizes across brands such as Alpenliebe Juzt Jelly, Alpenliebe, and Chupa Chups,” Ramakrishnan said.