Business for food and grocery retailers returned to pre-covid level from 3QFY21 post temporary headwinds in 1HFY21 as consumers continued to shop for essentials.
NEW DELHI: Domestic organised food and grocery retailers will likely report a 10% year-on-year growth in FY22, as per India Ratings and Research (Ind-Ra), with organised retailers and e-commerce likely to benefit from continued demand for essentials.
In FY21, Ind-Ra expects the food and grocery retailers to report flattish or a moderate growth in revenues.
“EBITDA margins are expected to remain under pressure in FY21 due to the subdued sales of the margin-accretive non-food categories such as general merchandise. Margins are expected to bounce back to pre-covid levels in FY22 with a gradual recovery in the sales of these categories," analysts at India Ratings and Research said in a note on Wednesday.
It, however, expects consolidation in the food and grocery segment and competition to remain fierce.
Several large companies including Reliance-backed JioMart, Amazon, and Tata group are gearing up to draw a bigger share of the country’s organised food and grocery retail market—also the largest within the country’s retail trade.
Competition is likely to remain fierce with consolidation in domestic retail and rapid growth of the e-commerce industry, which received a significant boost in FY21, according to the research note.
"While retailers have been pushing omni-channel offerings for the past few years, the pandemic has accelerated digital transformation forcing retailers to invest more rapidly in their omnichannel offerings. Grocery, which has lagged retail generally in e-commerce penetration, saw significant omnichannel interest in FY21, including delivery and in-store or curbside pickup of online order," it said.
Researcher Nielsen too reported a jump in share of online sales for fast moving consumer goods makers; meanwhile, top FMCG companies such as Nestle India, Marico, Hindustan Unilever Ltd and others reported significant gains in the channel. However, share of e-commerce for FMCG still rests at single digits, with traditional trade cornering the bulk of the households spends within the category.
The report said business for food and grocery retailers returned to pre-covid level from 3QFY21 post temporary headwinds in 1HFY21 as consumers continued to shop for essentials.
However, it did observe that not all food and grocery retailers benefitted from a surge in demand for essentials.
While kirana and e-commerce retailers did better, some large-format chains faced headwinds due to restrictions last year.
“The impact has been disproportionate across the course of the pandemic. Large format stores were more severely affected at the beginning of the lockdown due to restricted store operations and lower footfalls, as consumers preferred nearby small format and local kirana stores for purchases. Inventory availability, which took a hit during initial months of the lockdown due to pent-up demand for essential grocery items, has normalised with the resolution of supply chain issues. With the disruptions of the lockdown behind, Ind-Ra expects a stable performance in FY22 for F&G retailers," it said.