Consumption of food staples is slated to improve in the second half of the year with correction in prices of key commodities like edible oil, improved weather conditions, the upcoming festive season, and expectations of growth in rural demand on the back of a good harvest, Adani Wilmar CEO and MD Angshu Mallick said on Monday.
Mallick told FE that the inflationary trend has impacted the consumption of edible oils and other food products both in the packaged and unpacked segment. “Be it wheat or rice, there has been a de-growth. Edible oil consumption was down almost 7-8%. So, inflation has hit the monthly budget for all, rural markets were not supporting, the heatwave that hit this summer and coupled with high prices of edible oil, consumption was low,” he said.
However, going forward, Mallick said that as the prices have corrected, weather conditions have improved, agriculture looks good, and rural has started supporting to some extent, the second half looks positive. “We will see a growth in consumption in the second half of this year compared with the first half,” he said.
“The rural economy will possibly open up towards the end of the second quarter onwards as consumption picks up from October after the harvest, which is expected to be good this year. There is a positive sentiment, also reduction in prices will increase consumption, festivals will bring in more demand, and the second half of the year from July-December should definitely be better,” Mallick added.
Adani Wilmar announced a cut in MRP of varieties of oil by Rs 5- 30 a litre (2 – 15%). According to Mallick, there has been a nearly Rs 40-45 reduction in prices from April to June, amounting to almost 25% reduction in prices in the last three months.
While Mallick expects the prices to be stable at these levels, the impact of rupee depreciation will be a key watchout. “The weaker the rupee, the higher will be the costs. So, every Rs 1 change will make our imports costlier by almost Rs 1.50 paisa. So, if the market comes down, but the rupee weakens, the math changes,” he said.
“You may hedge 80-90% of your stock, but cannot hedge everything. In a falling market, we know it is going to fall. Now, at this price whether it is a good price to hold or not, we do not know,” he said. Meanwhile, he welcomed the levy of 5% GST on unbranded food items as it will lead to a level-playing field. He expects the branded packed staples market to rise to 25-30% from the current 8-10% levels as a result of this change.
“We feel that going forward, the branded staples business will now grow better. Competition will be healthy, and companies will try to give better quality to protect the interest of consumers in their brand. A huge market and only less than 10% of it branded surely provides a lot of scope,” he said.