Losing fizz: Softdrink industry revenues unlikely to regain pre-pandemic level in FY22

By: |
May 21, 2021 2:58 PM

The revenues, which were impacted by a fifth in FY21 because of the national lockdown in the peak summer season, will still be 10 per cent lower than the pre-pandemic levels in FY22, Crisil Ratings said in the report.

coca colaDemand for high-margin carbonated soft drinks (CSD), which forms two-thirds of the beverage portfolio of players, was impacted less during lockdowns compared with juices and bottled water

Revenues of softdrink majors like Pepsi and Coca Cola are unlikely to regain the levels seen before the pandemic struck as the second wave will impact consumption for the second consecutive summer, a report said on Friday.

The revenues, which were impacted by a fifth in FY21 because of the national lockdown in the peak summer season, will still be 10 per cent lower than the pre-pandemic levels in FY22, Crisil Ratings said in the report.

The non-alcoholic beverages industry is led by American cola giants Pepsi and Coca-Cola, who control over 80 per cent of the market, it said.

”Last fiscal, a strict nationwide lockdown and subsequent restrictions over April-September severely affected peak season demand as summer months alone account for two-thirds of annual cola sales. A redux looms now,” the agency said.

Its director Nitesh Jain said sales volumes will be adversely impacted in the peak season once again due to localised lockdowns and other restrictions to contain the second wave of the pandemic.

Consumption of the beverages at places outside the home, like hotels, restaurants and cafes, which constitutes up to a fourth of overall sales will be impacted in the first quarter, he said.

”Though these restrictions are staggered across regions and are less stringent this time around, full-year revenue may still be 10 per cent below pre-pandemic levels,” Jain added. However, operating profits may be more resilient, driven by continuation of cost-control measures and improving product mix, the agency said, adding this will also ensure that the credit profiles of the players are resilient.

Demand for high-margin carbonated soft drinks (CSD), which forms two-thirds of the beverage portfolio of players, was impacted less during lockdowns compared with juices and bottled water. This is due to higher in-home consumption of CSD, driven by increasing access to refrigeration, it said.

Its associate director Rohan Kulshrestha pegged the operating profits at 7 per cent lower than the pre-pandemic levels, as against the 10 per cent lower revenues.

The analysis assumes decline in demand by a fifth in the first quarter of this fiscal. Recovery is expected from the second quarter with the surge in number of cases and consequent lockdowns peaking in June, and the pace of vaccination also picking up, the agency said.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1RBI NPA recognition norms: MSME loans by NBFCs will be one of the most impacted segments, says Crisil
2Spectrum costs will drive up debt for some Asia-Pacific telcos: Moody’s
3NBFCs AUM likely to grow 8-10% in FY’23: Report