The demand for snack items is up, but can manufacturers keep up?
With restaurants shut and online food ordering not inspiring confidence yet, consumers are turning to comfort foods such as cakes, biscuits and ice-creams. For instance, Metro Cash & Carry witnessed more than 50% growth in the biscuits and snacks category, when the country entered its third phase of lockdown in May, as compared to the pre-Covid period. It also recorded an incremental demand for ice-creams and premium chocolates during the period. Amul, too, has seen an increase in demand for its chocolates, biscuits and Indian sweets.
Experts say the fact that these products are affordable has also fuelled the demand. “Historically, comfort foods have done well in times of crises, as they are small purchases, and don’t put a strain on the consumer’s pocket. These categories did well even during the 2008 recession, globally,” says Rajat Tuli, principal, Kearney. In fact, the consultancy firm’s consumer survey conducted in May suggests that 70% respondents intended to spend on indulgences, including food, going ahead.
Although the demand for these products is up significantly, FMCG companies are struggling with limited production capacity and supply chain hurdles.
Looking to indulge
Amul claims to have seen a record jump (30-40%) in the sales of chocolates and ras malai during the current period, and has also tied up with Swiggy and Zomato to deliver the same to customers. However, meeting the demand for ice-creams has been a sore point.
RS Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation, which manages brand Amul, says, “Though we have witnessed a demand for ice-creams and our family packs sold well wherever we made them available, the overall sales have declined as compared to last year. In March, we saw a fall of 95% over the corresponding period last year, but it improved marginally to 85% in April.”
Sodhi says Amul is facing issues with local authorities in a few locations, as they are not treating ice-cream under the essentials category, “even though the central government’s policy mentions that all food categories are to be considered as essentials”.
Amul has doubled its advertising spends in this period. The company has brought back its ads from the ‘90s and was airing them with reruns of Ramayan and Mahabharat on Doordarshan.
Mondelez India, which manufactures Cadbury Dairy Milk and Oreo, has also tied up with Swiggy and Dunzo. The company started servicing 400 hypermarkets directly, to reach out to consumers quicker, and has launched Oreo Jumbo, in 500 gm packs, so that consumers can store the product for a longer time.
“Consumers are now increasingly looking at ways to create experiences within the comfort of their homes. To ensure that our products reach consumers, we are trying our best to maintain good service levels, so that they continue to feature on the shelves of every retailer,” says a Mondelez India spokesperson.
Experts foresee further growth in these categories as economic activities resume and production stabilises. “Consumers might stem their big purchases for the foreseeable future, and they would need something to alleviate stress. Therefore, these categories might see further growth in the next two-three quarters,” says Tuli of Kearney.
He adds that companies could tap this opportunity by bringing down the prices of their products marginally, to make them more affordable, or by making them healthier without compromising on the taste.
Because the surge in demand for these products could be partially attributed to restaurants and movie theatres being unoperational, Devangshu Dutta, CEO, Third Eyesight, believes it is here to stay. “Since they are going to remain closed for some time, these brands will have to leverage e-commerce and traditional retail to further their reach,” he adds.