As FMCG Sales Pick Up, Analysts Say Recovery Could Be Short-Lived

As many companies struggle to recover from the coronavirus-triggered lockdown, a few are actually doing better. For Britannia, Nestle and Parle-G, the lockdown was positive, as the consumption of packaged food went up substantially with people staying at home.

"Yes, during the earlier days of lockdown, people bought Maggie and biscuits in bulk. The sales were twice. Now, it is normal," the owner of a kirana store in Mumbai told NDTV.

And the results can be seen in the balance books.

Parle-G's market share has increased by 5 per cent, according to company records. The biscuit maker said that was its highest growth in the past 3-4 decades.

Rival Britannia says the sales of bread, rusks and biscuits helped the company double its profit during the fiscal first quarter to Rs 545 crore on a year-on-year basis.

Britannia said it is even planning to invest Rs 700 crore in the next 2-3 years, since higher demand requires it to ramp up its operations.

Britannia's shares have risen 26.11 per cent so far this year, as against a 7.57 per cent decline in the benchmark Sensex index. 

Nielsen India, a data analytics firm, said FMCG sector is returning to the pre-COVID-19 era, with recovery in the sector driven by the traditional neighbourhood stores.

However, experts warn that this boom could be temporary.

"During the lockdown since people are indoors, the lowest common denominator snack has become biscuit. It is comfort food across segments, so yes, I would say green shoots for companies into essentials but not necessarily the non-essential segment, and that is something to watch out for," said FMCG analyst Harish Bijoor.