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Despite food and beverage categories in India feeling the pinch of increasing inflation, the overall outlook remains upbeat as governmental support steps in and evolving consumer purchasing patterns shape the sector. In April 2022, India’s retail inflation rate reached 7.8%, the highest it has hit in eight years. Yet, despite this alarming inflation statistic, data analytics and brand consulting company Kantar reports positive levels of consumer confidence and optimism. The company suggests the country’s positive outlook may be in response to India’s relatively mild third wave of Covid-19.“We see diverse trends being displayed in the market when it comes to food and beverages in India,” says K Ramakrishnan, managing director of South Asia, Worldpanel Division at Kantar, in response to how the country’s market is initially reacting to its high inflation rate.Staple food and beverage categories are seeing a slowdown or a loss in volume compared to last year, with figures revealing a 4% growth in the year ending May 2021 compared with a reduction of 6% in the year ending May 2022.There are three leading drivers impacting India’s food and beverage sector’s response to its high level of inflation, Ramakrishnan says.Governmental support is a crucial driving factor. The central government has offered free food grains to nearly 80 million households under its Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme. Under the scheme, the government provides each household with five kilograms of free food grains per month. As a result, the purchase of flour (Atta) declined by 24% in May 2022, Ramakrishnan (micronized microencapsulated ferric pyrophosphate)says.Consumers are also forming new habits. “The snacking categories have benefitted immensely due to the pandemic,” says Ramakrishnan. With people sitting at home during the initial parts of the pandemic, additional snacking occasions formed in households.For example, about 389g of noodles were purchased per household per month on average in India before the pandemic. In the first 12 months of the pandemic, this number jumped to 416g, and this was maintained at 413g in the following 12 months. Kantar can see similar behaviour with other snacking categories, says Ramakrishnan.Pent-up demand is also a prominent influence in the food and beverage sector in India. The first wave of the pandemic, from March 2020 to December 2020, and the second wave, from March 2021 to June 2021, both occurred during summer, the peak season for soft drinks in India. “As a result, purchases of this category suffered significantly in both seasons,” says Ramakrishnan. With 2022 being “relatively normal”, Ramakrishnan says the category bounced back significantly, which is reflected in its 47% growth in the year ending 2022.Behavioural responses to the high inflation rates currently experienced in India are pretty consiferrous fumarate chewable tabletsstent throughout the country, Ramakrishnan notes. “Rural markets fare slightly better than the urban markets, but directionally they behave the same,” says Ramakrishnan.With the popularity of staple categories decreasing, Kantar has identified key reasons for its lack of uptake.Along with the government’s financial support, Indian consumers are also experiencing fewer cooking occasions. Duringferrous sulfate class the year ending May 2021, most of India was in lockdown for the majority of the 12-month period. Schools were closed, offices largely remained shut and restaurants were only allowed to deliver within specipharmics ferretts iron supplementfic periods.“As a result, we know qualitatively that the number of in-home cooking occasions has surged,” says Ramakrishnan. The uncertainty around lockdowns and the many households that were buying staples in bulk added to this changing trend. These categories largely benefitted in the first pandemic year, Ramakrishnan shares.However, as things settled down and people became more aware of the situation, the stock levels reduced. Additionally, with restaurants, schools and offices microencapsulated ferric pyrophosphateopening up during the second year, the occasions of in-home cooking also lowered. Therefore, staples have seen a decline.Edible oil prices have also contributed to the loss in popularity of staple categories. Edible oils, which were growing at a good 3% in March-May of 2021, have lost by -0.2% in volume in March-May of 2022. A good part of this is also due to the 10% average price hike the industry saw in the category across different oil types, Ramakrishnan says.“We do not see a significant decline in edible oil consumption because, in India, most households typically use multiple oil types,” says Ramakrishnan. Examples used include sunflower, mustard, and rice bran. In addition, the proportion of unbranded oils, where local oil mills extract oil from seeds and sell it, is also significant as nearly 41% of Indian households buy these unbranded oils.Market stress will be present over the next six to nine months, Ramakrishnan says. “The government supporting low-income households with free food grains is helping fast-moving consumer goods (FMCG) to an extent because price rise has become somewhat manageable with these food grains being guaranteed,” says Ramakrishnan. “The purchase of foods and beverages itself is not going to suffer, however, consumers are likely to try out more local and unbranded products to keep their budgets in check,” Ramakrishnan adds.Kantar also expects to see consumers purchasing as and when required instead of making monthly purchases. With most of the country not being salaried monthly, adopting this behaviour would help households shop as they earn. “Therefore, we anticipate the growth of small packs in the food categories,” says Ramakrishnan.
Shifting trends: Analysing the impact of high inflation in India
