ET Now: What is your outlook on the at home or in home consumption in terms of making a strong demand. There is this clear second wave of the virus that we are seeing. Are there signs of speculative buying?
Mayank Shah: Yes, there would be. We are seeing the patterns that we saw last year in the early part of the lockdown. The initial response that we are seeing from the market, signs we were getting over a period of last one week also suggests the same that people have increased the speculative buying not to the tune of what it was last year because now people know that the stores would be open. Speculative buying would be more from a point of view of not stepping out and not really non-availability which was the case last time.
I think everybody has learnt– right from government to all the player companies– how to manage supply chains during this kind of situation and they are putting it to practice right now. So if you look at the movement of goods that is completely exempted from the lockdown, it is helping ensure consumers that stocks would be available at any given point in time. So yes, there is some amount of speculative buying and pantry loading happening right now, but that is more from a point of view of not stepping out and remaining absolutely safe staying home.
ET Now: With the cases on the rise and restrictions due to the lockdown put in place, are there any challenges when it comes to the supply distribution chain currently and what percentage of your sales comes from Maharashtra?
Mayank Shah: So the first part as I shared earlier I think everybody has learnt, government has learnt from their experience of last year, players have learnt, as a result of that thankfully there are no SCM or supply chain management challenges which are there right now. The flow of goods is pretty normal unlike last year where there was disruption in servicing retailers. There might be some stray incidences but broadly speaking if you look at larger picture there are hardly any disruptions which are happening in making the stocks available at the end point which is the retailer or to the consumer.
Coming to the second part, Maharashtra definitely is one of the important markets for the category. In fact, for most categories I think including our category, it is among the top five contributing states and as a result of that any sort of lockdown in Maharashtra would definitely have some kind of impact on the sales of the category.
ET Now: When we first saw the lockdown, we actually saw strong growth in the biscuit segment and then it normalised. When it comes to demand trends for Q4 what are you now anticipating, how are they already looking and what are you factoring in?
Mayank Shah: We expect the strong growth to continue, in fact throughout the last year, we have seen good growth coming in for all processed food segments and we anticipate the same will continue. Last year, the third and fourth quarter of the last financial year –the growth had tapered a little bit which we expect now to pick up as a result of the current situation. Processed food definitely gets some kind of benefit because of its longer shelf life and because of it being conducive to store at home.
Consumers typically store processed food at home, they load it a little more and once you buy it, it anyways gets consumed. It was a challenge ahead of most players to replicate the kind of growth that they saw in the first quarter last year. I think with the current situation, they would be able to further grow on that higher base so that base effect which most processed food players were worried about will no longer be a cause for worry. The growth would continue to be strong and in fact with the current situation, there would be a good amount of growth coming in processed food.
ET Now: On input costs as well– if you could share any updates with us, sugar is also up, wheat is up, any price hikes in the offing, would this be not the best time, what are you planning on that front?
Mayank Shah: We have been facing that challenge for about four months now, the edible oil has shot up, it has gone up by almost 2x than what it was probably about eight months, a year back- so that challenge remains. Sugar has gone up, wheat flour has gone up –so, the biggest challenge that is ahead of most processed food players is managing their cost. And currently, almost everybody is in a dilemma on whether they should be taking the prices up or they should be absorbing the input cost increase in input cost. I think the sense that we are getting right now is that most players in the industry are of the opinion of not trading off their growth and demand with any kind of price hike because any kind of price hike right now would definitely have an implication on demand.
Even in normal situation it is there, but currently given the situation of finances of most consumers, I think this is the most unlikely time to take a price hike. So, most players are currently absorbing the input cost increase and not passing it off to the consumers. I think they will try to retain their prices as far as possible. If the input prices do not cool in the near future, let us say in the next two or three months then maybe companies may look at taking the price hike but currently most players are not looking at taking a price hike because most of them are interested in ensuring that they grow.
Add to it, as I shared earlier, the high base of first quarter which was there in the last year, having a growth on that itself was a challenge and if you take a price hike then I think it would really be detrimental to get good growth in the first quarter, it would become very-very challenging. So given that situation I think most players are really trying and postponing any sort of price hike right now.