Mixed spread ahead for packaged-foods SMEs: CRISIL SME Tracker

Small and medium enterprises (SMEs), which make up almost three-fourths of India’s Rs -1 trillion-a-year packaged foods industry, are headed for a mixed bag in the current fiscal year.
 

The extended lockdown to stem the spread of the Covid-19 pandemic has disrupted supply chains and hampered factory operations due to the scarce availability of labour and restrictions on movement of goods across India, hurting SMEs more than large players.
 

While large players have been able to smooth down their supply chain issues over April and May, SMEs have found it challenging. Indeed, large players have been able to gain shelf-space and, consequently, market share amid the lockdown.

 

The industry’s five-year compound annual growth rate of 13-14 per cent was broken during the last fiscal year due to the delayed onset of monsoon and then floods, which impacted rural income growth.

In the current fiscal, however, the rural economy is expected to perform better than its urban counterpart, with agriculture being exempt from the lockdown and the monsoon expected to be normal and well-distributed. That is a good augury, considering that packaged foods have a fairly high penetration of about 60 per cent in rural India.

As a result, the overall industry is expected to grow by 10 per cent in the current fiscal year.
 

Among its various segments, biscuits, instant noodles and ready-to-eat products will log a faster pace of growth compared with traditional snacks, chips and cakes. Chocolates and bread should grow in line with the industry.