Since the beginning of the lockdown, demand for snack products has surged.

A super market aisle stacked with biscuits and snacksImage Credit: Picxy.com/sriraghuphotography
Money Consumer Goods Wednesday, May 13, 2020 - 11:13

Your favourite biscuits, packet of chips, or instant noodles could soon become harder to find as stocks deplete rapidly amid increased demand and limited production.

Panic ensued when the first phase of the lockdown began, shelves of stores were empty, even groceries were often hard to find — thanks to panic buying and hoarding. While things began to ease as confusion cleared and stocks moved, people continued to buy more than usual, anticipating extended lockdowns. 

As a result of this, biscuits and snacks could potentially start reducing on shelves again. This is mainly because companies are currently running on limited staff, partial production and not enough trucks are able to run.

Dhairyashil Patil, the National President of the All India Consumer Products Distributors' Federation (AICPDF) said that some shortages can be seen in staple food, noodles and biscuits due to a fall in manufacturing. 

“No company is at 100% production. They are not even at 70%. The availability of stocks from the company godown, and from there to the distributor is less. If we ask for 100 boxes, we get 15-20 boxes. Only 20-30% is being supplied and the rotation is not much. Transportation isn’t freely available,” he says. 

In addition to this, restrictions in transiting goods interstate is also proving as an additional hurdle for distributors. 

The situation eased over the last 50 days because of stock in the pipeline that was already present, according to Dhairyashil.

“Distributors had stock for 20-25 days, companies had 10-15 days of stock, retail markets had 10-15 days of stock, so everything went smoothly till now. Now, some products have gone out of stock,” he says.

People are cooped up at home and are snacking more than before. In addition to that, avenues to spend have drastically decreased. Companies such as Parle and ITC have said that they have seen a surge in demand for biscuits and snacks. 

Mayank Shah, Category Head at Parle, agrees that demand has gone up, and the company’s overall manufacturing has reduced. According to him, they were able to open their factories just a few days after the lockdown began and have been able to distribute to all markets. 

Parle G is almost a staple, he says. “In the current scenario, biscuits are a format that lends itself beautifully for stocking or consumption. People normally stock up on biscuits. Typically, if we talk about pantry loading in times like this, biscuits are the best possible option that one can look at,” he adds. 

Same is the case with ITC as well. Hemant Malik, the Divisional Chief Executive of the Foods Division, said that Sunfeast biscuits and YiPPee! noodles have been flying off the shelves across the country, even as the company has been facing supply chain bottlenecks like transportation hurdles and labour shortage.

While demand has gone up, Mayank says due to the restrictions on manpower in factories, they haven’t been able to produce more than 60-65% of the demand and will be able to ramp up as things open up.

“People now tend to buy more readymade things, and biscuits are one of the major purchases. The demand for biscuits has gone up almost by about 50-60%. On the other hand, the demand has gone up but there are still some supply restrictions or disruptions in terms of logistics and other things. Each time you go out, you may not find whatever you want available. Whenever you get biscuits, you buy a little more than what you require,” he adds. 

CG Foods, the maker of Wai Wai noodles, said that their plants are operating at 50% and that they are “battling supply constraints continuing with the struggle to meet market demand.” It said that demand for packaged foods and snacks has picked up in the last five weeks, and the company has been able to supply 50% of the average.  

In addition to this, companies have also seen a gradual increase in the cost of raw material. 

“With our traditional supply chains being hampered, we are breaking away from the traditional routes and looking at new strategies to ensure continued supply,” Varun Chaudhary, executive director of CG Corp Global said. For this, the company says it has tie-ups with e-commerce platforms. 

However, distributors claim that companies are shifting towards premium products in a bid to clock higher margins and make more money.

“Companies are misguiding the government and the consumer. They want to manufacture premium products in the name of essential commodities. They want to make money. The premium products which are manufactured with the same raw material. However, they are focussing on the more profitable products. To open factories and to get permissions, they are saying that they are essential commodity manufacturers,” CH Krishna, chairman of the Federation of All India Distributors Associations says.

Consumer companies have also been directly tying up with e-commerce companies, which hasn’t gone down too well with distributors, especially at a time when people have struggled to get things online and have turned to their neighbourhood stores. 

“Distributors are ready to cater to the nation with the available products. But, manufacturers are ignoring the distribution network and they are encouraging e-commerce because of pressure from multiple countries,” CH Krishna adds.

Despite the massive gap between supply and demand, Dhairyashil says that most distributors have commenced operations in orange and green zones. This is expected to get better as and when the lockdown is further eased.

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