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Friday, November 27, 2020

Firms look to boost capacity as packaged foods fly off shelves

Consumers are pivoting to branded ready-to-eat snacks, prompting companies to ramp up production.

Packaged food companies are increasing capacity as heightened demand for packaged foods and a pivot by consumers from unbranded to branded products has helped lift sales of snacks, noodles, cookies, ready-to-eat foods, condiments and staples.

Branded packaged foods have benefited as consumers switched to known and popular brands following the coronavirus outbreak, said Manish Aggarwal, Director, Bikanervala Food, owner of Bikano. The company, which makes packaged sweets and savoury snacks, among other things, is adding a Rs 200 crore plant in Hyderabad to help expand its presence in the southern market. The company has five production facilities across India, including ones in New Delhi and Greater Noida, but the new plant will help reach more southern states. 

“We were covering northern India but from Hyderabad we plan to cover south too. The loss we suffered in the lockdown has been recovered completely and we are growing 20% compared to the year-ago period,” Aggarwal said.

Restaurants remaining shut during the initial phase of the lockdown prompted people to try various types of convenience foods such as pastas, noodles, ready-to-cook idlis, poha and oats. This was reflected in strong double-digit growth in foods reported by companies such as Marico, Hindustan Unilever, Nestle India, ITC and Britannia Industries.

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Last month, Nepal-based CG Corp Global, which makes Wai Wai noodles, said it is expanding capacity in four of its existing plants, which are located in Assam, Ajmer, Chittor and Purnia, a process that will take more than a year to complete. This will help the noodle maker increase its capacity for its India operations by about 35%.

“With convenience foods increasingly becoming a part of life, we as a company are carefully strategizing a holistic business approach to capitalize on this trend. We are commencing our capacity expansion plan with the Purnia factory,” said Binod Chaudhary, Chairman, CG Corp Global.

Most food companies, unlike other fast-moving consumer goods firms, benefited as in-home consumption spiked after the covid outbreak, though out-of-home and institutional sales slumped.

In-home consumption of rice increased by 1.5-2 kg per household during the lockdown, according to third-party data available with LT Foods, said the company, which sells the Daawat brand of packaged rice apart from organic staples. It has invested Rs 12-15 crore in increasing the capacity of packaging units for small packs of Daawat. 

“This year, we have invested in more packaging facilities in Europe, India and the US. We expanded packaging capacity in the consumer business, that is, our smaller packs (1-5 kg rice packs), which is 80% of our total business. It has grown by more than 20%,” said Ashwani Arora, MD and CEO.

Several companies have in the past few months announced plans to ramp up capacity. Late last month, Nestle said it is set to invest Rs 2,600 crore in India over three-to-four years to expand manufacturing capacities, apart from setting up a plant in Gujarat. For the September quarter, the company benefited from an increase in in-home consumption with brands such as Maggi, KitKat, Maggi sauces and its portfolio of coffee brands witnessing “double-digit” growth.

Britannia has signed an MoU with the Tamil Nadu government to increase its investment. Its portfolio of cookies, bread and dairy products remained in demand during the first half of the year.

SourceLive Mint
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