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    Surge in pent-up demand: Consumer, F&B companies see summer supplies drying up

    Synopsis

    The scorching summer and rapid rise in dining out at restaurants and bars have led to beer sales delivering a month-on-month pick-up in demand, but various factors have choked supplies.

    Consumer goods cos bet on a sweet and colourful HoliAgencies
    Representative Image
    Consumers are facing an unprecedented shortage of summer products - from soft drinks, to beer, ice-cream, and even air-conditioners - amid a surge in demand, the resumption of travel, holidays, offices, schools and dining out, and an intense heatwave across large parts of the country.

    Executives said companies had underestimated the surge in pent-up demand after the two-year pandemic-induced gap and they have been caught unawares, with demand exceeding supply. For categories such as air-conditioners, the shortfall is also because of supply disruptions.

    "Demand is exceeding supplies this summer because of pent-up demand and return of mobility and travel," said Ravi Jaipuria, chairman of Varun Beverages, PepsiCo's largest South Asia bottler. "We are adding manufacturing capacities but it takes time and the new capacities can be operational only next season."

    Coca-Cola said in its March quarter earnings statement that its India unit added 500 million incremental transactions, up nearly 20% year-on-year in the quarter. An executive at one of Coca-Cola's franchise bottling companies said: "We are operating at 100% capacity and are still unable to meet real-time demand."

    The scorching summer and rapid increase in dining out at restaurants and bars have led to beer sales delivering a month-on-month pick-up in demand, but various factors have choked supplies.

    Beer Cafe founder Rahul Singh said the early onset of summer has resulted in a spike in demand. "No significant capex was done in terms of capacity enhancement by brewers due to the pandemic, and there is a brewing timeline which cannot be reduced," he said.

    Falling-short


    'Volumes Higher than 2019 Levels'
    "On top of that, two important states of Delhi and Haryana have changed their excise year from April to June, which means there is further disruption as the additional process of annual label approvals delays the route to market for alco-beverage products," Singh said.

    West Bengal recently began rationing beer to retail outlets with demand doubling over summer last year.

    Most states have witnessed volume recovery and are looking to surpass pre-pandemic levels, said Rishi Pardal, managing director of United Breweries, India's largest beer maker.

    "Owing to peak summer demand, few states have also introduced local regulations on movement of goods inter-state which may impact fulfilment of demand in certain markets," Pardal said. "We are well-prepared to serve the market."

    The maker of Kingfisher beer reported record volume growth in the March quarter, despite gross margins contracting due to inflationary pressures.

    Gujarat Cooperative Milk Marketing Federation (GCMMF), the maker of Amul dairy products, has been unable to meet demand for ice-creams this season despite carts returning to city streets, said managing director RS Sodhi.

    "The supply constraints are specially true for impulse, out-of-home packs," he said. "Demand is at 40% higher levels over 2019."

    Popular Models Sold Out
    Appliance makers said there is a shortage of popular AC models such as one-tonne and 5-star units as well as chest freezers, with China's Covid lockdown leading to a component squeeze that's forced companies to cut production capacity by 20-30% despite all-time high demand, with sales up by over 50% this summer over 2019.

    "The short supply of inventory due to China lockdown has created supply challenges with several high-selling AC models almost sold out," said Godrej Appliances business head Kamal Nandi. "AC production is down to 70% despite the continuing demand in the north due to component supply issues."

    LG Electronics is not able to meet the high demand despite running production at 100%, said Deepak Bansal, India vice president, home appliances and AC business. "There has been unprecedented sales both for the heatwave and pent up demand of the last two summers lost due to lockdowns," he said.

    Stock Refilling
    Retailers said some in-demand products have been out of stock for about three weeks now.

    "We have limited supplies and stocks are not being replenished as quickly in sync with peak demand," a senior executive at a large supermarket chain said.

    Those in search of diet drinks have often been frustrated. "Stocks of low-sugar soft drinks, for example, are also not adequate," he said.


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