Low purchasing power to impact food market: Britannia

NEW DELHI: FMCG major Britannia has warned of diminishing purchasing power and demand due to the economic circumstances, resulting in fundamental shifts in consumer behaviour, which it said would adversely impact the market for packaged food products. 

The company, in its annual report, released on Thursday, said migration to value for money options could lead to reduced growth and profitability for the company. The market leader in biscuits said broader trends in the economy are expected to have a direct impact on Britannia’s growth prospects as well. Inflation is expected to remain elevated for the foreseeable future, driven by war-induced commodity price increases and broadening price pressures, it said. 

“In addition, the anticipated increase in interest rates by central banks in the coming year are also expected to lower growth and exert pressure on economies, particularly those in emerging markets,” it said. Prices of household goods have increased with FMCG giants like Hindustan Unilever, Britannia, Tata Consumer Products, and Dabur increasing prices of their products - ranging from biscuits, sugar, salt, and tea/coffee to soaps, shampoos, and perfumes, among others. 

“In these circumstances, the ability to navigate cost pressures would have a bearing on the overall performance of the company,” Britannia said in the report. The inflationary pressures resulted in reduced consumer demand, especially in rural markets, as well as an increased preference for products at a lower price. As per a recent NielsenIQ report, FMCG sector volume fell 4.1% in Q4 FY22 from last year due to a fall in consumption across all zones and town classes, but more prominent in rural markets.