Ajoy Chawla, chief executive officer, jewellery division, Titan, says jewellery players have seen significant stress over the past year due to a gold price spike, demand pressure, and restricted lending by non-banking financial companies and banks.
“After Covid-19, this pressure has intensified. Hence, only those players with a strong balance sheet can seek higher liquidity,” said Chawla. “This will favour organised players, especially those with low debt levels,” he added.
Size matters after Covid, as Chirag Sheth, senior research consultant, South Asia, at international bullion research firm Metal Focus, points out.
“Customers will avoid going to small stores which can accommodate only three to four persons as social distancing will be difficult,” he said. Even the paints business is changing. The unorganised sector, which constitutes 30 per cent of the market, is highly fragmented with over 3,000 paintmakers. “These players will not be able to do business easily in a post-Covid world, where hygiene and safety standards will increase substantially, pushing up costs,” said H M Bharuka, managing director, Kansai Nerolac Paints.
He says the other challenge is that organised players are now going deeper into Bharat, targeting Tier II, III, and IV markets, where small players are based. Within a few years, predicts Bharuka, their share may dwindle to around 20 per cent.
Similarly, the organised biscuit market is currently 65 per cent of the Rs 57,000-crore biscuit business. Mayank Shah, senior category head, Parle Products, expects the organised market to expand because consumers are increasingly opting for packaged and branded products.
In contrast, smaller players found it difficult to keep production and distribution going. Many of them will get out of the market in the next year, he said.
A similar trend can be seen in the Rs 14,000-crore juice market, where giants PepsiCo and Dabur India operate. Fifty per cent of the juice volumes come from out-of-home (OOH) market consumption, dominated by the unorganised sector.
Home consumption is an organised sector play.
But, according to senior executive of a juice MNC, “This 50-per cent unorganised OOH market has collapsed completely in Covid times, as juice centres were forced to close down. Even after they open, safety and hygiene will keep customers away. It’s a big opportunity for the organised players to move in.” In fact, this has already kicked off, with PepsiCo promoting Tropicana as an immunity booster in an ad campaign.
The financial impact of the lockdown
is forcing many small restaurants to close, prompting consolidation. The restaurant market is Rs 4.23 trillion in size. The share of the formal sector is 40 per cent; the informal sector is 60 per cent. When restaurants reopen, people will prefer to keep away from small eateries for fear their hygiene standards will be lower.
has taken a heavy toll on the informal sector and our estimate is that it will shrink to the extent of 30-35 per cent, which is very sharp,” said Anurag Katriar, president, NRAI. In daily foods, such as sugar and edible oils, the pandemic has also triggered changes in buying habits which favour organised players. Atul Chaturvedi, executive chairman of Shree Renuka Sugars, said more and more retail consumers or the direct-to-home segment (this is 40 per cent of the market and half is sold loose) prefer packaged sugar.
Whether this broad trend across industries is good remains to be seen.
Consolidation provides scale and makes companies more competitive, which is good news
for consumers. But the shrinking of the unorganised sector, which provides a significant amount of employment, could have serious job implications.