HORECA reliant small & medium FMCG manufacturers see business drop by 40-50%

The hospitality and catering segment is perhaps going to be the last to recover from the impact of the pandemic. The HORECA segment, as it is called, has traditionally been a significant revenue generator for not only large FMCG companies but also for the small and medium enterprises. These SMEs have seen business shrink by 40-50 percent, said sources. This has been because these SMEs have been heavily reliant on the HORECA segment. These players are those that supply atta, sugar, cookies to hotels, cafes and restaurants.

"We had expanded and aligned capacity to the orders we were getting from the hospitality industry. Now, business is just 20-30 percent of what it used to be earlier. We have a lot of spare capacity which has been put to no use," said an SME into cookies manufacturing.

Even food delivery and take-outs which have been permitted so far are seeing few takers.

"The industry is struggling. We are seeing only 20-30 percent of normal orders via delivery or take-outs. Therefore our procurement and inventory have gone down significantly," said a restauranteur.

FMCG companies too have temporarily halted manufacturing lines for bulk packaging.

"We have halted production for 15 kg, 20kg and 40 kg packs have been because demand from institutions is very low. This used to be a high volume, low margin business but at this rate it is unsustainable," said an industry official.

The cash and carry segment too is feeling the impact of low demand from the HORECA industry.

"We saw a 24 percent decline in sales of HORECA segment during the COVID-19 period. Footfalls and frequency from the HORECA segment increased but the average invoice value has gone down," said LOTS Wholesale Solutions in a response to CNBC-TV18.

"Sales have now started picking up and has reached over 70 percent of the pre-COVID level," it said. Most of the cash and carry players had been seeing a 10 percent YOY growth from this category.

"We at METRO have been reinventing and restructuring our strategies in real-time to adapt to our customer needs. We tied up with the government, defence services and few hospitals, as well as partnered with online food aggregator and logistics companies to supply inventories to HoReCa during the lockdown phase," said Arvind Mediratta, MD & CEO, METRO Cash & Carry India.

"We hope for the sector to rebound in the next six months. However, it may take a year to reach the pre-COVID level of business," he added.