FMCG cos ramp up capacity to cater to elevated demand

With consumers preferring to purchase more packaged food in light of the pandemic, India's FMCG companies are working on ramping up manufacturing to cater to this surge in demand.

Most FMCG companies have started moving towards adding 15-20 percent additional capacity. Companies are looking at a combination of ways to scale up this capacity - either looking to add new lines in existing units or an addition of new facilities.

"There is an expectation that demand in certain categories will remain elevated. We had been contracting third parties for manufacturing for the last few months. We would prefer if we could scale up our own capacity if there is demand potential," said an industry official. Categories such as biscuits, honey, ready to eats, sauces & dips and health & nutrition products are expected to see high demand levels sustain.

"What we need to do is, we need to add lines over a period of time to scale up capacity. The infrastructure is there. So there is an incremental investment in capacity,” said Sanjiv Puri, Chairman & MD, ITC. The cigarettes-to-hotels conglomerate is making certain investments in its existing facilities and it said that there are also certain ICMLs (Integrated Consumer Goods Manufacturing and Logistics) facilities that are under final stages of completion.

Biscuit makers Britannia and Parle Products are also looking at expanding capacities to cater to the elevated demand for biscuits. "We believe that consumption of packaged foods will remain high and are therefore working towards augmenting capacities," said Parle Products. While Britannia said that it would be investing about Rs 700 crore to set up five factories over the next two years, Parle is looking to double investments on capacity expansion year on year.

Marico too is working on aggressively growing its food vertical. With increasing launches in the food space under the Saffola brand, the company may look to double revenues from the food vertical to Rs 500 crore over the next 2-3 years, said sources.

Dabur has also gone ahead with the expansion of its food business. "The recent months have seen Dabur enter the PET category besides launching value-added milk category under the Real brand. The Company has also launched premium health-focused variants with a Low-Calorie range under Real Activ," said Mohit Malhotra, CEO, Dabur India. "We are also aggressively expanding our culinary business under the Dabur Hommade brand while also looking at expanding to other food categories. Some of these initiatives have already been rolled out with the launch of Chutneys and Pickles range, value-added tea and the extension of Real into value-added milk category," said Malhotra.

Dilen Gandhi, Sr. Director & Category Head - Foods, PepsiCo India, said, "In the food category, the jump is in both penetration and frequency with greater demand coming for the larger packs across channels. During these recent months, consumer demand for health foods has increased which in turn has further accentuated consumer adoption of Quaker Oats."With some improvement in overall markets and consumer sentiment, FMCG companies are hoping that 2021 will be a better and more stable year.