Second wave flattens fizz for soft-drink makers: Crisil
May 22, 2021
Mumbai (Maharashtra) [India], May 22 : India's non-alcoholic beverages industry led by cola giants Pepsi and Coca-Cola is unlikely to reclaim pre-pandemic levels this fiscal, according to Crisil Ratings.
Despite some claw-back after an estimated decline by a fifth last fiscal, revenue will still be 10 per cent short of the fiscal 2020 mark.
Credit profiles of players, however, remain resilient because of their cost-control measures, strong balance sheets and ample liquidity.
Crisil said an analysis of 13 bottlers of Pepsi and Coca-Cola, which account for over 50 per cent of the market, indicates as much.
Pepsi and Coca-Cola have a combined market share of over 80 per cent in India's non-alcoholic beverages industry. The manufacturing operations are either owned by them or are done through third-party bottlers in different regions of the country.
Last fiscal, a strict nationwide lockdown and subsequent restrictions over April to September severely affected peak season demand as summer months alone account for two-thirds of annual cola sales. A redux looms now.
Nitesh Jain, Director at Crisil Ratings, said beverages sales volumes will be adversely impacted in the peak season once again due to localised lockdowns and restrictions on movement to contain the second wave of pandemic.
This will affect out-of-home consumption (hotels, restaurants and cafe segments constituting 20 to 25 per cent of overall sales) of beverages the most in the first quarter.
Though these restrictions are staggered across regions and are less stringent this time around, full-year revenue may still be 10 per cent below pre-pandemic levels
Operating profits may be more resilient, driven by continuation of cost-control measures and improving product mix.
Demand for high-margin carbonated soft drinks (CSD), which forms two-thirds of the beverage portfolio of players, was impacted less during lockdowns compared with juices and bottled water.
This is due to higher in-home consumption of CSD, driven by increasing access to refrigeration.
