Nov 11, 2020
The first quarter of 2020 was not good for the Indian ice-cream sector as lockdowns accorded with the peak summer season, as well as general averseness to consuming cold products during the pandemic.
A report by credit rating agency ICRA, overviewed that while the Dairy industry was stable but ice-cream companies underwent.
The organized ice-cream industry, witnessed a severe decline as 40-50 percent sales happen during the April-June quarter. ICRA stated that pure-play ice-cream manufacturers faced difficulties as the peak summer season was washed off. This quarter generates 45-50 percent of the sector’s annual turnover. Further, averseness to consuming cold products while the pandemic continues may also dent future demand.
ICRA vice president Gaurav Jain said, organized ice cream sector is generally dominated by Amul, Mother Dairy, and HUL’s Kwality Walls and Cornetto and it is expected to report nil to 5 percent growth in FY2021, linked to festival season consumption and continued impact of the pandemic.
During the initial lockdown, the milk demand and consumption had suffered due to the closure of hotels, restaurants, cafes, and ice-cream outlets. Therefore, turnover declined during the first quarter though it picked up in the July-September quarter. India is the largest producer and consumer of milk and milk products, accounting for 22 percent of overall global output. Production in FY2020 is estimated to be 192 million metric tonnes (MMT), of which 188 MT was consumed. ICRA expects milk production to rise to 200-202 MMT in FY2021. Given good monsoon conditions with no major instances of flooding (which impacts feed availability), volumes are expected to grow at 4-5 percent in FY2021, the report said.
The report added that traditional value-added products like ghee (13-14 percent of organized sector) will see muted volume growth due to lower institutional sales but will get compensated to some extent by higher retail sales. Products like the cheese will see a 10-15 percent year-on-year decline, led by lower restaurant sales.
ICRA assessed that revenues of the leading eight private sector dairies are likely to decline by 4 percent in FY2021. “Margins improvement will be a function of stable retail milk prices while procurement prices are likely to remain low,” the report added.