German wholesaler METRO Cash & Carry is witnessing an “almost pre-Covid level” demand in food and groceries, which it says is a positive sign. Sales in the hotels, restaurants and café segment (HoReCa) are down; while people are postponing purchase of discretionary items. Recoveries are expected towards Q1 FY21.

According to Arvind Mediratta, MD and CEO, METRO Cash & Carry India, kiranas have emerged stronger post Covid; grocery delivery options by food aggregators do not seem like a long-term viable option.

In an interview to BusinessLine , Mediratta talks about consumption trends, post Covid pick-up in sales and re-emergence of kiranas . Edited excerpts:

How have consumption trends evolved since the lockdown?

In the first few days, since lockdown was announced, we saw a spurt in buying of commodities, particularly essentials like atta , rice, dal and others.

Two-three weeks into lockdown, when people and kids were at home, there was demand for snacks, including frozen ones and ready-to-eat meals. We saw a jump in items like sweets, chocolates, confectionaries, noodles, pasta, cooking ingredients and sauces.

As soon as the government allowed sale of non-essentials, we saw a jump in demand for kitchen products (gas stoves, burners, microwaves, small kitchen appliances, mixers and juicers).

As we get into the unlocking phases, things are slowly going back to normal. People are consuming regular stuff with a jump in snacks and cooking ingredients. Now there is a phase where people are consuming a lot of immunity-boosting products like haldi doodh and so on.

All along, demand for hot beverages like tea and coffee were on the rise; along with decline in cold beverages, carbonated ones or even juice. There was also demand for dishwashers in urban areas; but that is now tapering off.

However, there is a slowdown in sale of apparel and footwear. Basics like t-shirts or innerwear are in demand.

How has the hospitality sector performed during this period?

In hospitality, products like anti-microbial and anti-bacterial bed sheets — which are good for one-time use — are seeing demand as the governments take over hotels, and even at the individual user level. There is also a demand for UV products that kill germs on surfaces. In between there has been a steady and rising demand for masks, disinfectants, sanitisers, fruits and vegetable washes and so on.

Hospitality remains badly affected. Hotels are operating at 10-odd per cent levels. Sales are down. Restaurants are hardly seeing people coming in. Some deliveries are happening; but they are lower than pre-Covid levels.

We also see demand down in office segments, especially canteens which were run by the big companies.

Now that unlocking is underway, will demand patterns move towards premium offerings?

People are worried about job security and the future remains uncertain. Naturally, there is not much discretionary spending. Focus is on (purchase of) essentials. This will continue for another 9-12 months. I do not see a sudden jump in items like apparels. Even though the malls have opened, footfalls are 10-20 per cent of Covid levels. There will be some demand for individual mobility solutions like two-wheelers.

India had imposed the lockdown early. But, cases are now on the rise across cities. Malls are doing 20-25 per cent level business (apart from those dealing with food and grocery). I am expecting recovery only around the first quarter of next fiscal.

There is also a liquidity crunch in the market and supply chains are disrupted. There are production and demand constraints too. The government has not given any subsidy to the retail sector either.

How do you see kiranas compete with alternative delivery channels that came up during the lockdown?

Kirana stores are back in vogue and are doing quite well. In fact, they have grown stronger.

Earlier, kiranas were places that people would go to for top-ups. Most of the monthly shopping concentrated around hypermarkets or modern retail. But, now people are now buying their regular monthly items from them. So these stores are also looking at a wider range or assortment.

Post Covid, people are unwilling to travel long distances to a hype market. And online players struggled with deliveries during lockdown. Orders took as long as two weeks to deliver. Moreover, discounts by online grocers have also gone.

The new delivery channels (by food aggregators) have been flop shows. Margins in food and groceries are much lower than food items. Then you do not have enough space to carry. Unit economics do not work out. That is where the kiranas again come in to play. No one can beat them on unit economics.

As a company, what is the outlook (post unlocking)?

We have seen 40-50 per cent growth in sales of new items like confectionaries, snacks, hot beverages, frozen items, etc. In the food and grocery segment, despite losing sales in the HoReCa sector, we are almost at pre-Covid levels or slightly higher. In non-food (items) we are down a bit; but are witnessing recovery every month.

In HoReCa, our sales are down significantly compared to pre-Covid levels; and for obvious reasons. We are down to 60-70 per cent levels in terms of sales. But, we have gained market share.

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