Revenue of Soft Drink Industry Unlikely to Regain Pre-Pandemic Level in FY22

Consumption of the beverages at places outside the home, like hotels, restaurants, and cafes, which constitutes up to a fourth of overall sales will be impacted in the first quarter.
Revenue of Soft Drink Industry Unlikely to Regain Pre-Pandemic Level in FY22

Revenues of soft drink majors like Pepsi and Coca-Cola are unlikely to regain the levels seen before the pandemic struck as the second wave will impact consumption for the second consecutive summer.

The revenues, which were impacted by a fifth in FY21 because of the national lockdown in the peak summer season, will still be 10 percent lower than the pre-pandemic levels in FY22, Crisil Ratings said in the report.

The non-alcoholic beverages industry is led by American cola giants Pepsi and Coca-Cola, who control over 80 percent of the market, it said.

”Last fiscal, a strict nationwide lockdown and subsequent restrictions over April-September severely affected peak season demand as summer months alone account for two-thirds of annual cola sales. A redux looms now,” the agency said.

Its director Nitesh Jain said sales volumes will be adversely impacted in the peak season once again due to localized lockdowns and other restrictions to contain the second wave of the pandemic.

Consumption of the beverages at places outside the home, like hotels, restaurants, and cafes, which constitutes up to a fourth of overall sales will be impacted in the first quarter, he said.

”Though these restrictions are staggered across regions and are less stringent this time around, full-year revenue may still be 10 percent below pre-pandemic levels,” Jain added. 

However, operating profits may be more resilient, driven by the continuation of cost-control measures and improving product mix, the agency said, adding this will also ensure that the credit profiles of the players are resilient.

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, it said.

Its Associate Director Rohan Kulshrestha pegged the operating profits at 7 percent lower than the pre-pandemic levels, as against the 10 percent lower revenues.
 

Publish Date
Not Sponsored
Live: People Reading Now
RECOMMENDED FOR YOU
TRENDING ARTICLE