Brick-and-Mortar Food and Grocery Retailers to Report 20 pc Growth in FY 2022
Brick-and-Mortar Food and Grocery Retailers to Report 20 pc Growth in FY 2022

<p>Brick-and-mortar food and grocery retailers could report 20 percent growth in fiscal 2022 revenue&nbsp;due to commodity inflation and market share gains from the unorganized players.</p>

<p><em><strong>“The largely non-discretionary nature of demand had kept the segment resilient even during peak pandemic in fiscal 2021 when revenue fell only 3 percent. Operating margin is expected to sustain at the current level of 6.3-6.8 percent due to better economies of scale and gradual pass-through of inflation in input prices, notwithstanding a normalization of store rentals,"</strong></em> a report said.</p>

<p>According to rating agency Crisil’s report, organized food and grocery retailers will see revenues grow over 38 percent over the pre-pandemic, fiscal 2020 level.</p>

<p><em><strong>“Low organized sector penetration of just 5 percent within the overall food and grocery retail market provides the players ample growth opportunities. Apart from deepening their presence in metro and Tier I cities, the retailers are also expanding fast into Tier II and Tier III ones,"</strong></em> said Naveen Vaidyanathan, Director, Crisil Ratings.</p>

<p>The area under operations by such retailers grew by 40 percent over the past two fiscals as retailers continued to expand during the pandemic, taking advantage of low real estate prices. The momentum is expected to continue with 10-12 percent area growth this fiscal, said Vaidyanathan.</p>

<p>Moreover, organized retailers are also facing stiff competition from quick-commerce platforms that promise food and grocery delivery in minutes. Crisil analysts expect both models to co-exist.</p>

<p>They further added, <em><strong>“Brick-and-mortar retailers continue to hold sway as they cater to customers for their larger weekly or monthly grocery shopping, as opposed to quick commerce, which typically caters to smaller, unplanned purchases by customers who prefer the convenience of shopping from home. Besides, traditional brick and mortar players are also looking to increase their online penetration, including by partnering with quick commerce players."&nbsp;</strong></em></p>

<p>As per the report, operating margins of brick-and-mortar food and grocery retailers are expected to remain largely stable this fiscal as retailers pass on the sharp increase in the price of goods and continue with cost-optimization measures.</p>

<p><em><strong>“Credit profiles of F&amp;G retailers will also remain stable, supported by strong cash-generating ability and low debt on balance sheets,"</strong></em> said Shounak Chakravarty, Associate Director, Crisil Ratings.</p>

<p>Retailers are expected to continue with their expansion plans, funded largely from internal accruals and large liquid surpluses.</p>

<p>Crisil expects further waves of the pandemic to have no material impact on the operations of retailers, unless severe.<br />
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<em><strong>“That said, slower-than-expected ramp-up of newer stores and increased competition from unorganized and quick commerce segments would be key monitorable,"</strong></em> analysts at Crisil said.<br />
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