Is snacking in India becoming too expensive?

NEW DELHI: Snacking is inherent to India's cultural ethos, and whether it becomes too expensive or not it'll always be loved. As a sector, snacking in India has made a 360-degree transformation since the pandemic began. While before this event, India was on a get-healthy trip of low snacking and daily exercise regime, the series of enforced lockdowns drastically affected the population's morale, leading to heightened amount of stress and everyone resorting to their old ways of comfort such as snacking.

Snacking grew so majorly that it changed India's eating norms, by 2020 -- instead of having three meals daily, we had become a multiple snacking cultures. Many studies agreed that the pandemic had led to considerable expansion in the category volumes, and, even after returning to pre-Covid living conditions, a slowdown in snacking was unlikely.

Effects of the pandemic

In fact, the hybrid work model supported the inflated consumption of snacks though certain trends certainly did stand strong. Branded snacks had finally earned the consumers' approval and owned over 65 per cent of the market share of all snacks sold, a huge uptick from the pre-covid 40 per cent levels.

In 2020-21, consumers were looking for quality assurance and thus were willing to pay a premium for branded snacks. Health consciousness too was on the consumers' minds and influenced the choice of snacks bought. So, snacks having high-protein and vitamin-rich qualities were preferred over the rest even at an elevated price range.

Inflation on the rise: Snacking to get dearer

Just as the FMCG and snacks markets were celebrating, inflation struck. The economy has been parked for a while, 13-months to be precise, on the upswing of an inflationary cycle and that has affected the FMCG segment heavily.

Retail inflation has ridden to unbelievable highs touching 6.95 per cent in March 2022 and continuing its rally to 7.8 per cent in April 2022. Since the Consumer Food Price Index is strong at 8.4 per cent in April from 7.7 per cent a month earlier, food prices are phenomenal at present and snacks are getting costlier as well.

Steady inflationary pressures mean high pressure on the industry

From March-April 2022, while there have been some price hikes in the snacking industry, downtrading has become the norm with consumers preferring smaller packs instead of their regular ones and cheaper brands too, as is the FMCG industry's current fate.

There've been several reasons for the continued inflationary state--the Ukraine war has accelerated pressures on fuel, food (Ukraine is a key global producer if sunflower oil, which is essential to the segment) and commodities prices; combined with the scarcity due to the Indonesian palm oil crisis (another key raw material), all kinds of snack players are feeling the mounting pressure.

Ways around inflation aside from price hikes

The recently announced below-prime Indian wheat production (along with its generic global scarcity) for another consecutive year too adds to the sector's worries. And the most logical way ahead is to hike snack pack prices to keep margins steady--but players have been trying to absorb all these conditions without passing it on to consumers

Then there's the strategy of reducing product quantity per pack reducing weight by 5-7 per cent, at an unchanged price point. Sometimes, retailers will also introduce bridge packs, a new mid-sized pack that promises the same value at another affordable price point--so other than 50 gm and 100 gm packs, a 75-gm pack may be launched at a modest price, if the 100 gm one has become more expensive.

In this way, despite the fact that the snacking segment has been affected directly by inflation for over two years, companies are still trying to keep a positive outlook and fight all challenges and grow sales volumes and sales numbers. We heartily believe that even this dark cloud will reveal its rainbow shortly.

Let's face it: Conditions are pointing to a dearer snacks category, with time and inflation. But will snacking ever grow too expensive for consumers? Indian consumers love their snacks too much and the snacking industry players are working hard to ensure the consumers are not affected by the rising prices and to keep the prices as reasonable as possible in the long run!