16/20

Moderate Demand

Increasing penetration of bakery products in the consumption basket of rural India will drive long term demand. Large FMCG companies with strong brands have developed low cost packs to increase volumes. The industry saw y-o-y growth in sales revenue of 13.3% and the performance of some large organised players like Britannia & Dr. Bectors indicate increase in sales revenue by 13.3% and 15.1% respectively during December 2021 quarter. The growth is expected to increase furthermore in quarters of FY23.

Extent of Competition

12/20

Neutral

The industry is fragmented and includes both established brands and regional players. Competition therefore remains intense, given the fact that there are no significant entry barriers. Some foreign brands & foreign players have also made an entry. Recently Modern Foods, an established brand was acquired by Grupo Bimbo, a Mexican Group. Established players however, have an edge given the strength of their brands and their distribution reach.

Regulatory Risk

12/20

Predictable Regulatory environment

The import duty protection for processed food products including bakery items continue to be high. The organized bakery business comes under the purview of Food Safety and Standards Authority of India (FSSAI). The unorganized/ local players which still continues to be a large component of the market have limited regulatory overview vis a vis the larger organised players.

Input Related Risk

16/20

No supply disruptions/ very narrow price band or fluctations

The economic disruption during the national lockdown impacted the supply chain in the industry including labour availability but these have been largely addressed post lockdown. The abundant supply of cereals due to successive favourable crop seasons will continue to mitigate raw material pricing risks. The increase in prices of key inputs like sugar are expected to affect the margins since the high competition will preclude a complete pass through of the increased costs.