How profitable is flour manufacturing in India during Covid-19?

Food processing companies are left in a pathetic situation due to Covid 19 because of shutting processing units, decreased customers, and poor revenue. They are forced to find “innovative methods” and “automation” as there’s a shortage of manforce in factories as well as small and micro packaging units across India. And the largest impact can be seen in Flour Industry.

Hungry and poor migrants started trudging through unimaginable distances to reach their native places and the ones who couldn’t they remained confined inside crudely-built shelter homes by respective state governments.

Industrialists who are planning to reopen their factories feel that the labourers may not immediately return to work in such situations.

But now despite labour shortage, supplies to retail stores have improved, demand for wheat flour remains robust. During the lockdown, when all the economic activities were suspended, the government made provisions for essentials to continue being sold through retail outlets which included FLOUR.

Wheat prices are expected to come down as fresh supply hits the market so Gupta is confident that flour supplies in the country are unlikely to be affected in the near term, whether lockdown continues or is lifted partially.

Swabhiman Agro believes that while manufacturers of essential items are managing to get their goods to the retail shops and instances of a shortage of these items are few, the real impact of the lockdown has been on retailers. So not just small time wheat flour suppliers, biscuit makers, and pulses millers, even the big shots like Hindustan Unilever, Britannia, and Parle would not have major negative impact on their business, given the dominance of the traditional distribution channels.

Meanwhile, prices have risen as traders have resorted to hoarding essential items. In addition to this there happened to be a supply shortage. Retailers have begun some profit booking and a further price increase could not be ruled out.

 “Consumer demand, which was already slowing down before this disruption, is likely to weaken further, thereby reducing our growth forecast… Channel checks indicate severe disruption for consumer companies too with a sharp 50%+ drop in sales during the ongoing lockdown. While staples are relatively less affected and should recover, paints and retailers may see the impact continuing beyond the lockdown,” the report noted.

Summary

Flour being the essential commodity will witness supply shortage & price hikes. If flour mills gets optimum manforce or automation technology such that enough production is generated, it would sustain any kind of lockdown. Swabhiman Agro believes that flour mills have the opportunity to capture the market since people are shifting to staples and even the government is making grounds for reopening and improving the conditions of flour mills across the nation.