Labour and logistics constraints impairing production plans: Amit Kumat, Prataap Snacks

Due to the unavailability of labour, the plants are being operational at lower than normal capacity. 

May 14, 2020 / 09:56 PM IST

Like other FMCG companies, Prataap Snacks too has been facing challenges on the labour and logistics front due to coronavirus-induced lockdown restrictions.

In an interaction with Moneycontrol, Amit Kumat, MD and CEO of Prataap Snacks, said the company's priority at present is to resume the plant to its normal capacity.

Due to the unavailability of labour, the plants are operational at lower than normal capacity.

In the last few years, Prataap Snacks has evolved into a leading snacks food company with a pan-India presence. It holds three brands, including the parent Yellow Diamond brand, Rich Feast for Sweet Snacks and the recently acquired Avadh brand.

Edited excerpts from an interview:

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Q. Due to the lockdown, many consumers are storing ready-to-eat snacks. Are you able to meet the growing demand? Have you increased your production capacity?

A. We have received the necessary permissions to resume operations which is subject to the terms and conditions laid down by the government. While production has resumed, utmost measures are being taken to ensure the compliance of guidelines and safety of employees.

Yet, we are facing certain challenges pertaining to the availability of labour and logistics. We are working towards finding solutions and expect the situation to ease with the passage of time. Our priority in such a scenario will be to resume the plant to its normal capacity. Our distributors are also resuming businesses based on their locations, especially in green zones and we are getting orders from them.

Q. Overall, what was the utilisation rate at your manufacturing units prior to the coronavirus outbreak ? Due to labour constraints and enforcement of social distancing norms at factories as well, will your output be significantly lower in the foreseeable future?

A. Due to the unavailability of labour, the plants are currently operational at lower than normal capacity. We expect the situation to ease once the lockdown is lifted. Being a fast-moving consumer goods company, we expect a faster recovery in comparison to other categories.

Q. What is Prataap Snacks doing differently to compete with established brands? 

A. Prataap Snacks has created a diverse product portfolio at strategic price points and packet sizes with more than 100 Stock Keeping Units (SKUs) at strategic price points starting from Rs 5 to Rs 100 pack sizes. The emphasis is on offering a value proposition to the price conscious consumer through higher grammage.

Q. What change do you expect in the packaged food or the overall food industry?

A. Considering the current situation, we expect short-term negative impact on the business. We foresee a positive impact on the industry in the long term since COVID-19 has deeply affected purchasing patterns. We expect the consumers to shift towards packaged and hygienic food products, which will in turn benefit the organised players and help them grow.

Q. Do you see a material shift happening in the product-wise revenue mix in the coming years?

A. We do not foresee any material shift to take place in the product-wise revenue mix. The company aims to remain focused on delivering value to the consumers through introduction of latest snacks at a variety of pack sizes with attractive prices. Yet we do expect the recently launched sweet category to increase in overall mix.

Q. Are you likely to curtail ad-spends in the short term?

A. Considering our proximity to the target market, the company does not highly depend on advertisements or digital platforms for retailing. The major source of revenue is the Rs 5/ packs which are mostly purchased on ground. Online orders are generally placed for family packs.

Our major spends are only for one product, called 'Ring', where we offer a free toy to consumer and advertise the same on kids' channels. We have refrained from any kind of advertising during the lockdown period. Once the lockdown is over, we will start our communication in a phased manner.

Q. What's the trend looking like in terms of raw material pricing?

A. Our key raw materials are palm oil and packaging laminate. In the past eight months, palm oil prices have shot up significantly. They have now  come down to some extent. Crude prices have also come down significantly, which impacts the pricing of packaging laminate. We are hopeful of these prices remaining in the normal range.

Q. What was your capex plan for FY21 and FY22? Amid the ongoing crisis, will you put these plans on hold or still go ahead?

A. Due to the pandemic, we are expecting a short-term negative impact on the business as well as the industry. But we also expect improvement with the passage of time considering we are in the packaged food industry. Hence, we are hopeful of recovering faster and will not require any changes in our strategic or long-term plans.

Q. At a time when the industry has been buzzing with activity about healthy snacks, is the company planning to venture in a full-fledged manner in this space?

A. Our current focus is on low ticket size of Rs 5/-, majorly sold in grocery stores. These stores will get permissions on priority, once the government grants the permission to resume. This can help the business resume in a faster way. Also, 50 percent of our products in the product portfolio are baked, not fried.

Q. What, in your view, will help bring demand back on track?

A. We are not facing any demand-related issues. There is a good demand in the market for our products. The problem lies in the fact that the factories are not operating at normal capacity due to labour and logistic constraints. Hence we are not in a situation to cater to that demand.

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Himadri Buch
first published: May 14, 2020 09:56 pm

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