Although packaging solutions company Tetra Pak’s Indian unit has witnessed the emergence of new categories that have increased demand for its products, it is struggling with almost a decade-high inflation in several raw materials.
Tetra Pak India has been through several highs and lows in the past 18 months since the Covid-19 pandemic hit the country. The lockdown during the first wave last year washed out an entire quarter of its sales and demand remained impacted in the subsequent quarters.
However, the pandemic also led to the mushrooming of new categories of products such as immunity-boosting beverages, which increased the demand for its products.
While beverages, Tetra Pak’s largest category so far in India, were less impacted by the second wave and are now on track to recovery, decade-high inflation in several raw material prices continues to affect the company’s business.
“Every year, there is some price increase but we are not under pressure to pass it on to the customer. This year, however, it has gone through the roof,” Ashutosh Manohar, MD of Tetra Pak India, told Moneycontrol. According to Manohar, the price of paper pulp has increased by 10-40 percent, while polymer prices have risen 80 percent over the past 10 years.
“The price of stainless steel grade that we use has risen by 20-25 percent,” he added.
After the blockage of the Suez Canal and pandemic-related lockdowns across the world, freight costs have risen, further impacting the company. Tetra Pak, Manohar said, has taken initiatives to contain prices and not pass on the increases to customers such as food and beverage and FMCG companies in the country, several of which are also struggling with increased costs.
FMCG companies across the board have increased the prices of their products in the past few months. Hindustan Unilever, Marico and Tata Consumer Products increased prices in the last quarter of FY21. Godrej Consumer Products and Britannia have taken another round of price increases recently.
Beverages clock recovery
Tetra Pak, which draws a major share of its business from non-alcoholic beverage companies, was severely affected last year after consumption of these products was hit due to the lockdown during peak summer. The second wave, too, hit during the summer, but Manohar said the impact wasn’t as bad.
“In 2021, these categories have rebounded almost 90 percent as compared to the pre-pandemic period. So, if you take 2019 as a base, we are nearly 90 percent of 2019 today, after a massive loss in 2020,” he said.
The cold beverages category started recovering even as the first wave ebbed, resulting in a 26 percent growth in the October 2020-March 2021 period, according to data from analytics and brand consulting company Kantar. There was a 26 percent surge even in the April-May 2021 period, the data showed.
Kantar projects the category will grow 12-16 percent in 2021 in the absence of a third wave.
Milk and other liquid dairy products such as buttermilk and lassi are the largest categories for Tetra Pak in India. Following the pandemic, other segments have emerged.
“ORS (oral rehydration solutions) is a new category which is doing well for us in India. Ethnic drinks such as coconut milk and plant-based beverages such as almond milk, soya milk are also emerging as new categories,” said Manohar.
Tetra Pak is also witnessing interest from packaged frozen foods such as frozen peas.