Food Processing Industry Emerges Stronger

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Food Processing Industry Emerges Stronger

During the height of the Covid-19 pandemic, KL Dugar Foods was forced to put 20 percent of its workforce to work on a rotation basis complying with the health safety protocols. Another company Hulas Foods also took similar measures. Eventually, this impacted the operation and production of the two food processing companies.

While most of the other companies of different industries were affected by the pandemic-induced economic slowdown and were laying off workers, food processing companies were facing different kinds of problems. They were struggling to meet high consumer demand when their workers had to be sent to Covid-related quarantine and isolation. The spike in demand was because of the stockpiling and hoarding of food items by consumers which is generally seen during times of emergencies.  

"Covid-19 pandemic has been challenging for all sectors of the economy including the FMCG sector. The first lockdown resulted in closure of borders, thereby restricting trade and commerce. A sudden spike in demand for essential food items like rice, lentils, oils and flour was noticed during this period, says Ashesh Bhandari, national sales manager of KL Dugar Foods, adding, “However, our company was able to supply fairly proportionately by striking a balanced work environment by maintaining safety protocols.”

Bhawani Rana, former President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) thinks that the role played by Nepali food processing industries during the time of crisis has been commendable. "In spite of the serious challenges such as supply chain disruptions and decrease in industrial capacity due to manpower issues, food industries worked hard to balance both the demand and supply sides," she says.

Producers say that while it is difficult to quantify the food consumption of the average Nepali household after the start of the pandemic as no research has been carried out like in advanced countries, the consumer demand largely remained intact.

According to Shaisabi Niroula, sales manager of Hulas Foods, the demand chain mostly remained immune to the pandemic-induced breakdowns. "There were slight changes in the demand which is difficult to put in figures. If an average family used to consume one kg of rice in the pre-pandemic times, it consumed probably a little less than this quantity in the pandemic times," he says, adding, "We were not completely unaffected. Due to lack of workers, we couldn't produce goods to suffice the demand. However, it didn't bring any big changes in our turnover."

The festive season (Dashain, Tihar and Chhath) brings a peak sales period in the country for food products. Food consumption grows significantly, and producers find themselves busy working round-the-clock to produce and supply goods to the market as fast as they can. According to Bhandari, KL Dugar Group’s FMCG sector witnessed a rise in demand of about 15-20 percent for its food products during the festivities this year.

Producers say that the demand for goods was low during last year's festive season due to fears of coronavirus transmission and the deep pandemic-induced economic recession. But this year, the demand has gone up as the fear among the people has declined with the ongoing vaccination drive and the economic recovery.

With the situation returning to normalcy, food processing companies are also back to their full production capacity. Niroula of Hulas Foods and Bhandari of KL Dugar Foods say that their plants are producing at full capacity and workers are getting full shifts.
As per the second follow-up report of Nepal Rastra Bank published in May 2021 on the impacts of Covid-19 on the economy, 80 percent of manufacturing sector companies have started to operate at full capacity. Similarly, a study conducted by the Confederation of Nepalese Industries (CNI) has found a significant rebound in manufacturing activities including food production.

In its Industry Status Report published on October 1, CNI said that the performance of the manufacturing sector noticeably improved in the fourth quarter of the last fiscal year. According to the report, the overall capacity utilisation of the companies stood at 64.8 percent during mid-April and mid-July of FY 2020/21, while the income of manufacturing companies increased by eight percent compared to a negative growth of 4.7 percent during the corresponding period of FY 2019/20. With the improving situation, 83 percent of manufacturers have expressed their willingness to increase their investment, the report also outlines.

Rana says that as the government has sped up the vaccination drive and Covid-19 cases continue to fall, the hardest-hit tourism and hospitality sector is also gradually rebounding back which has helped to boost the demand for food products.

The recent months have seen footfalls in restaurants going up significantly and the number of guests in hotels also increasing gradually. Similarly, online delivery of food has also expanded multifold as the pandemic has caused a massive shift in the way people buy goods and services. “If the bank interest rate is maintained at a single digit, it will further help companies to ramp up their investment," says Rana.

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