PANIC buying amidst lockdowns has been a blessing in disguise for the food sector as cash continues to roll between manufacturers, retailers and distributors.
Welfare organisations, industrialists and rich people are lifting flour, rice, sugar, pulses, ghee and cooking oil from the market in big quantities, thus fuelling their demand. This has benefitted stakeholders although a large segment of population is still running from pillar to post to get free food.
Many people who did not purchase food items at the start of the lockdown in the third week of March are now out in the market to pile up stocks for April or post-Eidul Fitr. People fear food shortages as the lockdown has been extended to April 14.
Retailers say they feel tired as well as satisfied these days. They deal with a number of product distributors in the morning and then face an extraordinary rush of buyers two hours before the closing time in the evening. It’s difficult to imagine the magnitude of cash and credit card dealings at superstores where buyers spend more liberally than they spend at neighbourhood general stores.
While buyers are building up their stocks amidst an extended lockdown, manufacturers and retailers anticipate gloomy sales post-Eidul Fitr.
Flour holds the top position in terms of brisk sales. It is persistently in short supply amid the arrival of new Sindh crop as retailers and manufacturers scratch each other’s backs and raise prices.
Consumers have had to pay up to Rs50-70 extra on every five- and 10kg bag in panic buying. Yet the Sindh and city governments are paying no heed to overpricing. They have not been monitoring the demand-and-supply situation. The government has not imposed any ban on the sale of more than one flour bag at a time.
As buyers build up their stocks amidst an extended lockdown, manufacturers and retailers anticipate gloomy sales post-Eid
The significant drop in the sale of flour because of the closure of restaurants, online food delivery services and offices has somewhat been offset by unusually high flour purchases by people from different segments of society.
The consumption of biscuits and chips is also down due to the closure of educational institutions. But heavy buying by parents and children in the last two business hours every day must have somewhat compensated for the overall losses of manufacturers.
Grocery sellers were clever enough to keep cigarette stocks — a move that is now paying off as paan shops and wholesale markets are closed.
A packet of Marlboro containing 10 packs of cigarettes now sells for Rs3,500-4,000 against the actual price of Rs2,800-2,900 while Dunhill costs Rs3,500 versus Rs2,400. Benson & Hedges is available at Rs3,500 as opposed to Rs2,200. Locally produced Gold Leaf and Capstan can be purchased for Rs1,950 and Rs900 versus Rs1,650 and Rs770.
Retailers are the main beneficiaries of the coronavirus. The producers of food items are operating as per their plant capacity as they cannot raise it for just one to two months.
Mian Mahmood Hasan, CEO of Rasul Group of Companies that makes Bake Parlor flour products, says many buyers have been lifting three to four bags of 10kg at once. “The mills cannot go beyond their existing daily production capacity,” he said.
“People will complain about the low quality of flour in coming months as they consume their build-up stocks. Flour loses its taste and quality in 20 to 30 days,” he said.
Flour demand will drop by 50 per cent in Ramazan as the Sindh crop fully reaches the market in April. It will be followed by the Punjab crop in May. “With 60 days of flour stocks already at home, I see dull flour sales in months to come,” he added.
Karachi Retail Grocers Group General Secretary Farid Qureishi said he noticed people grabbing at least four flour bags of 10kg each, which is enough for two months of consumption.
Rich people are also lifting flour and other edible items for onwards distribution as zakat, fitra and sadqa.
He said biscuits, chips, pasta, noodles, spaghetti, cupcakes, toffees and suparis are in high demand as children are at home.
Karachi Wholesalers Grocers Association Patron-in-Chief Anis Majeed said the lockdown changed Dandia Bazaar business dynamics from “slackness in demand in February to a more than 100pc jump in the sales of flour, rice, sugar, pulses, ghee/cooking oil etc.”
“I think the market will revert to the slow mode after Eidul Fitr. People have stocks for two months at home,” he said.
Showing the dark side of the market, All Karachi Tajir Itehad Chairman Atiq Mir said, “The trade loss during the 15-day lockdown is over Rs50 billion, which will swell to more than Rs100bn by April 14.”
Karachi takes care of more than 4m daily-wagers. But they are now in deep trouble. They can’t feed their families owing to a cash crunch.
“The government should allow the opening of markets and bazaars for at least five to six hours daily. It should also issue precautionary measures, which the traders will accept,” he said.
Among the losers are construction-related companies along with firms in the textile, automobile, electrical/electronic, furniture, tiles and sanitary, and timber sectors. These segments now seek a relaxation from the government in taxes and duties to offset the loss in sales and pay monthly salaries to their employees.
Textile and leather exporters are also pressing the Sindh government to let them open their units and clear the pending export shipments.
Lawn sales in retail stores and online shops have collapsed altogether. Lawn manufacturers are deeply concerned about missing their sales targets in case the market closure continues beyond April 14.
A lawn maker said, “There is no production and sales owing to the shutdown all over the country. The share of online sales ranges between 8pc and 15pc of total sales. But currently it is less than 5pc.”
“The country’s total lawn market is worth about Rs350bn. The share of brands is about 30-35pc,” he added.
Published in Dawn, The Business and Finance Weekly, April 6th, 2020