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F&B Sector Performance during 2020
Friday, 16 October, 2020, 14 : 00 PM [IST]
Venkatesh Ganapathy
Sales in F&B sector was predicted to grow in 2020 leading to growth in employment. However, the pandemic has adversely affected the revenues of the F&B sector at least in the first quarter due to lockdowns in several states affecting normal life. Companies have had to ramp up capacity in the next quarters with options for outsourcing opening up.

Out of home consumption has drastically reduced during the pandemic while at-home consumption has swelled. Change in consumer behaviour has depressed agricultural output disrupting supply chains. Once normalcy is restored, out of home consumption will pick up again but revenues may not be sufficient to recoup the losses during the pandemic. 

Challenges faced by F&B manufacturers
Rise in storage costs; Increased labour costs; Non-availability of skilled labour; Social distancing in manufacturing units; Logistics challenges; Care for health and safety of employees.

There were challenges in food production, labour issues and liquidity crunch. Packaging industry came into sharp focus during the pandemic and it was felt that farm level intervention was needed. Manufacturing units were operating at 15-20% capacity. The MSMEs struggled to produce raw materials for the F&B sector which affected the manufacturing capacity.

Food service distributors have been hit hard as restaurants, institutional catering services, food delivery aggregators and hospitality sector were forced to remain shut. Stay-at-home orders had a negative impact on fortunes of restaurant industry.

Statistics about the F&B sector



Number of users

1759.3 m by 2024

% of total market revenue through online sales

3% by 2023


US $ 236529m in 2020


10.7% (2020-2024)

Projected market volume

US $ 354758m by 2024

User penetration

14% (2020) … 22.8% (2024)

Average revenue per user

US $ 227.08

Interestingly, the behaviour of consumers during the pandemic has triggered manufacturers in the F&B sector to introduce new products built on the health and wellness platform. As dining out became impossible due to safety concerns, consumers started purchasing from retail grocery stores and e-tailers fuelling better performance of the retail channel relative to the food service channel.

There has been a trend of growing consumer interest in private label products. New products are focussed on health and nutrition and food products that are free from allergens, glutens are preferred by customers. Consumer preferences for natural flavours, colours and fragrances are expected to increase along with increased demand for added protein, fibre and probiotics and quality frozen foods. Consumer preferences for immunity-boosting foods rose during the pandemic. In the US, plant-based meats and substitutes for milk from cashews, almonds, soy beans and coconuts are being explored.

The F&B sector is plagued by low margins and pressure to keep prices and production costs low. Food safety, traceability and quality assurance have begun characterising the F&B sectors performance during the pandemic. The priorities for manufacturers are  improvements in processes, new product introductions especially in the health & wellness space and use of digital marketing techniques for promoting products. Edible packaging is emerging as an alternative.

Successful innovations in F&B sector have been introduced by SMEs. Larger companies are finding this a challenge due to high volumes and expensive equipment. The pandemic has forced larger organisations to look at inorganic growth route rather than invest their own resources for R&D. More organisations are using the breakthrough innovator model by outsourcing the research process. 

Automation in food processing sector has now become a necessity as consumers become health-conscious. Primary processing of agricultural products at the farm level is being explored to reduce wastage  agricultural universities can play a role in educating and training farmers.
The imposition of lockdown made customers scout for online solutions that were flexible and convenient. So, the F&B sector had to meet customer requirements to stay relevant during the pandemic. In the US, the F&B sector had to deal with customers who were becoming more environmentally conscious leading to greater patronisation of sustainable products.

Customers were concerned about the availability of food stuffs so this led to pantry loading as people started stocking items in anticipation of short supply. During the pandemic, essential businesses in the food value chain have performed well. Retail grocery channel generated greater revenues than foodservice channel. Food service suppliers have experienced customer disruptions.

Trends during the pandemic


Impact 1

Impact 2

Greater demand for frozen and perishable items

Increased cold storage and shipping capacity

Long-term impact on consumer behaviour with regards to preferences for ecommerce

Emphasis on food safety and traceability

Develop ability to track any food substance consumed through all stages of production, processing and distribution

F&B supply chains will need to be rejigged

Consumer becoming more price-conscious

Value-driven Consumers

Increase in demand for value products and private labels

Eating food at home vis-a-vis eating out

Growth in demand for meal kits

More grocery shopping through e commerce channels

Concerns about food safety

Reduced imports

Increase in consumer’s local preferences

Social distancing of workforce

Reduced manufacturing capacity

Greater thrust on automation in food production

Convenience focussed sectors like quick service, fast coffee have done better than those offering a dine-in service. In case of beverage companies, mainstream brands have performed well. Food manufacturers with high retail grocery exposure have performed well. Restaurant chains were forced to move to a convenience mode to arrest losses.

Ingredient suppliers, retail focussed co-manufacturers, private label manufacturers have done well during the pandemic. Food service channels have to unlock value by understanding their response to the pandemic and leverage the opportunity to diversify customer base in the future.

Online retail in F&B has taken off in a major fashion during the pandemic. Issues like faster delivery of perishable goods, reducing cost of delivery and addressing last mile delivery issues will continue to remain pain points for the F&B sectors performance.

F&B companies should revisit their sourcing strategies, optimise product ranges, and reassess the agility of their supply chains as well as their route-to-market channels. Streamlining of ecommerce and other distribution networks is essential. Pricing and promotion strategies also need to be revisited.

Transparency and traceability will remain cornerstones of success for F&B businesses post the pandemic. Availability of variety of products from multitude of channels will make innovation and product differentiation drivers for sustainability of the business. 

(The author works as associate professor (marketing & operations) at Presidency School of Business, Bangalore. He can be reached at
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