Organized sector benefited after Corona

Posted on 23rd Jun 2020 by rohit kumar

During the last few years, there has been a tendency for the economy to be gradually organized, but due to the Covid-19, it has suddenly increased. Organized companies in sectors such as jewelry, paints, biscuits, beverages, foodstuffs to restaurants are growing their market share, snatching the market share of financially weak, small, and organized companies. The level of production and balance sheet of the organized sector is better than that of the unorganized sector. The unorganized sector has suffered a lockdown, with many businesses being shut down. At the same time, consumers concerned about safety and hygiene have turned to established brands.

 

CRISIL estimates that organized sector jewelry companies like Tanishq will have a share in the business to more than 45 percent by 2021-22, from 25 to 35 percent in 2017-18. Titan CEO (Jewelry Division) Ajay Chawla said that jewelry companies have been under pressure due to rising gold prices, lower demand, and stricter lending by NBFCs and banks. Chawla said, "After Covid-19 this pressure has increased. In such a situation, only those companies will have more cash, whose balance sheet is strong and they are reliable in the market.

 

Chirag Seth, senior research consultant (South Asia) at Metal Focus, an international bullion research company, said that size has become very important after the Covid-19. "Customers will avoid going to smaller stores, which can only have three to four customers as it will be difficult to maintain physical distance," he said.

 

Even the paint business is changing. The unorganized sector, which has a 30 percent share in this market, is highly scattered, with more than 3,000 paint manufacturers. Kansai Nerolac MD HM Bharucha said, "These entrepreneurs will not be able to do business as easily in the post-Covid-19 world as the cost of sanitation and safety would be greatly increased." Another challenge, he says, is that organized companies are making deep inroads in India. They are targeting medium and small cities and towns where small entrepreneurs operate. Bharucha estimates that in a few years the share of the unorganized sector will come down to around 20 percent.

 

Similarly, the organized sector currently accounts for about 65 percent of the Rs 57,000 crore biscuit business in the country. Mayank Shah, senior category head of Parle Products, predicts that the organized market will grow as the number of consumers buying packaged and branded products is increasing.

 

Shah said, 'This gives them confidence that the products are cleanly made and safe. Household consumption of biscuits has increased during the lockdown. Organized biscuit manufacturers ensured that production and distribution continued despite challenges in lockdown.

 

A similar trend is visible in the Rs 14,000 crore juice market, in which big companies like PepsiCo and Dabur India have their presence. Fifty percent of juice is consumed outside the home market, which is dominated by the unorganized sector. The organized sector dominates domestic consumption. But during the Corona period, 50% of the unorganized market has come to a standstill. The financial impact of the lockdown has forced many smaller restaurants to close their operations. After the restaurant opens, people will prefer to stay away from smaller restaurants for fear of less cleanliness.

 

Consumption habits of consumers have also changed about daily food items like sugar and edible oil, which is beneficial for organized entrepreneurs. It has to be seen whether this trend is good in all industries. Consolidation increases competition, which is good news for consumers. But the shrinking of a large number of unorganized sectors that provide employment may adversely affect employment opportunities.