Spending on discretionary food yet to recover as consumers still under pressure

Consumer spending has increased in recent times due to easing inflation and interest rates. However, spending on discretionary food items remains subdued. 
This trend persists since real incomes have yet to fully recover from the impact of the crisis two years ago, substantially reducing consumers’ purchasing power.

John Keells Holdings (JKH), which runs a larger convenience foods behemoth, noted it continued to witness low-key demand for its products in its last quarter ended 31 December 2023. Thus extends its quarters-long streak of declining sales.  
Its subsidiary, Keells Food Products PLC has seen its volume sales continue to remain below their pre-crisis levels . This is due to larger outlays the consumers are required to make for their daily staples, leaving less for discretionary food items.

Keells Food Products offers a reasonable proxy for the country’s discretionary food sector as it is the market leader in processed meat with a widespread distribution network.
“The convenience foods business recorded a marginal volume decline during the quarter as a result of a moderation in consumer spend on processed meats, which is more discretionary and at a higher price point as compared to the beverage and frozen confectionery businesses,” said JKH Chairman Krishan Balendra last week commenting on the December quarter results.

The maker of processed meat under Keells Krest and Elephant House brands reported revenues of Rs.1.54 billion in the October – December quarter last year, down 14 percent from a year ago period. The company appeared still under margin pressure as the direct costs rose by 17 percent to Rs.1.17 billion in the same period, outstripping the increase in the top-line. At the operating level, the company reported a loss of Rs.3.84 million in the forgoing quarter, the company’s third fiscal quarter, flipping from a profit of Rs.41.0 million in the same period a year ago. The company reported a net loss of Rs.25.09 million in the period, narrowing from a loss of Rs.65.85 million a year ago. In the nine months, the company reported revenues of Rs.4.33 billion, down 16 percent and a net loss of Rs.182.75 million from a profit of Rs.100.23 million in the corresponding period a year ago.