Introduction
Millets like ragi, jowar, and brown top have witnessed 40-100% price inflation over the past year as erratic weather constraints supply even as campaigns promoting millets coupled with multinationals entering this segment have sharply spurred demand.
News Analysis for Laymen
Millets are hardy dryland crops like pearl millet (bajra), finger millet (ragi), sorghum (jowar), etc. Thanks to UN’s declaration of 2023 as International Year of Millets along with increased health consciousness, millets consumption has gained tremendous traction. Brands have launched pastas, cereals, snacks using millets while startups deliver millet meals.
But crop damage due to droughts or excess rainfall have limited yield for farmers even as more companies seek steady millet supplies. This supply-demand mismatch has led to nearly 100% price rise in one year for some millets varieties. It risks shrinking the still niche consumer market for millet products if inflation stays elevated. Policy interventions to improve farm productivity through irrigation, weather coverage and buffer stockpiling may be needed.
Original Analysis
Millet price pressures highlight India’s food inflation risks beyond traditional staples like wheat and rice centering government distribution schemes. Private sector dynamics around nutritious yet affordable alternate grains remain vulnerable to climate change impacts on largely rain-fed small farms.
Startups bringing millets into modern convenience food struggle with input costs even while having to invest in consumer education. Lack of scale efficiencies compared to established brands further challenges passing higher sourcing costs to price-sensitive buyers.
Partnerships between millet processors, FMCG majors and farm cooperatives around securing supplies via contract farming models exchanging better prices for guaranteed off take could incentivize farmers adopting resilient practices and stabilized yields. Blending policies across retail distribution of mass subsidized grains along with promoting climate resilient Smart Food choices allows balancing nutrition security and inflation management for all strata.
Impact on Retail Investors
For retail equity investors, this highlights risks of overoptimism around niche food segment prospects lacking thorough evaluation of input sustainability challenges that could suppress profit trajectories of consumer food startups despite demand upticks.
Astute investors should assess business models on addressing risks across supply variability, regulations capping consumer price increases and ability to retain customer wallet share when competing with traditional staples for protein mix incorporation or daily meal replacement.
Scaling too fast without mitigating farming ecosystem risks could negatively surprise investors if demand projections assume linear purchase continuity but input costs spike at crucial growth stages. Reasonable timelines accepting niche to mainstream transitions across consumer palate change and agriculture production capacities seems prudent.
Impact on Industries
Millet processing startups, FMCG companies increasingly targeting health foods portfolios with such climate resilient Smart Food ingredients and government agencies involved in social programs using millets would be directly impacted.
Farm equipment makers also witness demand fillip if crop protection investments seem justified from price upticks. However, excessive commodity inflation could halt uptake by privates sector if capacity creation carries high risks.
Poultry feed manufacturers increase millet blend ratios augmenting protein diversity in feed as well as reducing reliance on volatile imported soymeal. Rising farm prosperity also aids rural economic activity.
But low-income consumers face protein mix substitution challenges without stable millet costs. Food inflation could have economy-wide impacts on discretionary spending.
Long Term Positives & Negatives
Popularizing millets allows diet diversity aiding malnutrition challenges and diabetes incidence lowering especially across India’s middle class and urban populations. Enhancing climate resilience also guarantees water security for future generations as millets need minimal irrigation.
New agri-entrepreneurs leveraging processing technologies can also emerge across hitherto rice/wheat centric grain economies catering export demand too for standardized quality produce.
However, traditional government procurement infrastructure around fallback buffer stocks requires significant augmentation beyond just rice and wheat supporting production stability and inflation management of Smart Foods like millets. Storage technologies preventing spoilage etc need upgrades.
Short Term Issues & Positives
The short term downside from inflated millet prices is vulnerable low-income consumers shifting food budgets to staples like wheat or rice potentially increasing malnutrition. Demand calculations for new millet based brands also carry higher risks without output stabilization first.
However, positive change could be triggered regarding enhanced focus across agriculture value chains to incentivize millet production, processing, and consumption if broader ecosystem interconnectivity gets recognized by all stakeholders.
Government agencies expanding procurement, private trade associations supporting crop insurance programs and FMCG firms directly engaging in contract farming arrangements can together transform this niche crop category into stable mainstream substitute for rice/wheat.
Listed Companies Benefiting
The following listed companies could see direct or indirect benefits from rising millets consumption:
- Britannia – Launching more millet-based products under a trusted brand allows demand aggregation
- Parag Milk Foods – Integrated dairy model allows blended value-added products
- DFM Foods – Extensive distribution reach aids new millet snacks growth
- Tata Consumer Products – R&D for blending millets into Maggi noodles or breakfast cereals
- Additionally, agriculture sector mutual funds investing into IPOs of emerging millet processing startups can benefit from sector tailwinds.
Listed Companies Losing Out
Below listed staples focused FMCG firms face relative demand risks from millets consumption growth:
- ITC – Less aggressive on new grains compared to rivals
- Hindustan Unilever – Heavy reliance on wheat-based products
- Adani Wilmar – Losing edible oil market share already
- Rice-focused packaged food brands also face gradual demand erosion from inflation-conscious buyers:
- KRBL Ltd – Basmati rice brand vulnerable to down trading
- LT Foods – Niche organic segment difficult to expand
Conclusion
In summary, bridging supply-demand mismatches for climate resilient Smart Foods like millets through integrated agriculture, food processing, and nutrition security policies can unlock sustainable new consumption models benefiting health and environment goals. But patience accepting gradual palate transition seems prudent factoring value chain interconnectivity.
Citation
Bhosale, Jayashree. “Launch of new products like millet-based pasta, noodles, and snacks, inclusion of millets in breakfast cereals, and increased consumption of millets in the traditional form of flour have all bolstered the demand for millets, industry insiders.” The Economic Times