Third COVID-19 wave inhibits growth in domestic spending on food and beverages, likely to rise 0.5% in 2021 if crisis is resolved within 3 months (Current Issue No.3212)

​The impact of the third COVID-19 wave is set to hinder consumer spending on food and beverages for 2021. As a result, businesses in this sector will continue to face difficulties in raising sales throughout the year. KResearch assessed that under a base-case scenario which sees the outbreak contained within the next three months (with the number of new cases similar to that of the final week of March 2021 – prior to the start of the third outbreak, or an average of fewer than 100 cases/day), wherein vaccine rollouts go according to the plan and additional stimulus packages are issued over the remainder of this year, domestic spending on food and beverages may amount to THB 2.48 trillion, or growth of 0.5 percent. In the worst-case scenario, which either sees the crisis prolonged beyond the next three months or the emergence of a new COVID-19 clusters, the recovery of consumers' purchasing power is highly unlikely. Moreover, food and beverage operators, particularly micro-enterprises, would have to shoulder a steady increase in cost burdens to the extent that they may fail to maintain business liquidity for more than two consecutive years. Thus, the value of domestic spending on food and beverages will likely contract by 2.5 percent YoY.

Product groups that should be able to sustain sales growth at levels close to the previous year (or  expansion in the range of 0-1 percent) include food products like vegetables, fruits, meat and rice products – all of which are considered necessities. On the other hand, alcoholic and non-alcoholic beverages such as soft drinks and juices may tend to see further decline, continuing from last year, due to fragile purchasing power, intense competition, and increasingly stringent laws.

Amid this highly competitive environment which runs counter to the limited purchasing power, businesses are expected to make adjustments via production cost/expense reduction or delay in any unnecessary investments for the time being to ensure that they have sufficient liquidity to weather these difficult times. To seize the opportunities amid the ongoing crisis, focus should be on increased safety production standards and the offering of goods and services through a wider range of channels that are unique and distinctive, which will contribute to flexible business operations.