The Rs 35,000 crore biscuit industry has several players, the top most being the Britannia and Parle, which accounts for 70 percent of the industry’s volume and revenues.
Subdued rural growth has begun to show up in the cookies category of eatables, especially your tea-table humble biscuit plates. Reports have emerged that the staple biscuits category like Parle-G has slowed down in rural demand, although similar pains are not visible in the premium category yet.
An intriguing question is whether this slowdown is a warning bell for the home foods category, or just a blip following a drop rural income.
On the surface of it, it seems to be more of a blip as GST (Good and Services Tax) of 18 percent on a Rs 5 staple biscuits pack is too steep for the bottom of pyramid customer, especially when rural incomes have shrunk.
The Rs 35,000 crore biscuit industry has several players, the topmost being the Britannia and Parle, which accounts for 70 percent of the industry’s volume and revenues.
Moneycontrol spoke to FMCG analysts to know why Britannia has managed to stay afloat while Parle had to bear the brunt of GST.
What happened at Parle?
Recently, Parle Products, India's largest biscuit maker, said it may be forced to lay off up to 10,000 workers if the slowdown in consumption persists.
Parle, founded in 1929, employs about 100,000 people, including direct and contract workers across 10 company-owned facilities and 125 contract manufacturing plants.
Mayank Shah, Category Head of Parle Products, had recently said that the company had to raise prices due to an increase in input costs, and a hike in Goods & Services Tax to 18 percent, up from 12 percent.
While premium biscuits also fall in the same tax slab, he explained the move hurt demand, especially in the rural market, for its largest selling biscuit brand: Parle G.
Analysts tracking the biscuit maker Parle closely said the bulk of Parle’s portfolio is at lower-end, which has taken a bigger hit because of the rural slowdown.
Why Britannia is better off?
Founded in 1892, Britannia is headquartered in Kolkata, owned by the Wadia Group and headed by Nusli Wadia.
Parle, popular for its Parle-G and Marie brand of biscuits, is not the only food product company to have flagged slowing demand.
Earlier this month, biscuits maker Britannia Industries Managing Director Varun Berry had said consumers were "thinking twice" about buying products worth just Rs 5.
But FMCG analysts believe that Britannia’s position is better off than Parle as 65 percent of Britannia’s portfolio is in the premium segment.
Though Parle has the Milano Brand under its premium segment, these centre-filled biscuits are more in competition with brownie's cakes category, so that leaves the field wide open in the pure crispy chocolate cookies flavor premium category, wherein Mondelez's Oreo and Britannia Bourbon have occupied shelves.
The fact that Britannia has launched many premium category cookies like Sandwich biscuit “Treat Stars” and center-filled biscuit “Treat Burst”; and Parle having launched Krackjack Butter Masala and Monaco Pizza, reflects the changing consumer pattern in rural areas.Consumers across geographies aspire to move up the consumption curve, which is something that FMCG companies need to keep in mind to provide quality at the right price.The Great Diwali Discount!
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