Parle fears losing business to unorganised biscuit makers if GST not cut

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Parle, one of the biggest and oldest biscuit makers in India, now fears unorganised players will eat up its sales if the government does not accede to the biscuit makers’ demand of cutting the GST. While biscuit makers have been demanding lower GST on standard biscuits, Parle has blamed high tax slab for its slipping biscuit sales. Despite this, biscuit makers hiked prices of standard products like Glucose, Marie and Milk. Parle believes that not only has it caused a sales blip but also a loss of customers to unbranded products. “Consumers are so extremely price-sensitive that the moment price is hiked, they move to the unorganised sector or biscuits available as loose items. They are primarily looking at satiating their hunger,” Mayank Shah, Parle’s category head, told Financial Express Online. He added that Parle’s standard biscuit sales have fallen by 6-7% in the first quarter of the fiscal. “Consumers are moving away from biscuits that sell for below Rs 100 per kg, especially the economically weaker section and the middle class because they eat this biscuit for satiating their hunger. We have taken a price hike like most other players and reduced the count of the biscuits,” Shah said.

But that has led to Parle losing out to unorganised players. The situation is lose-lose for everyone: government loses as the unorganised sector will not pay tax; customers lose as the quality served is not good or not coming from the state-of-the-art facility, and; organised sector loses as business dries up, hence costing the government, Mayank Shah told Financial Express Online. Standard biscuits, which sell for below Rs 100 per kg, amount to volume sale of 40-42% at Parle and total 25% of value. However, while the company has witnessed a decline in standard biscuit sales, the same for premium segment has gone up by 8-9%. Meanwhile, biscuit makers including Parle hope that the government will take the decision of lowering biscuit GST in the upcoming GST Council meet. According to Parle, the government should tax biscuits at the pre-GST rate of 5% instead of clubbing standard and premium biscuits and taxing them at a premium slab of 18%.

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