Problem in Economy for

Market
 Context
• Biscuits are common product of consumption for rich and poor people.
• As per Indian biscuit manufactures association (IBMA) data, India produces 5000
tons of biscuits everyday which gets well absorbed in the market.
• Biscuit industries are huge contributor of  ’Make in India’ initiative since biscuit is
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made of agricultural products such as wheat, vegetable oil, sugar and milk which
are produced indigenously on large scale supporting many SMEs.
• The higher production of biscuits in India helps SMEs and large number of farmers.
• Moreover, biscuit industry employs about 7.5 lakh workforce directly and more
than 30 lakh persons indirectly in marketing, retail network, transportation etc.
• With an extremely low price point, Parle-G is a poor man’s biscuit, with 50 per cent
of its sales coming from rural India.
The tax structure: Earlier and now:

• Recently rolled out GST is touted to create the biggest hurdle.  Biscuit is a
mass consumption food item but has been suffering due to unjustified
imposition of Goods & Service Tax (GST) at a very high rate of 18% from 12%
• Biscuits are broadly divided into two categories -- biscuits above Rs 100 per
kg and below Rs 100 a kg.
• Government has mistakenly understood Parle G product as a premium
product by placing it in the higher tax slab
• Implication on Parle G :In response to higher GST, Parle had to raise prices
by 5 per cent, which further reduced sales. So they reduced the quantity of
Rs-5 pack from 70 grams to 65 grams since December 2018 which has not
gone well with the consumer.
 Volatility in Raw Material Prices:
• The wholesale prices of the raw materials such as Wheat flour, sugar, butter,
etc., which are key ingredients in the manufacturing of biscuits, are highly
volatile.
• For instance: Sugar and milk prices in India has risen at a CAGR of over 4.5% &
5.5% respectively, during 2013-2017. This in turn has led to increase in
average selling price of biscuits.
• Moreover, the recent proposals from government to revise the minimum
purchase price of wheat, sugar in order to relief the farmers will ultimately
effect the pricing of biscuits.
• Apart from GST, high inflation on raw material and packaging material is yet
again marring the growth of biscuit industry.
• This Industry is subjected to escalation in cost of inputs/ingredients due
to higher cost of transportation, fuel, packaging, wages etc. “
 Retail Challenges:
• Biscuit is an item which is still largely sold by the general traders. Company faces
lot of challenges at retail level, when a shopkeeper sell different food items
marked with different GST slabs as it becomes an arduous task to bill or sale.
• Biscuits, being a low-priced product, offers limited margins across value chain.
Unlike small bakeries across country like Frontier which have their exclusive retail
outlets, key players lack exclusive retail channel resulting in sharing their margins
throughout the value chain.
• India being a highly price sensitive country, manufacturers face difficulties to
increase prices due to which value chain stakeholders are expected to witness
shrinking profit margins.
• An effective distribution strategy is what it takes to reach to your customer
efficiently. For a product like biscuit, managing a distribution network is a
challenge
Unbranded Biscuits:
• Leading biscuit companies are seeing smaller and local players eat into
their sales.
• Unbranded ones, offer higher retail margins and lower price points since
they are not GST compliant.
• Many small players are not tax complaint and have low operating cost
which helps give high margins to retailers who push brands mostly in rural
areas.
• Although organized players have an impressive reach in rural part of
India, low priced unorganized biscuits are hindering the sales of
branded biscuits and this
Highly Fragmented Market
• Most of the key players in the market has diversified brand portfolio
further fragmenting the biscuit market.
• Due to this, the companies are not able to focus on the sales of a
single brand. This results in higher expenditure on marketing and
other promotional activities, eventually, shrinking the profits.
Lower in demand due to other factors

• Due to change in the population structure more millennial age group being added
who are health conscious, consider consuming biscuits to be unhealthy practice and
shifting more towards healthy snacks and breakfast item.
• During Election times, the demand for Parle G rises by 8-9 per cent in consumption.
But this time it didn't happen one of the reasons could be the strict auditing of
spends by all political parties. The Election Commission was stringent about  not
exceeding spends.
• Rural consumers are as aspirational as the urban consumers and would want to
consume premium products as well
• A sharp drop in Parle’s biscuit sales means the company may have to slash
production, which may result in layoffs of 8,000-10,000 people