Days after Britannia’s Varun Berry said that customers are thinking twice before buying even Rs 5 priced products, a top executive at rival Parle too said that the company may have to lay off several employees because of the ongoing slowdown in FMCG sector. Parle Products, the company famous for its iconic Parle-G biscuit, is facing a demand slowdown along with a hike in raw material prices due to which, it may have to let go of its employees, Mayank Shah, category head at Parle Products told Financial Express Online.
“The company is facing the dual brunt of economic slowdown and higher GST at biscuits, both premium and standard, and that has aggravated the situation for us,” Mayank Shah said. Parle Products has about 100,000 employees and may lay off about a tenth of them. The company is trying every bit to stay profitable under the current circumstances, Mayank Shah said.
Slowdown bites into even Rs 5 biscuits
The FMCG industry has been one of the worst-hit by an ongoing economic growth slowdown. Recently, Britannia’s Managing Director Varun Berry alluded to the slowdown woes, saying that customers are thinking twice before purchasing even Rs 5 priced products, the price point which is considered the golden price in FMCG industry. “Even for a Rs 5 product if the consumer is thinking twice before buying it, then there is some serious issue in the economy,” he said in a newspaper interview.
As for Parle, Mayank Shah said that Parle Products “is on the same page as Britannia” when it comes to sales slip in its own Rs 5 product such as Glucose, Marie biscuits. At Parle Products, sales have slipped about 7-8%, as the slowdown in the economy and sluggish demand hits the biscuit industry, Mayank Shah said.
The slowdown in the FMCG industry became evident when the generally cautious Hindustan Unilever said that the “FMCG industry is recession-resistant, not recession-proof”. Starting early this year, the sluggish demand growth has hit leading FMCG brands including Parle, Patanjali, Hindustan Unilever, Britannia etc. Food categories like salty snacks, biscuits, spices have been leading the slowdown, Nielsen said recently in its FMCG report. These categories are otherwise the growth drivers in the FMCG industry.
GST woes add to the slowdown
For the biscuits industry, the issue arose when the government decided to tax premium and standard biscuits at the same slab of 18%. “Biscuit… sold at Rs 100 per kg and below like Glucose, Marie and Milk, they were subject to higher GST rate. We have been asking the government to tax it at the earlier rate which was prior to GST,” Mayank Shah said. The biscuits industry has been requesting the government for the last two years to reduce the GST rate. The industry was forced to increase the biscuit price after this due to the hike in raw material prices.
When asked about the last time the industry raised the issue with the government, Mayank Shah said that the latest request was placed at the time of the election.