Cheapest cookies crumbling

Amid bone-chilling wintry cold, Parle, maker of Parle-G, the world’s largest-selling ‘glucose biscuits’, is feeling the heat of single-digit growth.

Praveen Kulkarni, GM of Parle, says sales have slowed. “The last couple of quarters, growth in the biscuit industry was hovering around 12%. Now, it has fallen to single digits. The industry is growing in the range of 8%.”

Glucose biscuits, the mainstay of the mass consumption segment, are leading the fall. If analysts and trade experts are to be believed, sales of glucose biscuits have halved in the last one year.
Not just Parle, the broader industry has been reeling in the past couple of quarters, say experts. In fact, the latest Nielsen report says share of the glucose segment had declined by about 24% in the April-September period. Industry experts say there had been an additional 25% decline in the December quarter.

Arvind Singhal of Technopak Advisors attributes the biscuit industry woes to high inflation and  weaker consumer sentiment.

“Glucose biscuits are generally consumed by the middle income or the value-conscious consumers who are looking for a quick snack. Glucose biscuits are treated as sugar substitute and generally taken as a snack replacement or energy boost. It is this value end of the segment that has been badly hurt by the rising prices and the slowdown in economy,” says Singhal.

Last year, bad monsoon had led to a slowdown in the rural economy, slowing down biscuit sales further.

Abneesh Roy of Edelweiss Securities says that biscuit majors such as Parle, Britannia and ITC have been rejigging their sales to focus on the premium segment which “is still showing a healthy double-digit growth. One reason for that is the low base. Another reason is, more and more consumers are moving to the premium segment”.

Consumers’ preferences are changing because cream biscuits are not that much more expensive than glucose biscuits these days. An analyst says, “The difference in prices is as less as three or five rupees. So, most consumers are inclined to indulge and go for cream cookies rather than glucose biscuits.”

Rising input costs are not a help either. Prices of key ingredients like wheat and sugar increased by 18% and 19%, respectively, in April-November 2012. This led to a 15-20% rise in biscuit prices last year either directly or thorough lighter packs at prevailing prices.

In order to fight falling demand, biscuit-makers are resorting to trade discounts, says Kulkarni of Parle. Several distributors confirm the trend.

“Going forward, we’ll see increased promotional offers both at the distributor and consumer levels,” says Kulkarni.