Biscuits major Parle is tapping into new categories like staples and confectionery that have been relatively less impacted by GST.
Biscuits have been slapped with 18 per cent levy under GST, and this is likely to be passed on to consumers in terms of higher prices but categories such as confectionery and staples have had a negligible impact.
While biscuits have always been the mainstay of the company, comprising nearly 70 per cent of its over ₹10,000-crore turnover, Parle is now seeking to enhance its confectionery portfolio (with revenues of ₹1,000 crore) and has also entered new categories like staples in the recent past.
“We already have a 18 per cent share in the confectionery segment and have even managed to become market leaders in sub categories like Eclairs. Confectionery is a relatively less penetrated and faster growing category compared to biscuits. We expect to grow at 25 per cent and reach a turnover of ₹1,250 crore by the end of this year in this category,’’ said B Krishna Rao, Category Head, Confectionery & Snacks at Parle Products.Earlier core
In fact, confectionery had been the core category for the 90-year-old company before it forayed into biscuits. “Biscuits is a 5.86 million-category while confectionery is almost half at 2.5 million with robust growth opportunities,’’ added Rao.
While biscuits have been growing at about 12 per cent, the largest segment within the category — glucose — has slowed down at 7 per cent.
Parle G, which has almost 80 per cent share in the glucose category, is now expected to raise its prices post GST.
“We may look at a price hike since Parle G falls in the below ₹100 a-kg category and we will have no option but to pass it on to the consumer. Today, our margins come from high-end chocolates (it has the Friberg brand) and categories like cookies and cream biscuits,’’ said Mayank Shah, Category Head for Biscuits & Staples at Parle Products. Biscuits below ₹100 a kg attracted zero per cent excise duties but had 14 per cent VAT before GST.
However, in categories like chocolates that have even higher GST levy at 28 per cent, Parle is not perturbed about the impact on demand for its new brand Friberg, which currently has restricted distribution at premium outlets in airports and malls and competes with international brands like Lindt. “Consumers buying our super premium chocolates are not those who are going to be impacted due to higher prices unlike our mass glucose brand Parle G,’’ claimed Shah.
Parle has decided to build its new category of staples through its brand Fresh Harvest which would be riding on its biscuits distribution.
“Staples is going to be the next big opportunity and challenge for us. Today less than 5 per cent of the ₹1.5-lakh crore commodities category is branded and we will have a different strategy through concept selling for the five pulses that we have launched,’’ added Shah.
Known for its distribution strength, Parle currently reaches out to 4.5 million outlets directly and also has an indirect reach of 6 million.