In potato chips, where 80 per cent of sales come from Rs 5 and Rs 10 packs, the decline in volume growth has been sharper, at 300 bps in the period under review. It now stands at 15 per cent versus 18 per cent last year. Volume growth in toilet soaps, where a quarter of sales come from small packs, has been flat, as against 3.3 per cent growth seen last year.
“The slowdown is getting worse,” said Mayank Shah, category head, Parle
Products, which is among the country’s leading biscuit manufacturers.
“Overall, the growth rate of biscuits has declined to levels of 2-2.5 per cent in April-June 2019 (first quarter, or Q1) and the biggest contributor to this has been the GST rate of 18 per cent slapped on the (biscuit) segment priced below Rs 100 per kg. This segment, where biscuit packs are priced at Rs 5 and below, has seen growth rates decline sharply in Q1 after we took price hikes of 7-8 per cent recently.”
On Tuesday, Parle
Products had said it would have to lay off people if sales continued to decline.
While rival Britannia
has given no indication of layoffs at its plants, Managing Director Varun Berry admitted in an investor call last week that he had never seen a slowdown like this before. “This slowdown has taken the biscuit category growth to 2 per cent in Q1,” he said.
Last week, Godrej Group Chairman Adi Godrej
Chairman Harsh Mariwala had said the focus of the Centre should be on economic revival at a time when the country’s central bank had lowered the fiscal 2020 GDP
growth rate to 6.9 per cent from 7 per cent estimated earlier.
Last month, Nielsen
had reduced its CY19 growth forecast for the overall FMCG
market to 9-10 per cent from 11-12 per cent estimated earlier, saying rural areas were contributing 57 per cent to the slowdown.
C K Ranganathan, founder and chairman, CavinKare, said, “There is a need for a stimulus package in rural areas. The government should also consider merging the 18 per cent and 12 per cent GST tax slabs into a common 15 per cent tax bracket and nudge banks for better transmission of interest rates.”