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GST on biscuits will have higher MRPs, increase prices & impact sales
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Monday, 03 July, 2017, 08 : 00 AM [IST]
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Nandita Vijay, Bengaluru
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The 18 per cent goods and service tax (GST) levied on biscuits will have higher maximum retail prices (MRPs), which will increase the price and impact the sales of manufacturers.
“But, on the other hand, the industry can look at small serving packs, and on the other, offer high-quality, nutritious biscuits, which could sustain sales,” Chetan L Hanchate, chief executive officer, Centre for Food Processing, and food consultant, told F&B News.
“Companies will definitely face the challenge of increasing prices when either no GST or a lower GST is levied on input costs, like those of wheat, sugar and milk,” he added.
“India has an educated consumer population. Therefore, increasing the biscuit prices cannot be resorted to, as the consumers are aware of the softened input costs,” Hanchate said.
“So, the industry will now have to take a stand to assess the ingredients that go into the making of the biscuits and price them accordingly,” he added.
“At the same time, biscuits manufactures need to consider innovative and attractive packaging concepts to allure the country’s young, buoyant population, which is willing to splurge,” Hanchate said.
“Instead of decreasing the packaging investment cost, they need to replough the profits productively to garner brand loyalty,” he added.
“Biscuit consumption is very unique. It is much sought after across all age groups for any occasion, or even to satiate hunger pangs,” Hanchate said.
“From a company perspective, efforts to retain consumption will be through small packs. Now, opting for small packs will improve the purchasing power of the population in the middle- and lower-income categories,” he added.
“However, small packs are convenient for out-of-home consumption. But for in-house consumption, regulars will prefer larger packs, because it is far more economical and convenient to serve,” Hanchate said.
“Both smaller and family packs are the unique selling propositions (USPs) of the manufacturers. The market will decide the dynamics of sales,” he added.
Hanchate commented on whether companies would carry on developing multi-grain and diabetic-friendly biscuits in the long run, after the levying of GST.
He said, “Biscuit consumption across the population is now more sought after, owing to the kind of nutritional value it offers.”
“It is an imminent fad across age groups in both the rural and urban landscapes to opt for lower-calorie and dietetic options,” Hanchate added.
Over 80 to 90 per cent of the biscuit market focuses on the fortification of biscuits. Manufacturers replace maida, experiment with millets and wheat, add sesame, caraway, cumin and anise seeds, cut trans-fat and infuse natural flavours.
“The consumers are not bothered about the price if the biscuits are healthy, and even the GST levy could have a lukewarm response. Therefore, companies should look at fortification and nutrition to offer a safe, sustainable and healthy range of biscuits, which could control existing lifestyle diseases,” said Hanchate.
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