Sales of the famous wafers, at six cents the package, fall due to the tax increase and the slowdown.
Snack at the time of the chai (Indian tea) and snack of the little ones. Parle-G cookie was a basic food of disadvantaged families and diet ingredients of all hospitals in the subcontinent.
Parle-G cookies have accompanied generations of Indians since the colonial era, but their sale plummets alongside that of other national consumer goods, such as cars or clothing. The crisis of a brand that was the best-selling of its sector underlines the slowdown in India while the industry calls for more stimuli from the Government to revive the growth of the third-largest economy in Asia.
A week ago the possible dismissal of between 8,000 and 10,000 workers of Parle Products, a company based in Bombay, Indian financial capital, was announced to reduce production due to its fall in the rural heart of the country, where 50% come from of their sales.
“The situation is so bad that if the government does not intervene immediately, we could be forced to eliminate those jobs,” the group’s head, Mayank Shah, told Reuters. According to the spokesman, the demand for the brand’s popular cookies, Parle-G, has worsened since the Government of India imposed the new tax for all products, included to the cheapest cookie package, one of six cents. “Our consumers are very sensitive to price changes. They are very aware of the cookies they buy for a certain cost.”
Created in 1929 as a family confectionery in the neighborhood of Vile Parle, then a suburb of Bombay, it soon became a symbol of independent India and its star product, Parle-Gluco, was the first brand in the country to cross the 50,000 million Rs. (627 million euros) barrier in retail sales.
And also the best-selling wafer firm in the world. Distributed in a hundred countries, some 4,500 cookies were eaten around the world every second, generating more 1,263 million euros per year, thanks to their prices. At 12 cents, 80 grams of cookies, these became a staple product in India, while the 50-gram package was sold for one dollar in the United States.
“We have asked for the reduction of the tax on goods and services in cookies valued at 100 rupees [1.25 euros] per kilo or less, which are normally sold in packages below five rupees [six cents]. But yes the government does not offer that stimulus; we will not have another option,” Shah said about the possible layoffs that would affect a workforce of 100,000 workers.
Under the previous tax regime, that category had a 12% rate and the company expected the new tax to set that 12% for normal cookies and 5% for cheaper ones. But the 2017 regime imposes an 18% charge for all varieties, forcing Parle to raise its prices by 5%; which has affected their sales.
However, Parle is not the only food company that has signaled the fall in demand. “We have only grown to 6% and the market is doing it at an even lower rate,” says Varun Berry, CEO of Britannia Industries, Parle’s main competitor.
“Obviously, there is a serious problem in the economy,” summarizes the manager, stressing that consumers “were thinking twice” to buy products that only cost five rupees. According to the local Economic Times, Britannia’s net profits fell 3.5% year-on-year, to 31.3 million euros, at the end of the first half of the year.
Last month, Nielsen revised the prediction of the increase in demand for consumer goods, placing them one point below expectations, 9% -10% this year due to the sharp rural economic slowdown.
Citing the study of the market research company, the industry notes that growth in the consumer goods sector has fallen, both in value and volume in the last four quarters consecutively since the third quarter of 2018.
The shadow of makeup economic data and the destruction of employment in India disappeared with the overwhelming electoral victory of the party in the Government last May.
But the initial excitement of the market faded in July, after the publication of budgets that raised taxes for overseas and portfolios of foreign investors, instead of providing the stimuli requested from the Executive.