After a series of price hikes, and cuts in products’ weightages and sizes by almost all FMCG companies to handle inflationary pressure, it seems like the trend has reached a saturation point. Mayank Shah, Senior Category Head, Parle Products, told Tanya Krishna of FinancialExpress.com: “We are not anticipating any further price hike. Going forward, if the situation remains favourable, the prices will either sustain and in the best case scenario, they will fall, because clearly the current prices are not sustainable.” Parle Products had last increased the prices of its products in May 2022, by 5-6 per cent. Shah also said that grammage reduction or ‘shrinkflation’ already took place twice in the last one year, across the industry, and there is ‘no scope of further reducing the pack sizes’. Here are the excerpts from the interview.
What are the new and evolving consumer behaviour trends in the FMCG industry. How is the company adjusting to this?
Post pandemic, there have been quite a few changes in the consumer behaviour in terms of consumption of products like biscuits or snacks or processed food. We have seen a larger penetration of processed food categories; one of the reasons being consumers tried some of the categories for the first time during the pandemic and they have stayed back with the category. This has helped many sub-categories of biscuits and snacks increase their penetration. Secondly, consumption of biscuits as input to many other things has also significantly improved. People have started using these products as ingredients for various bakery items and other dishes.
Besides, online buying was another big shift in consumer behaviour. During the pandemic, convenience along with the safety aspect propelled the shift to online buying. We are expecting that by next 2-3 years, e-commerce will have about 10 per cent contribution in the FMCG industry. For Parle, almost 89-90 per cent revenue comes from general trade, e-commerce contributes to about 3-4 per cent and the balance comes from modern trade.
How was the company’s performance in the previous year, and what is the outlook for the year 2022?
As far as 2022 is concerned, we are very hopeful this year. Last two years of the pandemic were really difficult, and it was not so much about the pandemic as much as it was about the input cost. If you look at the input cost, an increase in input costs since the last one and a half years, it has been phenomenal. And I think it’s not just the input cost; but the volatility.
Thankfully, in the last few weeks, the volatility is going down, although the input costs are high and the inflation remains. But hopefully, I think given the current situation we expect the prices of inputs to go down further and that hopefully should be a silver lining and 2022-23 should be better.
As far as food or biscuits or other allied categories are concerned, we are expecting lower double digit growth; so somewhere around 11-13 per cent. In terms of FMCG, we are expecting a higher single digit which is around 8-9 per cent.
Will there be a price hike by the company in the coming months? Also, what will be the quantum of the price hike and what are the factors leading to rise in prices?
I think most companies have already taken the price hike, followed by ban on palm oil by Indonesia and increasing wheat prices as a result of the geopolitical crisis, and increasing crude oil prices, which directly translates into higher logistics cost as well as packaging because packaging is a derivative of food.
We are not anticipating any further price hike. Going forward, if the situation remains favourable, the prices will either sustain and in the best case scenario, they will go down, because clearly the current prices are not sustainable.
What are your strategies to maintain the margins?
With most companies it’s not about increasing the margins, but either protecting the margins or minimizing the losses. Strategies to maintain margins will be to buy right and rationalising your cost. We are rationalising any inefficiencies, ensuring that we bring in efficiencies in terms of production, in terms of logistics and SCM, and even in terms of pack sizes, etc.
Are you planning on changing the product sizes/ pack volume and weight or packaging in order to balance the rising inflation and prices of the product? In what all product categories?
I think that has already happened across the industry, at least two times in one year. Now, we are at a juncture or at a point where any further reduction is not possible. Grammage reduction happens to not bother the consumers with different price points. Rs5 and Rs10 are the classical and very convenient price points, both from the point of view of consumers and retailers.
Also, typically India still is a mono pack market where consumers largely buy a single pack at a time. Given that companies kept reducing pack sizes all this while and ensured that a product is available at Rs5, it’s only to a level that one can reduce the pack size. Beyond a point, if the pack is not big enough to satiate hunger of a consumer, there’s no point. I don’t think there is any scope of further reducing it. This was done for every product, across categories including biscuits, namkeens, snacks, soaps, shampoo, etc.
Tell us about your expansion plans (in terms of retail presence and also product launches in the months to come).
Post pandemic, we already got into the packaged wheat flour category. We have rolled out Parle-G Chakki Atta in north and west and we will be very shortly rolling it out in south and east. We also got into another category which is cereals. We also launched Parle-G Oats & Berries and Parle-G Kismi Cinnamon biscuits. The product will fill the gap of an affordable health biscuit available for a price pack of Rs 10. These are the few new categories and before any new launches, we would like to consolidate our position in these categories.
In terms of retail presence, we will continue to expand our operations in rural markets while augmenting our presence in urban markets.