While food FMCG companies have been harping on how hefty GST tax slabs and ongoing economic slowdown have taken a toll on sales, their own brand positioning and building could also be a culprit.
While food FMCG companies have been harping on how hefty GST tax slabs and ongoing economic slowdown have taken a toll on the biscuit sales, their own brand positioning and brand building could also be one of the reasons behind slower than usual sales. It has been two years since the GST was implemented and the brands that were vulnerable because of the change “have had enough time to reinvest in brand building and earn consumer pricing,” UBS said in a recent note. Exemplifying Britannia, which has since moved its Tiger-brand biscuits to more value-added segment, UBS said that the brands which are not offering customer value proposition i.e, benefits given to the customers for the amount paid by them, are witnessing a loss in market share and volume momentum.
Even then, Britannia is also a part of the chorus that is claiming slower economic growth taking its sales as a victim. Speaking to a newspaper, Britannia’s managing director, Varun Berry recently said that people are not buying products that are priced at Rs 5. Days later, Parle’s category head, Mayank Shah told Financial Express Online that Parle is “on the same page as Britannia”.
What’s with GST rate?
By clubbing the tax rate for premium biscuits (which sell for over Rs 100 per kg) and standard biscuits (those which sell for Rs 100 per kg and less), the government has stirred a storm as the biscuit manufacturers call the move a deterrent to sales. The government now levies 18% GST on all biscuits creating a flux in the price-sensitive category. Together with high GST rate and general economic slowdown, the biscuit industry is witnessing a dip in sales.
“We have been requesting government for the last two years as it is not fair and is unjust to the middle and lower-income group,” Mayank Shah told Financial Express Online recently.
However, not all biscuit manufacturers have seen a demand slowdown because of GST. In fact, some of the players even managed to get a better hold of the market by passing off the lower GST benefits to the consumers (in terms of promotions, added product quantity etc). On the other hand, certain brands bore the brunt and had to pull back trade promotions and consumer preference, hence costing them market share, DBS said.