Bangalore: India’s largest biscuit maker Parle Products Pvt. Ltd is pushing aggressively into snacks and sweets as it seeks to shield itself from a slowdown in the growth of biscuit sales.
Within the next three years, Parle expects confectionery and snacks to generate 16-18% of its sales from less than 10% currently, said Praveen Kulkarni, general manager (marketing).
“Rather than looking at Parle as a biscuit company, we want to be seen as a food company,” said Mayank Shah, group product manager. “So, while we will further consolidate our position as a biscuit major, the focus would be there on new things such as the western and traditional snacks that we have launched.”
Parle gets over 90% of its revenue from popular biscuit brands such as Parle-G, Hide & Seek and Krackjack. Compared with rivals such as Britannia Industries Ltd and ITC Foods, the maker of Sunfeast biscuits, Parle has been slow in expanding into new product categories. Over the past few years, Parle’s main focus was growing its biscuit sales through increased distribution and new products as demand for biscuits was particularly strong from 2007 to 2010.
However, this year, biscuit sales have slowed sharply. According to industry body Indian Biscuit Manufacturers Association, biscuit volumes grew just 9% in the six months to September, a drop from the 11-16% rise in the previous years.
The soaring costs of key ingredients such as wheat and sugar forced biscuit makers to hike their prices, hurting demand. Parle’s biggest rival, Britannia, the maker of Tiger and Good Day biscuits, reported at least five straight quarters of decline in biscuit volumes.
Parle’s biscuit business has grown much slower than the 25% jump in sales of snacks as well as the 15% rise in sales of sweets such as Mango Bite and Melody, marketing head Kulkarni said.
Parle recently launched its Indian snacks Parle Namkeen to compete directly with Haldiram’s offerings. It also sells chips under the Parle Wafers, Musst and Monaco Smart Chips brands.
Given the slowdown in biscuit demand, Parle and Britannia will have to make a stronger and quicker push into new product categories, analysts say.
Parle chairman Vijay Chauhan, in an interview Mint published on 28 November, forecast revenue at about Rs.10,000 crore for 2012-13, which would be a 28% rise over last year.
Shah said that based on current market trends and given that snacks are growing much faster than biscuits, Parle would “like 60% of its sales coming from biscuits, 30% from snacks and 10% from confectionery over the long-term”.
Shah said the firm will tweak its business model according to market trends. “Ideally, the sales mix for us would be according to the category sizes. Biscuits as a category is (significantly) higher than snacks right now. So we will continue launching new products in the premium biscuit category.”
Britannia sells breads, health snacks, namkeen, oats and other foods apart from biscuits. ITC also sells various products such as ready-to-eat foods under the Kitchens of India brand, Bingo! potato chips and mint candies. Neither Britannia nor ITC disclose sales of specific products.
“The core capability for FMCG (fast-moving consumer goods) companies is distribution which can be leveraged across products. There is not much of a challenge as far as product innovation is concerned, so you will see FMCG companies diversifying into related product categories and most big companies are already doing that,” said Anand Ramanathan, associate director at consulting firm KPMG. “ITC has been doing it aggressively but even the others have been doing it in a small way.”
To increase its focus on snacks, Parle has used its wide network of wholesaler contacts to set up a separate distribution channel for the category, Kulkarni said.
“Parle has a very good distribution network. They reach towns, not just cities. So they have the experience and the infrastructure to scale up fast,” Ramanathan said.