Bangalore: India’s largest biscuit maker Parle Products Pvt. Ltd expects sales volumes to bounce back this year mainly on the back of a recovery in spending in rural areas and increased demand for affordable cream biscuits and cookies.

This year Parle, which gets over 90% of its sales from biscuits, expects volumes to rise 12-13% in the category, group product manager Mayank Shah said in an interview. Last year, the company reported biscuit volume growth of 8%, the lowest in several years, as an uneven monsoon and higher prices led to lower rural spending.

“Since May, things have been looking up and we should be doing better growth than last year when rural demand was subdued. Last year, because of the weak monsoons, etc., volume growth was pretty much same in rural and urban, which is unusual. But this year things should be back to normal and volume growth would be primarily driven by rural and value growth by urban areas," Shah said.

He said that increased penetration and demand for ‘mid-tier’ biscuits such as Gold Star and Top would be another driver of volume growth for the company. Parle’s ‘mid-tier’ biscuits are priced at 150-200 per kg, higher than its eponymous glucose biscuit and lower than its premium brands such as Hide and Seek and Milano. Shah also forecast an increase in volumes of over 8% for Parle-G, India’s highest selling biscuit product, for the year ended March 2014.

“Cookies and cream biscuits are really growing well. We estimate that there are three million retail outlets which are potential outlets for our mid-tier cream and cookie biscuits. We’re already there in 1.5 million outlets and this year we will focus on increasing penetration rather than launching new products. I think it would take us about two-three years to reach 3 million outlets," Shah said.

An increase in biscuit volumes of 12% would be “very impressive" in the current economic environment, said Bhaveshkumar Jain, analyst at Sushil Financial Services Pvt Ltd.

“A lot of FMCG (fast moving consumer goods) companies are talking of a slowdown in discretionary spend. Britannia also has been reporting volume growth of less than 5% in biscuits," Jain said. “But with the monsoons looking up and the increase in MSP (minimum support price), rural spending should be good so biscuit makers will benefit. And among biscuit companies, Parle has the highest presence in rural."

Over the past three years, Parle and its rivals Britannia Industries Ltd and Sunfeast maker ITC Foods have been passing on increased input costs to shoppers. Last year, Jain estimates that biscuit prices rose by over 7%.

But though costs of some inputs such as sugar and wheat have stabilized, biscuit prices will likely rise again this year, Parle’s Shah said.

“Crude oil has shot up and that increases our packaging costs significantly. And we import most of our crude oil so the rupee depreciation will again increase costs. So it looks inevitable that prices are going to rise this year also,’’ Shah said.

Though costs of some inputs such as sugar and wheat have stabilized, biscuit prices will likely rise again this year, Parle’s Shah said.

“Crude oil has shot up and that increases our packaging costs significantly. And we import most of our crude oil so the rupee depreciation will again increase costs. So it looks inevitable that prices are going to rise this year also," he said.

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