One of India’s largest biscuit manufacturers Parle has been affected by the change in GST rates, which have led to a downfall in their sales and can result in Parle laying off about 10,000 employees. Currently, Parle owns 10 company-owned manufacturing plants and 125 third party manufacturing plants. Such a mass layoff can actually give relief to the economically unstable Parle but will cause a real shakedown.
The initial GST rates for biscuit were in a range of 5-12% but now they have risen to a fixed slab of 18%, which has increased the manufacturing cost and forced the biscuit manufactured to either increase their prices or decrease quantity of their product. The target consumer for the biscuit industry are people belonging to the low or middle class, which actually include tend to have biscuits as one of their primary snacks. Also, People from rural areas are targetted by the manufacturer like Parle, which has not to increase their famed Parle-G’s price for the last 25 years.
While Parle-G is again going with the same strategy they have adopted for the last 25 years, in which they decrease the quantity instead of increasing the price. The strategy seems to backfire this time due to the fact that their major audience, the rural consumer feels a little cheated when presented with such fewer quantities. There has been a downfall in the consumption of Parle-G and thus the market is rejecting it, affecting its production and hence causing the probable mass layoffs.
Along with Parle-G, the Parle also manufactures other kinds of biscuits namely Monaco, KrackJack, Hide&Seek and much more. Their competitor Britannia’s managing director, Varun Berry also pitched in and said that a day to day consumer is thinking twice before picking up a 5 rupee pack of biscuit, which causes some real concern for the biscuit industry.
“We have sought reduction in the goods and services tax (GST) on biscuits priced at Rs 100 per kg or below, which are typically sold in packs of Rs 5 and below, but if the government doesn’t provide that stimulus, then we have no choice but to let go of 8,000-10,000 people from our workforce across factories as slowing sales are severely impacting us,” said Mayank Shah, category head of Parle Products.
The government was only charging the biscuit manufactures with VAT and their excise duty was negated back then but now with a fixed GST rate, they have been struggling to survive in a highly competitive market. The manufactures like Mayank Shah demands the government to do something about the hiked GST prices and provide some kind of relief to them.