Rising inflation, coupled with a new packaging legislation, will make price hikes of packaged foods inevitable, says Mr Chitranjan Dar, Divisional Chief Executive, ITC's foods division.
On one hand the costs of inputs such as raw material, furnace oil and packaging material and even logistics have gone up, while on the other, the new packaging law that bans producers from reducing the quantity inside the packet, will leave them with no choice but to raise prices. This new Legal Metrology Act is likely to come into force July next year.
At present, FMCG companies rely on reduced quantity to tackle rising inflationary pressure on input costs rather than changing the price points owing mainly to coinage issues. The new Act will make the price-point concept impossible, Mr Dar said.
On the demand-supply side, he said the company had to make a lot of efforts to meet the spurt in demand for its cream biscuits. Giving an example, he said the company's premium range offerings such as Dark Fantasy, Dream Cream Bourbon have witnessed a growth of 118 per cent in the second quarter over the first. Even other Sunfeast premium creams have also shown a growth of 72 per cent in Q2 over Q1.
Competition
Responding to a question on competition from global brands such as Oreo (from Kraft Foods), McVitie's from (United Biscuits), and domestic brands such as Parle and Britannia, he said international competition is a reality. It is good, as it aids “premiumisation” of the category. He said this has actually enriched Sunfeast's portfolio last year.
On the domestic front, given the emerging trends in consumption patterns, the biscuit market offers enormous opportunities, scope for improvement both in terms of new products and segments and also in terms of operational excellence. “The field of play is large and we are encouraged and really excited about the years ahead,” said Mr Dar.
At present ITC's Sunfeast is the third largest national player after Parle and Britannia. The brand has 10 per cent share of the Rs 15,000-crore biscuit market. And, within this, in the creams segment (which accounts for over Rs 3,500 crore) Sunfeast commands 15 per cent share.