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With rising input costs, biscuits makers have asked for an increase in the central excise exemption threshold from the current ₹100 a kg to ₹150 a kg in the forthcoming budget.
Minimum selling prices of commodities such as wheat, milk and sugar have been rising, forcing most biscuit companies to increase prices by 25 to 30 per cent over the last few years.
Companies making low-cost variants across categories from glucose, creams to cookies took a hit on profit margins. Most have tried to reduce grammage while trying to hold on to prices.
“Profit margins for the biscuit companies range from 3 to 5 per cent, and with costs rising, growth in these margins has remained stagnant. Even grammage correction has not helped the category,” says Maria Iyer, GM-Finance, Parle Products.
Mass brands such as 20:20 cookies, Parle Creams and Tiger Creams apart from the staple glucose category have all been forced to reduce grammage and increase prices.
Besides, packaging costs have also been rising.
“When grammage is reduced, the cost per pack of packaging goes up. Unlike in the case of premium products, it becomes difficult to maintain price points at the lower end of the biscuit category,” says Anand Agarwal, Finance Head, Britannia.
“Lower price points of ₹5 and ₹10 have been difficult to sustain for most of the biscuit players.”
Parle and Surya Food & Agro have been resisting price hikes. “We have tried to maintain the retail price, but grammages have been constantly reduced for our brands for the past eight years.
“Apart from the ingredient cost, even labour costs have gone up. We are now hoping in this budget the excise exemption limits go up to ₹150 per kg,” says BP Agarwal, CMD, Surya Food.
Footwear exampleBiscuit companies are now seeking parity with the footwear category where the excise exemption limits have been raised to ₹500.
“Exemptions on the footwear category, which is also labour-intensive, have been steadily going up,” adds Britannia’s Agarwal.
Most biscuit companies have exceeded the existing exemption limit of ₹100 per kg and are now having to pay excise duty at the rate of 6 per cent, apart from other taxes like value-added tax and sales tax.
The organised biscuit category is estimated at ₹22,000 crore and continues to grow between 8-9 per cent.
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