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The pandemic has revived the fortunes of mass-market biscuit brands in India
Basic economic theory suggests that as people’s incomes go up, their consumption goes up as well. However, the consumption of all products doesn’t go up at the same rate.
There is a class of products, which for the lack of a better term can be called “inferior goods”, whose consumption falls as people’s income rises. As income rises, people “move up the value chain” to superior products, and the consumption of the inferior products gets hit.
This is what happened to parts of the Indian biscuit industry in 2019. While the industry on the whole grew by 2.5% in the April to June 2019 quarter, there was divergence in the way different segments grew.
Biscuits are India’s largest consumer product segment, worth Rs 35,000 crore, and grew 2.5% in the April-June quarter. Biscuits costing more than Rs 100 per kilo, the premium version, account for twothirds of the market and grew 8%. The rest of the market — selling for less than Rs 100 per kilo — fell 9%.
“Mass products are usually first to get impacted. While premium or discretionary categories are not entirely insulated, they are holding up so far,” said Devendra Chawla, managing director at Spencer’s Retail.
This was last year. Now, thanks to the pandemic, Parle G, India’s largest mass market biscuit brand, has seen record sales.
Leading food company Parle Products logged record sales of its Parle-G biscuits, preferred for mass consumption, in April and May during the lockdown, said a senior company official.
The company has gained a market share of around 5 percent in the highly competitive biscuit segment, helped by Parle-G biscuits, which was proffered by the people while stocking pantry during the pandemic.
Parle-G biscuits also gained traction as it was preferred by government agencies and NGOs working to distribute food relief packages to the people during the pandemic due to its economic proposition with value package of Rs 2 besides being considered as a good source of glucose, Parle Products Senior Category Head Mayank Shah told PTI.
Parle G began its life as “Parle Gluco” in 1938, before being rebranded as Parle G in the 1980s. The messaging around the biscuit has always been around its nutritional value and “instant energy”. In the late 1990s, the biscuit was endorsed by “Shaktimaan”, a popular television superhero character.
There are multiple reasons why this mass-market brand has seen record sales in the last two months. Mint presents a nice summary.
According to Shah, “pantry loading" happened as biscuits have a long shelf life. “So people stocked up," he said. Shah didn’t say this but panic buying surely had a role in it as consumers, worried about foodstocks running out because of an extended lockdown, bought far more quantities than what they would in normal times.
Another thing that helped Parle Products clinch record sales were the good samaritans buying sacks of biscuits for distributing to the migrants they would meet on expressways, bypasses and various roads of the states.
Shah added that Parle-G became the go-to option for many, while for many it was the only food option available. "This is a common man's biscuit; people who cannot afford bread, buy Parle-G," said Shah. He added that several state governments also requisitioned biscuits and several non-governmental organizations also bought in huge quantities.
Parle G isn’t the only biscuit brand to profit from the lockdown. Share prices of rival Britannia hit a 52-week high, despite India’s broad market being rather turbulent due to the pandemic.
On May 29, Emkay Global re-iterated its ‘buy’ rating on the stock, increased Britannia’s earnings estimates by 12 per cent and raises the price target to Rs 3,900 from Rs 3,250. This factored in stronger-than-expected growth trends in its portfolio, besides an acceleration in market share gains and multiple tailwinds for higher growth and margin expansion.
“Britannia is emerging as the biggest beneficiary from the disruption, as packaged foods consumption is growing strongly, led by higher home consumption and lesser avenues for out-of-home eating,” the brokerage said.
“The shift from unorganised/street food to packaged foods may sustain even post lockdown given the higher preference for hygiene and trusted brands,” it added.
Both Britannia and Parle have portfolios of brands that span the value chain in the biscuit market. It remains to be seen how they perform once the crisis is past us.