Growing Bite By Bite
Mumbai-headquartered Parle Products, makers of the iconic biscuit brand Parle-G, continues to maintain its prime position. Started in 1939, its relevance has only increased with each passing decade. Today, it is consistently adapting to the cost dynamics, high inflation and the changing business environment while maintaining the price points of its iconic biscuit brand at Rs 5 and Rs 10.
A quick run-through is essential to understand and appreciate the Parle-G biscuits. Launched by the Chauhan family in Vile Parle, Bombay, Parle Products began manufacturing biscuits in 1939. In fact, the first Parle biscuit baked in 1938 was called Parle Gluco. Thereafter, the company introduced Monaco, India's first salted cracker. This was in the early 1940s before India became an independent country.
Post-Independence, the company introduced a slew of products including Cheeslings in 1956; its confectionery range expanded with Kismi in 1963 and Poppins in 1966. In 1972, it introduced the original sweet and salty biscuit, Krackjack. In the early 1980s, Parle Gluco became Parle-G, where G stood for glucose. The company kept adding new products like Melody in 1983 and India's first mango candy Mango Bite in 1986. Ten years later, it launched Hide & Seek, the moulded chocolate chip biscuits. Parle products also went global in the 1990s. Today, the company is into multiple product categories including atta, cereals, cakes and snacks, among others.
Not just in India, Parle biscuits and confectionaries are widely gaining acceptance in international markets across continents. Major first world markets like the US, UK, Canada, Australia, New Zealand and the Middle East are also relishing Parle products, the company says with pride.
As per the company, Parle-G had a 70 per cent share in the global business market in 2019. In 2020, it was adjudged the best-selling biscuit brand in the world, as per Nielsen.
How does one describe the brand loyalty towards Parle-G? Mayank Shah, Senior Category Head, Parle Products explains: "The amount of love and healthy criticism we receive from our customers is why we are India's biggest food company. We know we care about our consumers but in return our customers too show us that in many ways." He adds: "Recently, when there were a couple of tweets from a certain account talking against the brand, consumers jumped into action like our superheroes to back us up."
Fighting Pandemic, Inflation
The first lockdown announcement caused much furore and there was a panic buying throughout the country, recalls Shah. "In this situation, we decided to donate three crore packs of biscuits to the people in need so that they and their families survive tough times," he said. At its core, Parle Products is a swadeshi brand and has always put the interests of the nation first, says Shah.
How did the people react to the brand during the pandemic? "Because it was available for people in the time of need, it cemented our relationship with them; not just as a biscuits major but as a brand that is sensitive to the common man’s needs," says Shah. As a result, in the second year of the pandemic, the new launches namely Parle-G Chakki Atta and Parle Hide and Seek Choco Fills were very well received.
Atta, as per the company, is nearly a Rs 1.5 lakh crore per annum category. Hence, entering it made sense for Parle. "Atta is a generic commodity but the faith associated with Parle G and the assurance of hygiene and convenience synonymous with Parle Products helped the product to stand out amidst already established strong competitors," says Shah.
In terms of profitability, the last two years were challenging due to high inflation, says Shah. "It was not just increased input cost that was a concern but uncertainty and volatility in input cost was making it very difficult for right pricing of products," informs Shah. However, multiple initiatives across the company helped it drive efficiency and ensure a profitable growth.
Krishnarao Buddha, Senior Category Head, Parle Products recalls that in order to tackle the phenomenon of panic buying post-lockdown, the company kept the production running and invented ways to accelerate production with limited manpower following the government’s safety protocols. "We made sure our products were available at all outlets even in the remotest areas. The pattern of consumer buying shifted from physical stores to ecommerce platforms. We decided to also expand our reach and availability online. Since the pandemic, our ecommerce business has grown more than 300 per cent," adds Buddha.
For 2022, the company is confident of registering a 20 per cent growth in sales. "We are also looking at a 15 per cent increase in the ad spends this year," says Buddha.
Parle Products strongly believes in innovation. "Innovation is going to drive growth in the FMCG sector and focusing on this brief, we recently launched Parle G–Oats & Berries Biscuit to fill the gaps in the health category," he says.
Price Game
Experts point to two significant developments in the FMCG space in the past few months. Due to rise in input cost, inflation, taxation etc., almost all FMCG companies have hiked the price of their best selling products. At the same time, they have reduced grammage, which means that the content inside the pack weighs less now while the prices have either been kept under check or raised 5-15 per cent or even more. The reason for this is the Russia-Ukraine war and its impact.
Off late, some commodity prices have shown a decline. Will prices drop as a result? "FMCG companies may not slash prices despite decline in commodity prices since they have also suffered loss of margin due to increasing input cost inflation," explains Buddha, adding that in the case of eatables, Parle Products can look at volume promotions if there is a significant decline in commodity prices.
Have higher prices and reduced grammage actually lead to higher sales? "While cost cutting and grammage reduction have been the routes opted by many, recent trends show that it is not very effective. In fact, demand for reduced packs is lesser than the usual ones," Buddha says. According to Shah, the company has been focusing on production of lower price packs more than others. "Demand for lower unit packs is visible across categories, including biscuits, salty snacks and bakery products (rusk and cake mainly). For biscuits and bakery primarily the demand for lower unit packs of Rs 5 and Rs 10 is more, whereas for snacks, the lower unit pack of Rs 30 is more in demand," says Shah.
As a result of the popularity of the lower packs segment, Parle Products has bumped up the production capacity by 12-15 per cent over the last two months. Company insiders confess that at this point it is not contributing to profitability since the margins are affected by input cost inflation.
Grammage reduction and price hikes have also not reflected positively on consumption patterns. "What can be leveraged, though, is sales maximisation. In a situation like this, there are few brands that will be willing or have the capacity to still operate with negligible or low margins. In which case, the market is open for the remaining brands that can acquire customers and strengthen their existing customer base further.
However, off late due to commodities prices peaking out there is some respite for most manufacturers. The recent decline in commodities like edible oil and crude by 15-20 per cent from their peaks will help companies maintain prices and improve volumes," Shah adds. We surely hope so! We wish that the iconic biscuit brand will continue to remain affordable, filling and an important part in the lives of Indians. After all, it is one of the best examples of a ‘Made in India’ product that is widely known and recognized globally.
