Biscuit makers get relief

Duty waiver in this year's Budget offers relief to small biscuit-makers.

Small biscuit manufacturers of eastern India are feeling the pinch of regular freebies offered by organised food retailers.

With margins in the range of 50 paise for a RS 15 packet, the smaller manufacturers find themselves unable to offer discounts that organised players like Big Bazaar and Food Bazaars offer in Kolkata.

"It is difficult for us to sustain the 1+1 free offers and discounts that are part of almost all shopping malls of eastern India. Also, smaller biscuit companies find it hard to continue selling their products at a loss for longer periods for the sake of disposing off their stock, although this is easier for larger companies to sustain on the back of high economies of scale that they enjoy," said G P Agarwal, chairman of Priya Food Products, which has a turnover of Rs 60 crore.

Agreed Ankit Choudhary of Anmol Biscuits that does brisk business in eastern India with 1200 employees. "The biscuit industry is almost always scheme-driven, moving away from which would mean lesser volume as well as value sales. Moreover, increasing product pricing with increase in raw material prices is next to impossible for smaller biscuit manufacturers as we may run the risk of losing consumers to bigger players who can afford to sustain losses for a while," he said.

While the price of raw materials like refined corn flour, sugar, and vegetable oils, used for making biscuits, increased by about 40 per cent in 2006, Anmol increased prices by only 15 per cent while Priya and Bisk Farm did not increase prices at all.

"Being regional players, we were waiting for bigger players to increase prices first, taking cue from which we could have thought of increasing ours, as biscuit is a very price-sensitive market," said Vijay Singh, managing director of Bisk Farm, a Rs 80 crore biscuit brand in eastern India.

Post the excise duty cut Priya reduced prices by Re 1 for their highest selling biscuit variant which is now priced at Rs 20 for 400gm. Anmol, however, increased pack size by 10 gm without reducing prices, while Bisk Farm is not thinking of reducing prices as yet but can breathe a sigh of relief as the losses made last year could be recovered this year following the excise exemptions in this year's budget.