India’s biscuit crisis shows slowdown is hurting the poor more — and job losses are making it worse

• Parle is considering laying off 10,000 employees, thanks to the significant slump in sales, according to an ET report.
  
• The auto industry has already laid off nearly 350,000 employees in the last four months.
  
• Rural wages hit the lowest level in the last three years in May 2018.

Every economic slowdown hurts the poorer people the most. It’s no different this time. The cash crunch rising out of a slowing economy and rising unemployment is biting budget households in India so bad that they are cutting back on biscuits and that is leading to more job losses at manufacturing plants.

India’s largest biscuit maker, Parle is considering laying off 10,000 employees, thanks to the significant slump in sales, according to an ET report. Parle’s products are mostly consumed by people in the lower rungs of India’s economic pyramid, people in smaller towns and villages.

Parle, which makes Parle-G, Monaco and Marie biscuits records an average sale of over ₹10,000 crore annually with over 100,000 employees. “The number of shops stocking these products is the same, but the number of products being sold from these shops is going down due to weakening consumer demand,” Mayank Shah, category heads at Parle Products told National Herald.

Higher tax and lower incomes

It doesn’t help that biscuits are taxed at 12-18% in the goods and services tax regime. ““These biscuits were taxed at only 12-14 per cent under the previous excise and value added tax regime. Under GST, they are priced at 18%. This forces companies to increase prices, impacting sales,” Shah had added.

The slowdown is getting increasingly visible in consumption. It started with trucks followed by car sales and then two wheelers and now it has hit even products of daily consumption. The auto industry has already laid off nearly 350,000 employees in the last four months. Job cuts in companies like Parle will only make the situation worse.

People are increasingly worried about the prospects in the coming as signalled by the Reserve Bank of India’s consumer confidence index that fell sharply in June 2019 and has stayed near that level since then.

The falling biscuit sales only confirm that the country’s rural distress is far from abating. Rural wages hit the lowest level in the last three years in May 2018.

“The turmoil is in rural, the turmoil is related to agriculture, so because of that the issues are happening in the value segment, right. So obviously it's affecting every segment but the biggest issue is happening in the value segment because that's what sells in those markets,” Varun Berry, the MD of Brittania said adding that people are shying away from buying biscuits packs that are worth a mere ₹5.

Richer the better

However, the richer Indians may be shelving plans for a new car but they aren’t cutting down on biscuits yet. So, the more expensive packs of biscuits are still selling well and that’s where Britannia has not had to resort to job cuts yet but Parle has.

“With around 65-70% of the portfolio in the premium space, the company plans to introduce variants with protein, gluten free, whole wheat, seed, nuts, etc., and also a niche offering catering to modern trade and e-commerce channels,” said report on consumer sentiment by SBI Caps.

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