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Biscuit prices to rise by 10%
NEW DELHI: About 40 companies that account for almost one-third of the organised biscuit market in the country will increase prices by 10% across
the board from next month to cope with soaring prices of key ingredients like sugar, milk and milk powder.

The price hike, the steepest in the industry in two years, will come into effect on September 1, according to the Indian Biscuit Manufacturers Association (IBMA), which represents these second-string biscuit makers whose list include Priyagold, Anmol, Cremica, Bonn and Crown.

“Hiking consumer prices is a last resort move, but we have no choice on account of soaring price hikes,” said BP Agarwal, president of IBMA and managing director of Surya Food & Agro, the makers of Priyagold biscuits.

The top players — Parle, Britannia and, to a smaller extent, ITC — that make up for the rest of the Rs 6,500-crore organised biscuit market in the country, said they are yet to decide on price hikes to deal with rising prices of sugar and wheat.

“We are evaluating costs but we have not yet taken a call on increasing consumer prices,” said Neeraj Chandra, vice-president, sales, marketing and innovation, of Britannia Industries, India’s largest biscuit maker. Prices of sugar have shot up by 35% between January and August this year, while the prices of milk and milk powder went up by 10%.

The situation may get worse with the drought-like condition due to the shortfall in rains this year expected to impact agriculture output. According to experts, the biscuits market is highly price-sensitive and even a small price hike may make consumers switch brands. The IBMA move is expected to help the Parle, Britannia and ITC increase their market share, unless they too resort to price hikes.

“Yes, there can be some loss of market share, but it’s just not sustainable to sell at the current prices,” said an executive of a biscuit manufacturer, defending the decision for price cut. Companies have so far been resisting a price hike by reducing the net weight of units while keeping the selling price unchanged.

To counter a hit on their margins, big companies are pushing volumes by stepping up promotions and lower priced unit packs.

Also, according to industry experts, they can negotiate better deals with suppliers of different ingredients as they usually enter into long-term contracts for raw materials. Smaller companies, in contrast, buy their ingredients in a month-tomonth basis and, therefore, are much more vulnerable to market price hikes.

These companies are now demanding a tax cut on biscuit, the only processed food item to attract a 12.5% value-added tax (VAT). Other processed foods like bread, juices and jam are either exempt or levied 4% VAT in all states. IBMA also said it wants the government to allocate sugar to biscuit manufacturers in the small and medium size segment , particularly in view of a deficient monsoon.

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Nations all time favourite biscuit --PARLE-G-- cannot increase its price. By the sales it achieves it need not increse its price, it should find other ways.... IT'll be so bad if it does.
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