There are no fresh talks on acquiring Polish biscuit producer Dr Gerard, said B Krishna Rao, Senior Category Head, Parle Products while talking exclusively to CNBC-TV18. He said that nothing is materializing on the acquisition.
Earlier, there were reports that Parle Products is in talks with private equity firm Bridgepoint to consider buying Dr Gerard, the second largest biscuits producer in Poland.
Dr Gerard is reportedly valued at $121.72 million to $146.07 million. Founded in 1993, it makes over 200 different biscuits and salty snacks and exports to more than 30 countries, according to its website.
Talking further on the demand, Rao said that rural demand has slowed down in September but they have seen an uptick in demand for confectionary segment. He added that they are targeting 15-16 percent revenue growth in Q3FY23.
He believes that Rs 10 price point is contributing to 65 percent of the company’s portfolio.
“We are also targeting a volume growth of 4-5 percent in the quarter. However, rise in wheat prices will impact profitability significantly.” Rao said.
Parle Products says good days ahead as rural demand is reviving and commodity prices cooling
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Commodity prices have been cooling off in the last few days. Prices of wheat, palm oil, and sugar have all fallen. What has been the impact of this on biscuit manufacturers? Mayank Shah, Senior Category Head of Parle Products discussed more on this.
Mayank Shah, senior category head of Parle Products, is very optimistic about rural demand going up. Roughly about 45-50 percent of Parle’s business comes from the rural category.
“With a forecast of normal monsoon and with the increased realisation of most crops, we feel that farmers would have better purchasing power and we would have strong demand coming in from rural markets as we go forward in the FY22-FY23,” Shah told CNBC-TV18 in an exclusive chat. “We have seen rural demand getting revived in last one quarter.”
What will also help the biscuit manufacturer is the cooling commodity prices. Costs of wheat, palm oil, and sugar — the key ingredients for biscuits — have all fallen in the past few days.
“Softening of prices of key inputs has bought much-needed respite to most of the fast-moving consumer goods (FMCG) players where palm and crude are widely used,” Shah said. According to him, the benefit of lower palm oil costs will be seen in the next three-six months.
The company is not passing on the entire increase in input costs to the consumers. “Most companies have not factored in the complete increase in prices. Therefore, the price hikes which were due would probably not be taken given that the prices of key commodities are coming down,” he explained.
Another FMCG player, HUL, had recently said inflation had severely impacted the sale of soaps but the firm will have to hike prices and shrink packets.
According to K Ramakrishnan, MD-South Asia at Kantar Worldpanel, the drop in volumes of FMCG companies was sharper in urban than rural markets. “We definitely see a very marginal drop in the overall FMCG volumes and the drop is by and large coming from urban. Rural is almost holding the fort but it also doesn’t help because there is a population growth inherently of 2 percent, which means rural is also dropping,” he told CNBC-TV18.
He expects a better second half of FY23 for the FMCG sector.
Abneesh Roy, Executive Director, Institutional Equities at Edelweiss Securities, told CNBC-TV18 that FMCG stocks have started outperforming.
“We are overweight on the sector and we like names like Hindustan Unilever Ltd (HUL), Britannia, ITC, Asian Paints – almost all companies will benefit in the second half.”
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The demand for Parle’s products in the rural market has begun to increase and is likely to continue to go up, Mayank Shah, senior category head, Parle Products, said on Friday.
“Rural demand has started seeing an uptick and we are hopeful about that,” he told CNBC-TV18 in an interview.
Despite concerns about wheat supply and price hikes, given the ongoing war between Russia and Ukraine, Shah said the company is covered on the inventory front for the next two to three months.
“Although we are comfortable on the stocks that we have in India, there would be demand coming in from overseas market for wheat because Russia and Ukraine supply would get affected. As a result of which we will probably, going forward, see an increase in wheat flour prices or wheat prices as well,” he said.
Shah added the company has taken already taken a price hike of 6 to 7 percent this year.
“While we have taken 6-7 percent price hike, I do not think for most companies there is any further room of absorbing the increase in raw material cost,” he said.
For the entire interview, watch the accompanying video
Russia-Ukraine war impact: Parle expects wheat price to rise
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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With Russia and Ukraine accounting for about a quarter of the world’s wheat export, Parle Products is expecting a rise in the price of the grain given the geopolitical tensions between the two nations.
Parle Products on Friday said it expects a rise in the price of wheat as Russia and Ukraine are large producers and exporters of grains. Any disruptions in supply due to the geopolitical tensions between the two nations may lead to pushing up prices.
“Palm oil price yesterday (February 24) was at about Rs 140 per kg and that’s putting pressure on the bottomline of most food companies who use palm oil. So, not just oil, even wheat because Ukraine and Russia also happen to be major exporters of wheat. So both the prime raw material commodities which go into food,” Mayank Shah, senior category head, Parle Products, told CNBC-TV18 in an interview.
His remark comes as Russia has attacked Ukraine, which is one of the world’s largest exporters of grains – wheat, corn, and barley, whereas Russia itself is the largest wheat exporter, accounting for more than 18 percent of international exports. More than a quarter of the world’s wheat export comes from Russia and Ukraine. So far this week, international wheat is already costlier by over 15 percent.
Shah added the company has taken already taken a price hike of 6 to 7 percent this year. He explained that palm oil prices are at a record high which is hurting input costs.
“While we have taken 6-7 percent price hike, I do not think for most companies there is any further room of absorbing the increase in raw material cost because whatever cushion they had in terms of margins, where they can absorb the increased prices of raw material – that’s already done, but beyond this point, it would be difficult for most companies to do that. So, if this situation continues then you will see further price hikes,” he said.
Even as Parle Products’ top official cited concerns about over supply and price hikes, he said the company is covered on the inventory front for the next two to three months.
“Although we are comfortable on the stocks that we have in India, there would be demand coming in from overseas market for wheat because Russia and Ukraine supply would get affected. As a result of which we will probably, going forward, see an increase in wheat flour prices or wheat prices as well,” he said.
Earlier in November, Parle had said the price hike was on account of the tremendous input cost pressures as the price of key raw material palm oil prices had doubled on a year-on-year (YoY) basis. Packaging and laminate costs have also been up between 20 and 35 percent, it had said, adding that it was seeing a slight shortage of material on the packaging front. Freight costs also climbed on account of fuel prices rising by about 25 to 30 percent, the fast-moving consumer goods company said in November.
Meanwhile, the demand for Parle products has begun to increase in the rural market, Shah said. “Rural demand has started seeing an uptick and we are hopeful about that,” he told CNBC-TV18.
For the entire interview, watch the accompanying video
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Storyboard18 | Ad budgets won’t take a major hit due to the price hike: Mayank Shah, Parle Products
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Despite business challenges and pressures, most companies want to take this opportunity to grow, says Shah, senior category head, Parle Products.
Prices of fast-moving consumer goods such as biscuits and personal care items could continue to rise this quarter as FMCG companies try to counter inflationary headwinds.
Storyboard18 caught up with Mayank Shah, senior category head, Parle Products on the sidelines of Parle Hide & Seek’s new campaign launch where he spoke to us about the impact of the price hike on consumption in urban and rural markets.
He also told us why ad budgets won’t take a huge hit due to the hike. Parle Products owns the world’s largest selling biscuit brand – Parle G, which is consumed by millions of Indians every day across the pop strata.
Edited excerpts.
Parle launched a new campaign ‘Start your story with Hide & Seek’ ahead of Valentine’s Day. Tell us about the genesis of the campaign and how you arrived at the insight driving it?
The primary objective behind the campaign is to reinforce the brand identity as an ‘enabler’- an enabler for first-time conversations. The campaign highlights the feeling of teenage romance that is often felt during adolescence. It positions the brand as a friend and an enabler or even as a cupid which will help you to break the ice and strike a conversation.
It is a nice coincidence that we are launching it around Valentine’s Day. But if we talk about the legacy of the brand, the insight that we worked on was typical if you talk about young innocent teenagers which are the primary target audience for this brand, once they move from a school to junior college, it is completely a different world for them. They are very conscious about it. They are also conscious about whom they should talk to, whom they should approach, etc.
But the fear of rejection, a consciousness about whether you will be able to strike a good conversation with him or her keeps you away from approaching somebody and talking to them. And that is where the brand comes in.
The third wave of Covid-19 has coincided with the price hike. How are these converging pressures impacting consumption?
As of now, there are at least one or two price hikes taken by almost all companies. And we haven’t seen any major impact on consumption. There are two reasons behind it.
First is a certain amount of revenge buying. There’s that feeling among consumers having gone through the first two waves of the pandemic, they are ready to go out and spend. It’s about ‘living for the day’ rather than saving for tomorrow.
Somewhere we are moving towards this philosophy of living for the day rather than saving for a rainy day. Secondly, consumers are rational. When they see prices of commodities going up they also understand that there would be an increase in the prices of finished goods.
For most FMCG players rural markets have shown a lot of promise especially during the pandemic. Even a slight bit of hike in price has a significant impact on the monthly spending of a consumer in rural areas. How is consumption faring in these markets?
We need to look at rural growth through the prism of two years. We saw rural markets growing at a phenomenal pace last year. Over that higher base, we saw further growth and it is still growing.
Foods as a category grew at 16 – 17 percent last year in the rural areas. This year it has come down to 7- 8 percent. Of course, it is less but it is on a higher base. Compare this to the urban market which was worse affected because of limited market working hours, higher rate of contraction in urban areas, we missed that growing opportunity. So it is making up for that lost potential.
In fact, urban growth was in the low single digits, about 3-4% last year. Now, it is growing at about 8–9 percent. If we look at it from that perspective, rural is still ahead in terms of two years of growth.
Will advertising budgets take a hit owing to the hike and business pressures?
I don’t think ad budgets will take a major impact. Most companies want to take this opportunity to grow and for those who were not able to grow in the last one or two years, it’s a question of probably at least trying and going back to pre-pandemic levels. Not just us, but even other FMCG players would be spending. The primary reason being to have the revenues or top lines almost similar to pre-pandemic levels.
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After Britannia hiked prices closer to 4 percent on account of spike in input costs, rival Parle Products increased prices across categories.
Rising input costs have forced Parle to take price hikes of between 10 and 15 percent in the last quarter (July-September). Over the next two quarters too, Parle is expected to take price hikes to the tune of 10 to 20 percent across categories. This would be across biscuits, confectionery, rusks, and snacks.
In Parle’s biscuit segment, prices of the iconic Parle G and Krackjack are expected to be hiked by about 5-10 percent, going ahead. For Parle Rusk, the company has hiked prices by about Rs 10 for the 300-gram pack and by about Rs 4 for the 400-gram pack.
For the lower unit packs, which is the Rs 10-20-30 MRP packs, the company is keeping the MRP intact, but is reducing the grammage.
So, that is a combination of direct and indirect price hikes from FMCG players.
Parle says this is on account of the tremendous input cost pressures that the company has been seeing. The key raw materials for the company, that is palm oil prices, has doubled on year-on-year (YoY) basis. Packaging and laminate costs have also been up between 20 and 35 percent. In fact, it is seeing a slight shortage of material on the packaging front. Freight costs also climbed on account of fuel prices rising by about 25 to 30 percent.
In its confectionary business, it has seen wheat prices go up about 10 to 15 percent and sugar prices shoot up almost 20 percent. These have impacted the company’s confectionary business.
Not just Britannia or Parle, players across the FMCG industry have been experiencing tremendous input cost pressures. So, more price hikes could be on the cards.
Heavy discount in place until inventory pile-up cleared: Parle Product
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Mayank Shah, Senior Category Head of Parle Product, in an interview with CNBC-TV18, said around 10-15 percent discounts are being offered currently on food and beverages.
Mayank Shah, Senior Category Head of Parle Product, in an interview with CNBC-TV18, said around 10-15 percent discounts are being offered currently on food and beverages.
“This is a temporary phenomenon, just to get over with the inventory which we expect will get cleared probably in the next 15 days or so,” he said.
He added that last year nobody had a clue on how the situation will turn out and there was a speculative buying. People overbought stocks last year and that drove the consumption.
“Most food companies saw good Q1 last year. This time around companies were well prepared unlike last time and they not only saw an increase in demand coming in from consumers, but they also nibbled in the share of a few other companies. All those things were not there this time. The consumer also knew that grocery shops would be opened, so even the consumer moderated his buying,” he added.
“All this resulted in relatively lower demand than what the company is expected. While they geared up and produced more than last year, there was this mismatch between demand and supply. As a result of this, there is a bit of discounting that we are seeing currently,” he shared.
For the full interview, watch the accompanying video.
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Seeing some speculative buying as COVID curbs become stricter: Parle Products
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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As Maharashtra imposed fresh restrictions with cases rising in the state, under the new “Break the Chain” plan, the government has asked restaurants and bars to remain shut until April 30 for in-dining but can provide home deliveries until 8 pm. Mayank Shah, Senior Category Head at Parle Products spoke to CNBC-TV18 to talk about demand picture. Shah said, “As far as foods are concerned and processed food are concerned they are severe in a situation like this. People normally load their pantries, there is some amount of speculative buying also that happens.”
As Maharashtra imposed fresh restrictions with cases rising in the state, under the new “Break the Chain” plan, the government has asked restaurants and bars to remain shut until April 30 for in-dining but can provide home deliveries until 8 pm.
Mayank Shah, Senior Category Head at Parle Products spoke to CNBC-TV18 to talk about the demand picture. Shah said, “As far as foods are concerned and processed food are concerned they are severe in a situation like this. People normally load their pantries, there is some amount of speculative buying also that happens.”
“If restrictions come in then obviously there would be an inclination towards buy more of processed food, packaged food. It suits very well in a situation like this due to higher shelf life people stock processed food at home. We have started seeing early signs of people stocking food.”
Speaking about Q4, Shah said, “Maharashtra, as a market is one of the important markets for us, almost about -7 percent of our total revenue contribution, comes from Maharashtra. Last financial year Q1 and Q2 were relatively good in terms of traction that we had seen in terms of improvement in demand. Q3 onwards we saw tapering in demand as restaurants and other things started opening up.”
“For both Parle as well as the industry we anticipate good growth coming in for FY21-22 because of two reasons one is the penetration of biscuits have increased to a large extent and secondly considering the current situation the demand till then would continue to be robust.”
On price increase, he explained, “We have to continue to ensuring that we don’t increase prices at this juncture. There might be some tapering in demand as a result of increase in prices so yes input cost are hurting but I think currently most companies are absorbing it.”
Watch the video for more.
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Parle-G has launched the next leg of its iconic ‘G mane Genius’ campaign that speaks about ‘Jo Doosro Ki Khushi Mein Paaye Apni Khushi’ while emphasizing on cognitive intelligence and its importance in today’s children.
In an interview to Storyboard’s Shibani Gharat, Mayank Shah, Senior Category Head at Parle Products spoke at length about this campaign and the brand’s plans and outlook for the year 2021.
Festive season, lower mortality rate led to recovery in urban demand: Parle’s Mayank Shah
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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The third quarter is expected to be a quarter of demand recovery for the FMCG sector, said Mayank Shah, Senior Category Head of Parle Products on Tuesday. Rural growth is likely to continue while urban markets are expected to recover, he added.
The third quarter is expected to be a quarter of demand recovery for the FMCG sector, said Mayank Shah, Senior Category Head of Parle Products on Tuesday. Rural growth is likely to continue while urban markets are expected to recover, he added.
“Demand during the peak of lockdown was very high, post things started opening up in the second quarter onwards. The packaged food demand was slightly moderated, not high as it was but still much higher than what it was in the last year,” said Shah.
He added, “In the third quarter, we saw urban demand reviving which was impacted because of the lockdown. Revival in demand was led by two things in urban India, one was cases going down, mortality rates going down, and the second thing was—it was largely driven by festive season buying plus revival in demand coming in from modern trade as well is the result of that.”
On the industry growth, Shah said, “In the pre-COVID year the category was growing at somewhere around 8-9 percent and we are expecting that going forward the category would be growing at 15-16 percent almost about 2x. This is largely because of consumer propensity towards trusted brands.”
Shah is very confident that they would probably see double-digit growth in the next two-three years.
RS Sodhi, General Manager of Gujarat Cooperative Milk Marketing Federation said, “Demand this year was much better than 2019, in case of food consumer this year has shifted from unbranded to the branded products.”
He added, “HoReCa which was totally closed down now up 60-70 percent. HoReCa is opened up.”
Watch the video for more
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