Parle-G is a household name in most Indian homes. This Tuesday, India's largest and most loved biscuit maker announced heart-breaking news. They might have to layoff approximately 8,000-10,000 employees as a result of the economic slowdown and falling demand.
That's exactly what we were wondering. Is it possible to NOT crave Parle-G biscuits anymore?
The problem started with the rollout of the GST (goods and services tax) proposed by the government in 2017. The GST of 18% applied to the entire biscuit manufacturing industry, which meant no matter how affordable the biscuits were, the increase in taxes forced manufacturers to reduce the quantity or increase prices.
In the previous tax cycle, biscuits in the sub-below Rs. 100 per kg category were taxed at 12%. While firms had expected a 12% GST for premium biscuits and a 5% GST for lower-priced ones, the new GST rollout taxed all manufacturers at 18%, no matter what's the cost of the biscuit. Since over half of Parle-G's sales come from lower-income rural consumers, even a slight fluctuation in price or quantity can affect sales. And that's exactly what happened. The brand increased their prices by 5%, which then led to a rapid decline in sales.
And Parle-G wasn't the only one affected by the increased taxes. Varun Berry, the Managing Director of Britannia Industries Ltd. said in an interview, "Consumers were actually thinking twice before buying products worth just Rs 5." Clearly, indicating a serious slowdown in the economy and an immediate need for action.
Mayank Shah, category head of Parle Products said in an interview that the company has asked the government to reduce the GST on biscuits that fall under the category of below Rs. 100 per kg. If the government is unable to provide a push in favour of these manufacturers, the brand would be forced to layoff 8-10,000 employees to combat a decline in sales.
Parle currently employs 1 lakh people, operates 10 company-owned plants and has 125 third-party manufacturing units.