Despite falling consumer demand due to a slowdown in the economic activities, prices of biscuits may rise for the first time this year due to rising raw material costs. Iconic glucose biscuit Parle-G maker Parle Products, Leading the way in this round of price hikes.

The senior management of Parle Products has already started discussing cost pressures, sources told CNBC-TV18. The company may hike prices by 5 percent to 6 percent over the next month, said a person close to the development.

If this price hike comes into effect, it would be the first hike this year from biscuit makers. Last year, Parle Products had increased prices by 5-7 percent across its biscuit portfolio. This year, too, the company plans to hike prices for the mass and premium segments of its portfolio. For small packs, the price hike is likely to be in the form of a grammage reduction, while, for bigger packs, the price hike will most likely be in absolute value.

Meanwhile, market leader Britannia may go for price hikes in select products. “We may take small hikes in brands or SKUs where there have not been any increases in more than 24 months,” said Varun Berry, managing director, Britannia. The Good Day-maker is still mulling over the exact timing of the price hike but may look at taking them over the next three to four months.

The reason for these price hikes is the cost pressure that biscuit makers are facing as a result of escalating raw material prices. “The price of wheat flour has gone up by 15-16 percent and the price of sugar has gone up by 10-12 percent on a year on year basis. Therefore we will have to consider taking a price hike,” said Mayank Shah, Category Head, Parle Products.

Larger companies usually hedge their risks arising from volatility in raw material costs and are therefore shielded from any sudden movements.

“The price of wheat flour has definitely gone up year on year. In the South, it is sold at about Rs 24 per kg and it is slightly lower in North India. There are additional transport and handling costs for small and medium manufacturers,” said an official from the Roller Flour Millers' Federation of India.

In terms of market share, Britannia has a share of about 34 percent, Parle Products about 29 percent and ITC approximately 18 percent share.

First Published:Nov 22, 2019 2:38 PM IST