Good monsoon forecast buoys biscuit makers

Biscuit makers are optimistic of a rebound in rural demand due to the prediction of normal monsoons this year. Demand has been sluggish for the last few quarters.

Companies such as Britannia, Parle and ITC, the three biggest players in the organised market, are expecting growth rates in the rural market between 12-17% if the rains hold good. Rains would increase farm productivity leading to more disposable income in the hinterlands.

The India Meteorological Department (IMD), which made the forecast recently, defines average, or normal, rainfall as between 96% and 104% of a 50-year average of 89 centimetres for the four-month season beginning June.

“With the elections a lot of money flows into the system and a good monsoon will be a boost for us,” Britannia managing director Varun Berry said. The maker of Bourbon and Good Day biscuits expects its growth in the rural parts, which contributes about a third of its topline, to be between 12-15% for the year.

The Rs 35,000-crore biscuit market is the largest in the FMCG category, with Britannia, Parle and ITC controlling close to 70% of the market. The remaining is held by Anmol, Saj Industries, Mondelez and others. Within biscuits, glucose has the largest penetration as it is more affordable compared to cream biscuits and cookies. About 55% of the total sales, or Rs 18,000 crore, is from the rural markets, underscoring its importance.

For Parle, the largest biscuit maker by volumes, good rainfall is expected to translate into a growth of 15-17% for the year. “A decent monsoon would keep food inflation under check and sustain prices,” Mayank Shah, category head at Parle Products, said. A good monsoon will also aide margins of the companies as raw material prices of wheat and sugar have remained flat.

Hemant Malik, ITC Foods divisional CEO, said he was optimistic about buoyancy in rural demand.

Source:-https://retail.economictimes.indiatimes.com/news/food-entertainment/personal-care-pet-supplies-liquor/good-monsoon-forecast-buoys-biscuit-makers/69034753