Biscuit maker Parle Products Private Limited on Tuesday said it may lay off almost 10,000 employees if the demand slowdown continues, The Economic Times reported.
“We have sought reduction in the Goods and Services Tax on biscuits priced at Rs 100 per kg or below, which are typically sold in packs of Rs 5 and below, but if the government does not provide that stimulus, then we have no choice but to let go of 8,000 to 10,000 people from our workforce across factories as slowing sales are severely impacting us,” said Parle Products category head Mayank Shah.
The company said 12% tax was imposed on biscuits that cost Rs 100 per kg before GST was introduced. It expected the GST rate to be fixed at the same rate for premium biscuits and at 5% for biscuits priced lower. However, all biscuits came under the 18% GST tax bracket, forcing companies to increase prices. This had a direct impact on sales, Shah said.
Parle increased its prices by around 5%, which resulted in a significant decline in sales. The company has around one lakh employees in 10 plants and 125 third-party manufacturing units. More than half of the company’s sales come from rural markets.
“Consumers have become more value-conscious during the times of slowdown in the last six months,” Shah told Bloomberg Quint. “Offtake from the shops is getting affected. The number of shops stocking these products is the same, but the number of products being sold from these shops is going down due to weakening consumer demand.”
Parle’s concerns came a week after food-products company Britannia’s Managing Director Varun Berry said the demand for Rs 5 biscuit packets had fallen. “We’ve only grown 6% and the market is growing slower than that,” he added. The company’s net profit dived to 3.5% year-on-year to Rs 249 crore at the end of the April-June quarter.
Last month, marker researcher Nielsen had revised its growth prediction for the fast-moving consumer goods sector this year to 9%-10% instead of its previous forecast of 11-12%, attributing it to a sharp rural slowdown. It said the slowdown was significant across all food and non-food items.
Steel industry may cut production due to weak demand: JSW
Meanwhile, steelmaker JSW Steel on Wednesday said that the industry may be forced to cut its production in the future due to the economic slowdown, which it said had weakened demand from consumers in infrastructure and automobile sectors, Moneycontrol reported.
While the price of steel went down, rates of raw material such as iron ore and coal remained high, which kept cost of production elevated. “If you look the four sectors that reflect economic activity – capital goods, infrastructure, oil and gas and metals and mining – none of them is talking about investments...it is looking difficult for steel companies to make money in such circumstances,” JSW Steel’s Joint Managing Director and Group Chief Financial Officer Seshagiri Rao was quoted as saying. Rao also said that a production cut could be a solution even if it’s not in this quarter with all the same variables.
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