MARKET SIZE OF PARLE G

If you thought that a typical family run Indian company cannot top the
worldwide charts, think again. The homegrown biscuit brand, Parle G,
has proved the belief wrong by becoming the largest selling biscuit
brand in the world.

Ajay Chauhan, executive director of Parle Products, told Business

Standard: "The more than 50-year-old brand, Parle G, has been rated
as the largest selling glucose biscuit brand in the whole world in terms
of volumes. This came as a surprise to us when we were made to
understand that we have topped the worldwide charts of the global
biscuits industry. This was recently revealed by the US based Bakery
Manufacturers' Association."

The other global biscuit brands include Oreo from Nabisco and McVities
from UK-based United Biscuits among others. According to ORG-MARG
reports, Parle G commands a good 65 per cent market share in the
domestic biscuit market. The glucose biscuits category in India is
estimated at Rs 15 billion. The Parle G brand faces competition from
Britannia's Tiger brand of biscuits.

The company's flagship brand, Parle G, contributes more than 50 per

cent to the company's total turnover. The other biscuits in the Parle
Products’ basket include Monaco, Krack Jack, and Marie, Hide n Seek,
Cheeslings, Jeffs, Sixer and Fun Centre. Said Chauhan: "The core
brands of the company in the biscuit category will include only Parle G,
Monaco and Krack Jack. The other brands will not be aggressively
supported by us in the market."
"This is because these three brands contribute substantially to our
topline," Chauhan added.

The confectionery business, which is the other division of Parle

Products, currently contributes only 15 per cent to the company's total
turnover. Interestingly, the company started operations with the
confectionery business in 1929.

Chauhan elucidated: "The confectionery business has now taken a

backseat and has become a smaller part of our business because in
India biscuits have a larger market."

The company commands a 40 per cent market share in the Rs 35

billion biscuit market in India.

"Parle-G's consumer base is unique in the way it cuts across age

groups, income groups and SECs," says Shailesh John Khalkho,
account group manager at the agency. "So although the core target
consumers are young mothers and kids in the 6-to-12 bracket, we can
have a campaign that speaks to the entire spectrum of consumers.
Also, different people have different reasons for consuming Parle-G.
These can be broadly clubbed under the five pillars of taste, nutrition,
meal substitute, mental development and price. So we created five
stories built around these five different propositions."

India is among the largest producers of biscuits in the world and yet
the per capita consumption stands at a dismal 1.5 kilograms. Over 900
million Indians consume biscuits in some form or the other. At the
base of this consuming pyramid stand the popular varieties — Parle G
and Tiger. This alone constitutes about 40% of the total market
estimated around Rs 3000 crores (approximately US$ 600 million).
And if you add the Marie category to that figure, it amounts to almost
80% of the branded biscuit market. These are just the guesstimates
for the branded market. Add the unbranded, unorganised biscuit
market and you get a colossal figure almost double the size. I’m sure
you can appreciate how large these numbers are. A market of this size
has the potential to influence not only the development of packaging
materials and machines, but the social sector too. And that, you know,
is what saddens me. Here is a truly great market — one of the
mega markets that India can be proud of, like dairy and agro
products. What saddens me is to see how the controllers of this
great market – the biscuit-walas — are just not doing enough in
the “right directions” to qualitatively improve the product
offering and thereby leverage the industry to what I believe
could be a world beater – you know, even something like our IT
industry.
 MARKET SHARE OF VARIOUS BRANDS IN THE SAME
PRODUCT CATEGORY.

The size of biscuits market in India is Rs 5,000 crores of which Rs

3,000 crores is accounted for by the organized sector. Glucose and
milk biscuits account for 25% each and Marie biscuits 20% of the
biscuits market.

The biscuit industry in India witnessed annual growth as below:

2003-04 15%

2004-05 14%

2005-06 14%

2006-07 13%

While the growth rate has been stagnating during last 4 years,
momentum is expected topick up during 2007-08, mainly on account
of exemption from central excise duty on biscuits with MRP up to Rs
100/per kg, as per Union Budget for 2007-08. Indian Biscuit
Manufacturers’ Association (IBMA), instrumental in obtaining the
excise duty exemption, estimates annual growth of around 17-18% in
2007-08. Growth in biscuit marketing has been achieved, mainly due
to improvement in rural market penetration.
The per capita consumption of biscuits in our country is only 2.1 kg
compared to more than 10 kg in the USA, UK and West European
countries and above 4.5 kg in South East Asian countries like
Singapore, Hong Kong, Thailand, and Indonesia etc. China has a per
capita consumption of 1.9 kg while in the case of Japan it is estimated
at 7.5 kg. This shows the huge untapped potential of biscuit industry in
India. Exports of Biscuit is estimated to around 10% of the annual
production during the year 2006-07

With the entry of big players, the domestic biscuit manufacturing

sector is to see a healthy competition that would ensure good quality
products at affordable prices to the consumer.

Exports of biscuits would also pick up. It has already increased with
Indian biscuits turning favorite choice in several Middle East markets.
The export of high end products (like

Cream biscuits) to former East European countries has also begun to

rise. Thus, the biscuit manufacturing segment is poised for a stronger
growth in the coming days.

Total Market Size

As per Indian Biscuits Manufacturers Association (IBMA), the biscuit

industry has grown by 15 per cent in value terms in FY 08; Britannia’s
extended portfolio in biscuits along with constant reinvigoration of
portfolio through launches of newer variants has enabled it to grow at
18 per cent. In Q2 FY09, although sales were robust at around 27 per
cent y-o-y, PAT (profit after tax) growth did not keep up the pace; up
only 10%.
HEALTHY GROWTH
Rs crore FY08 FY09E FY10E
Revenue 2,585.0 2,979.0 3,399.0
EBITDA 232.0 270.0 322.0
Net
191.0 240.0 286.0
profit
EPS (Rs) 80.0 100.5 119.7
P/E (x) 15.5 12.4 10.4
E: estimates

The slower growth in PAT could be attributed to the 36 per cent

increase in the raw material costs (wheat, sugar and edible oil). The
stability in wheat prices and the decline in edible oil costs is a
comforting sign for margins in the future.

Speaking of Indian markets in totality, Parle occupies 40% market in

glucose biscuit category keeping itself ahead of its competitors
Britannia Tiger occupying 22%, ITC Sunfeast 15% and other
competitors i.e., local brands at 23%.