After making a soft entry into the Rs 3,000 crore biscuit segment, Hindustan Lever (HLL) has decided to exit the business. HLL was selling its biscuits under the Modern and Kissan franchisee.
“We had made a low-profile entry into the biscuits segment. Currently, we don’t have any major plans in this segment,” said a Lever executive.
This is not the first time that Lever’s tried its hand in the biscuit category. Years ago, it had entered the segment under the Lipton brand.
Pitted against Parle Products’ Parle G and Britannia Industries’ Tiger, HLL had extended the Modern brand of bread to glucose biscuits. Kissan Greedy Bistix was an innovative product — biscuit sticks with fruit dips. HLL had acquired Modern Foods, as part of the government’s privatisation programme a few years ago.
A Sundarajan, managing director of market research firm, Market Search said, “There is room for one more player in this category. However, it’s a long haul. In the short period that Lever was present, it never backed up the business to take on two well-entrenched players even though Lever had both the financial and distribution muscle.”
Lever’s exit from this category did not come as a surprise to other players. A brand manager at Parle Products said, “Modern biscuits had soya as one of its ingredients. Though soya has nutritional values, it still has not found acceptability in terms of taste with Indian consumers.”
The biscuit business is extremely price sensitive. Parle and Britannia increased prices of Parle G and Tiger brands only to roll them in the face of stiff resistance put up by consumers.
In July last year both had increased prices by 50 paise and Re 1 in small and large packs — the first such move in nine years. This was on account of rising costs of inputs such as wheat flour, oils, sugar, and packaging.
“Consumer resistance and coinage problems forced us to bring down the price. We are managing margins by relentlessly undertaking cost-cutting measures,” said a Parle Products executive.
The biscuit business is broadly divided into two segments —popular (glucose and marie) and value-added variants (cream). In the glucose category, Parle holds a commendable share of the market, and in marie, the leader is Britannia Industries.
The Kolkata based ITC, a new entrant in this segment, has been increasingly munching the crunchy biscuits market, which is growing at a double-digit rate.