Parle may slash 10,000 jobs as consumption declines

Parle Products Pvt Ltd might cut off upto 10,000 jobs as declining economic growth and falling consumption in the rural India could cause production cuts, a company executive of Parle Products said on Wednesday.

According to a report in Reuters, decline in Asia’s third-largest economy is affecting the sales of everything from cars to clothing, forcing companies to cut production.

The fall in Parle’s biscuit sales means the 90-year-old company may have to slash production, which may result in job cuts of 8,000-10,000 people, Mayank Shah, category head at Parle, said.

“The situation is so bad, that if the government doesn’t intervene immediately … we may be forced to eliminate these positions,” he said.

Founded in 1929, Parle employs about 100,000 people, including direct and contract workers across 10 company-owned facilities and 125 contract manufacturing plants.

Mayank Shah of Parle Products held higher slabs in Goods and Services tax and lack of adequate government stimulus responsible for the slowdown in demand.

“Imposing higher taxes on biscuits bought typically by lower-income consumers will definitely impact sales. The government needs to spruce up demand. There has also been a long pending demand to reduce GST on biscuits priced at ₹100 per kg or below.”

“These biscuits were taxed at only 12-14 per cent under the previous excise and value added tax regime. Under GST, they are priced at 18 per cent. This forces companies to increase prices, impacting sales,” said Shah

“Consumers here are extremely price-sensitive. They’re extremely conscious of how many biscuits they are getting for a particular price,” Shah said.

Parle, which has an annual revenue of above $1.4 billion, held talks over the past year with the government’s GST council as well as former Finance Minister Arun Jaitley, asking them to review tax rates, Shah added.

The slowdown in India’s economic growth, which has already led to thousands of job losses in its crucial automotive industry, was accelerating the drop in demand, Shah said.

Market research firm Nielsen said last month India’s consumer goods industry was losing steam as spending in the rural heartland cools and small manufacturers lose competitive advantages in a slowing economy. Parle is not the only food product company to have flagged slowing demand.

Varun Berry, managing director, Britannia Ltd, in a post-earnings conference said the consumers are thinking twice before buying even a ₹5 product. He indicated towards a “serious issue in the economy”.

“We’ve only grown 6 per cent and the market is growing slower than that,” Varun Berry, managing director at the maker of Good Day and Tiger biscuits, said.

Britannia Industries market shares have declined more than 3 per cent since it announced its first-quarter results on August 9, 2019