Industry Profile

BISCUIT INDUSTRY IN INDIA - AN OVERVIEW

1. Biscuit industry in India in the organized sector produces around 60% of the total production, the balance 40% being contributed by the unorganized bakeries. The industry consists of two large scale manufacturers, around 50 medium scale brands and small scale units ranging up to 2500 units in the country, as at 2000-01. The unorganized sector is estimated to have approximately 30,000 small & tiny bakeries across the country.


2. The annual turnover of the organized sector of the biscuit manufacturers (as at 2001-02) is Rs. 4,350 crores.
3. In terms of volume biscuit production by the organized segment in 2001-02 is estimated at 1.30 million tonnes. The major Brands of biscuits are - Brittania, Parle Bakeman, Priya Gold,Elite,Cremica, Dukes, Anupam, Horlicks, Craze, Nezone, besides various regional/State brands.


4. Biscuit industry which was till then reserved in the SSI Sector, was unreserved in 1997-98, in accordance with the Govt Policy, based on the recommendations of the Abid Hussain Committee.


5. The annual production of biscuit in the organized sector, continues to be predominantly in the small and medium sale sector before and after de-reservation. The annual production was around 7.4 Lakh tonnes in 1997-98 In the next five years, biscuit production witnessed an annual growth of 10% to 12%, up to 1999-00.


6. The annual Growth showed a decline of 3.5% in 2000-01, mainly due to 100% hike in Central Excise Duty (from 9% to 16%). Production in the year 2001-02 increased very marginally by 2.75% where in 2002-03 the growth is around 3%.


7. The Union Budget for 2003-04 granted 50% reduction in the rate of Excise Duty on Biscuit i.e. from 16% to 8%. The Federation's estimate for the current year indicates a growth of approximately 8% to 9%.


8. However the average utilization of installed capacity by biscuit manufacturers in the country has been a dismal 60% over the last decade up to 2001-02.


9. Though dereservation resulted in a few MNCs, i.e. Sara Lee, Kellogs SmithKline Beecham, Heinz etc entering the biscuit industry in India, most of them, with the exception of SmithKline Beecham (Horlicks Biscuits), have ceased production in the country.


10. On the other hand, import of biscuits, specially in the high price segment has started from 1998-99, but however, the quantum of imports has not so far increased alarmingly and has remained at around 3.75% of the consumption of biscuits in the country in the year 2001-02. However, recent imports from china industries cheaper verities of biscuit, needs to be examined with cautions, especially in the context of the price as the low margin based domestic industry, which is operating at 60 % of the total installed capital. Exports of biscuits from India has been to the extent of 5.5% of the total production. Export are expected to grow only in the year 2003-04 and beyond.


11. Biscuit is a hygienically packaged nutritious snack food available at very competitive prices, volumes and different tastes. According to the NCAER Study, biscuit is predominantly consumed by people from the lower strata of society, particularly children in both rural and urban areas with an average monthly income of Rs. 750.00.


12. Biscuit can he broadly categorized into the following segments:
    (Based on productions of 2000-01)
    Glucose 44%
    Marie 13%
    Cream 10%
    Crackers 13%
    Milk 12%
    Others 8%.


13. In recognition of industry's obligations towards the community, being a part of it, biscuit manufacturers supply biscuits to the social welfare agencies in all States for the benefit of school children, senior citizens and other needy sections of the society. FBMI Members have always responded positively to our appeal as also by the Government, to rush truck loads of biscuits to the people affected by earthquakes, floods, famine etc. Our industry has also participated in supplying biscuits to the people of war ravaged Afghanistan and presently to the Iraqi people, under the aegis of the UN.


14. As regards the consumption pattern is concerned. surveys and estimates by industry from time to time indicate the average consumption scenario in the four Zones have been more or less close to each other, as below:
    Northern States: 28%
    Southern States: 24%
    Western States: 25%
    Eastern States: 23%


15. Though India is considered as the third largest producer of Biscuits after USA and China, 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 4.25 kg in south cast Asian countries, Le. Singapore, Hong Kong, Thailand, Indonesia etc. China has a per capita consumption of 1.90 kg, while in the case of Japan it is estimated at 7.5 kg.


16. In view of the meager per capita consumption even as penetration of biscuits manufactured by the organised sector, into rural areas in India, has been very good during the last 10 years, as also in the metro and other cities, small towns etc. However, in spite of this, the industry has not been able to utilize about half of their installed capacities.


17. Biscuit is a comparatively low margin food product in the PMCG (Packaged Mass Consumption Goods ) sector. The commodity is also price sensitive, as a consequence of which, even when the Excise Duty was doubled on biscuits in 2000-01 biscuit manufacturers, including the major brands, were not able hike MRPs to the extend of the steep increase in the Duty. Taxation, both Central Excise Duty as also State Sales Tax, other miscellaneous levies i.e. turnover tax, local area tax, mandi taxes, purchase tax, octroi etc etc, has been a major deterrent in the growth of the biscuit industry. The CII Study Report has identified Biscuit as one of the products that should treated as "Merit Good for the purpose of liberal tax policy both by the Centre and States.


18. Besides lack of technology upgradation in manufacturing, packaging etc has also been a factor affecting our industry, along with inadequate financial credit and support particularly for the medium and small scale biscuit units.


19. On the other hand, the Government of India has identified food processing industries as a priority area to be encouraged for growth and development and created the Ministry of Food Processing Industries (which was till then a Dept in the Ministry of Agriculture), headed by an Ministry of State with Independent charge.


20. The Food Processing Ministry has been rendering yeomen service to the industry, of which biscuit manufacturing is an important part. The Ministry, with the objective of enabling food processing Industries to undertake technology upgradation diversification. expansion as also to set up new units has formulated scheme of Grants and Financial Assistance. Please see www.mofpi.nic.in


21. Other areas of concern to industries of food products like Biscuits include multiplicity of food laws and their enforcing agencies in the Central and State Governments with overlapping functions & implementation. At the persistent instance of industry organizations including FBMI the Ministry of FPI took the initiative in evolving an Integrated Food Act, harmonizing the existing multifarious legislations enabling better compliance. The Draft Unifled Food Bill 2002 has been prepared and now awaits approval by the Cabinet and the Parliament, which will fulfill an important need of the industry and pave way for accelerated development and growth.


22. Biscuit manufacturing as well as other bakery products like Bread etc are agro based industries, with the major inputs - wheat flour/atta sugar, milk vanaspati/vegetable oil etc all being agriculture produces.


23. Industries such as Biscuit are also languishing as they are not able to achieve their potentials for higher production, in the absence of the concrete food Processing Industry Policy. FBMI in close coordination with other organizations and apex Chambers, initiated to urge the Govt of India to formulate a comprehensive Policy Document, for smooth growth and harmonious development of the industry. The Food Processing Industry Policy, which has been evolved as a result of various workshops, deliberations and representations by a large cross section of food processing industries, is yet to be finalized. It is hoped that the Ministry of Food Processing Industries, GOI would initiate action for implementation of the Policy expeditiously.


24. Biscuit Production
    According to the production figures of members available upto the calendar year 2003, the total production was 625000 tonnes as against 475000 tonnes in the previous year. The production of biscuit for the last 11 years is as under:
    1993 - 167750 1994 - 180526
    1995 - 202567 1996 - 222371
    1997 - 362000 1998 - 400000
    1999 - 425000 2000 - 450000
    2001 - 465000 2002 - 475000
    2003 - 625000
    
    Note: the production of members of FBMI consist of 50% (approx) of the total production of biscuit in the organized sector.