Manufacturers of processed foods have hailed the recent GST reforms, and say that consumption is expected to dramatically increase for their products in the coming months.
Moneycontrol spoke to five processed food manufacturing companies, on the sidelines of World Food India 2025 programme in New Delhi, who unambiguously said that they are going to pass on the GST-cuts benefits to consumers, as that would help them too in increasing their sales.
“The GST cut is a big relief for consumers as well as businesses. The supply chain costs for us will reduce further, and working capital pressures will ease,” a senior executive from Mother Dairy told Moneycontrol.
“We have announced the price cuts on almost all our products…consumption is poised to grow in the coming months without a doubt,” the person added.
CEO-Processed Foods Division at Allana Group said: “In principle, we’ve agreed to pass on the rate cut benefits to consumers. We’ve many categories, such as, pet food business, fruit and ice-cream business, and we’ve reduced prices on those.”
Muley said those companies who are choosing to increase grammage or product volume in place of cutting retail prices are also benefitting the consumers. “Some companies are restrained by their price points, but they are still passing on benefits.”
Moneycontrol had reported on September 12 that consumer goods companies have told officials of Central Board of Indirect Taxes and Customs (CBIC) that they cannot cut retail prices of low-value products in line with GST reductions, arguing that further price cuts would make transactions inconvenient for consumers.
Makers of biscuits, soaps, and toothpaste sold at Rs 5, Rs 10 and Rs 20 told officials that lowering MRPs below these price points would not work in the Indian market, as the domestic consumer is used to demand products in these price bands.
A senior executive from ‘Mr Makhana’, which sells flavoured makhana snacks in India and 13 other countries, told Moneycontrol that the new packages of their products have risen in volume to reflect the GST-cuts.
“We have five different pack sizes of different price bands. They start from Rs 50 and go up to Rs 230. The packets of sizes 20 grams and 60 grams earlier, have now risen to 22 grams and 64 grams, respectively, reflecting the pass through of prices,” the person said.
“We do expect a rise in sales due to more volume being sold now, at the same price point,” he added.
Effective from September 22nd, around 300 daily-use items are now in the 0% or 5% slabs, which were earlier in 12% and 18% slabs. Prime Minister Narendra Modi on Thursday at the WFI event had said that the GST reforms have benefited the farmers and producers. “The poor and middle class will now pay less for consuming nutrition, as 90% of processed food products today are in 0% and 5% slabs.”
The Joint MD at National Agricultural Cooperative Marketing Federation of India (NAFED) said that this time, the government is “very much focused” on ensuring pass-through takes place. “There is constant communication between the government and companies,” he said, adding that GST 2.0 is a big boost to consumer sentiments.
MD & CEO, of Marico told Moneycontrol: “By making the essential consumer goods cheaper, especially in the run up to the festival season, these reforms will play a pivotal role in stimulating economic momentum and building long term growth in the FMCG sector.”
‘High export potential for processed foods’
These companies, meanwhile, also feel that in the coming years, the exports of domestically manufactured processed foods will only rise as opportunities for tapping new markets are emerging.
Allana Group’s Muley said that the company is now eyeing to export more of its products in the United States. “Right now, our pet food business is exported to the US, but we wish to export other products as well.”
The Group currently exports to over 90 countries – mainly in the Middle East, Africa, Europe, and Far East. Their key products include frozen fruits, ready-to-eat meals, snacks, ice-creams, and packaged foods.
Mother Dairy is now aiming to export their dairy products to Russia, and expand their sales in the US. “Some products of Indian origin are increasingly being demanded by our diaspora in the US. So we see a huge potential there,” the executive quoted above said.
“We are already exporting in 40 countries…and going forward, this figure will increase. Dairy products, fruits and vegetables, as well as Dhara edible oils are being demanded globally.”
