Biscuit makers to face fiercer competition

Local biscuit makers are set to face increased competition from imported ones after the government has decided to slash the supplementary duty to 45 percent from 60 percent from next fiscal year.

Furthermore, the value-added tax on the locally made biscuits are due to increase by up to 30 percent each kilogram as part of the measures proposed by Finance Minister AMA Muhith to amp up revenue collections in fiscal 2015-16.

The VAT on cracker, digestive and chocolate biscuits have been raised to Tk 120 from Tk 100 each kilogram.

For cream biscuits, it has been hiked 25 percent to Tk 100 and general biscuits 30 percent to Tk 85. 

The competition between locally made and foreign biscuits is going to rise following the duty cut, said Madad Ali Virani, executive director of Olympic Industries, a leading biscuit maker.

The country's biscuit industry has grown over the last several years thanks to increased investments as a result of the rising demand for the snack.

Operators said the local firms have been able to win the confidence of a greater section of consumers by improving the quality and providing the snack at reasonable prices.

As a result, the local manufacturers were able to sustain their position in the biscuit market by driving away products imported from India, Malaysia and Indonesia.

Currently, the domestic biscuits makers -- both large firms such as Olympic and Pran, and small bakeries -- cater to 95 percent of the local demand, said Virani.

The organised sector accounts for 2 lakh tonnes of biscuits a year and the urorganised biscuit makers such as bakery account for the same, he said.

The proposed duty cut -- a measure taken by the government to gradually liberalise trade -- is going to give an edge to foreign biscuits.

The market share of imported biscuits may increase, said Virani, adding that local manufacturers who make premium biscuits may be affected.

The duty reduction is unlikely to hamper the cheap product segment, he said.

The prices of locally made biscuits may rise by 5 percent after hike in VAT, said Md Jashim Uddin, vice-chairman of Bengal Group of Industries that operates in the biscuit segment through a concern, Romania Food & Beverage.

The price gap between domestically produced and imported biscuits will reduce, he added.

Jashim Uddin however brought to the fore the issue of under-invoicing that many importers resort to when bringing in biscuits from Malaysia and Indonesia.

He urged the government to measures to stop false declarations.

Virani said the local industry is trying to improve so that it can compete in the liberalised trading regime. “Otherwise you cannot sustain.”

He said the biscuit market grows by 8-9 percent a year for rising purchasing capacity and higher mobility of people.