Britannia, other FMCG stocks in focus today; here is why

This is because leading food company Britannia on Tuesday said a possible reduction of tax on food products under the proposed GST reforms could help increase consumption in the coming quarters and that the company will extend benefits to consumers.

The GST Council's two-day meeting, chaired by Union Finance Minister Nirmala Sitharaman, is set to begin today. The Centre has proposed to lower the tax rates on a host of items, goods and services, including daily use stuff ranging from butter to electronics.

The Council will discuss the Centre's 'next-gen' GST reform proposal of having just two tax rates of 5% and 18% by moving products from the current 12% and 28% slab to lower rates. A special 40% rate has been proposed to be levied on a select few items.

Terming the rationalisation of GST and a good monsoon this year as “positive indicators”, Britannia Executive Vice-Chairman, Managing Director and CEO Varun Berry said he expects the demand situation to become “better and much stronger” in the coming quarters.

When asked whether the GST reduction would augur consumption, Berry said, "Definitely," as the food items are expected to move to 5% and “positively impact” the consumption.

On being asked whether Britannia will pass on the benefits to consumers, Berry said, "Yes! Of course."

“It will take at least one and a half months for consumers to get this benefit,” he said.

According to Berry, biscuits are the cheapest form of food, which anyone can buy and are available everywhere from urban markets to lower-strata villages with a population of less than 3,000 people.

“So, certainly it's going to (positively) impact consumption, although penetration is 100%, but the amount which people are going to consume is going to be enhanced,” Berry said.

Under the current GST regime, biscuits are under the 18% tax slab. However, all food products, including biscuits, are proposed to be placed under 5% in the proposed new GST regime.

Echoing similar views, Wipro Consumer Care & Lighting CEO Vineet Agrawal said he expects improvement in consumer demand in the second half of this fiscal year with the likely reduction in tax on consumer goods.

The company, which sells FMCG products ranging from personal care with brands such as Santoor, Chandrika, Yardley and Brahmins to Nirpara in the food segment, said it will pass on any benefit of a GST reduction to its consumers.

“Yes, we should be extending the benefits of GST reduction across our product categories to our customers,” Agrawal, who is also Managing Director of Wipro Enterprises, said in an interview with news agency PTI.

Agarwal said the FMCG industry was facing challenges because of food inflation, but as the economy improves, consumers will have a higher income, which will enable them to spend more.

“I think three things – a good monsoon, given the fact that GST will get rationalised and generally inflation has come down – will help consumer sentiment. We expect demand to improve as we go forward,” said Agrawal, who is hanging up his boots next year after leading Wipro’s consumer business for over two decades.

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