Parle Agro, the maker of Frooti and Appy Fizz, has reported a steep 87% year-on-year (YoY) decline in net profit for FY24, citing the 40% ‘sin tax’ on sparkling drinks as the primary reason.
GST up from 12% to 40%, had an impact on business – MD
According to ET, Nadia Chauhan, Joint Managing Director at Parle Agro, said, “The decision to place fruit-based, non-caffeinated sparkling drinks in the sin tax category, taking GST on Appy Fizz up by four times from 12% to 40%, had a massive impact on the overall business, which is dependent on specific price points.”
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The company’s net profit dropped to INR 22 crore for FY24, while revenue declined 12% to INR 3,210 crore. Chauhan attributed the decline to the reduced serving size of Appy Fizz, from 160ml to 125ml, due to the increased tax burden. “When you reduce the serving size, the value to the consumer reduces as well. They were used to 160 ml, which had to go down to 125ml, which impacted sales,” she explained.
However, Parle Agro’s competitors, including Coca-Cola and PepsiCo, also face the same 40% tax on carbonated drinks. An industry analyst noted that consumers are increasingly preferring no-sugar and low-sugar drinks, but Frooti and Appy Fizz have limited options in these categories.
Parle Agro’s INR 600 Cr investment in Dairy, changes growth
Despite the challenges, Chauhan remains optimistic about Appy Fizz’s growth, stating that its contribution to the company’s portfolio has increased to over 40%. She also highlighted Parle Agro’s significant investment in the dairy category, exceeding INR 600 crore, which is changing the company’s growth trajectory.
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Interestingly, Chauhan believes the growing circulation of INR 20 coins will boost Appy Fizz sales, as its price tag of INR 20 becomes ‘small change’ for customers. “We are already seeing growth rates of over 30-40% over the previous year,” she said.
In contrast, rival Hindustan Coca-Cola Beverages reported a 247% increase in net profit for FY24 to INR 2,808.3 crore, with a 9.2% increase in revenue to INR 14,021 crore.
The company’s franchisee business, accounting for 40% of its sales, was not included in the reported numbers. A leading FMCG distributor noted that Parle Agro had to take back significant stocks due to unsold inventories in kirana stores.
