Cake makers unlikely to slice prices

Cake makers aren't contemplating any major increase in prices for the Christmas and New Year season, the time when sales peak, in the hope that the market will shrug off slackness post goods and services tax (GST) and will see a rise in demand.

The imposition of 18% GST, against 5% tax earlier, impacted sales adversely in the past few months, and to make matters worse, egg prices jumped by over 50% raising the cost of production. However, with the coming peak season, cake manufacturers are ready to absorb the increase in cost to boost sales.

"We expect sales to increase during Christmas and New Year, and are expecting a 20% growth from last year,'' said CG Prathibasmidan, director of Rs 600-crore Elite Group, a prominent cake maker.

He admitted the market has been struggling after the introduction of GST. "But people usually don't cut expenses for buying cakes on occasions like Christmas,'' he said.

Though size of Indian bakery industry is about Rs 21,000 crore, cakes account for only a minor slice, while breads and biscuits make up a large chunk. The organised cake market is estimated to be about Rs 2000 crore, while the unorganised one is bigger.

"The cake market has seen a tenfold rise in the past three years with the pie getting bigger as youngsters prefer cakes to mithai,'' said Ayyappan K Swamy, head, marketing and franchisee operations, Mumbai-based Monginis Food, which has a strong presence in western India. He expects it to stabilise after initial confusion over GST. "Rise in egg prices hasn't affected us much, as we are a dominant player in vegetarian cakes," he said. Average cake prices have risen Rs 10 from last year. "Average price of an ordinary plum cake remains at Rs 300-350 per kg. Besides egg prices, vanaspati too has become slightly costly.

However, flour and sugar prices haven't fluctuated much," said Vijesh Vishwanath, director of Best Bakers.