Frooti maker faces 12% revenue drop amidst tax hike challenges

Beverages company Parle Agro Pvt Ltd that sells Frooti and Appy Fizz brand of drinks reported a 12% drop in standalone revenues for the 12 months ended 31 March 2024, according to data shared by business intelligence platform Tofler.

The company reported revenues of ₹3,209 crore last fiscal; down from ₹3,654 crore reported in the year-ago period.  Profit also declined from ₹160.8 crore to ₹21 crore due to increased taxation on its Appy Fizz brand, which moved to a 40% tax bracket in fiscal 2024 from 12%.

“The decrease in revenues and profits for Parle Agro in the financial year 2023-24 primarily stemmed from significant tax policy changes. Appy Fizz, a rapidly growing challenger brand within our portfolio, encountered a drastic GST increase of four folds, from 12% to 40%. This tax hike impacted our pricing strategy considerably, leading us to adjust serving sizes for consumers,” said Nadia Chauhan, joint managing director and CMO, Parle Agro. Parle Agro is promoted by Mumbai-based Prakash Chauhan and family.

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To be sure Parle-Agro’s beverage portfolio of fruit-based beverages, sparkling drinks and bottled water competes with beverage majors such as Coca-Cola, Dabur, PepsiCo, Amul and Britannia. It works with big-ticket Bollywood celebrities such as Alia Bhatt and Varun Dhawan who endorse its brands. 

Chauhan said the company made “substantial investments”, exceeding ₹600 crore, in the dairy category in response to greater taxation on fizzy drinks. “This strategic shift is redefining our growth trajectory. This category also mitigates the volatility of seasonal beverages, particularly given the significant impact of unseasonal rains during the last financial year,” she added.

Dairy beverages

In 2021, the Mumbai-based beverage maker re-entered the dairy beverages market with Smoodh flavoured milk priced at  ₹10, targeting the mass end of the consumer basket.

“Furthermore, with a comprehensive portfolio restructure and an increase in the circulation of the ₹20 coin, we are confident in driving substantial expansion for Appy Fizz once again. We are already witnessing impressive growth rates of over 30-40% for FY 2024-25 year-to-date compared to the previous year. Appy Fizz will regain its benchmark performance,” Chauhan added.

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India's non-alcoholic, ready-to-drink beverage market is projected to reach ₹1.5 trillion by 2030 from the current ₹60,000 crore, according to the Indian Council for Research on International Economic Relations (Icrier). 

Despite this, carbonated or aerated beverages, including low-sugar, fruit-based, flavoured, and zero-sugar options, face a steep 40% tax rate in India. 

This high tax burden, irrespective of sugar or fruit content, is imposed through a combination of 28% GST and a 12% compensation cess.

India’s beverage industry has been batting for lower taxation on aerated drinks.