The biscuits and confectioneries industry in Bangladesh is one of the few industries that have shown incredible resilience during the economic slowdown caused by the pandemic. Fueled by the uninterrupted rise in demand, Bangladeshi manufacturers are now catering to the global market as well as the domestic market. Responding to the success, the market players are taking expansionary initiatives to exploit the opportunity to the full. Bringing in high quality at affordable prices, the industry is now looking at self-sufficiency.

Market Overview

The biscuits industry in Bangladesh is worth more than BDT 6000 crore (USD 708 million) with an annual export volume worth BDT 330 Crore (USD 39 million) as the Export Promotion Bureau reports.[1] The annual growth in the industry is as high as 10-12% and the growth is likely to expedite with a favorable export scenario.[2] The annual overall confectioneries and snacks market revenue in Bangladesh amounts to $8.6 billion, which is expected to grow at a CAGR of 5.36%. [3] 

One of the more apparent factors working behind the growth of this industry is the preference for packaged food over eating out during the pandemic. However, the curve was trending up long before the pandemic was in the picture. The success has been attributed to the quality of the products, higher level of investments, consumer preferences, use of better technology, and tapping the international market. Industry stakeholders opine that the growth should remain uninterrupted given the pandemic situation does not go out of hands.

Bangladesh Biscuit Exports / Source: Bangladesh Auto Biscuit and Bread Manufacturers’ Association
Bangladesh Biscuit Exports / Source: Bangladesh Auto Biscuit and Bread Manufacturers’ Association

Exports

Overall, biscuit exports from Bangladesh have increased over the years in tandem with the increase in production. The figure stood at $16 million in FY 2015-16, which has grown 2.4 times to reach $39 million in 2019-20.[4] The government has allowed 20% cash incentives on export products including biscuits and confectioneries. In addition to the expanding market, favorable export policies have contributed to the surging exports. Saudi Arabia, Oman, Malaysia, UAE, and Somalia are among the top destinations for Bangladeshi products. The primary consumer groups of these products abroad are the Bangladeshi diaspora in these countries.  

Competitive Landscape

The biscuits and confectioneries industry in Bangladesh is dominated by a handful of companies. The market leader, Olympic Industries Ltd’s registered revenue was BDT 1600 crore (USD 189 million) in FY 2019-20 after experiencing a 15.7% YoY growth.[5] Currently, Olympic can now utilize roughly 70% of its capacity. However, responding to the surge in demand, the company is investing an additional BDT 42 crore (USD 5 million) to upgrade its production capacity.[6] Energy Plus, Tip, and Nutty: Olympic’s three popular brands alone control some 25-30% of the biscuits market as of January 2021.[4] Other major players, Bangas, Pran, Haque, Fu Wang, and Danish (Partex) have been able to hold their fort as well with quality products in affordable price ranges. As per the annual reports of the publicly listed companies, all of them have registered substantial growth over the last few decades.

Annual Turnover of Selected Publicly Listed Biscuits Companies / Source: Annual Reports
Annual Turnover of Selected Publicly Listed Biscuits Companies / Source: Annual Reports

Impact of the Pandemic

Despite the slowdown and expense-cut in the economy, the biscuits and confectioneries industry has been rather unaffected in terms of sales and profitability during the pandemic. As the lockdowns were imposed, the country has seen a sharp spike in demands for FMCG goods due to uncertainty. Between July and September 2020, Olympic registered a profit of BDT 57 crore, a figure 2.2% higher than the previous year. The company’s management attributed this rise to the shift in consumer preference during COVID. [9] As people drastically limited eating out, the demand for hygienic packaged food rose and the industry grabbed the opportunity.

[geot exclude_country="Bangladesh"]

Looking to invest in Bangladesh?

We provide end-to-end strategy and entry support services to international investors

Get in Touch
[/geot]

However, the sudden spike in demand left the distributors shorthanded for a while in the beginning. Coupled with the restrictions in movement, the surge affected the market players for a few weeks, according to an industry stakeholder. But, the industry quickly got up on its feet. Although the first half of 2020 came with significant challenges including supply chain disruptions, the industry has been resilient and is set to export products worth $31 million in the second half of 2021.[4] 

Challenges 

Without the pandemic in the picture, the industry faced challenges like demand swings and fluctuations, issues with backward linkage and packaging. According to industry stakeholders, the demand for biscuits is highly sensitive to events like elections and labor downturns, which makes it difficult for manufacturers to forecast with accuracy. The wide margin of error in the forecast often disrupts the supply chain. The companies also struggle to ensure the quality of packaging through procuring high-quality raw materials and maintaining machine quality. But since then, Covid-19 has introduced a slew of new challenges.

Commodity Prices on the Rise

Moving forward, the rising prices of the key commodities required to manufacture biscuits and confectioneries is a major challenge for the industry. The industry comes with the promise of affordably providing high-quality goods. However, the increasing cost is gradually squeezing the profit margin for the manufacturers. High dependence on imports for ingredients like wheat is a barrier for the industry. A 116% increase has been registered in wheat imports in the last six years.[7] The wholesale price of wheat has increased by 0.41% in the last year.[8] Following the rise in demand and prices, the government has removed the advance income tax (AIT) on wheat imports.[9] Apart from wheat, prices of other key ingredients like sugar and oil have also increased over the years. 

Disruption in the Supply Chain

Although the industry is seemingly unaffected by the pandemic, the distribution channels took a serious hit. Looking to curb the rise in infections, lockdowns were imposed several times starting from March 2020. According to Olympic, the country’s largest biscuit manufacturer and distributor, lockdowns made their lives substantially difficult as they were trying to cater to the increased demand. During this time, the industry faced challenges in procuring raw materials from abroad as well. The initial turbulence gradually stabled as the players adapted to the added challenges of the supply chain. However, the industry fears further disruptions in procurement and distribution as the country prays to avoid another surge in COVID infections.

High Freight Charges

The biscuits and confectioneries industry is largely dependent on imports for procuring the key ingredients. On the other hand, the rising export volume is a testament to its potential to become a major export industry. Naturally, freight costs are a major factor to consider in this high import-export-oriented industry. According to industry stakeholders, due to high freight charges, the industry is not being able to reap the benefits to the full extent. With demands booming, freight costs are a major headache for the exporters. 

Recommendations

Food Safety Standards

Although the products offer good value for money, compliance with the food safety standards remains questionable in the biscuit industry in Bangladesh. Bangladesh Auto Biscuits and Bread Manufacturers’ Association (BABBMA) admits the inadequacy of research cells or laboratories to ensure food safety standards compliance by all manufacturers.[9] To expedite the growth of the industry, the regulatory bodies in place, such as Bangladesh Food Safety Authority (BFSA), and Bangladesh Standards and Testing Institution, are required to take an active role. Their American and European counterparts’ (for example, the US Food and Drug Administration) proactive measures to ensure quality at source can be considered as a benchmark for food safety measures, which presently are a hurdle for Bangladeshi exporters. 

Tapping Opportunities in the International Arena

As discussed earlier, the biscuit products of Bangladesh have not been able to capture the foreign markets in the true sense as they are mostly consumed by Bangladeshis living abroad. However, through ensuring quality, and compliance with safety standards, the industry should focus on building a ‘Made in Bangladesh’ brand to tap the immense opportunities in the international markets. Building a solid national brand as a top manufacturer can go a long way in terms of gaining the trust of the consumers abroad. Recently, Pran’s Potata has won the Indian market with a customer-centric approach.[10] Such success needs to be replicated to lay the groundwork for the national brand. From a policy perspective, overseas production can be encouraged by easing up on existing outgoing foreign direct investment restrictions so that biscuit factories (being a heavy item, nearshoring can be a better alternative to exports of biscuits), which can contribute to incoming dividends, can be set up abroad.

Focusing on Healthy Products

Bringing diversity in the product lineup can be a way forward for the biscuit manufacturers in Bangladesh, which can act as a major import substitution strategy. A strategy of introducing products catering to the niche but emerging customer health-conscious customer segments should help the brands expand their customer base both home and abroad. But in order to do so, there should be a long-term plan to introduce healthy ingredients (such as oats and quinoa) into local farming to establish backward linkage and reduce costs of production.

Faiyaz Uddin Ayeshik, Content Writer and Saif Nazrul, Senior Business Consultant & Project Manager, at LightCastle Partners, have prepared the write-up. For further clarifications, contact here: [email protected]

References

  • 1. Biscuit exports booming – The Daily Star
  • 2. Swell in demand for biscuits during pandemic – The Business Standard
  • 3. Confectionery & Snacks: Bangladesh – Statista
  • 4. Biscuit exports booming – The Daily Star
  • 5. Olympic Annual Report 2019-20 – Olympic Industries Ltd
  • 6. Olympic to invest Tk 42cr to expand biscuit production – The Daily Star
  • 7. Wheat imports rise 116pc in six years – The Daily Star
  • 8. Wheat Intelligence: Bangladesh – Tridge
  • 9. Biscuits bring bucks – The Independent
  • 10. Pran’s Potata is taking India by storm – Dhaka Tribune
[gs-fb-comments]
Join our mailing list to get latest updates at your mailbox.