Nadia Chauhan, Joint Managing Director at Parle Agro, attributed an 87% year-on-year decline in the company’s net profit for FY24 to the imposition of a 40% ‘sin tax’ on fruit-based sparkling drinks like App.
“The decision to categorize fruit-based, non-caffeinated sparkling drinks under the sin tax, raising GST from 12% to 40%, had a massive impact on our business, which relies on specific price points,” Chauhan said.
Parle Agro reported a net profit of ₹22 crore for FY24, with revenue declining 12% year-on-year to ₹3,210 crore, as per filings accessed by business intelligence platform Tofler.
To counter the higher tax burden, Parle Agro reduced the serving size of Appy Fizz from 160 ml to 125 ml. “When serving size reduces, the perceived value to consumers decreases as well. This impacted sales significantly,” Chauhan explained.
Appy Fizz, a key challenger brand in the beverage sector, contributed over 40% to Parle Agro’s portfolio but faced challenges in maintaining growth momentum. The company also dealt with high unsold inventories, particularly in Kirana stores, according to an FMCG distributor.
The company’s flagship products, Frooti and Appy Fizz, compete with Coca-Cola’s Maaza and Minute Maid, PepsiCo’s Slice and Tropicana, and Dabur’s Real.
Despite market trends favouring no-sugar and low-sugar beverages, both Frooti and Appy Fizz have limited offerings in these segments, noted industry analysts.
Chauhan highlighted Parle Agro’s investment of over ₹600 crore in the dairy category, which she believes will drive long-term growth. She also expressed optimism about the increasing circulation of ₹20 coins, which could enhance sales of Appy Fizz, priced at ₹20.
“Appy Fizz is already seeing 30-40% growth over the previous year,” she said.
Meanwhile, rival Hindustan Coca-Cola Beverages (HCCB) reported a robust 247% increase in net profit for FY24, reaching ₹2,808.3 crore, with revenue rising 9.2% to ₹14,021 crore.
All carbonated drinks in India are subject to a 28% GST plus a 12% compensation cess, resulting in an effective 40% tax rate—the highest among packaged food and beverage products, according to the Indian Beverage Association (IBA).
While the tax aims to curb unhealthy consumption, Parle Agro contends it disproportionately affects innovative fruit-based sparkling beverages like Appy Fizz.