The economics of the one taka candy
Tea and cigarette sellers have been selling lozenges and other candies at one taka for decades, defying inflationary laws. As loose change disappears from circulation, these candies have become a currency
Twenty years ago, when I was a child, I was particularly fond of milk candies. Every day, I would save some of my tiffin money only to buy them.
Soon after finishing class, I would go to a tin-shed shop near my school gate. In those days, I could buy a candy for Tk1.
In the last twenty years, the price of almost everything has increased significantly. Twenty years ago, you could buy one kilogram of sugar for Tk30. Now it is Tk65. You could buy a litre of milk for only Tk20, now the price is around Tk90.
But one thing has not changed over all these years. The Tk1 candy is still sold at the same price.
In 1997, Pran Dairy Limited launched its first candy product Pran Milk Candy for Tk1. The price of the 2.5gram candy is still the same.
Olympic Industries Limited launched its first candy product Olympic Green Mango in 2011. When it was launched, the company set its price at Tk1. For the last nine years, the company has been selling the candy for the same price.
Whenever you walk past a tea stall, you see jars of assorted candies alongside cigarettes and tea.
Popular Tk1 candy brands include Pran Mr Mango, Pran Aamros Candy, Olympic Tasty Milk and Olympic Jhaal Tetul, Danish Green Mango Candy, Milk Candy, Lichu Candy and Pineapple Candy.
If we count a 5 per cent inflation rate annually for the last 20 years, the value of Tk1 in 2000 will now be Tk2.65
According to Towfiqul Islam Khan, senior research fellow of Centre for Policy Dialogue (CPD), if we count a 5 per cent inflation rate annually for the last 20 years, the value of Tk1 in 2000 will now be Tk2.65.
So how did the candy industry defy the laws in inflation? According to industry insiders, the demand for cheap candies has grown so much over the years that the producers were able to offset price rise of raw materials by expanding production.
Also, over the years, the country has developed the capacity to produce the raw materials for the candies as well as its packaging, which further contributed to lowering production costs.
How it works
According to industry insiders, the annual candy and chocolate market size is worth Tk2,000 crores. The market is growing at a rate of 12-15 per cent.
Roughly 60 per cent of the candy and chocolate market in Bangladesh is dominated by foreign brands. Foreign brands include Alpen Liebe, Air Action Mentos, and Pnut. The price is Tk1 for all of these candies.
Local food industry giants like Pran-RFL Group and Olympic Industries Limited have also stepped up their production.
Pran-RFL Group has a 20 per cent market share in the candy industry, which is the largest market share of any single company in the country.
In the past the market was small but we had high profit margin. Now the market has expanded, and we have increased the volume of production. Though we are achieving lower profit margins, we are still making a profit because of large-scale production
Kamruzzaman Kamal, director (marketing) of Pran-RFL Group explained some underlying reasons behind keeping the price same. One of the main reasons is production capacity matching surging demand.
"In the past the market was small but we had high profit margin. Now the market has expanded, and we have increased the volume of production. Though we are achieving lower profit margins, we are still making a profit because of large-scale production," explained Kamruzzaman Kamal.
As a company begins large-scale production, it has to buy raw materials and packaging papers in bulk.
"When we bought small amount of raw materials, we had to pay more," said Kamruzzaman, adding that the company's production cost has significantly come down because of large-scale production.
Another important reason is that in the past, the company had to import raw materials as well as packaging papers. Now the packaging papers are being produced locally.
"We are using liquid glucose instead of sugar. We are also using local milk for making candy," said Kamruzzaman, adding that the glucose is also produced locally.
We are using liquid glucose instead of sugar. We are also using local milk for making candy
Perfetti van melle Bangladesh Private Limited, an Italy-based company, launched one of its popular brands Alpen Liebe in Bangladesh in 2005.
Since inception, the company has been selling the candy for Tk1.
Paromita Fairuz, senior category manager (Marketing) of Perfetti van melle Bangladesh Private Limited, agrees that large-scale production is the main reason behind keeping the price same for years.
"The price of local raw materials and packing also has an impact on the price of the candy," said Paromita Fairuz.
Olympic Industries Limited has a 10 per cent market share in the candy industry.
Md Rakibuzzaman, brand manager of Olympic, said that though they are producing more candies, their profit margin has come down.
"These candies are not that profitable any more. They used to be in the past. Now the profit margin has come down," said Md Rakibuzzaman.
Partex Star Group's Danish Foods Limited has a 5 per cent market share in the candy industry.
Ekramul Hoque, general manager (finance and account) of Partex Star Group said that Danish Foods Limited has been selling Danish Rich Milky Caramel Candy for Tk1 since 2013.
Ekramul Hoque said that when they launched the caramel candy seven years ago, the price of a kilogram of sugar was between Tk50 and Tk52.
Now the price of a kilogram of sugar is between Tk58 and Tk60. The price of one litre liquid glucose was Tk50. It is now Tk65.
"In the beginning, in 2013-14, we would produce 90 lakh pieces of candy. Now we are producing 400 lakh pieces," he said.
He added that their target customers are mainly of two types – ones who smoke cigarettes in roadside tea stalls and school going children.
"Basically, when people smoke cigarettes, they eat these candies to get rid of the smell," said Ekramul Hoque.
Candy as a currency
These candies are also used as a currency. Whenever shopkeepers fail to give customers loose change for Tk1 or Tk2, they usually offer them these candies instead.
"In many places, I have seen that whenever shopkeepers run out of one taka coin or note, they habitually offer customers one taka candies. Our products are being sold as a currency," Ekramul Hoque.
Anu Muhammad, economist and professor, does not consider candy replacing currency a bad thing.
He observed that shopkeepers offer customers candies instead of money because there is a crisis of one taka notes or coins.
"The good thing is that many candies are being sold in that process," said the economist.
Dr Khondaker Golam Moazzem, research director of CPD does not support candies being used as a currency.
"Candy has value itself, but it should not be used as a currency or barter," he said.
There is a tendency in our country to go for a currency with higher value....As a result, it becomes a challenge to fix a fair price for a product. Ultimately, the economic burden falls on the consumers
"There is a tendency in our country to go for a currency with higher value. People no longer want to use lower valued currencies. This way, they are being denominated. As a result, it becomes a challenge to fix a fair price for a product. Ultimately, the economic burden falls on the consumers," said Moazzem.
Tea seller Sabbir Hossain in the Jigatola area admitted that many customers become annoyed when they are offered candy instead of change.
Seeking anonymity, a tea seller in the capital's Farmgate area let this correspondent in on a secret.
He said that he buys a jar of 250 candies for Tk185. It takes him three days to sell a jar of two taka candies and he can make a profit of Tk65.
"Suppose a customer gives us Tk10 to buy a Navy cigarette which costs Tk7, we give him back a two taka note and a one taka candy saying that we do not have a one taka coin," said the tea seller.
