Bengaluru: Biscuit maker Britannia Industries Ltd is planning to significantly increase international sales by improving manufacturing capacity in the Middle East, boosting exports and making acquisitions or entering joint ventures.
Separately, the company is preparing to launch three new, so-called first to market products next fiscal, managing director Varun Berry said in an interview. Britannia, criticized earlier for a lack of new, successful products, has launched two new premium brands—Chunkies and Heavens —in the past six months.
Britannia expects to increase sales from international markets to Rs.700 crore within the next 18 months from roughly Rs.400-450 crore at the end of March.
The company distributes its products in 75 countries, with Middle Eastern countries accounting for a majority of its international business.
“Our ability to double exports from India and to substantially increase the manufacturing footprint in the Middle East can increase our international sales to Rs.700 crore or so in a year to 18 months. But to get beyond this number, you have to think of setting up manufacturing facilities in different markets and that can happen through acquisitions, joint ventures or a greenfield (project). Our plan is to take this business to Rs.1,000-1,500 crore,” Berry said.
Berry added that Britannia, which has been selling low-priced brands in international markets, now plans to introduce its premium brands Chunkies and Heavens abroad.
“It’s a good idea to diversify by expanding in international markets but it’s a difficult move to execute,” said Abneesh Roy, associate director at Edelweiss Capital. “International sales are very volatile and difficult to predict as law and order is not stable in many emerging markets. We’ve seen some companies report fluctuating numbers in markets like Vietnam and Africa.”
Though demand for biscuits has been hit by rising prices and weak economic growth, Britannia has been an outperformer among consumer goods makers over the past 18 months, reporting significant gains in both margins and market share, which it has grabbed from Parle Products Pvt. Ltd and ITC Foods.
Earnings before interest, taxes, depreciation and amortization margin, an indicator of operating profitability, soared to 10% in the September quarter from 6% in the year ended 2013, helped partly by stabilizing costs of wheat and sugar, while revenue also grew consistently ahead of industry rates in that time as the company improved its distribution network.
Britannia is betting on a so-called power brand approach as well as new brand launches to boost sales growth and keep increasing market share. Britannia, which has 13 biscuit brands, has identified five so-called power brands—Good Day, NutriChoice, Tiger, 50:50 and Marie Gold—around which the company will lead its innovation and marketing efforts, Mint reported on 30 January.
“We have to make sure that our innovation journey becomes robust and that we accelerate product innovation going forward. There are three big launches on the table and we’ve already invested in these ideas. We’ve ordered the manufacturing equipment for that, and these are big investments. These are completely differentiated, first-to-market kind of products. There will also be around six (brand) re-launches with which we will raise standards on the current products,” Berry said.