Britannia Industries Ltd’s growth over the past three decades has mirrored the rapid strides made by the Indian economy, which has put more disposable income in the hands of the people. Revenue has grown from Rs 100 crore in 1981 to Rs 1,100 crore in 2001 and Rs 4,600 crore in 2011.
Britannia’s managing director Vinita Bali in an interview said growth has come across food categories. In the past year, the company has extended brands such as Tiger from biscuits to dairy, Treat from biscuits to chocolate, and NutriChoice to a diabetic snack. Edited excerpts:
How was last year for you?
Well, to summarize, we are looking at a top-line growth of 25%, a bottom-line consolidated growth of 30%. Stand-alone, Britannia is 25% and 25%. We are talking about a 60 basis points (bps) improvement in margins and a 50 bps improvement in share (A basis point is one-hundredth of a percentage point). Overall I would say that is strong top line. The performance is driven by 15% volume and the balance out of that is coming from a balance of pricing and mix.
The fourth quarter of the last fiscal again saw a lot of volatility, with wheat prices increasing. Should prices be raised again?
You know, if you look at our business between last year and this year, the change in trajectory is really a function of two things. You know what we have done in terms of revenue management and the other thing is what we have done in terms of operational improvement. If you look at our results, the rise in the price of commodities has been 29% almost, so having absorbed that and fuel and other costs, we have actually improved the margin of the business by 60 bps.
You’ve always thrived on the challenge of turning around companies. That part of it is over with Britannia.
A turnaround is nothing but a different way of a build-up. We’ve been through the first five or six years, and the next five or six years like the last five or six will be different because consumers are different, markets are different, preferences are different, aspirations are different of people as well as us. I keep coming back to my favourite theme, which is India right now is so dynamic that frankly anyone sitting here can say five years from now, people will be drinking this and eating this and driving this car and using this phone. I don’t think we can say that.
What is it that gets you excited now?
What keeps us excited is having a robust funnel of new initiatives. What keeps us excited (is) what we do with our brands. What keeps us excited are the extensions we can do. Take a brand like Tiger or take a brand like Treat—it is moved from Treat being a biscuit to Treat being a chocolate with Chocodecker. What keeps us excited is the fact that we have a bread, cake and rusk portfolio which has grown more than five times in the last five years. What keeps us excited is that we have a dairy portfolio which has doubled in four years. What keeps us excited is to create a huge funnel of these products from a consumer point of view.
Most companies in the packaged consumer goods sector are talking about doubling turnover. What are Britannia’s plans?
You know I can sit here and tell you we will double, triple, quadruple, but that means nothing. I would rather be more concrete and say that we have got a rich and robust funnel of innovations. We have a rich and robust pipeline of ideas of what to do with our brands. You know that is real. The rest is all wish list.
You have been slowly adding on to products, whether it be NutriChoice, Tiger, dairy. How are you managing the changes in the product profile?
I would say we have been fast adding on products (laughs). The changes are coming in a lot of areas. We grew our Rs 100 crore revenue in 1981 to Rs 1,100 crore in 20 years in 2001 and to Rs 4,600 crore in 10 years from there. I think Britannia is in a sweet spot.
How does the portfolio mix look now?
Our bread, cake, rusk is more than 10% of sales; dairy is 5%; overseas is 7-8%.
How do you see the mix changing?
I will answer this in two or three different ways. I don’t see biscuits going away for the very simple reason that we are a country of over a billion people and on average we consume less than 1kg per person per year. Even if I removed 400 million people from this it is still 1.5kg of biscuits per person per year. When I create a diabetic biscuit, it’s not just a biscuit, it’s a snack for someone. We have to separate out the form from what I am selling to the benefit that I am giving the consumer. I think there is going to be a huge growth in biscuit, I think there is going to be a huge growth in bread and cake rusk, milk and dahi (yogurt) and so on. For the very simple reason that if you look at the entire market for food in India, only 9% of that is packaged and branded. So 91% of food that we are consuming is unbranded.
Are you looking at transforming from a biscuits, cake, rusk, dairy, bread company to a food company?
I don’t believe in nomenclature and titles. Food is anything you eat. I am including snacks in that and I am including beverages in that. I am looking at everything that is bought and consumed. So I am using food loosely in that sense.
What are the trends that you will cater to?
The trends are nothing unique to us. I think the trends are for everybody to see. There is more and more emphasis on well-being, wellness, wholesome food. That is why we got high-fibre, multigrain bread, diabetic and fortification with the renovated Marie Gold that has 10 vitamins, or we have fortified bread with micro-nutrients. So our business is about making food and drink wholesome and enjoyable.
Your competitors also finally got into the market last year with their products, such as Oreo cookies.
There are lots of people. The Indian marketplace today is so dynamic that everybody and his cousin is going to be introducing all kinds of products. Those are local companies, those are multinationals, those are companies which are looking to come to India, and those are companies already present in India, and I think that is what creates the dynamism in India.
Consumer packaged goods companies are all also getting into retail.
We already have a retail business in the form of Daily Bread, which has been growing very nicely, it’s extending and expanding. I’m not going to tell you exactly how many, but we have a large number of outlets in Bangalore, we’ve got operations through franchisees in Goa as well as in Hyderabad. Again, that is a business that is growing in high double digits.
Would you look at acquiring smaller chains?
If there is a good value accretive opportunity, we’ll certainly look at it.
Are you only looking at domestic opportunities?
We’re open to looking at, but I would say that definitely we’d look at India for one simple reason: if everybody is looking to India as a growth market, why would we sitting in India want to look at western Europe.
Would you tell us what areas you’ll look at?
I’ve said it many times now—we’re in a food, snacks, beverages business and anything in that business is something that we’d be willing to evaluate.
Are you in talks with anybody at the moment?
Frankly, if I were, would I tell you? (Laughs) I’m not commenting on that.
Besides Daily Bread, will you look at other formats of retail?
If you go to Delhi, in certain areas, you’ll see a bicycle cart branded Britannia and the guy goes around selling Britannia bread. Now I don’t know what to call it, but that’s a direct-to-consumer type of a delivery model business.
The biscuit market in India has been growing at 6%, but given your higher penetration levels relative to your competitors, do you expect to grow faster than them?
We are growing faster. Last year our volume growth was 15% and our revenue growth was 26%, so I’m not sure in how many different ways I can answer the same question. We are in the industry, we are growing double digit, we have an aspiration and ambition to continue a high growth trajectory.
But market leadership seems distant.
What is distant?
Parle is still No. 1.
I don’t agree with that at all. Parle is No. 1 in glucose, which is a category that has been declining. Glucose used to be 33% of the total biscuit market; it is now 27% of the total biscuit market. If you look at the number of packs sold, we sell more packs than them. To me, that doesn’t really matter, it is the share of the consumption, it’s the brand or company, and if you look at it narrowly in terms of biscuits, it’s one thing. If you look at it broadly in terms of baking and if you include things like cake and rusk and everything else, then it tells a different story.