Mumbai: The sales of Britannia Industries Ltd have nearly doubled in the five years since Vinita Bali took over as chief executive of the biscuit and bread maker. Her success has made Nusli Wadia’s Bombay Dyeing group, which now controls Britannia, ask her to help out its ailing textile business as well. In an interview, Bali spoke of how Britannia is gearing up to meet the challenge posed by multinational corporations (MNCs) such as Kraft Foods Inc., Groupe Danone SA and United Biscuits, the makers of McVities biscuits, which are planning to enter the Indian market. Edited excerpts:
How do you view the increasing competition?
Competition is good. What competition does is it brings in new investments. New investments in a category leads to higher growth. Let’s look at some of the highest growth categories—telecom, auto, consumer durables—the competition is intensive. India is a huge market and can take five such competitors at least.
But India is also a price-sensitive market. With multinationals making an entry, do you see profits being compromised for the sake of growth and volumes?
There is huge room for growth and expansion. As newer players come in, they should invest in building the market rather than operate on the model “same for less”. The model in India across industries is sinful: Less for less, or slightly inferior quality at a much lower price. Or, I give you quality that is not very discernible at a slightly lower price. Or, run huge promotions (such as) 20% free, 30% free. Our growth in categories like Nutrichoice (Crackers), cheese has shown us that the market is yearning for better products and they are ready to pay for it. The beauty of India is that we have consumer(s) at every price point. This is the market where consumers are there for pre-paid cellphones and cellphones for Rs2 lakh; loose cigarettes and cigars; cycles and Jaguar. What we have to figure out is what is the best innovation and business model to go to market.
Growth appetite: Britannia managing director Vinita Bali says innovations in packaging, selling, product mix and distribution will drive growth for the biscuit and bread manufacturer. Ashesh Shah / Mint
Typically, MNCs are very good at growing markets and managing margins. In India, the packaged foods industry is underdeveloped compared to other markets. Look at biscuits, a Rs10,000 crore category, the consumption is 1.5kg per person per annum, whereas (even in) a developing country like Vietnam (it) is 3 kg.
What would drive growth for you?
It will be from innovations; innovations in packaging, selling, product mix and distribution. Biscuits, that is part of housewives’ grocery shopping basket, is available in small packs and jars. The jar packaging is a Rs500 crore business.
The insight of personal consumption led to distributing differently. These jars are now seen next to cash counters. The small packs become convenient anytime snacks as they compete with chocolates, samosas, bhujiya and sandwiches. For a consumer, everything other than his meals is the same—a snack. We need to look at the consumption opportunity and not get caught up in the product and product definitions. What we will see is (the) emergence of new categories. Take (health drink)Actimind. It’s milk-based, but more than just milk, it offers seven nutrients and comes in packs of 150ml for one-time consumption.
What about your power brand strategy?
We have our six power brands to which we now have added Nutrichoice. We will use all planks, all channels, every geography to drive growth. For instance, Tiger (biscuit) is now available in cream, banana, coconut (flavours). Treat has new additions like Jim Jam and Choco Decker. Besides, we will focus on bakery and dairies with desserts, salads and different kinds of breads like Omega 3 bread, oats bread, multigrain bread and cookies. In dairies, we have doubled the business in (the) last three years and we will continue to see high double-digit growth here.
What do you mean by consumption opportunity? Is it different from making products more affordable in small packs priced at Re1, Rs2, Rs5 and so on?
This is not just about affordability of price. For instance, a Rs5 Good Day (biscuit packet) still has seven-eight biscuits. The consumption opportunity for the jar biscuits is larger. It’s one-time consumption at a point of sale. For instance, we now have launched a Rs5 dahi (yogurt) for one-time consumption, which will be available on select train routes. The one-time consumption allows new consumption moments which can be at the work station at a BPO (business process outsourcing office), it can be at a kiosk at a railway station or a Cafe Coffee Day (outlet).
Companies such as Hindustan Unilever and GlaxoSmithKline Consumer Healthcare India are all looking at new categories for growth. What about you?
We are very restrictive when we think of innovation as only product. I don’t want to go by what is sort of existing. We have large breakfast—cheese, cheese spread, milk, butter. Most of milk consumption is with cereals, dalia (crushed wheat), milk by itself. We think it’s not the product, it’s about consumption opportunity as the driver. We will look at what competency we have to drive that consumption opportunity. Whether it leads to cereals, noodles, etc., I will not say. But it will lead to something. It will lead to something more than the configurations you have seen so far.
Will it be more of the same wheat, sugar, milk-based products?
Innovation is anything that is capable of generating new value. It can be a new product, new pack, new route to market, new way of selling.
After working for MNCs such as Coca-Cola and Cadbury, how is the experience of working with a family-run organization different?
Britannia is a very professionally run company. I have always been asked whether it’s difficult having come from MNCs. In terms of working, it is no different. In many ways, it’s much easier. As an MNC, if you are working in 200 countries around the world, there is incredible reporting metrics and control mechanisms.
I remember when I was division president for Coca-Cola responsible for South Latin America, I had weekly sales calls. Here I meet my chairman a day before the quarterly budgets. Once we have finalized the annual plan and budget approvals, it is management’s task to deliver. I don’t have to go to Atlanta, Cincinnati or Finland for any approvals. It works much faster. The relationship is very professional with the non-executive chairman here and it is the same with the chairman at Coke, Cadbury.
In my view, there is no difference.
You have doubled the sales in five years from Rs1,700 crore to Rs3,200 crore. What are the challenges for next five?
The critical challenge is margin and margin expansion. It will be an area of greater focus. If you look at commodity inflation, till recently, we only spoke of the Wholesale Price Index. Now food inflation is 18%. Sugar prices have almost doubled from Rs17 to Rs32 in a year before touching a peak of Rs40... How many can afford this price increase? Look at milk—it has gone up 25% in (the) last four months. Wheat prices are higher now than last year. Our biggest challenge is we have not taken a price increase to take the cost increase in inputs.
How do you plan to keep growing without cutting margins?
It has been tough. Margins dilution has been there in the last year. Margins are under pressure. It is a critical area of challenge. We will look at greater cost efficiencies, product mix, introduce new innovations and products where we can command higher prices and better margins—digestives, five grain, cream cracker, Choco Decker. We have been there for 92 years and will be there for at least another 992 years. A quarter here and there like this is irrelevant. It’s like (cricketer) Sachin Tendulkar hitting nothing and sometimes a double century. A view of business has to be longer term.
In five years, the company has managed to save Rs180 crore on costs. Can you tell us how?
We looked inside the four walls. We had higher productivity levels. Lower wastage, capital productivity waste was out of system. We reduced wastage in every element of the system. We took individual consultants, area expertise consultants and, where necessary, got other consultants involved; looked at better economies for distribution, capital productivity, labour productivity, taking waste out of the system; looked at every single element to remove wastage.
The Wadias have given you the additional responsibility of growing their textile business. What are the challenges you see there?
I am on the board of Bombay Dyeing. I am working with (its) chief executive and management team to get the textile strategy sharpened and focused. It started six-seven months back; we will see how it shapes up. It is to bring the company back to growth.
The issues are the same like FMCG (fast-moving consumer goods): right product mix, branding, pricing and distribution. The brand is seeing competition from multi-branded formats and large formats. We will have to be present where the consumer is. We will do what we have to with more intensity to create a higher trajectory for growth.