×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

‘Britannia is more than just biscuits’

‘Britannia is more than just biscuits’
Comment E-mail Print Share
First Published: Mon, Apr 30 2007. 12 13 AM IST
Updated: Mon, Apr 30 2007. 12 13 AM IST
Mumbai
Britannia Industries Ltd, which accounts for about 38% in value and 32% in volume of the organized biscuits market in India, has been undergoing a steady transformation. Vinita Bali, its managing director, is repositioning the biscuit company into a one-stop firm for “good food”.
In an interview with Mint, Bali talked about her strategies to boost exports, create new markets through innovations and protect profit margins in the face of rising costs. She, however, refused to be drawn into the Wadia-Danone controversy, saying there is no rift between the joint-venture partners Wadias and Groupe Danone SA on the use of the Tiger brand by Danone and it has to do with the intellectual property of Britannia, which developed and owns all rights to the Tiger brand. Edited extracts:
Britannia’s net sales have been rising, but this does not reflect on the firm’s bottom line as its margins continue to be under pressure.
What you are seeing is the impact of an extraordinary and unprecedented increase in commodity prices, which was more than Rs200 crore last year for our business. Also, unlike in previous years, everything increased simultaneously... Wheat, sugar, oils, dairy products. Even this year, wheat at mandis (markets) in the North is at Rs980 per quintal compared with Rs750 last year. As you know, the government is importing wheat to keep prices under check. The government has also banned exports of dairy products to keep those prices under some control, too.
If you look at our ratios, except for the input cost, nothing else has gone up. In fact, in many areas, the cost has gone down as a result of our focus on efficiency and effectiveness. The single highest impact on our bottom-line growth (in percentage terms) trailing our top-line growth (in percentage terms) are rising commodity prices.
How do you plan to address this?
We have done a few things to address this—a ruthless focus on taking unproductive costs out of the system, innovations in process and technology, and logistics, in addition to product and pack innovations kicking in. We have moved to diversify our product portfolio and brought in innovations such as individual consumption packs. So, a consumer does not have to buy a 100gm pack of biscuits, eat three and wonder what to do with the balance seven. We are making biscuits available in different formats. For example, the standard Tiger, in 100gm and 200gm packs, was a routine grocery pack that mothers bought. Today, Tiger is a real fun biscuit, with many new variants and shapes... creams to chota (small) Tiger. We’ve launched a large number of different products. Treat used to be a cream biscuit, but now it’s a fruit roll, too. Other recent launches include Mariegold Doubles, Chutkule, Treat Fruit Rollz and Nutrichoice, a fabulous digestive biscuit and in “no added sugar variants” called Nutrichoice SugarOut.
This impacts pricing, too. These brands command a premium because they are not operating in the “me too” category. So, we are creating new value out of innovations. Last year, we launched more new brands than the entire biscuit industry put together.
There is another part of Britannia, which is not well known—the business of bread, cakes and rusks, which is now worth more than Rs200 crore with more than 40% growth last year. We sell about six lakh loaves of bread every day. We make and sell products that consumers can eat anywhere at any time, every day.
Exports account for less than 1% of Britannia’s turnover. Any plan to raise it?
We have just bought into two companies in the Middle East. These companies are pretty significant and have their presence in 35-40 countries, largely in the Middle East and Africa, but they also export to Australia and Japan. That gives us access to many new markets.
Do you plan to take Britannia’s portfolio of products to these countries through the acquired company?
Yes, certainly.
Do you have any target in mind in terms of exports to total turnover?
We’d like international business to be at least 10% of the total turnover as soon as we can, and our recent partnership in the Middle East with a respected and successful group like Khimji Ramdas signals that priority.
Does that mean that this is only the beginning and we will see more such acquisitions?
Not really. We believe there is opportunity for growth in markets outside India and we will pursue those that make good business sense for us.
You are also diversifying...
Most people look at Britannia as a biscuit company. But we are far more than a biscuit company. We sell cakes and rusks and dairy products, such as cheese, butter and ghee. Together, these two businesses account for about 18% of our revenue. We are test marketing a product called Anlene, a malted beverage fortified with calcium for prevention of osteoporosis. Biscuits is the mainstay of our business right now, but Britannia is really about good food. Our slogan “Swastha khao, tan man jagao” (eat healthy, revitalize your body and mind) effectively captures what Britannia strives to do. We stand for food that’s tasty and good for you in various tastes, shapes, sizes and price points. We have recently bought Daily Bread in Bangalore and it is expanding. It has seven outlets in Bangalore now and from the time we bought it (in December 2006), two large outlets have been added.
Is this business scalable?
Certainly, in 30-40 metros over a period of time. And you will see that happening starting this year. Reliance Fresh is already selling Daily Bread in Hyderabad. We see big potential for growth in this segment.
What is the company’s product strategy?
From a strategic point of view, we don’t start with a product; we start with an opportunity. Product is a variable. I can design any product, but if I am not clear about the opportunity, then having a product doesn’t help. I can give you examples of hundreds of great products that have failed because there wasn’t any relevance or meaning for the consumer. We’re constantly looking for opportunities. For instance, the advent of call centres gave us a 24-hour consumption opportunity, which did not exist earlier.
So, five years down, will Britannia say, “We also make biscuits”?
I don’t know. I can’t relate to this question. We will do whatever makes sense in terms of the opportunity and our core competence. I would like to say that we will always be a biscuit company because I see people continuing to eat biscuits. Will they eat the same biscuit they’re eating today? Perhaps not. Britannia’s a 90-year-old brand in India and if you would have asked somebody 50 years ago that five years from now, would you say that Britannia is also a biscuit company, I am not sure what they?would?have?said.?We’re not into technology that will become?obsolete.?As?long?as there are people who have an appetite, we will have a business.
You are heavily into rural marketing.
It’s not rural marketing; it’s marketing to people who live in rural India. The only thing we are concerned about is the opportunity and how do we get a share of an opportunity. If it’s rural, we’ll go rural. The opportunities could be at call centres, schools, railway platforms... We make biscuits that are supplied to the United Nations as part of their world food programme. Those biscuits go to Iraq, Afghanistan, Rwanda and Malawi, wherever there is social insecurity.
Where do you see the biggest opportunity?
I can’t talk about biggest or smallest (opportunities). There are several opportunities that I have already shared with you. The opportunity is to find consumption occasions everywhere and prioritize them. To share an example, we launched Greetings, specially created gift packs for Diwali. The idea was built on a very obvious insight that a lot of food products are exchanged around Diwali. If we get mithai (sweets), we say “Oh God, how much mithai can one eat.” It is (also) perishable. But something like biscuits makes for a great gift. We started Greetings two years ago in a small way. Last year it was big and this year will be even bigger.
Is the focus on higher-end products?
It does not have to be a high-end product; it could be a high-margin pack. When I put Tiger into a pouch, it gives me a higher margin than putting Tiger into a 200gm pack. Product and packaging innovations help to improve margins.
So, you’re customizing your brands in different geographies.
Not really. There are different packs and products that have regional preferences. For example, biscuits like Marie and Thin Arrowroot sell more in the eastern part of India. In rural India, we sell the smaller packs similar to shampoo sachets. There are variations, based on local tastes, preferences, price points and need.
Any plans to enter the confectionery business or any other segments?
We never had plans to get into the confectionery business. At the right kind of opportunity, we will grow in foods and snacks.
Any plans to hike prices?
We keep doing price adjustments on a continual basis through the year.
Research firm ACNielsen’s figures show that your market shares dipped for the initial months last year, but have bounced back. What has been the turnaround strategy for Britannia in the last few months?
Yes, we have gained market share. ACNielsen is good for knowing trends, but its sample is not robust enough to cover a lot of places that sell a lot of our products such as railway stations, airports, etc., and therefore not fully representative. Also, ACNielsen keeps changing its sample base, making historical comparisons invalid and irrelevant.
You’ve been in India for over two years, how’s the experience been?
Good... A lot is happening in India right now, which adds to the dynamism, complexity and chaos. If I were to compare India with Latin America or Africa, there are many similarities. But it’s very different to North America or western Europe. I think there are far greater complexities that we deal with in India and, frankly, we also have the knack of making the simple, complex. Our appreciation for and therefore orientation to processes and systems is less than adequate, which holds us back... And those are the areas for work to be globally competitive.
Indian consumers are much more driven by value. Here success will depend, like in many parts of Africa and Latin America, on how we make products more affordable.
The thing that makes India different is what we are going through now, as we move towards a consumer democracy with people having a plethora of choices available to them and a lot more disposable income to indulge those choices. Those who were born in the country in the mid-1980s have seen good times in general. Not like us. We had to wait for years to get a car or a phone.
Do you see the impact of purchasing power in your industry similar to auto and other sectors?
In our industry, people upgrade. Those who were eating unbranded biscuits can now afford to buy branded biscuits. The base of consumers is increasing and people are buying (biscuits) more often.
You are investing in new facilities.
We are investing more than Rs200 crore. In order to support the 29% top-line growth, we have to make sure that the back end is geared up in terms of new lines, new plants, new packaging machines.
Where are the plants coming up?
Everywhere... In the north, south, east and west. We are investing in contract manufacturing factories also. There are 61 of them.
Could you throw some light on the controversy surrounding Danone’s use of the Tiger brand overseas and the rift between the Wadias and Danone following this?
Let me state that there is no rift between the Wadias and Danone on the use of the Tiger brand by Danone. That has to do with the intellectual property rights (IPRs) of Britannia, which developed and owns all the Tiger IPR and several Danone companies using Tiger without the knowledge or approval of the board of Britannia. This is being steered by the IPR Committee of the board of Britannia, which consists of independent directors.
sagar.m@livemint.com
Comment E-mail Print Share
First Published: Mon, Apr 30 2007. 12 13 AM IST
More Topics: Home |