BackWe are focusing on five big power brands: Britannia’s Varun Berry
Britannia will continue to invest in new initiatives such as a Rs65 crore R&D centre set to open by the end of the year, says MD Berry
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Biscuits and dairy products maker Britannia Industries Ltd on Thursday announced its results for the March quarter. In an interview over the phone, managing director Varun Berry said that while the slow recovery in demand was a cause for concern, the company would continue to invest in new initiatives such as the ₹ 65-crore research and development centre set to open by the end of the year. Berry also spoke about product rationalization and a plan to boost the small dairy portfolio. Edited excerpts:
How’s this quarter panned out for Britannia in terms of volume growth and spends?
It’s all the groundwork that we’ve done thus far. We’ve ramped up distribution this year. Direct distribution has gone by 33%, so we are now directly getting into a million outlets which used to be about 7.3 lakh previously. We have a lot of work going on in rural distribution and that’s helping us.
Also, this was a big quarter for us from a brand standpoint because Filmfare (awards) happened. We were also involved with the cricket World Cup. We also saw two big launches, including Good Day Chunkies. A lot of work happened this quarter on marketing as well. So that’s the story on the top line. As for the bottom line, it is in line with the commodity situation.
You started with product portfolio rationalization a few quarters ago. What’s the progress on that front?
That’s going very well. We are focusing on the five big power brands. We are focusing our spends on those power brands. We’ve reduced almost 15 SKUs (stock-keeping units) this year; last year, we had reduced them even more. It just simplifies our operations from a factory and a sales standpoint. And it’s helping us a lot. We derive a lot more from reducing these SKUs and focusing on bigger SKUs. It’s a continuous process and yes we will continue to evaluate our portfolio and remove and add SKUs going forward.
While commodity costs have remained in your favour, any indications of price hikes going forward?
No, not really. In fact, in the last six months what we’ve done is give consumers a lot more value—whether you look at our Good Day, Milk Bikis or Marie portfolios.
Any signs of a recovery in consumer demand?
None. There are some ups and downs which happen from month to month, but overall the demand situation hasn’t changed; in fact, it’s only trended downwards. Yes, we have seen a few months here and there but that doesn’t make for a recovery. We’ve been lucky that we’ve been gaining share and that’s why our growth is higher than the industry.
By when do you anticipate consumers starting to spend more?
We continue to believe that the government is taking the right steps. I think they are doing all the right things from a demand-generation point of view, but I don’t think they are getting the benefits of that just yet. But I do hope that in the next six months or so we start to see some recovery. If that doesn’t happen we will see a few fist fights in the market.
The good news is that the monsoon seems to be on track. But I think it will take more than the monsoon. I think it’s consumer confidence which needs to come back and I’m hopeful that in the next six months we will see a demand recovery.
Britannia announced an enhancement of capacity in the next 18 months. Is this the right time to invest when consumers are wary of spending?
It’s always the right time to invest. We’ve put in a lot money to enhance our capacity. We’ve also put up a new research and development centre which will be ready by the end of the year. This will be for the entire company—biscuits and dairy. We’ve invested about ₹ 45 crore on the centre, plus the land cost—so that would be about ₹ 60-65 crore.
What are your plans for boosting your dairy portfolio over the next 12-18 months?
We are working on a plan for dairy. We’ve done one round of discussions with our board and we need to do some more work. So I think it will take us about three months to get to a final plan.
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