Britannia banks on increased distribution to fuel sale of dairy products2 min read . Updated: 20 May 2013, 12:03 AM IST
It’s important for Britannia to sell more of its dairy products because volume growth in biscuits is slowing
Bangalore: Britannia Industries Ltd is expanding distribution of products such as curd and cheese in supermarkets and other modern trade outlets and launching new products as it looks to maintain the high growth of its non-biscuit business.
The maker of Tiger and Good Day biscuits expects sales of its non-biscuit businesses to grow rapidly to ₹ 1,500 crore in the year ended 31 March, managing director Vinita Bali said. The company reports its full-year results later this month.
“Our target is to continue the high double digit growth rates that we’ve seen in the non-biscuit businesses. We’re looking at innovations in our current products and launching new products in dairy. And we have to increase the availability of these products," Bali said in an interview.
It’s important for Britannia to sell more of its dairy products because volume growth in biscuits is slowing as the high cost of inputs such as sugar have forced biscuit-makers, including Britannia, to raise prices over the past few years. The Wadia Group company is also facing increased competition in biscuits from Parle Products Ltd and ITC Foods.
Unlike biscuits, which companies say are available across 85-90% of urban India and 60-70% of the hinterland, dairy products such as branded milk and cheese aren’t that widely available.
The company needs to boost demand in urban areas and persuade consumers to opt for its products rather than making these at home, said Ashok Namboodiri, who heads Britannia’s dairy business.
“There are hardly any dairy products available in rural areas. It (availability of branded dairy products) is focused in urban areas because there’s still a lot of room for growth. Modern trade is the priority in distribution over the next two to three years given that our target customer is likely to shop there. The idea is to first saturate that channel," Namboodiri said.
Bali pointed out that not every biscuit outlet is a dairy outlet. “For example, you can’t sell curd in an outlet which doesn’t have a fridge. Curd is available in just six metros and cheese in the top 30 cities," she said.
However, the company enjoys benefits of scale as it uses the same distributor to sell all its products to retailers.
Apart from cheese and curd, Britannia’s non-biscuit products, which will account for roughly 20-25% of its business, include ready-to-drink beverages such as flavoured milk, ghee, bread, cake and rusk.
A majority of the sales of non-biscuit products come from cheese, curd and ready-to-drink beverages and these three categories will continue to drive growth, Namboodiri said.
Britannia’s non-biscuit products are gaining importance for the company partly because margins are higher than in biscuits, said Bhaveshkumar Jain, analyst at Sushil Financial Services Pvt Ltd.
“The non-biscuit business is going to be a major driver of growth for Britannia. I expect the biscuit business to grow 10-11% over the next years whereas the non-biscuit side will grow at 20-25%. Other players like Nestle and Danone have also sounded very positive about dairy products," Jain said.