''In the second quarter we have seen very good growth in the traditional trade or the nearby grocer which is our area of strength. The alternate channel, which is about 6% of the total trade, has suffered because institutions are shut, trains are not running and there's hardly any sale there.''
Britannia Industries on Monday reported a 23% jump in consolidated net profit while volume rose 9% in the September quarter even as its share were down 5.21% on Tuesday. Varun Berry, managing director at the company known for Tiger and Marie Gold biscuits, said rural markets continue to grow faster than urban lagging on account of slowdown in modern trade. Edited excerpts from an interview:
As growth has normalized for in-home consumption, what are the broad trends in the September quarter?
Growth trends have normalized but within segments --traditional trade, modern trade or what we call alternate channels like transport clusters, airlines, railways, institutions that you sell to and e-commerce --it is a very different story. In the second quarter we have seen very good growth in the traditional trade or the nearby grocer which is our area of strength. The alternate channel, which is about 6% of the total trade, has suffered because institutions are shut, trains are not running and there's hardly any sale there.
Modern trade has suffered and sales are very, very tepid because consumers are wary of going back to stores. E-commerce has been growing very aggressively.
Within the traditional trade, the rural part of our business, has seen aggressive growth. We've had two good years of monsoons so rural will continue to grow.
What’s the difference in growth rate for urban versus rural?
If you just look at urban traditional trade and rural traditional trade, the difference would be 1:1.4. But if you were to look at total urban markets, which includes e-commerce and modern trade, it would be more like 1:1.6 because modern trade sales have been fairly underleveraged during this period.
We have two opportunities in rural: one, the rural economy is growing at a faster clip because of the agriculture sector being fairly robust this year with good monsoons etc. Second, our market share in rural markets has been always lower. So from our perspective, rural for the next three to four years is going to grow at a higher clip than urban.
What will be the share of sales from rural going forward?
Currently, rural markets contribute about 30% to our total sales. In the next two years or so we would like this to get to about 33- 35% of our total sales. That’s the kind of infrastructure we are building. Pre-covid, we had 19,000 distributors and now we have 22,000 and we continue to add rural distributors to make sure that our coverage increases.
What are Indian households consuming at the moment?
Indian consumer is getting bored of life at home. So they are becoming a little more adventurous, ordering in cooked food and snacks.
They are also venturing out at times to eat out. I think that trend will continue but it'll not come back to the pre-covid level at least in the next six to nine months. From whatever we hear, covid is here to stay for at least another year, year-and-a-half. I think people will start to get back to life sooner rather than later.
What’s you view on the government’s stimulus package so far and what else do you think it can do to revive demand?
As far as our industry is concerned, we were doing well and continue to do well. But from an economic growth standpoint, from a country's perspective, I think the time is right for the government to invest, to look at infrastructure projects, in terms of making sure that it gives the economy a kickstart, by giving employment to a lot more people. And I think budget deficit at this point in time should be the last thing on the government's mind, even if it means printing money and going after a lot of developmental projects, which offer better infrastructure and a lot of job opportunities. That’s the best thing for the government to do at this stage.
Are you discounting or offering any freebies on your products?
No, we are not under any kind of pressure. And we don't have excess stocks. We are seeing some of these activities coming back from a competition standpoint which does reflect their inability to sell in quantities that they were during the last three-four months. But we are perfectly in order.