Battle for Britannia: Managing costs and quality of revenue 

Ms Vinita Bali, biscuits major Britannia Industries' Managing Director, knows she has a tough task for the next several months. The fluctuating rupee, high commodity and inputs costs (milk and milk product prices have gone up by 26 per cent), volatile fuel prices — all make for a dizzying mix. “We are talking about the basket of food inflation still being 12-13 per cent, so the next few months are going to be uncertain,” she says.

Britannia imports refined palm oil and it will cost the company more, while cashewnut prices have gone up, too, along with milk. While its profits have gone up in the last two quarters, margins have been under pressure given this cost impact. So, how has the company tackled it? Ms Bali says the company is dealing with margin pressure in three ways. “We are improving quality of revenues, managing costs and innovating to add higher value,” she says.

By quality of revenue, Ms Bali means the price premium that certain brands in the Britannia portfolio have managed to command by launching or innovating to create differentiated products. “Creating differentiated products gives us an advantage; we launched Vita Marie, then fortified Vita Marie, then extended it to Marie with oats and honey and each time we do that we are going up the value chain,” she elaborates. While a 154.5 gm pack of Marie Gold biscuits is priced at Rs 13, a 181 gm pack is at Rs 15. A 136 gm pack of Vita Marie Gold is priced at Rs 15, while a Vita Marie Gold with honey and oats is priced at Rs 12 for a 103 gm pack. Clearly, the value-added pack of Marie is able to extract a price premium to a plain Marie.

Says Ms Bali, “So, in terms of the mix of products, mix of geographies, there are differential margins we make on different brands, if I sell more of a value-added brand, I improve margins and the quality of revenues improve.”

In its quest to become more of a foods company, Britannia has launched a range of breakfast foods under the brand Healthy Start. Four variants of oats, test marketed in Mumbai a few months ago, have now been launched in the south. “We are slowly moving from side of plate to centre of plate with a range of breakfast products,” says Ms Bali.

In oats, a fast growing category, albeit on a low base, Britannia has launched plain, strawberry, savoury and a multi-grain porridge. The Rs 200-crore oats category has suddenly seen 25-30 per cent growth rates as lifestyles and breakfast habits change. But with brands such as Saffola and Kellogg's jumping into the fray even as existing brands such as Quaker and Baggry's step up their activity, Britannia has its work cut out. The Mumbai launch says Ms Bali, has already given Britannia a 15 per cent share of the category, enough encouragement to extend it to other parts of the country. Britannia also has a small range of Indian breakfast options — a plain, broken wheat and a poha upma.

Britannia is also expanding capacity. One new plant in Patna is already operational while one each is coming up in Orissa and Karnataka, all with an average investment of Rs 60-80 crore each. “We are growing top line 20 per cent so we have to scale up capacity at least by 20 per cent if not more. Our investment in the back end is a reflection of what's happening in the front end,” adds Ms Bali.