Nusli Wadia-owned Britannia Industries is one of the largest food products companies in the country. In an interview with BusinessLine , Varun Berry, Managing Director; Ali Harris Shere, VP - Marketing; and Sudhir Nema, VP - R&D and Quality, share the company’s outlook and how they plan to make inroads into the rural market. Excerpts:
Have sales gone down because of shortage of cash among consumers? Will there be a liquidity crunch?
Nema : Yes, the centre will take us towards that goal. Even in current categories, it used to take a long time to innovate, and now the time to market will be reduced to about six months.
There are about 50 people working in the centre and 25 per cent of them are food technologists. We plan to straddle different categories. Today, we are a biscuit company with 85 per cent of the total share coming from biscuits. We are planning not to have one big block coming from biscuits. So we are looking at macro snacks. We are evaluating every category.
So, could that mean having tie-ups with international brands?
Berry: If need be, yes. If we are not experts in a certain segment, and think that someone is an expert, and there is room in that category, we will certainly look into it. Three years ago, if a major chocolate brand had come to us and wanted to partner with us, we would have certainly looked into it. We are more ready now than we were three years ago.
You had earlier mentioned that you have made changes in the corporate structure. Getting more people on the ground…
Berry : We have actually reduced the number of people, but have empowered them a lot. We concentrated the spend on the power brands, whereas earlier, we used to advertise for every brand.
For value brands, you don’t have to be in the story-telling mode — they need sales and promotion. You can be cut and dry. Premium products need to be in the story-telling mode where advertising is more important than sales and promotion.
Shere: Once we got the power brand category right, in the past 16-18 months, we have re-launched and re-staged every single product of ours. We haven’t done any discounting or used advertising money to do below-the-line advertising. We revved up some of the products that had lost some traction. We have tried to stay relevant to the consumers. We have not been reactive, but proactive. The trick lies in making really good premium products accessible to the hinterland.
Compared with your nearest competitor, you have traditionally been weak in the rural market. Are you making any inroads there?
Berry: What is important is to have a good distribution strategy — to make the products available, with the right pricing and packaging. We have tried to strengthen the distribution in the Hindi belt, which mostly consists of rural areas.
In Tamil Nadu, for example, where we have got three-fourths of the market, we are building the rural distribution. In Tamil Nadu, there is no retailer who does not carry Britannia products.
But this is being done indirectly through wholesalers. We want to get there directly — sourcing products from our own distributors. Wholesalers don’t give you all the products — only those which sells the most. So, we are changing that.
Have the prices stabilised after the reduction of import duty on wheat and imposition of stocking norms on sugar? During the last quarter, costs went up almost 18 per cent and most of it was because of increase in sugar prices. So, will you be looking at increasing prices, or is it quite difficult to do so at the current moment?
Berry: Inflation has been high. It is actually 12 per cent and for the full year, it will be about 10 per cent. Inputs have gone up 12 per cent, and then the inflation kicked in and on the top of that demonetisation. Sugar, oil, everything has gone up. Initially, the reduction of import duty on wheat did help, but suddenly, the prices have gone up again. The Black Sea area shuts down during winter. So, if you reduce the duty even further, it can be fine. We have already taken a 6.5 per cent increase in prices and will try and get some more increase as we go through the year.
Does the potassium bromate issue continue to be a cause of concern for Britannia? Has it affected the overall growth so far?
Berry: It did affect us. Let me be absolutely categorical about this: we never put potassium bromate, which is supposed to be cancer causing, in our product. The various tests have proved that we never did. It is not just us, but the entire industry has been hit. It has still not recovered. We have had a double-digit volume decline.
What kind of savings are you looking at and which areas will you plough those savings into. You have talked about savings to the tune of ₹170 crore. How do you plan to achieve that?
Berry: Savings have to be further intensified now. But then savings happen as a percentage of what you sell. We haven’t still done the math on that, but our target for savings is going up. We will obviously tighten the belt. Wherever there are frills, we are going to do away with that. For example, for one of our biscuit brands, we improved the delivery and thereby reduced the cost.
Nema: We realised that all the product designs are outdated. For example, the design for Good Day hasn’t been changed since 1987. The tool boxes which weren’t available earlier, are there now. There are recipes which are outdated, too. So, we are cleaning up the recipes and designs, and there, we will see significant opportunities.
Will there be a fresh capital infusion during the year? Is Britannia looking at setting up more manufacturing centres?
Berry: Yes. We opened one factory in Tamil Nadu. We will open four more during the year. We have 14 as of now. We expect to have a capex of about ₹310 crore during the year, which will be more or less the same during the next three years.