Despite downtrading across the industry, Britannia Industries is witnessing “resurgence” in demand for its premium portfolio, where margins continue to be higher.
Demand is uniform across small packs and larger ones in the premium segment, a focus area of the company.
The re-launch of ‘Milk Bikis Classic’ biscuits or other launches in NutriChoice or wafer sticks - including the health and wellness segments - will mostly be in the premium categories.
Incidentally, Milk Bikis has grown higher than Britannia in Q1FY22 and a new advertising campaign has been launched. In the April to June period revenue for Britannia remained near flat y-o-y; volume sales were up one per cent.
On-the-go consumption, including that of items like cakes, is expected to be back with clusters like schools and colleges re-opening and Railways resuming operations at full strength.
“Thankfully, we don’t have much in the value offerings. And our resurgences are coming mostly in premium products. On an overall market construct basis there is resurgence in the value segment. But that is a small portion for us,” Varun Berry, Managing Director, Britannia Industries said during a recent investor call.
Margins continue to be on the lower side in value offerings.
“I do not want to play in a segment which is growing say 30-40 per cent but which will not have the margins that I am looking for,” he added.
Channel Outlook
Britannia now has a better product mix with all its brands being back on air and full range of products in the market.
Although supply chains were not disrupted in the second wave of Covid infections, it was the front-end that was hit in the first few months of the fiscal. Launches were delayed as trials were disrupted. Similarly, distribution reach which was hit in the initial part of Q1FY22, is coming back now.
The company in its investor presentation maintained direct distribution reach fell from 23.7 lakh to 20.8 lakh between March and June quarters; while rural distribution (rural preferred dealers) stood stagnant at 23,000 sequentially.
“Distribution took a bit of a tumble, but it is coming back strongly. The continuous (stock) replenishment system is also back up,” Berry said, adding growth in channels (which include e-commerce, modern trade and alternate channel sales) is witnessing a 1.12x growth, y-o-y.
E-commerce sales are at 2 per cent of total, up from the previous 0.4 -0.5 per cent and there is potential to increase (online) sales to 5 per cent. The company has not ruled out the possibility of an online brand store in future.
Capex
Focused States – like Uttar Pradesh and those of the Hindi heartland – are growing faster than the national average (1.33x vs 1x).
With UP being a focus market, the company is putting up a plant there with a proposed investment of ₹300 crore that will be spread in a phase-wise manner. In Khurda (Odisha) about ₹94 crore has been invested as capacity ramp up in multiple categories. The Ranjangaon plant (Maharashtra) will add new product lines, including dairy.
“We have invested ₹130 crore in the capacity building during the quarter with ramp-ups happening in Odhisa and Tamil Nadu. A Greenfield unit is also coming up in Uttar Pradesh and land has already been acquired,” Berry said during the earnings call.