Britannia Industries, the country’s second largest food company, is looking at an overseas expansion plan driven primarily through its own manufacturing facilities.
The company is evaluating countries such as Bangladesh, Myanmar, Nigeria, Kenya and Egypt to set up units.
It is likely to zero in on Africa. Parle already manufacture there and Britannia will compete in that market, Edelweiss Securities said in a report.
According to Britannia MD Varun Berry, the company’s strategy is to open a manufacturing facility every year in a new country.
“We are yet to finalise on a particular country for this year. (Bangladesh) is certainly one on our list. As of now, the focus is on Africa and SAARC,” he told BusinessLine in an interview.
The company currently has three manufacturing facilities outside India — one each in Dubai and Oman that it had acquired, and a greenfield one in Nepal. It also exports to the US and nearly 80 other countries across Asia, West Asia and Africa. Around 13 of these countries were added in FY18.
According to Berry, Britannia expects its international business to contribute 15 per cent of its turnover in five years.
Flattish growth
The international business accounts for 7 per cent of the company’s ₹9,906-crore turnover (consolidated). In Q1 FY19, its growth remained flat due to a slowdown in West Asia and Africa.
Other geographies such as Australia, the US and Canada, too, have seen a decline in demand; political troubles in countries such as Yemen and Libya have also had an impact.
According to Abneesh Roy, Senior Vice-President, Institutional Equities, Edelweiss Securities, it makes “long-term strategy sense” for Britannia to enter new markets and set up manufacturing facilities there.
“When you look at other Indian FMCG companies, you will see a substantial part of their revenues coming from Africa and overseas operations. Biscuit-makers too can look at these opportunities depending on the geographies they want to operate in,” he said.
Focus on profits
The company, Berry said, is open to inorganic growth and acquisitions or joint venture partnerships for setting up facilities overseas. While overseas expansion will be “slow and steady”, it will not be at the cost of profitability. Nepal for instance, is one market where operations are profitable.
“We are going to be aggressive as far as international expansion is concerned. But we are not going to break the bank on it,” he said, adding that the investment in these geographies have to pay back in five years.
“We are not in the market to say that we are okay with being profitable after 20 years. It is going to be payback in five years,” Berry said.
Earlier this year, Britannia commissioned a dedicated exports unit in Mundra, Gujarat.