With a war chest, Britannia to compete with regional players, expects margins to improve

New Delhi: With a 'war chest' ready, leading bakery food company Britannia Industries is all set to "fight many battles in smaller territories" against regional players that are giving tough competition to large brands with aggressive pricing and higher margins for distributors.

Britannia, which has recently gone for a price increase to fend against the impact of the commodity inflation, is now "in a good place" and ready to spend in the specific territories to compete against small players, said its Vice Chairman & Managing Director Varun Berry in the earnings call on Wednesday.

"We are in a good place. We have also been able to create a war chest for ourselves to be able to spend if we need to, in specific territories, specific states, against specific players. So we are going to fight many battles in smaller territories," he said.

Britannia, which owns household brands such as MarieGold, Tiger, Nutrichoice, and Good Day, is doing a "specific analysis on each one of these competitors", said Berry.

The company will maintain the current prices, however, Berry said, "if there's any need to be competitive in certain territories, we will make sure that we do that".

In the June quarter, large companies have reported competition faced by smaller and region-specific brands in some segments.

About the commodity inflation, Berry said reasonably it was 'stable' in the June quarter and 'pretty manageable' though it was very turbulent for the full year.

"I think from here on, we do not see the kind of wide fluctuations that we have seen in commodities. And we always perform much better in stable conditions during the turbulence in commodity prices, like what we have seen in the last two years... We have covered most of our inflation through our price increases. We are done with that, and we are in a good position today," he said.

When asked about margins, Berry said, "As the 'commodity prices are within a band, then obviously the margins can only be better".

On the outlook, Berry said, "Driving consumption in the core categories remains our big agenda".

The company is closely monitoring policy interventions (income tax benefits for the middle class) by the government, which may boost the consumption, and the harvest output, which impact the commodity prices, which will be "very critical" thing for Britannia, he said.

Britannia expects volume to come back "slowly and steadily" over the revenue growth in the coming quarters.

"We are pretty happy with our transaction growth of 12 per cent, and volume will also come back slowly and steadily, but I would say the delta between volume and revenue will remain at about 6 to 8 per cent for the coming two or three quarters," he said.

According to Berry, 60 per cent of Britannia's business comes from price packs of Rs 5 and Rs 10, hence it looks its business more in terms of transaction growth.

Over the performance of Britannia in the June quarter, Berry said it had a "robust double-digit growth" across our four focus states of the Hindi belt.

Britannia is focusing on expanding its presence in the Hindi Belt, which includes several northern Indian states with Hindi as the primary language. This area includes states like Uttar Pradesh, Madhya Pradesh, Rajasthan, and Gujarat.

"The Hindi belt this quarter has been really, really good. All four states have given us very good growth, very high double-digit growth," said Berry, adding, "the growth is 2.7 times what they are for our other states, and this has led to a market share gain of 65 basis points over Q1 in the Hindi states. So that agenda is going quite well for us."

According to Berry, the company has done well in five regions out of two.

About e-commerce, Berry said, this channel has been doing really well for the company and has been gaining share in that segment, although it's still only 4 per cent of the overall business.

When asked about the quick-commerce, Britannia said 75 per cent of its total digital commerce business is now coming from the hyper-local delivery platforms.

Britannia Industries had on Tuesday reported a 3 per cent rise in consolidated net profit at Rs 520.13 crore in the June quarter. Its sales were up 9.8 per cent to Rs 4,534.86 crore.