?Britannia explores growth opportunities in bakery segment

The board of Britannia Industries has given approval to stock split in 1:2 ratio. The decision is taken to increase stock liquidity and affordability for small retail investors. 

The company said that the shares with Rs 2 of face value will be split into two equity shares of Rs 1 each. The stock split will be subject to the approval of the members and authorities as applicable. 

Britannia said, "There had been a significant rise in the market price of the equity shares of the Company over a period of last one year. In order to improve the liquidity of the Company's Equity Shares in the stock markets and to make them more affordable for the small retail investors, it is proposed to sub-divide Equity Shares of face value of Rs 2 each into 2 Equity Shares of the face value of Re 1 each."

Britannia Industries chairman Nusli N. Wadia said the company has earmarked Rs 400-500 crore  for expansion of capacity and new product development, including Rs 300 crore dairy plant whose site may be relocated from Maharashtra to Andhra Pradesh since the company is yet to hear from the Maharashtra government on the incentives.

Talking to reporters on the sidelines of Britannia’s 99th annual general meeting here on Monday, Wadia said Britannia has been waiting to hear from the Maharashtra government for over a year on the incentives for the dairy project. “Hence, we are exploring whether to shift the project to Andhra Pradesh,” he said.

Wadia said the company will not enter fresh milk. Britannia has started milk procurement pilot in Maharashtra to strengthen dairy back-end capabilities and will set up cold chains across the country. The company will also enter the filled croissants space towards end of the year, apart from expansion of cake and rusk portfolio, he said.

Britannia leads the biscuits market by value of around one-third share. Wadia said the company wants to enter overseas markets and has set up a dedicated export unit in special economic zone at Mundra. “This will increase our foreign exchange earnings,” he said.

Driven by the double-digit volume growth, FMCG major Britannia Industries has posted 19.41 per cent growth in consolidated net profit at Rs 258.08 crore for the quarter ended June 30, 2018. The company had posted a net profit of Rs 216.12 crore in the April-June period a year ago.

 For the quarter under review, the total revenue stood at Rs 2,585.84. It was Rs 2,375.01 crore in the corresponding period of the previous fiscal, Britannia Industries said in a BSE filing.

The company said reported revenue, part of total income, for the quarter ended June 30, 2018, is not comparable to the revenue reported in the previous period due to implementation of GST with effect from July 1, 2017.

"Excise duty has subsumed into GST, and hence revenue from sale of goods for the period commencing July 1, 2017 does not include excise duty," it added.

"We have witnessed positive momentum in the market over the last few quarters. Our double-digit growth for the quarter is backed by a double-digit volume growth primarily due to our investment in brands and widening our distribution network through focus on direct reach, rural market and weak states," Britannia Industries MD Varun Berry said.

The international businesses remained flat due to slow-down in geographies like Middle East and Africa, Britannia said.

"The growth in dairy business has been subdued due to our focus on driving value added products and reducing our play in the less profitable commoditised products, which has helped us improve our profitability," Britannia said.

The company said in its 100th year it will enter into “many unchartered territories" to secure disruptive growth.

The company in a separate filing said its board of directors has recommended and approved issuance of secured redeemable non-convertible debentures as bonus debentures of Rs 50 in the ratio of 1 bonus debenture for every 1 equity shares held by the shareholders of the company.

Shares of Britannia Industries were trading at Rs 6,318.95 apiece, down 1.19 per cent, on BSE.

Food company, Britannia Industries (BIL) has come up with a greenfield manufacturing facility in the country, at an investment of.`200 crore in Rampur, Assam. The Rampur facility will produce a wide array of Britannia products to cater extensively to Assam and the north-eastern states. The unit has a production capacity of 60,000 tonnes of biscuits annually.

The company already has two manufacturing facilities in Assam with a production capacity of 30,000 tonnes annually. Varun Berry, managing director, Britannia Industries, who was in Assam on Monday, said the facility in Rampur has come up in record time of 14 months. “The way government of Assam has supported us in getting clearances is unprecedented and unseen in any other place in the country,” he said. He added, “Britannia is Rs 10,000-crore company with operations in 75 countries. Northeast India roughly accounts for Rs 600-crore business annually and Assam facilities contribute 8% to the total production. In the three units in Assam, the company has invested close to Rs 350 crore.”

“As government of Assam is initiating for communication with South East Asian countries, we may look at supplying our products from here to those countries. We are diversifying and adding more products, we will soon emerge as a complete food company. Assam could be an ideal base to evaluate business expansion to International markets,” Berry added.

The country’s leading dairy brand Amul has further strengthened its market leadership over the last one year by grabbing the shares of rival brands, Britannia and Go, in general, and modern trade.

While Amul’s all-India volume share in cheese rose to 71% during the period from March 2017 to February 2018 from 64% in the previous year, Britannia’s volume share shrunk to 17% from 20% and Go’s share declined to 6% from 10%, respectively, industry sources said quoting Nielsen data.

Usually, according to industry experts, it’s difficult for a leader with a large majority share to further shore up its position. However, what helped Amul grab share from its competitors is a major expansion that trebled its production capacity to 3,000 tonnes a month.

R S Sodhi, MD of Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets its dairy products under Amul, said after the expansion, the company became aggressive on the distribution and pricing front, especially to the HoReCa (hotels, restaurants, catering) segment.

Another factor that assisted Amul, which has a strong network of 5,000 distributors, is that it did not increase prices in the last two years. The strategy paid off in boosting volumes. GCMMF plans to further expand its capacity to around 5,000 tonnes a month in the next two years.

Britannia Industries said it does not subscribe to Nielsen’s market share data for the dairy category. “As far as the cheese category for Britannia goes, we have seen healthy double-digit growth in 2017-18 with modern trade contributing marginally higher than general trade to this growth. While cheese slices (which were pioneered in India by Britannia) continue to be the largest segment for the brand, the growth has been funneled by cheese blocks, cubes, and spreads,” said Venkat Shankar, VP and head of dairy business, Britannia Industries.

Devendra Shah, chairman of Parag Milk Foods, the maker of Go cheese, also said the company’s cheese business has been growing well. “As per our internal data, our cheese business has grown more than 20% CAGR in the last one year. Along with consumer business, we are also focusing on institutional sales and direct supply to QSRs. Almost half of the consumption of cheese comes from institutions. Going by the growing demand, we are increasing our capacity from 40 metric tonnes per day to 60 metric tonnes per day,” said Shah.

In round figure, Rs 2,000-crore cheese market in India is growing at 10-12% annually. Although cheese has always been an acquired taste in India, its consumption has been growing significantly driven by pizza chains and consumers adapting to new forms of cuisines.

During the year, general trade in cheese is said to have grown ahead of modern trade. While general trade grew 20%, modern trade’s growth was around 8%. In general trade, while Britannia grew by 1%, Amul is said to have clocked a growth rate of around 30% and has a market share of 86%. Go, on the other hand, declined significantly by 65%.

More than a year after demonetisation and six months since the GST was implemented consumer demand still remains sluggish with no immediate signs of uptick and people not feeling bullish.

Rural growth, in spite of showing glimpses of optimism, is not entirely back to what it was, as people are still holding back on spending.

Britannia Managing Director Varun Berry said “Are we out of the woods? I am not sure. It will take more time for heady double-digit volume growth to come back, something we haven’t seen in the last five years. From the lowest that we have seen post-demonetisation and GST, we are on an uptrend as a category (biscuits), but then there are these roadblocks, all for the right reasons though, which act as speed breakers and put a cap on the optimism. Rural demand has not fully recovered, in spite of the monsoons this year. He attributes it to people not feeling rich”.

The maker of Bourbon and Good Day biscuits reported a 5% rise in revenue for the six months ended September 30, something it says it has been able to by increasing its distribution footprint steadily over the last few years and not because of the health of the industry. Biscuits contribute about 70% to the company’s topline, followed by cake & rusks (13%) and bread (5%).

From 550,000 direct retail outlets five years ago, the Bengaluru-based company now has access to 17 lakh direct outlets. This has helped it expand in rural areas, with particular focus in Rajasthan, Madhya Pradesh, Uttar Pradesh and Gujarat, where it lags behind its rivals.

Britannia Industries Ltd, one of the major bakery and dairy products companies desires to become a global company, which is why it is aiming to double its turnover in next four to five years and also plans to expand offshore presence.

The company is primarily targeting the developing countries and expects that the exports would add on up to 14-15 percent of its turnover within next 4-5 years.

As per the reports published by PTI, Varun Berry, Managing Director, Britannia Industries, said, "In the next 5 years, I would see this going from eight per cent to 14-15 per cent. It would all be developing countries. We are not going to developed countries as it does not make sense."

He also added, "Our first step would be the countries, which has environment similar to ours. The strategy would be to seed in our products in these countries, establish a little bit of space and then start to think of a manufacturing facility there. In the meantime, if some good opportunities (acquisitions) come up in some countries, then we would look at that as well."

He further added: "Today, we are not a food company. We are broadly a bakery company only which also does dairy. We truly want to be a food company as we go forward. It’s our vision to make Britannia not just an Indian food company but a global food company. We want our footprint across the globe and made some move in that direction and a lot more would be coming in future."

Britannia clocked revenue of Rs 7,947.90 crore in FY 2015-16 and plans to double it in next 4-5 years with growth in current business and new categories in which it plans to enter.