Financial Daily from THE HINDU group of publications
Friday, Aug 20, 2004
Food & Dairy Products
Corporate - Outsourcing
Britannia finds outsourcing a cheaper option
Mr Nusli N. Wadia (second from right), Chairman, Britannia, and Field Marshal Sam Manekshaw, Director, interacting with shareholders before the start of the company's AGM in Kolkata on Thursday. Parth Sanyal
Kolkata , Aug. 19
BRITANNIA Industries Ltd (BIL) plans to outsource more of its own products as it finds outsourcing a cheaper option than increasing output at its existing plants where the cost of production is high on account of higher wages.
The company has already started outsourcing in a big way, and it may continue to do so till its proposed greenfield biscuit plant in Uttaranchal is ready for commercial production.
Addressing shareholders at the company's 85th annual general meeting here on Thursday, the BIL Chairman, Mr Nusli Wadia, said the company remained committed to its objective of increasing its market share, thereby enhancing sales value coupled with aggressive cost reduction initiatives. Though the company at present controlled about 39 per cent share (in value term) of the country's organised biscuit market, it sees immense growth potential in the area provided it can ensure greater availability, affordability and awareness of its brand. Mr Wadia said that the key challenge would be to manage profitability in an environment where input costs had been steadily increasing, and where the possibility of increasing consumer prices was becoming difficult. He felt that the profitability could be maintained by increasing volumes at a faster pace on the one hand and by managing all operating costs on the other.
As a part of cost cutting measure, the company closed down its Mumbai plant effective March 2004. However, certain sections of the employees representing the union had approached the Industrial Tribunal against the closure, and the matter was referred to the Mumbai High Court.
He expected the process of closing down operation would be completed by middle of 2005.
The company is in the process of setting up a greenfield biscuit project in Uttaranchal to augment its production capacity, entailing an investment of about Rs 55.2 crore.
This plant will have capacity to produce over 45,000 tonnes of two or three varieties of biscuit per annum.
The shareholders were assured that the BIL management was aware about the emerging competition in the domestic biscuit and food market.
Multinational companies might be the toughest competitors in the years to come.
Therefore, the company decided to concentrate more on domestic market with its core products such as biscuit and high protein food products.
Mr Wadia said the company has no plans to diversify into other products.
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