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Wednesday, Oct 18, 2006
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Business Daily from THE HINDU group of publications Wednesday, Oct 18, 2006 ePaper |
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Corporate
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Outlook Britannia NZ Foods consolidating operations
K. Giriprakash
The company has now started posting marginal profits.
Bangalore , Oct.17 With its decision to focus more on boosting its bottomline, Britannia New Zealand (BNZ) Foods is consolidating its operations across the country. "Our primary focus has been to be a profitable, sustainable business," Britannia New Zealand Foods' head for dairy business, Mr Anupam Dutta, told Business Line. Britannia New Zealand Foods is a joint venture between Britannia and the New Zealand-based Fonterra Co-operative Group. After it exited the packaged milk business two years ago, though the turnover went down by over Rs 100 crore, the company was able to turnaround its entire business. It has now started posting marginal profits.
Fall in royalty income
A fallout of its decision to exit the milk business has been the reduction in income from royalty for Britannia from BNZ Foods. BNZ Foods pays royalty to Britannia for using its name and it is calculated by taking into account the turnover of the business. Hence, income from royalty and shared services has fallen to Rs 2.43 crore in 2005-06 from Rs 3.68 crore in 2004-05. However, as BNZ Foods buys biscuits and other products from Britannia for its promotional activities, during 2005-06, earnings from BNZ Foods rose to Rs 1. 01 crore from Rs 74 lakh in 2004-05. Britannia New Zealand Foods expects to end the year with a turnover of around Rs 120 crore, registering an increase of around 15 per cent over last year. During 2004-05, the company's turnover was around Rs 250 crore but since then the turnover has reduced while the bottomline has turned healthier. The company has also reduced its presence in the bulk market in the case of dairy whitener largely because of pricing issues. "We participate in the market only if it is profitable and we can add value," Mr Dutta said. For example, most of the company's products under the Milkman brand are priced at 20 per cent premium to competition. Mr Dutta said the company has been trying to get into areas where competition has not got into yet. "We want to enter into product categories where we can differentiate ourselves, add value and charge a premium for it," he said. "We are also constantly evaluating products from the Fonterra group and we are always looking to add do-good products that add value and help us make more money," he said. He said cheese contributes to about 45-50 per cent of the company's turnover and is growing at a CAGR of 16-17 per cent. Contribution from butter has been marginal but Mr Dutta said that the response from the modern trade outlets has been encouraging. Ghee is its most widespread brand and is growing at 20 per cent in value terms while the dairy whitener business is growing at 6 per cent.
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