The Hindu Business Line : Britannia cutting costs to fight price rise

Mumbai, April 18 Inflation, which recently touched a three-year high, has eaten into the profit margins of domestic biscuit makers in the just ended fiscal, with the industry fearing that its margins will be under pressure in the current fiscal too due to the persistent volatility in the economy.

Faced with ballooning prices of inputs and the debilitating inflationary trends, biscuit makers, including top brands such as Britannia, Parle and ITC, are engaged in cost-cutting measures, especially in the areas of manufacturing, logistics and distribution costs. The industry had to shoulder a 20 to 25 per cent increase in prices of inputs in the last two years.

Shrinking profits

Ms Vinita Bali, Managing Director of Britannia, agreed that the “profit pool of the industry has shrunk” due to inflationary trends. “This year too, it will be a challenging and tough year for us,” she told Business Line.

Britannia will be stepping up its cost reduction and market segmenting initiative this year to counter the price rise. “We have been pursuing mix management initiative vigorously. What we did was to increase the price of some of our products, especially the high-end ones, and left prices untouched for other products. For example, we had taken a price increase on our NutriChoice Digestive brand from Rs 30 to Rs 35. We also took some price increases on our cream products,” Ms Bali said.

Market share

Asked whether the inflationary trends impacted its market share, she said in spite of the price increases, the company was able to maintain its market share in a “fiercely competitive environment”. In fact Britannia gained market share for its Tiger brand, which included glucose, cream, coconut and recently-launched banana variant. “Enhancing the portfolio of varieties under the Tiger brand is intended to give consumers more reasons to buy Tiger,” she said.

Britannia’s share in the domestic biscuit market is about 35 per cent, out of which the share of its glucose brands is about 18 per cent. The growth in the biscuit market in India itself has reflected a decline in the last fiscal.

Growth rate

“In the first half of the year, the growth rate was about 15 to 16 per cent, while in the second half, if you look at the sequential growth month-on-month, it came down to 10.5 per cent,” according to Ms Bali.

Britannia was able to shore up its sales significantly by taking up bulk supplies to alternative and in-transit avenues of consumption. “We are focusing on bulk supplies at railway platforms, canteens and BPO offices. We have also launched smaller packs with two to three biscuits to facilitate quick eating at these consumption avenues. We have a separate market structure and sales force to handle these alternative distribution channels,” she said.

Per capita consumption

India’s per capital biscuit consumption was still at about one kg, as against 2.5 to 3 kg in Sri Lanka and 2 kg in Vietnam. The company invested about Rs 200 crore in the last two to three years to increase the capacities of its various plants such as its cake plant in the North East.

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