With its entry into the breakfast foods space, biscuit maker Britannia Industries Ltd has added one more prong to its avowed plan of becoming a complete foods company. After its foray into milk with Acti Mind, Britannia hopes to make a dent with its ‘brekker' offerings. Managing Director Vinita Bali says the non-biscuits business has been outpacing the biscuits business and growing at 20 per cent. In this interview to BrandLine, Bali talks about changing consumption patterns, managing spiralling commodity costs and the ‘quality' of revenue. Excerpts from an interview:

With your entry into many non-biscuits categories are they growing faster for you now?

As a percentage yes, they are growing faster, categories such as dairy and bakery. It was Rs 600 crore last year, and we've seen about 20 per growth. This is very much consistent, in keeping with what Britannia stands for: eat healthy, think better. We are the largest snack brand in India but we are slowly moving from side of plate to centre of plate with a range of breakfast products. We are looking not just at foods, which a lot of people are doing, but looking at (developing) a range with oats.

So, as you enter these new categories, aren't you opening yourself to competition in new flanks? How do you intend to deal with it?

Talking about competition in India is quite irrelevant because the market is at a very nascent stage. Packaged food in India is only 9 per cent of total food consumed. So many more competitors can enter the market and there is enough room for everyone to grow. Take per capita consumption of packaged foods. If I were to look at the middle-income class on a base of 500 million we are still much lower than other developing countries in our region, lower than Sri Lanka, Vietnam. While the India growth story is shaky now, it is there to stay. If you look at a market where GDP growth is going to be 5-7 per cent, you are looking at a 14-15 per cent growth for the industry. Also, at relatively little economic growth, a large part of your income goes into consumption. If you were to get more money, it is unlikely you will spend it on food, more likely on gadgets and such, but if I were a daily wage or factory worker and if I got more money, I would spend it on food. India is just beginning to grow.

How are you managing the high commodity costs?

We import refined palm oil. Prices of milk and milk products have gone up by more than 26-27 per cent, price of cashewnuts has gone up. Fuel has gone up, in TN, the VAT rate has gone up; when fuel goes up, it impacts transportation, distribution, everything. So, we are talking about a basket of food inflation still being 12-13 per cent, so the next few months are going to be uncertain.

The biscuits category has become very competitive. What about the competition you are facing from Kraft's Oreo? You are losing share in the cream biscuits category?

Oreo is one brand, the interest is because it happens to be an MNC brand. We have to expect competition. I don't think there should be any surprise that new brands are being launched in virtually every category in India. That is what is to be expected in a market which is growing. So, honestly, people say this and that is being launched ... my response is well, more of this is going to happen and not less of it. Every time a new brand comes and invests in the market, the market grows. And, if you go anywhere in the West and see the kind of growth there … we are growing 12-13 per cent. So, it's a very boring way to look at it (competition from other biscuit brands)

So, do you see categories morphing across brands, products?

Categories are already morphing. For consumers there are different snacking options, it could be a biscuit, it could be a samosa , a bhajji , so what are the opportunities for consumption?

The wonderful thing about our business is that demand is completely elastic. I am not selling you medicines for a headache, so it's not as if you are going to buy them unless you have a headache. Our kind of products deal with variety, diversity of experiences. In categories like this, where demand is elastic, there is tremendous scope for innovation and growth

Do you have the freedom in pricing?

Freedom we have, and we don't … where products are fully differentiated, and where nobody else is present, the degrees of freedoms are enormous, but it still has to be seen as value for the consumer. In pricing there are two-three issues. The consumer should see value to buy the product. The second is, does the consumer see enough value to buy your brand compared to buying a competitive brand?

In India a lot of value is defined by ‘I will give you more for same price, or the same for lesser price'. And that stretches across categories, that's why the whole aspect of innovation and creating products that are not commodity-like. The moment I put oats and honey in a Marie and fortify it I have created greater degrees of freedom; the moment I put multi-grain along with oats, I have greater freedom in pricing. So, it's a very dynamic variable.

Is your ‘Chota pack' strategy still doing well for you?

We still have a Rs 2 pack of glucose biscuits. That's quite magical! In India, it's not just the price per kg, the price point itself is very important. Also, when you have a diverse portfolio of products and packages, it creates greater options for you, you can sell different pack sizes in different areas. India is a crazy country when it comes to pricing, packages and value perceptions!

Have you been able to hold on to your Rs 5 price point?

Some, we have held at that point, a few brands have gone up to Rs 6. Eventually, that will be the current Rs 5 price point while Rs 12 will be the Rs 10 price point.

Overall, you have raised prices over 10-12 per cent?

If you look at our first six months, where our overall value growth has been 20 per cent, volume growth has been 10 per cent. And the balance 10 per cent has come from the pricing mix.

How is consumption changing?

There have been many changes influencing consumption behaviour. You have more women working, more people travelling today than earlier, many more have less time today, people are crunched for time and looking for smart solutions from a time and convenience perspective. More people working has created opportunities for companies like ours.

Look at BPOs, more people are working through the night there, munching something, BPOs are a great opportunity for us. As I am selling a light bite, it's a 24/7 consumption opportunity for us. Now we are going to have more airports and more shops there, that's also an opportunity for us. As India becomes mobile, as more start working, that creates more opportunities for consumption.

Kraft slapped a case on Treato that it resembles Oreo, but is Treato doing well for you?

(As the case is sub-judice, the MD refrained from comment.) We are selling. Treato is part of a whole range of cream products that we have!

What are your key challenges in the coming years?

One challenge really is driving profitable growth. Driving growth is not an issue, but driving it profitably is a challenge, taking into account higher input costs, competition and everything else. The second thing is relevant innovation. We can create all kinds of products, but they have to be relevant. The third is the ability to go to market in metros, non-metros, semi-urban clusters, rural, segmentation by channel, the entire go to market strategy has become very complex. Earlier it was very simple, you had few products, few SKUs, few kiranas , guys just went in and sold.

Now, we have organised retail, the local retailers have upgraded, you have rural opening up. Now we have maha -metros and mini-metros. So, how do you service these markets, how do you segment those channels, and how do you do it in a manner where cost to serve does not increase disproportionately because the expectations of retail are also changing?

What about brand loyalty?

Loyalty today is not to a brand but to a range of brands. In any case consumers are not buying one brand, it's not a medicine that they can't change it. People want variety.

Related Topics
comment COMMENT NOW