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FMCG major Britannia Industries is looking at a 4-5 per cent price hike across categories to offset a similar rise in raw material costs.
According to Varun Berry, Managing Director, Britannia, price hikes will be across specific categories, or, in “select premium” range or across specific geographies.
The company initiated a 10 per cent price hike in the dairy categories, a month back. The hike came after “milk prices went through the roof”.
Q1 net down
A seven per cent year-on-year rise in raw material costs to ₹1,368 crore for the April to June 2019 period (against ₹1271 crore), saw its bottomline take a hit.
During this period, Britannia witnessed a 4 per cent dip in profit after tax (consolidated) to ₹249 crore ( ₹258 crore).
Consolidated revenue from operations was ₹2,700 crore — up 6 per cent for the period under review.
“Price increase will become important for us in doing business in the dairy segment, especially where prices of milk have gone through the roof. In bakery, the inflation is reasonable,” Berry said here.
“This is a slowdown year and we do not want to affect consumer sentiments any further. So a 4-5 per cent price rise is what we are looking at across specific pack sizes. Hikes could be done selectively in regions too,” he added.
Demand, the company estimates, will pick up over the next 6-15 months. And so, “price hikes have to be taken where the impact isn’t large”.
No cut in ad-spends
According to Berry, despite the slowdown, there will be “no cuts” in advertisement and marketing spends. In fact, the company sees slowdown as an opportunity to push spends, build on new categories and penetrate further in markets where it has a lesser dominance over competition.
Nusli N Wadia, Chairman, in response to a shareholder query during the annual general meeting earlier in the day, said that Britannia “will continue to concentrate on brand building”.
“We have actually gained market share. We did not pull back and continue to aggressively spend on advertisements and sales promotion,” Berry said.
Slowdown also gives Britannia the opportunity to consolidate its market share from regional players who face liquidity, production and distribution issues.
The Wadia Group company has a third market share in the ₹30,000-crore biscuit market in India, with regional players occupying 27 per cent of the market.
Britannia, in line with its plans, is looking at overseas manufacturing facilities. These facilities would primarily be company-owned.
While the Nepal facility began operations earlier this fiscal, it has zeroed-in on Bangladesh through a third-party (contract manufacturing) arrangement.
The company is also looking at opportunities in Africa and South-East Asian nations. Britannia exports to 70-odd countries.
Capex plans
In India, it is looking to focus on the east and north-east markets through expansion in manufacturing and deeper distribution of offerings in places like Arunachal Pradesh.
While Britannia is setting up its second manufacturing facility in Bihar, it will look at another facility in Bengal or expand its existing facility in Assam.
“The ballpark capex could be in the range of ₹150 crore. But it’s a decision we will look at one year down the line,” Berry said.
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