Companies

To beat slowdown blues, Britannia to hike prices in select categories

Abhishek Law Kolkata | Updated on August 22, 2019 Published on August 22, 2019

Vinay Subramanyam, Head - Marketing, Britannia   -  Debasish Bhaduri

Low unit packs, cost optimisation among other plans

The country’s largest biscuit-maker, Britannia Industries, is looking to beat slowdown blues through a mix of cost optimisation, “judicious” price hikes and low unit packs (LUPs).

This comes even as the company says “sales growth rate has halved” and there is a decline in consumption across urban and rural markets. According to market sources, rural sales, which earlier were one-and-a-half-times urban sales, have slowed down. They are now growing at a slower pace than urban sales. Sales in the value segment have also been hit.

Varun Berry, MD, Britannia, in a recent analyst call, had maintained that “…even a ₹5 product, if the consumer is thinking twice before buying, then obviously, there is some serious issue in the economy.”

The biscuit major, with a turnover of ₹10,000 crore in FY19, has a near 33 per cent market share.

According to Vinay Subramanyam, Head – Marketing, Britannia will look at region-specific ad campaigns (apart from national ones), across select power brands such as Good Day, Marie Gold, 50-50, Milk Bikis, Treat and NutriChoice.

Small is big

For instance, the company recently launched a NutriChoice Sugarfree Cracker targeting the Eastern and North-Eastern markets. It has roped in a regional brand ambassador for West Bengal, and come up with smaller value ₹10 packs (in place of the previous ₹13 packs). Low unit packs priced below ₹15 account for the majority of sales in the FMCG sector.

“For us, it is about providing the right value to the customer. This can be done through lower unit priced offerings, among other ways,” he told BusinessLine.

Subramanyam ruled out options like grammage reduction (where the price remains the same, but there is a reduction in weight) and freebies to shore up demand or consumption.

There will, however, be no major ad spend cuts. A report by Edelweiss Securities says that in Q1 FY20, Britannia strengthened its brand equity through focussed campaigns. Ad spend stood at ₹130 crore in the quarter, a 21 per cent jump over the ₹107 crore spent in Q1 FY19.

“There will be judicious price hikes” to the extent that “it does not pinch the consumer”, said Subramanyam. A round of price hikes is expected in Q3 FY20 across select brands and categories. Price hikes were initiated in Q1 primarily across the dairy segment.

This apart, the company is looking at cost optimisation like reduction in freight and carrying cost. Some of the other initiatives here could include closing down unproductive plants, including third party manufacturing units.

“We have to become efficient and for that tough calls have to be taken,” Subramanyam said.

The Edelweiss Securities report says Britannia had “taken a long position in certain commodities such as flour, which has helped in managing inventory.” It is also looking at a cost efficiency of ₹265 crore.

“With a focus on tightening belt in this phase of low growths, the company has accelerated the cost efficiency initiatives to maintain the shape of business,” it further added.

Published on August 22, 2019
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