Our strategy will remain nimble and dynamic to adapt to evolving consumer paradigms: Varun Berry

Abhishek Law Kolkata | Updated on October 31, 2020

Varun Berry, Managing Director, Britannia Industries Limited   -  Nishant Ratnakar

Britannia Industries MD says company should be at par or better than pre-Covid-19 levels in the next six to eight months

Britannia Industries reported a stellar set of numbers in the September quarter (Q2FY21) with consolidated sales increasing by over 12 per cent and net profit by 23 per cent. EBITDA increased 37.2 per cent YoY to ₹680 crore (EBITDA margins expanded 361 basis points), while gross margin expansion was by 176 basis points.

In an interview to BusinessLine, Varun Berry, Managing Director, Britannia Industries, talks about economic recovery, consumer trends, trade channels and inter corporate deposits (ICDs). Excerpts:

What is your take on the economic recovery and how is Britannia placed?

There are companies which were on the wrong side of the pandemic, and then there were others who found themselves on the right side. We, luckily, were on the right side of the pandemic.

In Q1 (June quarter) and Q2 (September quarter), Britannia witnessed volume growth across categories. The biggest part was identifying areas where the rebound would be faster. We expanded our reach in rural areas from 19,000 rural preferred dealers in March to 22,000. We will continue to add rural distributors to make sure that our coverage increases.

If you look at the economy, there was a contraction of nearly 24 per cent in GDP. From a growth standpoint, the time is right for the government to invest, to look at infrastructure projects, to look at the agenda of improving employment rates, and make sure the economy gets a kick start. The Centre is rolling out different stimulus measures, and these will take some time to play out; the impact should hopefully be seen over the next few quarters. So, by next fiscal, we can expect a revival in GDP growth.

Can you peg a growth outlook for FY21?

We are keeping a close watch on macro-economic factors, changes in labour laws and others, evolving consumer behaviour and attitude when it comes to preferred channels of purchase, SKU sizes and assortments, and product innovation. Our strategy will remain nimble and dynamic to adapt to evolving consumer paradigms.

In the current scenario, it’s tough to predict a growth number. Yes, growth will be coming back, and we should be at par or better than pre-Covid-19 levels in the next six to eight months, and the country’s economy and the industrial stability and output should be in tune with each other then. We are confident of performing well in these challenging times with agility, adaptability and passion.

Volume growth for the biscuit segment seems to be tapering off. Your comment.

As out-of-home consumption picks up in the coming quarters, volume growth will inevitably taper off. This is expected to happen. However, for us apart from biscuits, adjacencies businesses too delivered a healthy, profitable growth. Categories like rusk, cheese, crème wafers and some other segments are doing very well. We see great opportunities there.

Any post Unlocking trends that you notice?

Rural continues to be a strong growth driver for biscuits. We are seeing a consistent premiumisation of portfolio and factors like two straight years of good monsoons have worked well towards maintaining a high demand trajectory.

Urban markets continue to be relatively more hit by the pandemic; but are slowly picking up.

In terms of pack sizes, rural is still more LUP (low unit pack) dominant, while family packs or larger SKUs and premium offerings continue to be popular in urban centres. We are also democratising some of our premium offerings by making them available in small packs for lower-income consumers.

What about trade channels, have they normalised?

In the second quarter, we have also seen very good growth in the traditional trade (kiranas). This channel has always remained our dominant channel and a huge driver of competitive advantage. Within the traditional trade, we’ve been consistently growing our rural business, and today, the rural share of our business is at around 30-35 per cent. Again, the two good years of monsoons that we’ve had, have helped create a more positive consumption environment in rural areas.

Modern trade channels continued to be rather tepid this quarter and sales there are on a relatively slow track, single digits and very low. A part of that has to do with the fact that people are still hesitant in visiting crowded places like hypermarkets.

On the other hand, neighbourhood stores or general trade remains very robust and there is double-digit growth there. Mom-and-pop stores are also stocking up, which includes LUPs in smaller towns and family packs for larger ones.

Britannia continues to have an overhang of ICDs to the tune of ₹700 crore or so. Your comment.

There is no worry on that front. Repayments are happening on time with no default. As you know, these ICDs were made to group companies. Our exposure, through ICDs, remains fairly stable.

Published on October 31, 2020

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