Britannia Industries Ltd, India’s leading Food Company is set to replace Hindustan Petroleum Corporation Ltd, to enter into Nifty 50 after almost 14 years. The company was chosen after considering the other alternative which was Godrej Consumer Products Ltd. This replacement in the index shall be effective after the market hours of 29th March, 2019.
Britannia is a brand that has served Indian generations. The brand is 100 years old and has continued to be the market leader. It serves around 77 million households with its range of products in the Dairy & Bakery segment.
The Largest Bakery Brand of the country had modest beginning, in the pre independence era. The company was setup in the year 1892, wherein biscuits were manufactured in a small house around Central Kolkata area. Later, the entity was acquired by the Gupta Brothers, who in 1918 partnered with C.H. Holmes, and the company was named as the ‘Britannia Biscuit Company Ltd’. Biscuits earlier were considered an Elite product & its demand increased during the World War II period, thus giving huge boost to the sales of Britannia Industries.
After the company’s ownership changed hands, from Rajan Pillai securing the control in the late 1980s, to the Wadia’s & Groupe Danone’s equal partnership in 1993. The group’s major stake went to the Wadia’s in the year 2009 after Danone sold its entire stake to them.
The company has two operating segments, Bakery & Dairy. Whilst the bakery segment has been operational since the company’s inception; the dairy segment was introduced in the year 2002 as a Joint Venture between Britannia & Fonterra. At present, Britannia is handling its dairy business alone, while the company had announced plans to partner with some dairy company in order to improve the penetration of its dairy products. The company in order to improve its performance has exited some of its non-profitable dairy products and is focussing only on the value added products, so that dairy segment contributes to the profits of the business rather than dragging those.
The Biscuits segment contributes the major chunk of the revenue. The company’s Premium portfolio contributes around 80-85% of the total biscuits contribution and has shown better growth than the non-premium products. This particular focus of the company on Premium products is not only improving the product mix, but is also leading to the margin expansion.
The company’s sales have grown at a CAGR of ~14%, while its profits have swelled at a CAGR of 20% over the past 10 fiscals. Britannia’s 60% of value sales & 55% volume sales currently are manufactured in house, while the company is targeting around 70% value & 60% volume sales from in house manufacturing. Britannia has succeeded ‘Parle Agro’ as the market leader with 38% market share in the biscuits segment.
The company has improved its position by changing its outlook as the least innovating company to the regular innovator. It is the trust of the people in the company, which has made Britannia as the 4th most valued brand as per the Most Trusted Brands (MTB) 2019 survey commissioned by Brand Equity – The Economic Times.
In order to further improve its position the company launches new products & re launches some of its existing products in its bakery segment, which includes products like Biscuits, Cakes, Bread, Rusks, Croissants, Wafers etc. Apart from this, the company is developing new consumption occasions like out of home & on the go, which shall mark the entry of the company into newer food categories, develop the market & strongly position the brand amongst the youth. In order to mark its 100th Birthday, the company has announced new trademark & the launch of 50 new products mostly in the premium range in both Dairy & Bakery category.
The company with its huge scale has been able to develop a strong network of manufacturing facilities, food parks, dealers, distributors & final consumers. The company has 80 factories that serve both domestic & international customers, through 50,000 associates, 5 million retail outlets & 2000 employees. The company has presence in 70 countries worldwide which are met through exports from India, while the company has established its local presence in Middle East. Further, the penetration of Britannia in Nepal has led to company becoming market leader & company is now gearing for local operation in Nepal. The greenfield Nepal plant shall be operational by the 4th quarter of FY 2019. The company is committed to its vision of venturing into one export market every year.
The company has a blend of both modern & traditional distribution system. While the goods are distributed using the modern modes of transport in the urban & the metropolitan cities, the company uses traditional methods to distribute products in the rural areas. The company also boasts of using unusual delivery system that includes boats in the backwaters of Kerala, Bullock carts in order to reach the interiors of Madhya Pradesh, Camel carts in Rajasthan & Hand pulled carts in the other rural areas of the country. The company has identified Hindi speaking states of UP, MP, Rajasthan & Gujarat as under penetrated & having huge growth potential.
The company professes it to be a People centric firm, with Consumers & Employees at its focus. The company has served & satisfied all age groups from 6 year old child to an Octogenarian. This has been possible because of a strong team working as an Organization. Britannia’s 80% of the current senior leadership team is from within the company. The company puts cross functional teams into action with young managers at the fore front who are able to bring in freshness through innovation & creativity into the business.
The focussed marketing efforts on: Brand consolidation, Product launches, High impact association with Filmfare, IPL, Consumer promotions & Celebrity endorsement, Multi media campaigns has resulted in Britannia becoming the market leader in the Biscuits segment by surpassing Parle Agro & owning a market share of 38%.
Who made all this happen!!
The company has shown a tremendous improvement in its performance over the past decade. This is especially after the change in the leadership of the company i.e. the appointment of Varun Berry as the company’s Managing Director in the year 2014.
Varun Berry, a management trainee from Hindutan Lever, credited for Pepsico’s huge success in Gujarat. He is known for possessing a holistic 360 degree approach towards business, from looking at operational efficiencies and manufacturing to supply chain management.
The main tasks entrusted to Berry were to improve the operating margins which were in single digits (owing to huge fixed costs), and improvement in Dairy segment’s revenue performance. His first step was towards cost efficiencies by reducing wastages, reducing distance to the market, setting up new & large manufacturing facilities & value engineering.
Berry brought back the focus of the company towards the core business of biscuits, which contributed around 80% of the revenues of the business. The then new segment of food cereals was chopped off. Berry reduced the number of size variants in different categories, and chose to stick to 5 big brands which included Good Day, Marie, 50:50, NutriChoice & Tiger.
The company today has developed strong moats, which are difficult to beat by the competition. First, is the brand ‘Britannia’ & second are its low cost operations. With this the company has widened its reach in rural India, which at present stand at around 75% of the company’s urban reach. The company with its plethora of products in the food segment wants to become a ‘Total Food company’, for this the company is continuing its focus on premiumisation, expanding distribution in weaker states as well as rural markets, entering in newer categories & cost savings.
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Categories: Posts on Indian Industries