Re: {LONGTERMINVESTORS} Britannia Industries...Thread
RAJESH DESAI
See robust growth in urban and rural India: Britannia
Play Video Aug 25, 2011 at 01.44 PM (Source: CNBC-TV18)In an interview to CNBC-TV18, Vinita Bali, chief executive officer, Britannia said, she sees robust growth in urban and rural India. Fifty percent of Britannia’s sales come from rural India.
She further said, revenue management, cost management and innovation are the key catalysts to improve company’s performance in the future. “Compound annual growth rate (CAGR) for the last five years have been around 19-20%.”
Excerpts from Markets Midday on CNBC-TV18 Watch the full show » |
The commodity inflation, Bali said, is impacting costs significantly. “Inflation has gone up in palm oil and dairy products,” she added.
Also read: Buy Britannia Industries; target of Rs 515, says KRChoksey
Below is the edited transcript of her interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Also watch the accompanying videos.
Q: Since food inflation appears to have receded a bit, do you expect the pressures, which were there on your margins for the past several quarters, will begin to ease?
A: When you look at food inflation, there are two commodities, which have moderated a little bit, wheat and sugar. On the other hand, if you look at refined palm oil, dairy, milk and milk based products, dry fruits like cashew that we use a lot, there in fact inflation has gone up astronomically.
Has commodity inflation come down for us? It hasn’t really come down. But, in an overall sense, it is less significant than it was in the previous year. But having said that, it is still impacting our costs and cost pressure reasonably significantly.
Q: There is also a lot of unbranded competition that you face which also will be trimming your margins. What are your plans to compensate for this? Is there a plan to go up value added products?
A: Three catalysts are going to improve our performance in the future. First, the quality of revenue management. That has to do with our innovation funnel and the products that we are introducing in various segments of the market.
Second, cost management, there are a very large number of initiatives right across the value chain that look at costs, that look at non value adding costs. The whole output from this exercise is to structurally remove costs from our value chain. Third, which relates to the first and the second, is an innovation and differentiation to drive up the value chain.
We are in the process of introducing new product called ‘Vita Marie’ with oats and honey. It builds on the strong franchise that we have got for Marie. It provides to the consumer a very differentiating and rich taste and experience with health benefits.
If you look at our entire foray of ‘Nutri-Choice’, which started as thin arrowroot, we added five grain to it, high fiber, and most recently the diabetic friendly range of Nutri-Choice products. So, these are two examples within the bakery portfolio. Similarly, in dairy, we are introducing a badam (almond) milk under the ‘Tiger Zor’ brand name.
So, revenue management is really a function of how we are bringing innovation to some of our power brands. It is a function of the pricing strategy on these differentiated products and what we are doing to the core of our business in terms of separating it from what else is available in the market. So, these three planks, revenue management, cost management and a rich innovation funnel, are going to be the catalysts for improvement in our performance in the future.
Q: In FY11, you saw a fairly decent rise in your top-line by almost 25%. Would you be able to repeat that kind of percentage top-line performance in FY12 as well?
A: We ended last year with a top-line growth of about 24%. We closed the first quarter of this year with a 22 or 23% increase in top-line and a 30% increase on a standalone basis and a 39% increase in profit after tax (PAT) on a consolidated basis.
If you look at our performance in the last five years, our compound annual rate of growth has been about 19-20%. I don’t believe in giving any forward looking forecasts. Certainly, our intent is to continue with this trajectory of growth irrespective of what we are seeing around us, from the point of view of environmental factors and consumer demand.
Q: Your EBITDA growth percentage has been erratic. A brokerage has done an eight years average and that comes down to around an 11% compounded annual growth rate (CAGR). According to you, is that sustainable based on what exactly is happening on the rural prosperity front etc?
A: Our profitability is a function of the nature and characteristics of the core market we operate in, which is bakery. The second part of it really has to do with food inflation. Our challenge, which we are gearing ourselves to meet every year better and better, is going to be how we take this.
It is not just that the market is very competitive, I think it’s the nature of competition that we are talking about. How do we take that, how do we take the external environment with things like commodity inflation and really create for ourselves a stable and growing trajectory of our business. That is task no 1, it is mission critical and it is something that we as a management are addressing. I would love to talk about the results, once we declare the results.
Q: This year we have had a fairly decent spread of the monsoon. Rural prosperity is not in doubt, there is a sustainable amount of money that is being pumped into rural areas because of NREGS and whole lot of other projects. While this is hurting your input cost because of MSP, the point is that your market itself is growing. Do you see, therefore, a sustainable and a quantitative jump, a quantum growth in top-line for a company like yours?
A: The entire industry, in fact all packaged goods, saw a big impact of NREGA in its first year, a year and a half or two years ago. I think we will continue to see a good robust growth in urban and rural India. If you look at our numbers, we are growing equally in urban and rural India. Depending on the product we talk about, 50% of our sales come from rural India.
There is another very important and interesting insight and that is that the needs or aspirations or palette of rural India is very similar to that of urban India. So, our large brands whether it is a ‘50-50’ or ‘Good Day’ or ‘Tiger’, we see an equal traction in rural as well as in urban India.
I think overall the point that you are making is an important one. I am endorsing that whichever way you say, whether India's GDP is going to grow at 7-7.5 or 9%, I think for products like ours, given the pricing structure that the industry follows, we should continue to see a healthy growth.
Britannia Industries was up 0.68% to Rs 472.50 at 11:56 IST on BSE, after consolidated net profit surged 39% to Rs 39.30 crore on 21% rise in sales to Rs 1208.10 crore in Q1 June 2011 over Q1 June 2010.
The company announced the results on Saturday, 6 August 2011.
The stock hit a high of Rs 474.95 and a low of Rs 457.05 so far during the day. The stock had hit a record high of Rs 534.70 on 9 September 2010 and a 52-week low of Rs 324 on 10 May 2011.
The mid-cap stock had outperformed the market over the past one month till 5 August 2011, declining 3.33% compared with the Sensex's 7.68% fall. The scrip had also outperformed the market in past one quarter, rising 29.25% as against 4.97% decline in the Sensex.
The biscuits major has equity capital of Rs 23.89 crore. Face value per share is Rs 2.
Commenting on the results, Ms Vinita Bali, managing director, Britannia Industries said, "This is our 6th consecutive quarter of 20% growth across all business. We have also launched several new products like Vita Marie Honey Oats, Britannia Gourmet Cheese and Tiger Zor-Badam Milk etc".
Britannia said the company continues to focus on cost effectiveness, operational efficiencies and driving consumer off-take to generate profitable growth.
--On Mon, Jun 13, 2011 at 4:13 PM, RAJESH DESAI <stock...@gmail.com> wrote:
6.Britannia Industries
I am starting a new thread for each company I am tracking and shall post all updates in the respective threads. All members are requested to also post reports, views and updates in these threads.Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products, acts of God and their pricing, product demand and supply constraints.Nothing in this article/report is, or should be construed as an investment advice.
The operating environment for Britannia Industries Ltd in fiscal 2011 appears more favourable than it has been in the past few years. Volatile agricultural commodity prices had affected the company’s raw material costs, with the main inputs being wheat flour, sugar and edible oil. Its dairy business, too, has been affected by the sharp rise in milk input costs.
Milk prices continue to rise, which is a cause for concern, but the prices of other inputs such as wheat and sugar have stabilized. Higher farm output and the government’s policy measures have brought some relief. Edible oil prices did get a jolt in the second half of fiscal 2011 as global palm oil prices shot through the roof. These have fallen from those highs, but are still expensive. In fiscal 2012, plastic packaging costs are likely to play spoilsport due to the impact of higher crude oil prices.
The importance of commodity prices for a food company cannot be overstated. Britannia’s total material costs (including conversion costs) in fiscal 2011 were around 72% of consolidated revenue. Most consumer firms kept price increases in check, so as to not hurt demand. Britannia’s managing director Vinita Bali said in a recent interview that in fiscal 2011, volumes contributed around 15% to revenue growth, with the rest coming from changes in product mix and price increases.
In fiscal 2011, consolidated revenue had risen by around 22%, indicating that product mix and price increase contributed around 7%. Mix will increasingly play an important role in driving Britannia’s growth and insulating it from price-led competition.
The company has launched new products in biscuits to capture the growing trend for healthier snacks and to widen the appeal for biscuits—competing with chocolates, for example. That gives it better pricing power, compared with mass market products, due to the relatively lower competition in the new segments.
The company’s strategy is to occupy a larger shelf space in a consumer’s larder, to sell both impulse and steady consumption items—such as breakfast foods. That could enable it to break free from a low operating profit margin, which was only 5.4% in fiscal 2011, even after an improvement by 85 basis points over the previous year. One basis point is one-hundredth of a percentage point.
Every branded food firm wants a larger share of the total food basket, of which branded foods constitute only 9% at present. This is expected to increase due to growing disposable income, lifestyle changes and the growing penetration of modern retail.
While the opportunity is huge, the risk arises from growing competition as companies such as ITC Ltd and Kraft Foods eye the same market. Though Britannia has a formidable product portfolio, competition can put pressure on already slender margins.
What has worked in Britannia’s favour is its scale. Though its material costs grew ahead of sales growth, relatively lower increase in other expenses such as salaries, advertising and operating expenses led to margins improving. In fiscal 2012, if the firm can maintain sales growth around last year’s levels, and if the current trends in material costs last till the end, Britannia is set for a good year.
Investors are counting on that as Britannia’s stock has risen by around 36% in a month—as investors reacted to its results—and now trades at around 40 times its fiscal 2011 earnings per share. The past few quarters have seen profitability improve, which investors expect will further improve and have, hence, re-rated the stock. Even small increases in its operating margin can add significantly to profit growth.
Mint
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EQUITY BULL
EQUITY BULL
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EQUITY BULL
RAJESH DESAI
Strong topline growth driven by volumes & price hikes: Britannia Industries Net sales improved by 21.4% y-o-y to Rs1106.3 crores on account of healthy mix of volume (12-13%) & price growth (7-8%). Consolidated revenues increased by 21% y-o-y. The non biscuit segment with a size of 900 crores has shown robust growth & has more than doubled in last 5 years. KRChoksey expects Britannia’s revenue to grow at a healthy CAGR of 17% over FY11-13E on account of double digit volume growth, continuous innovations, increased penetration & judicious price hikes.
Margin expansion minimal despite price hikes: Britannia’s EBITDA grew by 23.8% y-o-y to Rs50.6 crores. The company took price hikes of 6-8%; however the significant increase in raw material costs curtailed the gross margin expansion to 11 bps y-o-y. Out of its key raw materials, wheat & Sugar have remained stable in Q1 but SMP, refined palm oil & Cashew have increased significantly by 24%, 35% & 74% respectively.
Net Profit improved by 27.3% y-o-y to Rs41.8 crores on account of strong operational performance & 31% y-o-y increase in other income (includes profit on sale of property).
Valuations & Views:
Britannia industries continues to report healthy topline growth driven by product mix, healthy volumes & judicious price hike. With improvement in product mix (led by innovations & decrease in proportion of Glucose in the overall biscuit segment), stepping up of cost cutting initiatives across the value chain, leveraging the synergies across segments & judicious price hikes KRChoksey expects margins to improve going forward. They expect Britannia’s Revenue & EPS to grow at healthy CAGR of 17% and 39% respectively over FY11-13E. At CMP of Rs476, the stock is trading at 26 times FY12E EPS of Rs 18.3 & 20.3 times FY13E EPS of Rs23.4. KRChoksey recommends a HOLD on the stock with a target of Rs515, based on 22 times FY13E EPS of Rs23.4, giving an upside potential of 8%.
EQUITY BULL
RAJESH DESAI
Britannia's 3-point strategy to tackle inflation
Vinita Bali, managing director of the USD 1 billion baker, Britannia Limited is Forbes India Business Woman of the year and one of India’s most respected executives. However, in her own words, corporate India should consider themselves lucky that she chose Mumbai over Delhi to do her post graduation studies, because she may have become more of a communist otherwise!
Bali’s passion is marketing healthy, but tasty, food to a large group of people. “We have got some wonderful products which are highly fortified and indulgent brands like Pure Magic. So everything is what is relevant for consumers,” she said."
Below is an edited transcript of her interview to CNBC-TV18's Senthil Chengalvarayan. Also watch the accompanying videos.
Q: Can companies like Pepsi and the three companies that you have been associated with, Britannia, Coke and Cadbury before that, ever be profitable selling healthy stuff?
A: I think I am passionate about delighting consumers and I am passionate about delighting consumers with wide array of choices. I think we have to look at it from an ordinary perspective. All of us want to indulge at times, we want to eat healthy at other times, we want to binge at other times and I think companies like ours make that wide array of choices possible for consumers.
We have looked at adding what is good in our products and removing what is not good, for example transfat; removing that doesn’t do anything to the taste. I think the idea came from going back to what was the slogan for Britannia - Swasth Khao Tan Man Jagao. The moment you start saying that it is a defining statement of who we are and what we do, then it stand to reason to remove what is not good and add what is good.
At the same time, we also believe that we are a food company and we would like to cater to a large diversity of food requirements and choices that people have. So we have got some wonderful products which are highly fortified and we have got indulgent brands like Pure Magic and so on. Everything is what is relevant for consumers.
Q: So you are saying that when you removed transfats, your biscuits got no less tasty?
A: Absolutely not. In fact, one of the things I pride ourselves on is that we know how to make food taste good, whether it’s a biscuit, cheese, bread or cake. Our products development people had to work a lot to ensure this.
For example, when you add iron to a biscuit, it has a metallic taste. The big challenge for all of us was how to enrich a biscuit with iron and yet mask the taste of iron. Frankly that is one of the reasons why there is a greater consumption of biscuits fortified with iron than there is for an iron tablet.
Q: So how do you fortify and enrich a biscuit with iron, mask the taste and yet sell it at a price point which is attractive enough to attract customers in a very price inelastic market?
A: It’s a challenge, it’s a big challenge, but at the same time we must remember that the beauty of working in a country like India is that there are enough consumers at every price point, from the lowest to the highest. The important thing is that the base biscuit that anybody starts with has to be at a price point that people can afford. It has to be accessible and therefore available wherever people are. So that is in a way the entry point.
But there is another very interesting thing that is happening at that price point. Several years ago, if you wanted to consume a biscuit for Rs 5, the only thing that was available was a Glucose biscuit. Today, I can buy cream biscuit for Rs 5, I can buy cookies for Rs 5 and I can buy the plain Glucose biscuit for Rs 5. So I think as consumer tastes have diversified and the challenge for companies like ours has been to create competitiveness from a cost point of view that enables us to deliver that taste proposition at a very affordable price and to diversify our product impact portfolio which is what we have done with something like Nutri Choice.
Q: Is the fortified Tiger any more expensive than the normal Tiger Glucose biscuit?
A: No.
Q: But do you think the consumer will be willing to pay a little more for a product that’s better for him?
A: Consumers in India are very smart when it comes to value. When I am buying that biscuit, my preference changes once I know it’s fortified. But at Rs 2 price point, I think it’s very critical for us to give today's consumers something that they can cherish, something that they can enjoy and something which is actually very good value for them.
When you look at a biscuit, the ingredients that go into making a biscuit are wheat flour, dairy products, sugar etc. So a biscuit gives you energy. In fact when you look at the penetration of biscuits as a category in urban as well as rural India, the penetration is almost 85% of all households in India. The reason for that is that it’s great tasting, it’s hygienic, it gives energy and if it is enriched with micronutrients, it doesn’t get better than that.
Q: Since you mentioned the various ingredients that go with it, I just can't help but ask you, how badly has the increase in the price of ingredients affected you?
A: Very significantly. If you look at the profit pool of the industry, it has industry has actually declined. Take dairy and dairy products - milk this year alone has increased by 26%. I remember about six years ago when I joined this company, we used to buy wheat at a price of about Rs 7.80 per kilogram. That same wheat is in excess of Rs 16 now. Sugar which used to be about Rs 8-9 is about Rs 30. So as an industry we have had to absorb a significant inflation and yet continue to generate more and more delightful as well as healthy products and it hasn’t been easy.
Q: But how you have done that because you haven't really increased prices two and threefold?
A: Prices have not gone up two and threefold and prices certainly have not gone up enough to cover the inflation. So from our point of view, there are really three things that we focused on. The first is how we manage our revenue, which is really a question of mix. This is why you see a lot more of a diverse set of products emanating from Britannia, which is sort of our innovation pipeline.
So it's about revenue management, about innovation that is capable of adding new consumption occasions and therefore new value, and the third is cost management. We don't have an option, we have got to do all three to be in business and to be in business profitably.
Q: You’ll sold biscuits for a very, very long time and then diversified into dairy products. But it's taken you extremely long by industry standards to come out with snacks. What kept you out of the snack market for so long?
A: Actually I don't agree, and I will tell you why. We are the largest snacking company in India. You define a snack as anything I consume in between main meals, and biscuits are the most often consumed snack in the country. So we have been there and we have been very dominant in that segment.
Q: Let me say savoury snacks.
A: So what you are really talking about is savoury snacks. I think it's a very conventional way of looking at what people are buying and consuming. A biscuit is not a snack, but something savoury is a snack. In India, a samosa is a snack, bhel puri is a snack and pani puri is a snack. So we have got a large snacking basket.
But even within this, you have got sweet biscuits and you have got savoury biscuits. Yes, we have just come up with a whole range of products under the NutriChoice brand name, because it's important for us to deliver something which is differentiated, something which is not just a copycat of something that exists. Also, we want to do it in a manner where we have the competency to do it better than anybody else.
So it's not about chasing every product category, it is about finding the right category that fits in with our competence, with our ability to be able to differentiate and creating a business proposition out of that.
Q: How different is Indian consumer today from the first time you sold him or her Rasna — your first job?
A: India is different today, so therefore the Indian consumer is different today. India is made of people who are far more confident, who seek variety and have the wherewithal and the disposable income, relatively speaking, to be able to indulge themselves.
But some things haven’t changed. The consumer is still very driven by value. The consumer is still very driven by price and price points but the consumer is more experimental. The consumer has seen a lot of influences — a lot of factors both from within and outside the country that has tended to influence.
This whole emphasis on health and wellness, even as we seek indulgence, is something which is there to stay. So in many ways the consumers are more confident, they continue to look for choice, they continue to be driven by value. They are far more experimental, they have got more disposable income to experiment with. The biggest thing is in those days we use to think that urban consumers have taste preferences, which are different from rural consumers. That’s absolutely not true.
As people we like more or less the same things, it was a question of access, availability. Look at the way media has exploded. When I was a brand manager life was very simple. You planned Doordarshan and some regional channels, you did two promotions in a year and you did pretty well.
Q: Was the decision to move out of traditional biscuits also driven by the fact, as you said, it’s a market that has already penetrated 85% of Indian households. Was that one of the driving factors of Britannia, even earlier on looking at dairy products or looking at various other products?
A: If you think of yourself as a company that has poised to cater to the food requirements of transforming or an evolving India, then you got to ask yourself the question that within the food pyramid what are the things that you can do? And the food pyramid is you can have cereal and cereal-based products and we were already in there with our range of bakery products.
Then you got milk and milk based products and that’s the next, that’s the second largest market and that was the decision to enter dairy. But we have significantly strengthened our position in dairy and then you have got things like fruit and vegetables and so on. We are catering to an opportunity in the market. As I keep saying, it’s no longer about segmenting the consumers, it’s about segmenting the opportunity.
Q: When you are segmenting the opportunity, are the distribution channels again different from each of them?
A: A lot are similar but some are different. Even in the bakery, for example, we sell bread, which has a shelf life of three-five days and then we sell biscuits which have four-six months shelf life. How you go to market with bread is very different. Unless our bread is available in the outlets at 6:30 in the morning for you to be able to get your fresh loaf of breakfast, we miss out on the sell for the day.
Similarly dahi (curd) has a short shelf life and therefore the way you actually distribute dahi is very different. So even within the same category depending on the kind of product you have, you’ve got to configure different routes to market.
Q: You are very passionate about making your biscuits healthier today. But do you’re friends rib you about the fact that you worked for three companies that sell — I will call it sin in a playful way — but that sell a sinful temptation.
A: No, that’s okay. Many people call it many things. The fact is that in each of those companies there is a diverse range of products, some of which are more healthy some are less healthy. I think eventually, the way I look at it, whatever business you are doing you have got to do it with a sense of responsibility and commitment.
We have to recognise that as people, we enjoy things, which are indulgent. We enjoy things that are good for health and that is the way it must be. If you look at life comprehensively, there is joy, energy, sharing, caring, health, sinful indulgence and all of that make life rich and energizing.
Products, like the ones that I have been associated with or even others, add to that joy of life. I think anything that you do in excess is not good.
Q: Are you a reluctant manager? Let me tell you why I ask you this. You’d said that you did contemplate during the JNU, which was a completely another track. Even while in Cadbury you have got a scholarship to the University of Michigan and you did contemplate a carrier in academics. That is after a fairly long stint in the corporate world. So are you a reluctant manager and do you look around restlessly to do other things?
A: I wouldn’t be calling myself a reluctant manager. I think when you are sort of average on many things then there are many choices that open up.
Q: But you clearly weren’t average.
A: I didn’t have one of those hugely talented things that I was going to be destined to be a painter or destined to be musician. But I am a manager who loves art. I think people have a lot to learn from art.
I enjoy both the right brain activities as well as the left brain activities. For me, if I were to look at it a little bit differently, whether it’s business or academics or the foreign service, I think any environment that stimulates you, any environment that challenges you, any environment that calls upon you to make it better than the way you found it, for me personally, is stimulating.
Q: So would you say a career in policy would have been more stimulating then?
A: Who knows? A career in policy could be still waiting for me.
Britannia sacks 42 execs in one day
FMCG Major Cites Poor Performance For Easing Out Senior Staffers
Samidha Sharma & Namrata Singh TNN
Mumbai: Biscuit maker Britannia Industries pink slipped 42 executives in a single day signaling that FMCG companies, faced with soaring costs and hyper-competition, were cracking the whip on under performers.
The development took place last week and came quite abruptly, said some of the employees who have been laid off. Britannia said it sharpened performance parameters for the staff this year differentiating them into “great, good and gone” and rewarded the top performers with bonuses as high as 150%, something not very common in the industry. Sources said Britannia decided to let go executives who had underperformed in two out of the last three years.
All 42 employees, including some managerial staff, who have been asked to leave will be given their salaries for the next two months, but have been asked to go on leave immediately. These employees were from the manufacturing, sales, packaging and quality control teams, said a person aware of the development.
While the percentage of employees who have been asked to leave is about 3% of the company's total strength of around 1,400, the haste with which the move was executed shocked many staffers. But the company said the affected employees were put on notice for some months now.
“This is part of the ongoing performance management process, which differentiates the great, good and under-performers and has nothing to do with any other factor. Each year, under-performers (usually 20 to 30) are put on a performance improvement plan and progress is consistently and carefully monitored. In those cases, where the level of performance continues to be below the acceptable benchmark and there is no noticeable improvement, employees are transitioned. There is no surprise for the employee as it is discussed in advance as part of the performance review and happens every year,” said the company spokesperson in an emailed statement.
Some of the sacked employees said the development came as a surprise. “A senior management team accompanied by the Human Resource team had come down to Kolkata and asked us to put in our resignations. They simply said that this decision was taken in light of our performance,” said an employee from the company’s Kolkata unit, who did not want to be named. This employee has been with the foods major for over two decades and was given a salary hike last year.
“I didn’t get a salary hike in 2009 and 2011. The HR asked me to resign last week saying that my performance was not up to the mark. The management has asked officers who haven’t got two salary hikes in the last 3 years to resign for under performance,” said a production officer, who did not want to be named. A retired Britannia employee, on conditions of anonymity, added: “This is very unlike the way Britannia functions.”
Industry experts believe that companies like Britannia are bound to get tougher on performance expectation from employees with increasing competition in the marketplace. Britannia has been facing stiff competition from ITC, Kraft and Parle and also some regional players. The Rs 4,600-crore Britannia, which has 250 managers, has been growing at strong double digits every year for the last four-five years. It has consistently stepped up brand investments as well to support and maintain its market shares.
Most companies in the FMCG space, including Hindustan Unilever (HUL) follow a performance appraisal system where employees are segmented into different levels of delivered performance every year. Those who fall in the lowest bracket are usually mentored for a certain period of time to upgrade their performance. The level of strictness observed in weeding out the bottom 1-2% employees may vary from company to company. However, no FMCG company has yet admitted to following a policy of laying off under-performers. Some companies like Procter & Gamble India (P&G) have in the past followed good practices of “outplacing” surplus employees based on their interests.
On the flip side, however, there is also a war for talent in the FMCG industry which has an annual attrition rate of 18-20%. Companies like HUL, P&G and Godrej Consumer Products, which try to maintain a pipeline at ever managerial level, are constantly on a recruitment drive.
AXE FALLS
• Britannia has categorized performance as “great, good and gone” this year
• It has rewarded the top performers with bonuses as high as 150%
• Sources said Britannia decided to let go executives who had underperformed in two out of the last three years ( Wi t h i n p u t s f r o m S h i l p a P h a d n i s i n B a n g a l o r e )--
On Sat, Nov 19, 2011 at 3:29 PM, RAJESH DESAI <stock...@gmail.com> wrote:Britannia to focus on existing categories
After foraying into segments such as snacks, beverages and ready-to-cook, Bangalore-based Britannia Industries believes it’s time to nurture these products.
According to Anuradha Narasimhan, category director, health & wellness, the focus of the firm will be on growing its presence in these segments, rather expanding into new areas. “The priority for us will be to consolidate in the segments we are in,” she said.
At a time, when competition in packaged foods is growing, analysts say Britannia’s move to focus on existing categories is aimed at avoiding the pitfalls of rapid diversification. In recent years, the Rs 4,605-crore company has concentrated on delivering good-for-you products in innovative formats. Health & wellness, said Narasimhan, was a key part of the firm’s growth strategy. “We are clear we would like to play there,” she said.
From biscuits to beverages and snacks to allied products, Britannia had attempted to deliver all of these on a healthy platform, she said. Its recent launch of savouries, for instance, is a case in point. Narasimhan said what was missing in the company’s portfolio was a salty product. At the same time, the firm, whose key business remains biscuits, was conscious of the fact that this had to be delivered on a healthy format. “We came up with multi-grain roasties and chips, which are healthy snacking options,” she said.
Given the thrust on innovation, simply launching new products could be dangerous, say market experts. “You need time to nurture products already in your portfolio,” said a Mumbai-based fast moving consumer goods analyst.
The need to take a pause in new launches is also linked to another reason. Britannia, said Narasimhan, remained serious about driving health & wellness not only among kids, but also among adults. “Unlike the kids’ health category, which is fairly large at about Rs 15,000 crore, the adult health segment is half of that. But the growth rates that the latter show are much more than the kids’. Which is why we remain committed to this segment,” she said.
Britannia is using two brands, NutriChoice and Healthy Start, to target adult health. NutriChoice products include cookies for diabetics, digestive and five-grain biscuits, healthy cream crackers and snacks. Healthy Start, on the other hand, includes a range of ready-to-cook products, aimed at consumption during breakfast time.
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CA. Rajesh Desai
CA. Rajesh Desai
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CA. Rajesh Desai
RAJESH DESAI
PFA..Presentation--On Mon, Feb 27, 2012 at 5:29 PM, RAJESH DESAI <stock...@gmail.com> wrote:
pfa... Analysts meet update--On Mon, Feb 13, 2012 at 11:51 AM, RAJESH DESAI <stock...@gmail.com> wrote:
Britannia Industries Limited..Analyst Meet21-Feb-12
3.00 PM IST
Ball Room, Taj President, Mumbai 400001
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CA. Rajesh Desai
CA. Rajesh Desai
CA. Rajesh Desai
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CA. Rajesh Desai
RAJESH DESAI
CNBC-TV18 has learnt that bread to biscuits majorBritannia is going to unlock value from its Bangalore headquarters spread over 7-8 acres in the heart of the city. In an exclusive conversation with Sunanda Jayaseelan, Jeh Wadia, managing director of Bombay Realty which will be undertaking this development says that he is bullish on the potential of both commercial and residential development in South India. What is more is that he has indicated that the Bangalore JV may not be the only one.
It has been understood that Britannia and Bombay-headquartered Bombay Realty, which is the realty arm of the Wadia Group have formed a joint venture for the purpose of converting Britannia's Bangalore headquarters into a commercial and residential complex.
Speaking to CNBC-TV18, MD of Bombay Realty, Jeh Wadia says that the plan was to have, at Britannia's seven acres plus headquarters, which is in the heart of Bangalore City, a commercial space as well as residential including premium townhouses and slightly lower priced homes.
The formal announcement is scheduled to be made by the first quarter of next fiscal, closer to April-June 2012.
Jeh Wadia says that it is too early to reveal the financial details of this transaction as of now and that those are still being firmed up. Nonetheless, it is expected to definitely mean a huge cash flow for Britannia. Realty developers and analysts put the market value of this property of Britannia anything between Rs 8000 and Rs 10000 per square foot.
Meanwhile, Britannia is looking at alternative arrangement to locate its office. Even as that is one, it is also learnt that Bombay Realty is evaluating Britannia's Chennai property for a similar development. Britannia could not be reached out for comments on the story.
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CA. Rajesh Desai
RAJESH DESAI
Britannia eyes bigger mkt share in health food segment
With the market for health snacks and health food seeing healthy growth, bread to biscuit major, Britannia wants a share of the pie, reports CNBC-TV18's Farah Bookwala.
Everyone's going healthy these days. So why not snacks? Following the footsteps of Pepsi's Aliva launched in 2009 and Parle's Hippo in 2010, Britannia's newly-launched snacking entrant 'Snackuits' also comes with a baked, healthy tag, all aimed at gaining a bigger share of the Rs 7,000-10,000-crore snacking market.
With its popular 50:50 biscuits reaching a turnover of Rs 480 crore, Britannia hopes for similar gains from its comparatively-cheaper & smaller packs of Snackuits.
Neeraj Chandra, vice-president and chief operating officer, Britannia
says, one would be delighted to get shares anywhere in the single digit area as even that would be large.
Infact not just healthy snacks, Britannia also wants to chart out its own recipe in the health food products segment.
The company which forayed into the ready-to-eat breakfast market with its daily bread range has now forayed into the Rs 250-crore oats market. A comparatively late entry when compared to Mumbai-based Marico which launched Saffola Oats in 2010 and has already garnered a 12% market share.
But with the oats market estimated to grow at 30% there is room for more players and innovations in this market
Saugata Gupta, chief executive officer - consumer, Marico Mumbai, says the breakfast market is growing about 20-25% and already is an Rs 500 crore market.
Infact, Britannia's health and wellness portfolio comprises more than 50% of its entire product range and sales portfolio and from its recent product launches the company clearly is hungry for more.
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CA. Rajesh Desai
RAJESH DESAI
In an exclusive interview to CNBC-TV18, Vinita Bali, CEO of Britannia , says that they expect consumer demand to grow around 11-13% in FY13 as compared to 16-18% the previous year.
“The uncertainty surrounding what is likely to happen, the food inflation that we have seen in our own country, all of these are factors that will influence demand as we move forward,” she said.
Below is an edited transcript of her interview with Latha Venkatesh and Gautam Broker. Also watch the accompanying video.
Q: What is the sense you are getting of consumption volumes? One could see a bit of a fall in volumes in several quarters in your own P&L. Is volume of consumption a problem?
A: We did not see a decline in the growth in the last year. In fact if you look at each quarter, we have talked about anywhere between 17% and 19% topline growth. If I were to look at total market and not just Britannia, we did see towards the end of the year a little bit of a slowdown in the rate of growth. But we are still talking about a double-digit growth, but perhaps not 16-18% growth for the market. I am talking about but an 11-12% growth, which is still reasonably high by any standards.
I think what happens to consumer demand across a large number of categories, which are low unit price, high velocity of consumption, is that it also depends on the price of other competing goods and services that those people buy. So for example, if vegetables and grains are becoming more expensive, then I cut down not in terms of eliminating them from my category of consumption, but perhaps the frequency of consumption of other items.
So a lot of very large consumer product segments are dependent on disposable income after meeting the needs of staples of your everyday eating and so on and so forth. But we do continue to see a double-digit growth. I think a lot of how consumers behave is also determined by what they hear in the media and elsewhere. I think the uncertainty surrounding what is likely to happen, the food inflation that we have seen in our own country, all of these are factors that will influence demand as we move forward.
Q: You mentioned 11-12% for the industry. What was the growth a year ago, and is this a slight decline from a year ago levels?
A: Yes, that is what I said. We began to see a decline in the rate of growth sometime around November of last year. So we are talking about 15-16% a year ago around the same time this year compared with an 11-13% because there are a large number of categories including the ones that we operate, which are not audited for example by Nielson and there I am going by our own experience or our estimates of what the market is likely to be.
Q: Even if the monsoon were to disappoint modestly, do you think food inflation will remain in check or could it spiral up once again?
A: I think we can’t sort of treat all commodities as a homogeneous mass. We have got to disaggregate those. So let’s take the big ones; wheat has actually been pretty stable despite an increase that was announced in the Minimum Support Price (MSP) of wheat. Wheat prices in the Mandi so far have actually been very stable. Sugar on the other hand has increased by about between 7-8%. Then you have got things like refined palm oil, which because of the dollar-rupee exchange rate saw inflation upwards of about 15%
Then there are a lot of other ingredients that get used in our industry, when I say our industry I am talking about biscuits, bakery, and confectionery and so on. Things like almonds, cashews, nuts, and coco and chocolate chips and so on where again there has been some inflation.
So I think it would be right to say that compared with past years we have seen some moderation especially when we talk about things like wheat flour. On the other hand, we have been negatively impacted by anything that is imported such as refined palm oil. So I think overall we are still talking about a rate of inflation, which is anywhere in input cost about 5-6%. But when you superimpose on that the inflation in fuel prices, that takes the total input cost of the industry to still be relatively high in the region of about 9-10%.
Q: Last quarter’s results shows that despite the gross margin improvement, we saw margins dip and that was because of very high ad spends. Is that owning to competition, do you see ad spends remaining at this elevated level, what sort of guidance you can give us?
A: Let me correct two things. Yes there was a 200 bps improvement in gross margin, but there was also 70-80 bps improvement in the operating margin. You are absolutely right, our investment in advertising was significantly higher than what it has been in the previous quarters and that is because we had a number of new launches that we were supporting. We came up with a new campaign for Good Day, we launched two-three different variants of Good Day as in Chocochips, Choconuts and Fresh Bake Cookies all under the Good Day franchise. We also had several other launches in our NutriChoice range and therefore the investment on advertising was there to support the new launches that we had.
One of the things that we believe in and I have said this many times is our business is brands and we invest in brands, both at the frontend by way of advertising and at the backend by way of infrastructure and capacity creation. In the last year itself we created two new Greenfield sites, we expanded our capacity in our existing units as well. So we saw levels of capital expenditure in our business go up to almost Rs 200 crore a year from an average of about Rs 70-80 crore in the previous four-five years. So our investment behind brands both at the frontend as well as the backend will continue.
We are here for the long haul, we believe in long brands, we believe in creating propositions that will support the power brands or the pillar brands that we have. So for example, NutriChoice today supports a large number of product categories. Tiger today supports not just a glucose biscuit but also cream biscuit, a cookie as well as our differentiated bakery products. So we will continue to invest in the growth of our brands and we will continue to support our brands as necessary.
Q: Do you still have leeway to raise prices and therefore for FY13 what might be the operating margins that we can expect you to deliver?
A: First of all, I have never given any forward looking guidance and I am not about to do that. All I can say is that we manage prices as a dynamic variable. Obviously it is a function of input costs, but also it is a function of the competitive environment. By that I don’t just mean prices of other biscuits because I think it’s a fallacy to think that biscuits compete with biscuits, actually biscuits compete with a whole host of other categories. Snacking in India is a very large segment, so whether you are in namkeen or snacks or biscuits, the competitive repertoire is actually quite large.
I think what we can say definitely is that we continue to manage prices as we continue to manage our cost and the three big priorities for the company remain unchanged and those are to improve the quality of revenue we deliver through our mix and so on, to continue with the innovations that we have got both in terms of products and packs, but also other business model innovations, which may not be obvious to a consumer, but which very much add to value that we are creating. Last, but not least is the value of cost management and cost reduction. We have had a pretty aggressive programme where we look at cost slight through the value chain, we look at costs that we can remove without in any way hurting the service levels or the delivery of our business and I think we have taken pretty aggressive cost effectiveness targets as part of our thing, which is the innovation and the business model itself to figure out a way of reducing total delivered cost to the consumer.
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CA. Rajesh Desai
RAJESH DESAI
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CA. Rajesh Desai
RAJESH DESAI
Britannia Industries rose after 0.33% equity changed hands in two bulk deals on the BSE today, 31 August 2012
A bulk deal of 1 lakh shares was struck on the Britannia Industries counter at Rs 494 per share at 11:37 IST on the BSE. Another bulk deal of 3 lakh shares was struck on the scrip at Rs 505 per share at 13:40 IST on the BSE. A total of 4 lakh shares changed hands at an average price of Rs 502.25 per share in two bulk deals struck on the Britannia Industries counter on the BSE today, 31 August 2012.
Britannia sues GSK’s Horlicks for copyright violations
Britannia Industries sued FMCG major GSK Consumer Healthcare – makers of the Horlicks brand, for trademark and copyright violations of its popular NutriChoice biscuits. In a suit filed in the Madras High Court, Britannia said GSK’s recently launched Horlicks Nutribic biscuit is a copy of its NutriChoice Oats biscuit. GSK on August 20, 2012 launched a new biscuit called ‘Horlicks Nutribic’ in Chennai, which according to Britannia is a slavish copy of its NutriChoice Oats biscuits. On noticing GSK products in shops in Chennai, Britannia immediately approached the Madras High Court, with a stay application restraining GSK from passing off its Horlicks Nutribic biscuits using the trade dress of NutriChoice Oats biscuits and also infringing its registered trademark NUTRIBIX.
Britannia argued before the Madras High Court that Horlicks Nutribic has adopted similar packaging style, colour scheme etc. to ride on the enormous reputation built by Britannia for its NutriChoice brand, over the past 13 years. In an interim order passed by the Madras High Court today, GSK, its directors, employees, agents, distributors and retailers have been restrained from manufacturing, selling and advertising Horlicks Nutribic brand of biscuits with the similar trade dress of Britannia’s NutriChoice Oats biscuits. Further, the Horlicks Company has been restrained from using the Nutribic trade name.
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Karishma Suvarna
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CA. Rajesh Desai
RAJESH DESAI
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CA. Rajesh Desai