Britannia Industries – Is It An Incredibly Healthy Company?

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Britannia Industries Overview 

Britannia Industries is one of the leading food companies in India having 100 years of legacy. With brands like Good Day, Tiger, Marie Gold, Milk Bikis, and NutriChoice which are manufactured by Britannia are the household names in India.

With the core emphasis on healthy, fresh and delicious food, Britannia was awarded as the ‘Most Trusted Brands’ by the Economic Times Brand Equity survey.

Along with this, it has also emerged as the most valuable and trusted brands in many surveys conducted by prestigious organisations like Millward Brown, IMRB, WPP Group, and Havas Media Group to name a few.

Britannia Industries takes pride in having stayed true to its credo, ‘Eat Healthy, Think Better’. It has removed over 8500 tonnes of Trans Fats from products. With this, the company became India’s first Zero Trans Fats Company. Over 50% of the company’s portfolio is enriched with essential micro-nutrients which nourish the body.

Britannia Industries believes that ‘Taste & Trust’ are its sobriquet and will constantly endeavour to make a Billion Indians reach out for a delightful and healthy Britannia product several times a day!

Even during the tough times, Britannia Industries has continued the good work. In order to ensure the availability of products, the company has found some innovative ways.

It has partnered with Dunzo to deliver products right to the customer’s footstep. Also, it has developed a WhatsApp based tool, so that customers could easily locate stores with Britannia Industries products.

The factories and warehouses promptly adapted to social distancing and hygiene norms. And, it has also found an innovative delivery solution to overcome the lockdown obstacle.

As a part of serving the community, Britannia Industries and the Wadia Group delivered 1.35 Cr + meals equivalents and 90 lakhs of packaged Biscuits, Cakes and Rusks were served to 19 states and 110 cities across India.

Geographical Spread

Britannia Industries has a presence in more than 60 countries across the globe. The company has a local manufacturing unit in UAE and Oman.

It is the number 2 biscuit player in UAE with a strong contention to leadership and has a similarly strong market position in the other GCC countries. Recently, the company has also started a greenfield manufacturing plant in Nepal.

Britannia Industries footprint spreads across North America, Europe, Africa and South-East Asia through exports and the company is investing in a state- of- the- art facility in Mundra SEZ, Gujarat, to service the exports markets.

Also, the company has scaled up its operations at the Ranjangaon Mega food park and now it has 5 biscuit lines, 2 cake lines, 1 croissant line and 1 snack line.

Britannia Industries believes in the principle of ‘One new market a year’. Based on this, the company plans to extend the local operations in Africa and South-East Asia in the coming years.

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Also, the company serves the ASIA PAC and the SAARC region. The environment in these geographies is very competitive with the presence of local and international players. Major challenges that an international business face are geopolitical conflicts, import duty barriers, exchange rate dynamics etc.

Britannia Industries – Shareholding Pattern

Britannia Industries Shareholding Pattern

Source: Company Website

Product Portfolio 

Britannia Industries’ product portfolio includes Biscuits, Bread, Cakes, Rusk, and dairy products including Cheese, Beverages, Milk and Yoghurt.

Britannia Industries products are available across the country in close to 5 million retail outlets and reach over 50% of Indian homes. The company’s dairy business contributes close to 5% of the revenue and Britannia dairy products directly reach 100,000 outlets.

Britannia Industries Product Portfolio

Britannia Industries Bread is the largest brand in the organized bread market with an annual turnover of over 1 lac tons in volume and Rs.450 crores in value.

The business operates with 13 factories and 4 franchisees selling close to 1 million loaves daily across more than 100 cities and towns of India.

Now let us look at the various brands in each of the above categories.

Britannia Industries Categories

 

Individual segments

1. Biscuits & Cakes

Britannia Industries is the largest food category in India and is practically a part of every household’s consumption basket.

It is one of the deeply penetrated categories, reaching up to 90% of the households. The per capita consumption of biscuits in India is comparatively low at 2kgs versus 10kgs in developed countries.

britannia industries biscuits

Source: India Mart

The low per capita consumption with high penetration gives a chance to increase consumption through good business strategies. The threat in this segment arises from the competitors who are investing significantly to encash this opportunity.

Cakes

It is an evolving segment with some breakthrough in the pricing, variants and format in the last few years. The growth of this segment has slowed down due to the overall economic condition and there has been a significant increase in the competitive activity.

2. Rusk

This is a traditional category where there is a reasonable level of unorganised players. It has not witnessed any significant changes.

The company can leverage this opportunity and bring in innovation. Necessary investment is technology and recipes is being made to capture the market share in this segment.

3. Bread

A staple food in many parts of the country. Consumer preference for healthy and premium products is providing opportunity in this category.

Britannia Industries Bread

Source: Pinterest

Major investments by competitors in infrastructure to produce high-quality products and higher media spends continue to pose challenges for the Company’s business.

4. Dairy Business

India is the largest producer of dairy products and currently contributes approx. 20% of global production. This segment is dominated by both organised and unorganised sector, but the share of the organised sector is rising in recent times.

Britannia Industries Dairy Products

Source: Millenium Post

Due to urbanisation, processed milk has witnessed a rising demand. This can be due to an increase in retail outlets and supermarkets beyond urban cities i.e. in tier 1 cities.

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Packaged milk will remain a key driver of the industry growth, also the value-added dairy products are expected to witness healthy growth.

Quality milk procurement and continuous infrastructure improvement including the cold storage chain is the primary growth challenge for the company.

To address these challenges, Britannia Industries has been continuously investing in farmer connect programs, scaling up milk procurement capabilities, ensuring consistency in quality of raw material and strengthening cold chain distribution.

Also Watch: The Success Story of Britannia Industries

Adjacent Business

1. Cream Wafers

Wafers is a 700 Cr category which is growing at a healthy pace. In this segment, Britannia Industries is the first branded payer to enter having a large national presence in this fragmented category.

The fragmented and unorganised nature of this segment offers a good opportunity for the company to expand in this category. The entry of new national players with differentiated products at competitive price points is expected to pose a significant challenge to growth.

2. Centre-filled Croissant

It is practically a new category in India. However, it’s an established category in many other developing countries.

Britannia Industries entered this segment which is in the nascent stage and has a huge potential which can shift the consumption habits of the youth.

3. Salted Snacks

This category is very large and highly competitive with more than 2000 players operating in it.

Migration for unorganised or local to branded products can drive growth for national players like Britannia Industries.

The company is adopting various business strategies to boost sales of each segment.

Some of them are localized strategies, continuous differentiation, scaling distribution channel, continuous upgrades through right products, packaging and insightful communication, bringing newness in categories through flavours, tastes and quality, expand to different geographies, and many other strategies.

Stock Market Performance

(comparison of closing price/index value on respective dates)

Britannia Industries Share Price

From the above chart, it can be concluded that the stock of Britannia Industries outperformed Nifty by a large extend. The index is ~8% down as compared to start of the year, whereas the stock of Britannia Industries is 22.95% up.

Financials

The consolidated revenue (including its subsidiary) of Britannia Industries grew at a rate of CAGR 6.39% from FY17 to FY20.

Also EPS has been growing at a healthy rate at CAGR of 12.16%.

Source: Value research

On a standalone basis, Britannia Industries did have significant debt and the debt to equity ratio was close to 0, but in the current year, the company has raised significant debt and the ratio stands at 28.2%.

Overall, the financials of the company in FY20, are better than the previous year which shows a positive sign. And the company is continuously adapting business strategies to boost sales and tapping the untapped market.

Risks

There are risks associated with the business of Britannia Industries due to the changes in the external factors and the segments in which the company operates.

Market risk is the risk associated with a change in Market prices –such as the foreign exchange rates and the interest rates which will affect the group’s income and the value of the holdings of financial instruments.

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The growth of the Britannia Industries portfolio is linked to overall economic growth. The primary risk to the business will be on account of adverse changes to the economy.

Further, the changes in consumer behaviour, buying patterns and working environment arising due to COVID-19 pandemic may pose some challenges for the businesses.

Conclusion

The current pandemic situation is not only tough for Britannia Industries, but also for other companies as well.

Being in the essential commodities business, Britannia Industries was able to restart the manufacturing units at 65% capacity by mid-April, as the lockdown began in March to contain the spread causing disruption to businesses.

Britannia Industries MD Varun Berry had a plan, the 80:20 rule. 20% of the brands like Marie Gold, Good Day and cream variants, Milk Bikis and Nutrichoice, which contribute 80% to the company’s revenue were put on the priority list.

Britannia Industries’ 80:20 formula gave an advantage as it streamlined productivity which gave more flexibility in manufacturing capacities, and also ensured efficiencies in factories and the distance travelled by the products.

The result, in the June quarter, Britannia Industries posted revenue of INR 3,384 Cr, a spike of 26% over a year ago. Operating profit surged to INR 669 crore, a jump of 91 percent and profit after tax (PAT) zoomed by 118 percent to INR 546 crore. This has got Britannia Industries ahead of the pack.

Also, during the lockdown, people started brushing up their cooking skills, started preparing easy to complex dishes and gourmet as well. Cheese became one of the ‘star’ ingredients.

Britannia Industries cheese was quick to grab this opportunity and started a digital campaign to tap the rising demand for cheese.

Britannia Industries cheese saw 300% of its business coming from e-commerce and has tie-ups with several subscription-based e-commerce platforms like Milk Basket and Supr Daily, which provide daily essentials delivery services across all major metros.

These were some of the strategies implemented by the company with changing market conditions. This helps the company to achieve its short term goals.

This also tells about how Britannia Industries is planning to go ahead in terms of sales, marketing and innovation. Britannia Industries’ focus is going to be, on staying agile and invest in making the most out of the behavioural shifts and macro consumer trends.

References

Britannia Industries Annual Report FY-20

Value Research

Business Insider|Money Control

This research report has been written by Unmesh Dahake for FinMedium Research Desk.

Read more Research Reports here.

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