Amid definite signs of a chill in rural sales, FMCG major Britannia Industries has been ramping up its premium portfolio to be able to deal with the ongoing economic slowdown better. Lesser exposure to the sub- Rs 100 category has compensated for sluggish sales in tier 2 markets and beyond, improving profitability during the third quarter of the current financial year.
The maker of Good Day and Tiger biscuits has posted 32.9 per cent increase in consolidated net profit to Rs 402.73 crore for the quarter ended September 30, 2019. Net sales were up 5.88 per cent to Rs 3,022.91 crore during the quarter under review as against Rs 2,854.81 crore of the corresponding quarter previous fiscal.
“We continued to grow faster than the market with sequential revenue growth of 13 per cent,” Varun Berry, managing director, Britannia Industries, said.
On the cost front, the company witnessed moderate inflation in the prices of key raw materials for the bakery business, while there was an inordinate increase in milk prices that impacted the dairy business. “We accelerated the drive on cost efficiencies and leveraged fixed costs, which helped us improve the shape of our business and deliver high operating profits in the quarter,” he said, adding Britannia will continue to invest in category innovation during the phase of sluggish demand in the belief that the government’s recent measures will boost consumer demand. It also plans to scale up the salted snacks segment in the West and croissant business in East and South, said Berry.
Biscuits are India’s largest consumer product segment, with a worth of Rs 35,000 crore and growing 2.5 per cent in the April-June quarter. Biscuits costing more than Rs 100 per kg, the premium version, account for two-thirds of the market and grew 8 per cent. The rest of the market (less than Rs 100 per kg) fell 9 per cent. Analysts say urban growth is still robust. “Such a situation, in fact, is a good opportunity for premium players like Britannia and ITC to fortify their presence in the biscuits category,” said JM Financial’s Richard Lu and Vicky Punjabi.
ITC continued to upgrade its premium products with its ‘Dark Fantasy Choco Fills’. Parle also kept up with the launch of premium range biscuits as premium is doing really well and is untouched by the slowdown, said Mayank Shah, senior category head, Parle Products.