Even as a slowdown in the Indian fast-moving consumer goods (FMCG) segment drives sales and profits down, Britannia Industries is eyeing rapid expansion in both domestic and overseas markets.
According to senior company officials, including chairman Nusli Wadia and managing director Varun Berry, a new plant in Bangladesh is likely to be the first step in this new phase of expansion and Britannia plans to expand into one new international market every year.
“We have already set up a plant in Nepal, and are seriously looking at Bangladesh and other South-East Asian countries. We are evaluating opportunities in Africa... and plan to step up our endeavour on the international side,” Wadia said at the Annual General Meeting (AGM) of the company on Friday.
Berry, speaking to reporters after the event, added that the manufacturing unit in Bangladesh will likely to start operations in the fourth quarter of 2019-20 fiscal. Brittania already exports to over 70 countries and it “will focus on setting foot in one new geography every year,” Berry said.
Expansion amidst slowdown
Britannia’s new foreign expansion plans have been announced alongside slowing sales in its primary market (India), especially in the northern states like Himachal Pradesh, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Madhya Pradesh and Chhattisgarh. However, the company has also increased its market share in all these states, and plans to set up new plants across the region.
According to Berry, the company is looking to enhance its presence in the eastern and north-eastern markets by expanding its manufacturing units and driving deeper penetration of its distribution networks in state like Arunachal Pradesh. Britannia is setting up a new facility in Bihar and is planning to set up a new facility in West Bengal or expand its older facility in Assam.
“We are setting up a second plant in Bihar, which should be commissioned in a year and a half... Next likely stop is Kharagpur, but it may take at least a year, if at all that location is final,” Berry said, adding that the proposed facility in the east will make biscuits and “adjacent categories” and likely need a capital expenditure of around Rs 150 crore.
Price hike planned
Rising raw material costs are also likely to see the company effect price hikes across certain select segments. “On average, there has been a 4 per cent general inflation in input cost... Milk prices have completely shot through the roof... We will undertake a 4-5 per cent hike across the portfolio this fiscal,” Berry said.
During the first quarter of the fiscal year, Britannia’s raw material costs rose over 7 per cent compared to the same quarter of the previous year. The company also reported a 3.64 per cent on-year decline in consolidated net profit during the quarter.