Biscuit-maker Britannia Industries has postponed new launches by 3-4 months, hit hard by the prolonged consumption slowdown in the country. Products such as croissants and salty snacks, which are in the trial phase, will be rolled out later in the year as the maker of Good Day and Tiger biscuits awaits revival in consumer demand.
“In croissants, we are looking for a pan-India launch only in the next three-four months and salted snacks in the next six months only after taking the products to absolute finality. So far, we haven’t moved beyond that (test market) because in times like these (when the economy is slowing down) it isn’t a good idea to take these projects nationally,” Varun Berry, MD, Britannia Industries told analysts during an investor call.
The company said it is “trying to fine tune the flavours of the croissants (which are on a pilot currently in markets such as West Bengal and Tamil Nadu) completely.” “We’ve also prioritised some of the future innovation projects because in times like this when (the) economy is a little slow, consumers tend to go back to their favourite brands, that gives them more comfort, and are not as experimentative as they would be in good times,” Berry said. Besides, the company might also take price hikes in a section of portfolio, which has not seen price hikes over the past 24 months to fight against the raw material inflation, he added.
In the third quarter of the current fiscal, the company clocked three per cent volume growth on a base of seven per cent, making it the softest two-year average volume growth in 21 quarters. However, cost optimisation efforts along with flattish ad spends led to 94 bps year-on-year EBITDA margin expansion and Britannia reporting its highest-ever EBITDA margin for a quarter.
The company’s operating profit or EBITDA margin expanded to 16.8 per cent from 15.9 per cent last year. Britannia, which also makes dairy and bakery products, took a hit also due to a significant upsurge in milk prices impacting profitability. “On the cost front, we witnessed moderate inflation in the prices of key raw materials for the bakery business. There was a significant increase in milk prices which impacted our dairy business,” Berry had said.
The company chose to focus on strengthening the building blocks of the business rather than pushing sales in the face of a low off take scenario.
However, the management expects things to stabilise in the next two quarters and it would see uptick as far as growth is concerned. “We are hopeful that in this country, slowdown can only be short lived & our focused efforts on distribution and processes will help us get back on high growth trajectory and consistently enhance value for all our stakeholders,” Berry noted.
Hit due to upsurge in milk prices
Britannia, which also makes dairy and bakery products, took a hit also due to a significant upsurge in milk prices impacting profitability. On the cost front, it witnessed moderate inflation in the prices of key raw materials for the bakery business, said Berry
Clocked 3% volume growth in Q3
In third quarter of the current fiscal, the company clocked three per cent volume growth on a base of seven per cent, making it the softest two-year average volume growth in 21 quarters. Its operating profit or EBITDA margin expanded to 16.8 per cent from 15.9 per cent last year