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Informist, Monday, Aug 5, 2024

 

By Avishek Rakshit

 

KOLKATA – India's largest biscuits company, Britannia Industries Ltd, is likely to raise prices of some of its products marginally in the coming days as raw material costs such as those of cocoa, flour, and sugar, are expected to increase by 4%, the company's vice-chairman and managing director, Varun Berry said today.

 

Speaking to investors in a teleconference after announcing the financial performance for the Apr-Jun on Friday, Berry said, "We might have to take a little bit of pricing (price hike), but it would not be like previous times. We need to see which are the brands and categories where we can take pricing if need be."

 

Berry said that costs of key raw materials such as milk, wheat, and others have already increased, but costs of other raw materials like palm oil, and laminates have come down, which had a balancing effect on the company during Apr-Jun.

 

During Apr-Jun, flour procurement cost for Britannia increased by 7%, sugar cost went up by 8%, and cocoa cost shot up by 34%. On the other hand, palm oil cost fell 7%, laminates procurement cost was down 4%, and cost of corrugated boxes increased marginally by 1%.

 

"There has been a trend of prices (of raw materials) going up marginally, but we have managed," Berry said. "The price rollbacks, whatever was required, have been done, and we are in a phase of consolidation now. Our volume growth is now close to double-digit," he said.

 

Berry, however, said that price hikes have a negative effect on the recovering demand, especially in rural markets, as consumers have been buying products which offer the cheapest price in the same product category.

 

Britannia's decision to hike prices in the coming days is despite its focus on increasing market share by focusing on increasing revenue with higher sales volumes. Usually, unilateral price hikes result in market share loss if competitors refrain from increasing prices. Berry, however, said that the company will not sacrifice its margins to drive revenue growth.

 

Against the usual trend of posting a 19% operating margin, Britannia reported the metric at 18% for the quarter ended June. "I will not mind if it (margins) stays at 16% even, but it is not that I am willing to sacrifice margins for topline growth," Berry said.

 

The official said that Britannia's market share gain in rural India has been more as compared to the urban centres during Apr-Jun, and the company is focussing on driving rural sales by increasing its distribution base. The company now has a direct presence across 2.8 mln outlets as of June. It has also increased its rural distributors by 7% year-on-year to 30,000 currently.

 

On Friday, Britannia reported a 10.5% year-on-year growth in its consolidated net profit for the June quarter at 5.1 bln rupees. Higher volumes also led the consolidated total revenue from operations to increase by nearly 6% at 42.5 bln rupees.

 

Its net profit, however, fell short of the Street's expectation of 5.3 bln rupees, although the revenue was slightly ahead of the consensus estimates of 42 bln rupees.

 

At 1220 IST, shares of Britannia Industries traded 0.5% higher at 5,750.45 rupees on the National Stock Exchange. End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

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