‘Impact of slowdown on FMCG demand may show up in Q4’

Despite high food-price inflation and an economic slowdown,Britannia's revenues have held up quite well so far this financial year....

Published: February 23, 2009 2:36:07 am

Despite high food-price inflation and an economic slowdown,Britannia’s revenues have held up quite well so far this financial year. But the impact of the slowdown could become more visible on FMCG demand in the Q4 of FY09 and thereafter,admits Vinita Bali,managing director,Britannia Industries,in an interview with S K Singh and Niti Kiran.

How is revenue growth likely to be in FY09?

In 2008-09,sales growth year-to-date till December is 24 per cent,compared to 17.5 per cent in 2007-08,28.4 per cent in 2006-07,and 13.5 per cent in 2005-06.

The first half of 2008 saw inflationary pressures due to high commodity prices. What strategies did you adopt to maintain your margins?

Our focus has been on improving productivity and eliminating cost disadvantages,besides cutting non-value adding activities to secure profitable growth. Through the various cost-reduction initiatives,the company has over the last three years eliminated Rs 120 crore in costs. In addition,we have made judicious price increases.

How is the economic slowdown impacting your business?

Britannia has sustained positive growth over the last two quarters with strong efforts at building consumption moments,and upgradation and innovation efforts behind our brands. It is important in today’s scenario to maintain a tight vigil on costs and simultaneously make vigorous efforts to stimulate demand. We have focused on cutting costs,improving our products,and making our advertising and promotions more effective.

It is possible that the economic scenario could have some impact on FMCG demand with a lag. This may become more visible in the current quarter and in the times to come.

However,the biggest challenge to the bakery industry over the last two years has been the unprecedented inflation in input prices of agricultural commodities which have raised costs by about 15-20 per cent this year itself. So far there is no significant change in these prices versus a few months ago.

The company has taken cost-effectiveness measures to minimise the impact of input-cost inflation. Our growth has come from a healthy mix of volume growth,prices increases,and improved product mix.

Which product segments and geographies will account for growth in future?

We see growth in all our businesses — biscuits,cakes,rusks and dairy. All our power brands are growing at double-digit rate in every region. Rural growth is,in fact,ahead of urban growth.

What percentage of revenue does the rural market account for? At what rate is rural revenue growing?

This varies by brand and ranges from 20 to 50 per cent. Rural growth rate is approximately 25 per cent.

What are your competitive strengths vis-à-vis multinational,national and local players?

Britannia is the market leader in bakery products. The company’s operations cover the entire value chain — from procurement to logistics,manufacturing,marketing,sales and distribution. Our competitive strengths include a deep understanding of the Indian consumer and an ability to translate that into delightful and healthy products,ongoing research for product innovation,state-of-the-art manufacturing facilities,a wide distribution network across the country,and impactful marketing.

Britannia was named by Time magazine in its August 2008 edition as one of eight global examples of creative capitalism,recognising the initiatives taken by the company in the area of nutrition. Presently,50 per cent of the biscuit portfolio is fortified with micro-nutrients. Britannia is the only manufacturer to have eliminated trans-fats from biscuits.

Could you elaborate on the distribution strengths of the company?

Britannia brands are available in approximately three million outlets in the country.

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