Britannia Industries Limited (BRITANNIA) Q3 FY23 Earnings Concall Transcript

Britannia Industries Limited (NSE:BRITANNIA) Q3 FY23 Earnings Concall dated Feb. 02, 2023.

Corporate Participants:

Yash Vardhan Bagri — Finance Manager Daily and New Business

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

AMIT DOSHI — CHIEF MARKETING OFFICER

MANOJ BALGI — CHIEF PROCUREMENT OFFICER

Analysts:

Abneesh Roy — Nuvama — Analyst

Avi Mehta — Macquarie — Analyst

Jaykumar Doshi — Kotak — Analyst

Latika Chopra — JPMorgan Chase — Analyst

Percy Panthaki — IIFL — Analyst

Sheela Rathi — Morgan Stanley — Analyst

Vivek Maheshwari — Jefferies — Analyst

Kunal Vora — BNP — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Britannia Industries Limited Q3 FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there’ll be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Yash Vardhan Bagri. Thank you and over to you sir.

Yash Vardhan Bagri — Finance Manager Daily and New Business

Thanks Nirav. Hello, everyone this is Yash filling in for my colleague Mayank today. I welcome you all to the Britannia earnings call to discuss the financial results of quarter three 22-23. Joining us today on the earnings call are our Vice Chairman and Managing Director, Mr. Varun Berry; Executive Director and CEO, Mr. Rajneet Kohli; Executive Director and CFO, Mr. N. Venkatraman; Chief Sales Officer, Mr. Vipin Kataria; Chief Marketing Officer, Mr. Amit Doshi; Chief Procurement Officer, Mr. Manoj Balgi and Chief Development and Quality Officer, Mr. Sudhir Nema.

The analyst deck is uploaded in our website. Before I pass it on to Mr. Varun Berry, I would like to draw your attention to the safe harbor statement in the presentation. Over to you Mr. Varun Berry with remarks on the performance.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Good afternoon everyone. Very happy to be here with you. So without much ado, let me get to the presentation. If you get to page number three that will give you the three parameters of our business. Our year-on year growth is 16% on revenues. On operating profits we’ve grown 55% and we’ve continued to gain market-share through this quarter as well.

Moving to the next slide, which gives a look at what’s happening through the environment as far as inflation is concerned. The food inflation in India continues, albeit at a slightly lower level. Wheat is one-commodity which remains on the boil, so if you were to look at the first quadrant on the left that shows what’s happening to the Indian overall consumer food price inflation, which is showing at approximately 6% year-on year in Q3 of 2023. US dollar, obviously strengthening versus the Indian rupee.

You go to the third quadrant on the left, that shows wheat. So if you were to look at the red line, the red line shows the Chicago Board of Trade and how the wheat prices have said in the CBOT. Now, very clearly international prices have been dropping after Q1, we’ve seen a drop-in the wheat prices. However, in India, which is a fairly insulated market, the prices have been only going up and while we are very close to the season, we will know soon enough in the next few months how the crop is and how the commodity prices rule at that time.

But right now, it’s at a high as far as wheat is concerned. The IPO prices have softened both for the Bursa Malaysian derivatives exchange as well as the Indian market prices are almost parallel to each other and that’s helped us control inflation on our commodities to an extent. Going to the next slide that shows the inflation versus Q3 of 2021. Basically, what’s happened is that in the last two years, we’ve seen a very-high inflation and even on a year-to-date basis, we’ve seen an inflation of approximately 12%.

In this quarter because of RPO softening as well as us consuming cheaper wheat covers which we had bought in the beginning of the year during the season, it softened a bit internally for our consumption — from our consumption standpoint, but it still remains reasonably high the inflation for our commodity basket. Going to the next slide which is on our cost and profitability front. If you look at it, we have taken necessary pricing actions and these are actions to cover for all of the inflation in the first-half of the year.

We’ve stepped up our cost efficiency programs and they are looking extremely, extremely good and I will cover that in a few more slides. We’ve made — there have been some corrections in RPO, and we’ve been consuming wheat, which was at the right price and hence Q3 results have shown improved operating margin. However, as a result of that, we’ve seen operating margin improvement of 330 basis-points quarter-on-quarter. However, there are as market leaders, we always need to lead the price increases and we have done that and despite leading that we’ve been able to gain share.

However, there are pockets where we’ve seen a competitive reaction, so there will be some modifications that we’ll have to make from where we are at today and we will do so in the coming quarter. We obviously want to make sure that in every possible segment, we surge forward and gained share through all of the strategies that we deploy, which I’ll come to in a bit. So next slide, which is the strategic pillars, which we have been talking about for quite a few quarters now which drive our profitable growth distribution which is very-very key to our strategy and marketing of our key brands.

Heightened innovation — we’ve been then — after COVID we’ve been going pretty heavy on innovation launches, our adjacent businesses and I’ll come to that in a bit had been doing reasonably well I would say. Cost-efficiency programs I already spoke about, and I’ll speak about them in a little more as we go through the presentation. And finally sustainability. So let me go through these one-by-one. So, the first one is on driving efficiency in distribution, as you’ll see from this slide, we have now 28,000 rural distributors versus 26,000 in March of 2022.

And we have gained 1.5 times the share that we’ve gained on an all-India basis in rural, so that strategy of going heavy on rural has been working for us and as a result of that, while some companies have been announcing some kind of slowdown, we have not seen any slowdown in our rural revenues and our growth — volume growth in the rural areas. The second part of that slide is on direct reach. We have also been focusing on getting this after the COVID relapse, so to say, we’ve been focusing on getting wider direct reach and we’ve added 1.5 lakh outlets during this year.

So from 24.9 lakh outlets we’ve gone to 26.4 lakh outlets with our direct reach program. Moving to the next slide, which is about the marketing activities during the quarter. So, there are multiple marketing activities and some of you must-have seen them on air. So, we have some new creatives that we’ve got this quarter 50-50 was one of them. Some the others is listed on this slide also, some of the campaigns that we’ve run during this quarter. We’ve also won some industry awards, which are also there on this slide. Amit, would you like to comment on this?

AMIT DOSHI — CHIEF MARKETING OFFICER

Yeah, I think as Varun said, we’ve continued to make investments in our core brands, to drive — to ensure that we continue to drive penetration for these brands and each of them is top-of-mind in their respective categories. Now as Varun said, it’s also heartening to get the industry recognition because we believe that we want to do work that wins in the market and it’s always good to get peer recognition for both — so there is campaign India there and there’s Storyboard 18 there and three of our pieces. The first one being for Good Day than 50-50 and then NutriChoice were among the top 50 ads in the country and top 25 ads in the country, respectively.

For Milk Bikis Classic, we won Awards for Best Regional Marketing in Tamil Nadu at the EFFIE Awards they are the best when it comes to effectiveness. And one of our NutriChoice digital pieces was actually voted as the Viewers Choice Ads of 2022 by the Outlook magazine.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So while — sorry. I just wanted to go back to the previous slide not shift to it, but while advertising wins awards there are no awards for sales, but as we remiss not mentioning within Kataria and the sales team making some superlative efforts in getting the results that I was talking about on the previous slide. Okay, moving onto the next slide, which is about innovation. So we’ve had some very good launches Biscafe which is a very unique product has moved almost 5 times in terms of revenues since we launched it.

Similarly NutriChoice Seeds, Herbs and Protein which was launched in Q1 again has moved 4 times since launch. We also had focused scale up drives on 50-50 Golmaal model, which is a very interesting product, it wasn’t national till sometime ago. It was only East and even today, it remains predominantly East while we are trying to spread it across the country. A great product, it’s moved 2 times its revenues during this year. Milk Bikis Classic a very nostalgic and a great product, doing very well in its core territory of Tamil Nadu and Kerala.

In adjacent categories we’ve launched the Festive plum cake In East and South which is doing quite just before the festive season. We’ve also launched a new product in our snacking, which is called Tic Tac Toe snacking again has been — it’s in test market, but it these test markets we launched this product and it’s doing quite well. It’s actually yet to go into the West market, but it’s currently only in the south market and it’s doing quite well. We’ve also got a fresh portfolio, again, we are experimenting with fresh paneer, through our Fresh distribution channel.

I won’t say it’s a blockbuster but this is giving us great readings on what we should be doing with our Fresh channel as we go-forward. And on adjacent categories also we’ve had some focused scale-up drives Croissant which was launched across the country in Q2. It is growing very, very handsomely and doing quite well and the Marble Cake, which we also launched in Q2 has been scaled-up and is doing very well. Both of these products are at about 150% which is 2.5 times what they were during launch and 130%, which is 2.3 times versus when it launched.

So good progress on innovation as well as adjacency products. Now, moving onto the next slide, which is about I’ll joint-venture with Bel of France on cheese, So just to give you an update, you know that we have signed a strategic partnership to disrupt this very nascent, but fast growing cheese category in India. Obviously, we bring brands with trust and the distribution strength and Bel brings the product know-how as well as the technical expertise. We are looking at a differentiated portfolio of very, very innovative cheese products and these will be produced in our new state-of-the art facility at Ranjangaon, you guys are welcome to visit us and have a look at the facility, whenever you happen to be in that part of the country.

And you know that we hold a majority stake at 51% and Bel holds a 49% stake. Now, to give you an update on where we stand-on this so cheese lines, cheddar cheese lines will be commercialized in Q1 of 2023, 2024, so cheddar cheese has to be produced for that to be used the produce the various formats of processed cheese. So, the processed cheese line will take a little more time. They will be ready in the second-half of 2023, 2024 and on these processing lines we will produce slices cubes, blocks and spreads so that will be really in the second-half of the next financial year.

In the meantime, what are we doing in the meantime we are working on the joint branding, how the products and the packaging designs are going to look. We are working on the organization structure. We are training the personnel, we are finalizing our portfolio not just for immediate launch, but the portfolio as it will look in the next 2 years, 3 years, 5years. There will be some products which will be imported to start with, namely the rupees 10 sachets of cheese which Bel currently sells, which is imported from Bel, Vietnam that will continue to be imported, but will be booked through our distribution system and hence will be accessible to a lot more consumers as we put it into a lot more outlets across the country.

The second product, which will be imported will be the portions. These are the triangular portion, great products, which will continue to be imported from Vietnam. As you all know, there is a treaty that Vietnam and India has, so there are no import duties on products which are imported from Vietnam, so we will take advantage of that. What we’ve done for ourselves, we have set clear benchmarks on where these products have to reach in terms of revenues before we trigger line in Ranjangaon, so we are planning a line of the sachets as well as the portions in Ranjangaon, but the timing of that will be in the next year — in the next two years depending on how we scale-up these products in the market.

So, that is an update for you on our joint-venture. Hope that is detailed enough for you. Going to the next slide, which is the Ranjangaon factory commercialization, as far as the other dairy products are concerned. Now, just to give you the products that we are looking at, one is of course aseptic green tea which are the drinks, we are going to produce in PET bottles. Currently, we are selling our drinks in Tetra and we will be moving a part of the portfolio to green tea. Second is fresh dairy, which is dahi and other fresh innovative products which can be produced. So this fresh dairy line can produce Greek yogurts, it can produce drinking yogurts in a fresh format with a limited shelf-life of 21 days.

So, we will be looking at that as we start to commercialize the line. We have a line for powders, which can do dairy whitener for retail and also for captive conjunction within our bakery, which is SMP skimmed milk powder, SCM sweetened condensed milk and whey powder. So, as we speak I’ll come to where we are at on all of these lines. And the last is fat, which is ghee, so these are the other lines that we have in our dairy facility. Just to give you an update on where we stand. So, as far as milk collection is concerned for producing all of these products, we are currently collecting 70,000 liters per day of milk from 2,850 farmers. Our objective is to collect up to 150,000 liters per day from 4000 plus farmers, right. Currently we have 65 bulk milk collection centers, which are run by our partners in the rural areas around Ranjangaon. We are looking at scaling these BMCs as we call them to 125 at the year end.

We are providing extension services to all of our farmer partners which are being strengthened to make sure that we generally add value to all of our farmer partners. As far as the commercialization of the lines is concerned, the SMP, which is the skimmed milk powder and dairy whitener lines are already being — have been commercialized, they are already producing product and this product is being used internally by our bakery division to produce biscuits and other products right.

We’ve also started to produce sweetened condensed milk, which is also being used by our bakery division. We have also commercialized our PET line and we’ve launched milk shakes in PET, only in the South, currently they have gone into the market, only in the month of January, so you wouldn’t have seen them, but they are great products, looking really good, tasting awesome. Fresh dairy is also to be commissioned in the next couple of months before the end of this financial quarter so that’s where we are at. We are doing extensive training of operators in the dairy facility, the quality parameters are being very clearly set to very high standards and we are setting up all the systems to make sure that we run this facility to the highest standard possible.

Moving on to the next slide, we’ve made reasonable shifts in our adjacency business and these will definitely fuel the next phase of profitable growth for Britannia as we go through time. So, on bakery adjancies cake, we’ve had quite a few iterations as well as our base-cakes are doing well and we’ve registered healthy growth in this category. We have also improved profitability across cake, rusk as well as bread as far as this year is concerned. New businesses, croissant continues to gain traction. I’ve already spoken about the kind of growth that we have seen post the national launch. Yes, there are pockets where we doing better than the others, there is focus required in certain markets and we are making sure that we provide that as we go through the months with this new launch.

Our wafers, we’ve launched low-density wafers, cheese flavor etc and wafers overall continue to gain market-share, I wouldn’t say blockbuster, but the makings of a blockbuster for sure. As far as international is concerned, we’ve seen healthy profitable growth across key geographies, Nepal continues to do extremely well. If you remember, we’ve invested INR55 crores in Nepal and that’s given us very, very good return. Commercialization of our own operations in Kenya is happening as we speak and we will be scaling that business up as we go through the next financial year.

Moving on to the next slide, which is our cost efficiency programs. We’ve been driving ecosystem of efficiency. Now, if you were to look at it, the teams are the same. From a supply-chain standpoint, it’s all about process automations, distance to-market optimal power sources, renewable energy. From a material standpoint, it’s again the teams are exactly the same, our sourcing strategy, vendor development making sure that you get the right people into the right category, packaging initiatives, vendors cost optimization, etc, etc.

And on the others, we’ve got market returns, which we’ve made very-very good progress on. Commitment charges that we pay to our manufacturing partners, Fiscal incentives and there I would like to just talk about that in detail, I will come back to that and media effectiveness, there’s some very good work which is happening on media effectiveness as well. So on fiscal incentives we have made a lot of investments in production, in the R&D center, innovation aligns dairy, etc. Now, we have these lines have all been secured with incentives, which have been provided by the state and the central government’s and this has been giving us the payback for all of the money that we’ve been putting in manufacturing.

So, on one end we are getting all the efficiencies on the other end, we are getting the incentive. So, it’s working out quite well on our overall investments. Moving to the last slide from the business standpoint, so we are clearly on-track as far as ESG is concerned. We are on track for all the targets that we’ve committed to be it energy efficiency, plastic reduction, sustainable packaging working with communities around our plants, including improving the lives of farmers around Ranjangaon etc. So, we are making great progress there.

I will hand over to Manoj, Manoj is the architect of this — between Manoj and they have been driving this. So over to Manoj to take you through some of the details here. Manoj?

MANOJ BALGI — CHIEF PROCUREMENT OFFICER

Yeah, so we are working on four pillars. As far as the ESG agenda goes people, resources, growth and governance and we have taken targets which are good for the community and good for the business and if we were to go through the people quadrant where our focus is on targeting farmers, so Varun talked about 2,800 odd farmers that we collect milk directly from, we do a lot of CSR work in and around our factories, partnering with the Wadia Foundation and we have reached about 14,500 odd beneficiaries.

The work is more on sanitation and water management and hygiene around those communities and again on the nutrition side, we have reached more than 2 lakh beneficiaries till December 2022. In terms of resources, we have increased our share of renewable electricity source for our operations from 33% to 38%, the share of renewable energy is about 18% from 14% last year. 3% reduction in emission an additional 61,000 kilos of plastic has been discarded in this period till December. We are on-track for our EPR program, we have been plastic neutral last year and we will be plastic neutral this year and 72% of laminates — multilayer packaging that we source are now recyclable.

Our water consumption has been reduced by 33% through recycling and reuse. In terms of the commitment towards reducing the fat — sodium and sugar content, we are on-track about 2.5% of reduction in sugar versus 2018, 2019 when we started the program, and about 13% reduction in sodium. And in terms of governance, we are extending our sustainability program to 100 of our key suppliers. Assessment is on and we’ll co-op them into our ESG program. Thank you.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Okay, thank you,. Now moving to the financials so actually there is nothing much to say here. The results speak for themselves. So full-year 2022-2023 we’ve grown 16%, Q3 is also incidentally 16% for the year and if you look at the 24 month growth, it’s at 32%, so both very healthy, good growth that we’ve registered stood from a top-line revenue perspective.

Next slide is about operating profits have grown this year to 15.5%. This quarter is at 55%, 24 month growth is at 35% because last year Q3, there was a decline of 13%, but a very healthy 35% even on a 24 month basis, with our margins being at 18.5% of revenue. Now, getting to the next slide which gives the key financial ratios. So, net sales up 16%, operating profit up 55% profit before-tax is up 127%, but this includes INR376 crores of exceptional gain which is on account of the 49% stake sale pursuant to the joint-venture with Bel, on our cheese business. So this is an exceptional number.

And as a result of that profit-after-tax is at 151% standing at INR932 crores. Now, even the numbers below — the only one to really look at it profit from operations, which has gone up to high at 18.5%. The profit before-tax obviously is 28% and profit-after-tax at 23% in exceptional items option so I’m not going to belabor those numbers. So, those are the results. Over to you for questions, please.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama. Please go-ahead sir.

Abneesh Roy — Nuvama — Analyst

Yeah, thanks and congrats on good numbers. My first question is on the dairy business. So, in cheese, when I see currently that is obviously one or two mass end pricing from Amul and Mother Dairy kind of players and also there are some regional brands and Indian consumption also if you see is mostly of mass end cheese at low prices. So when you say that you want to disrupt the market and you have already discussed the sharp scale-up in the next 3 years, 5 years that’s coming because LUP strategy of INR10 and innovations like triangular or is it coming because you want to make India consume the other variants which say the developed countries consume?

The issue there is, most Indians will not be knowing those, we’ll have to have huge education for those. So, which is the one you are betting from a 3-year 5-year strategy in terms of LUP and aggressive pricing because of sourcing of milk or because of new variants coming to India?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So a bit of both Abneesh, see one, we want to scale-up the formats that we already exist in. Coming together with Britannia and Laughing Cow. I think the magic of brand will really play up, both very strong brand, that magic will definitely play up and obviously the technical know-how of Bel on how to create differentiated offerings which are much better than the market, which are obviously catered to the Indian taste, albeit at a premium to what the cooperatives are providing, I think that’s going to be one strategy.

And the second is the LUP at INR10 is a big one, if you think about it. It’s a habit, creating initiative, whenever a category has to go through a lot more consumers, you’ve got to have a carrier SKU, which gets to consumers across the country. And if you think about it, the pass-through — the QSRs have helped us create cheese is the tip of the iceberg as far as the Indian population is concerned, how do you create that same kind of average across-the-board and get to the bottom of the pyramid? And that is really the strategy which is the second strategy that we are betting. So — and obviously all these products and a lot more products, which can be — which we can sort of create as habit forming will be produced in the long-run in India — in the country. So that really is the strategy as far as cheese is concerned.

Abneesh Roy — Nuvama — Analyst

Thanks, that’s useful. I had a follow-up on dairy business, in paneer the new launch looked interesting. When I see the pricing your pricing is at INR110 versus INR80 to INR85 for Mother Dairy and Amul. Your pricing is much more closer to [Indecipherable] for example. So here, once your sourcing is in place, once your factories will be in-place your pricing then — will it converge more to the value players or here you would want to be in the [Indecipherable] kind of premium kind of a player.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

No, we are not looking at becoming the value players in any category. If we have a right to succeed these are all experiments Abneesh, we are looking at what we can do, how can we add value etc. If you can create a premium offering, which gives us revenues as well as profit we are in it. We don’t have a line for paneer for instance — it’s all third-party. Even in our Ranjangaon facility, we haven’t invested for a paneer line. So, these are experiments which are without real investment if they work out, then we have the milk, we have the factory we have everything else we can always put up a line and move forward with it. If it doesn’t work, and it’s still the bottom of the pyramid pricing, which is working, then we will move forward and walk away from initiatives and inventory.

Abneesh Roy — Nuvama — Analyst

Sure, my second and last question is on your biscuit market-share.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Third question Abneesh. Okay, go, we can’t say no.

Abneesh Roy — Nuvama — Analyst

Sure, thanks. In biscuits, your market-share improvement has been quite good so in inflationary times, the market-leader, number one player, the premium player always gains market-share in most FMCG. Now, we are obviously coming into deflation gradually, palm oil first, packaging second and wheat obviously India will see 112 million ton production which government forecasted last year, it did not go right, but if that happens and say milk also deflates the next year, how are you going to tackle the competition from regional players and maybe the second player against whom you’ve gained market-share, would you be worried on that front in a gradual manner? I know currently it is not relevant, I’m asking for a next two to four quarter perspective?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Well Abneesh, you’ve seen us in deflationary times as well. So, we’ve been through quite a few years of deflation and we managed that quite well. So we will deploy the same strategy as we go-forward and I’m hoping that we get to deflationary times. It doesn’t seem so right now, but I’m hoping that you’re right.

Abneesh Roy — Nuvama — Analyst

Sure, that’s all from my side. Thanks a lot.

Operator

Thank you. [Operator Instructions] Next question is from the line of Avi Mehta from Macquarie Group. Please go ahead.

Avi Mehta — Macquarie — Analyst

Hi, this is Avi, here from Macquarie. Sir I just wanted to understand the competitive intensity, a little better. So, over the last two quarters, not just two quarters actually even before that we’ve been able to drive very strong market-share gains despite taking and I remember the last few calls, you’ve been saying we have taken the industry-leading price hikes. Now, what should we read from a competitive intensity as of now? Is there a moderation or is there a change in behavior if you could help us understand that, please?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

See, we are working very clearly on our agenda, right. Our agenda has been guiding distribution, we know where our strengths are, we know where our weaknesses are. We have been working towards fulfilling our weaknesses. We’ve been heightening our strengths, so I think that’s been working really well for us. We’ve been nourishing our brands. We know again, where our strengths are, where our weaknesses within the brands.

We been heightening our strengths and we’ve been making sure that we fulfill some of the weaknesses. We know we have weaknesses right. The value portfolio is one weakness which we’ve not tried to fulfill. Within the premium portfolio, there are certain weaknesses that we are trying to fulfill and I think there is a lot to do within our system to make sure that we strengthen our geographical footprint, we’ve strengthened our brand portfolio, we’ve strengthened our innovation footprint to make sure that we continue to gain our march over competition.

It’s not about I’m going to cut prices or I’m going to give discounts or — this guy is bigger than me in this segment and hence how I can look at being — from a pricing standpoint or from a promotion standpoint hurt them or anything like that, no. It’s very internally to us, this strategy and it’s working very well for us and I think that’s what we’ll continue to do. Yes, we watch others, it’s not that we’re not watching what others are doing, we are learning from them. There are certain players within the biscuit competition, we’ve been doing quite well and we’ve learned from them. For example, Patanjali is doing very well in milk and our Milk Bikis was predominantly a Tamil Nadu brand.

So, we’ve now expanded Milk Bikis business across the country, we’ve come up with a very innovative positioning of Doodh Roti Ki Shakti using only atta to produce our product [Technical Issues] we move forward in certain geographies etc and that’s what we’ll continue to do as we move forward.

Avi Mehta — Macquarie — Analyst

Okay, sir. So I mean, would it be fair if I understood it correctly, it’s not got to do — I mean while the competition may not have probably put in the same investments we have done, it probably is not got to do with difference in growth rates between the value versus the base or mid or the premium end. There’s no other reason which is more specific from a category perspective that we should read. It is more about us doing the right things and probably the competition has not necessarily or may not have invested in those specific alternatives that’s the right way to look at it right sir?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Yes, that’s the right way to look at it. So, it’s about making sure that you stick with our strategy, you develop the right strategies within segments and you move forward.

Avi Mehta — Macquarie — Analyst

Okay, sir. Sir, the second bit was more of a bookkeeping and the build up to that. Would we be able to give us some sense on what are the one-off gains from these forward contracts which may not continue going-forward? And also a sense on where the ad spend intensity is versus the normalized pre COVID levels, just to get a sense on where margins can probably trend?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

No. So clearly let’s start with the advertising part, we have normalized our advertising spend this quarters. So we have gone back to the pre COVID levels. From one-off gains I have spoken about the one-off gain from the joint-venture. But besides that, we’ve been consuming covers of wheat which have been at a much lower-price so that is certainly going to go away right as we move to the next quarter, because you never cover wheat till the next seasons. Our wheat covers will now end and hence, we will start to consume wheat which will come from the market from this season. So that will be one change, there always are some changes that come through during the season and I think those are the two changes frankly, there are no other exceptional items.

Avi Mehta — Macquarie — Analyst

No, sir, I was trying to just understand the quantification, roughly how much would it have benefited margins because that would help us understand, so this quarter, we’ve almost on 18.5%, 19.5% kind of margin. As we go into the next year — how much should we kind of remove out of this? Is it 100 basis-points and that’s the level that we look at as a steady-state that’s broadly where I was trying to hit.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

No, so I had mentioned that as well. We, as market leaders, we have to take price increases before everyone else does and we did so. Now the inflation not being at the level that it was a few quarters ago there have been certain categories where competition has played a little bit of hardball. It’s not then a widespread phenomenon, but there will be a few segments — few SKUs, few brands, where we will have to address pricing back to the lower level. So, that will be a small number, it might not be a very large number, but that would be the only thing. Besides that I think we are pretty much in a good place.

Avi Mehta — Macquarie — Analyst

Sir, any guidance or any range you can help us understand because if we went to 19 in COVID, you said that was not the level we should assume and correctly so-far, but now we are again back to 19, so I’m just trying to appreciate what — would you be comfortable at [Indecipherable] over the last two quarters is a better range to look at because there are covers, but clearly those covers would continue. If there is anything you could..

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

I won’t think so, I would think so Q2 — between Q2 and Q3 would be the right range to look at.

Avi Mehta — Macquarie — Analyst

Okay, thank you very much, sir. That’s all from my side. Thank you very much sir.

Operator

Thank you. [Operator Instructions] Next question is from the line of Jaykumar Doshi from Kotak. Please go-ahead.

Jaykumar Doshi — Kotak — Analyst

Yeah, hi, thanks for the opportunity. About a year-ago, you had indicated that the potential for dairy business is about INR2000 crores. Do you still believe in that number or you think it can be higher based on the development for the past few quarters?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

I didn’t get that. Your voice is not very clear. Can you just repeat that question quickly.

Jaykumar Doshi — Kotak — Analyst

Sure, I’ll repeat. About a year-ago, you had indicated that the potential for dairy business is about INR2000 crores in the medium-term, you had not given any indicators sort of in terms of timeline, do you still believe that number is doable or do you think you can do better than INR2000 crores and is it possible at this point of time to give us some color in terms of how that portfolio can shape up in terms of revenues over the next three years?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

I would still stick with that number. We are in the process of launching our new products. Cheese is still not even in the market so let’s watch this space for a bit and we will come back to you with that. That’s what we have set for ourselves so we’ll stick with that.

Jaykumar Doshi — Kotak — Analyst

Understood. And current scale is about INR500 crores, INR600 crores, is that understanding correct?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Just over that.

Jaykumar Doshi — Kotak — Analyst

And one more follow-up around the same thing. I think prior to pandemic, industry was growing at a very low-single digit levels in terms of volume and you were able to grow faster based on new product launches and market-share gains. And couple of times, you had called out industry growth versus your — the gap between the growth driven by new products. Could you give us an indication in terms of what do you think that gap is and how whether that gap is widening, given that you’ve seen good success in new product launches and now dairy will scale up?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

No, as you can see from the market-share, we have been continuously gaining share. So the gap remains pretty much the same, but I must admit that around COVID times and beyond we’ve seen the market growth to be much faster than what we’d seen from 2013 to let’s say 2018, 2019. So, the market growth have certainly picked up and which is a great trend from a industry standpoint.

Jaykumar Doshi — Kotak — Analyst

Understood. Thank you so much. That’s it from my side.

Operator

Thank you. The next question is from the line of Latika Chopra from JPMorgan Chase. Please go-ahead.

Latika Chopra — JPMorgan Chase — Analyst

Yeah hi, thank you for the opportunity. Thank you Varun for your detailed comments on adjacencies, but what I’m looking for now is a little bit quantitative flavor. So, would be — it will helpful if you could share what is the salience of non biscuits portfolio in your business today. And if you could share a little flavor on what is the kind of annualized revenues today that you’re seeing for key segments like cakes, rusks, maybe croissants and wafers.

And if one looks at the growth algorithm over the next 5 years or three years for Britannia, what’s that salience or revenue size of these adjacencies, could be in your view?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So currently the biscuit and the non-biscuit portfolio are approximately 77% 23% which has gone up from what it used to be and if you think about it used to be almost 85% was about biscuits till about 7 8 years ago. And so, it’s been continuously — obviously the non biscuit portfolio has been growing faster. You also got to remember that biscuit is so large that for the other categories to become a substantial part and to contribute substantially to it, it requires a little bit of time and it’s taken time, but I think we are moving in the right direction.

Latika Chopra — JPMorgan Chase — Analyst

And in one of the interviews, you’ve said that probably this 33% probably becomes 35% over the next 5 years, is that how we should read?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Yes.

Latika Chopra — JPMorgan Chase — Analyst

And within this 23% today, could you tell us how much would be cakes and breads and rusks which at the more meaty parts of this portfolio?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So, cake and rusk would be almost 50% of this and the rest would be approximately 50% of the 23%.

Latika Chopra — JPMorgan Chase — Analyst

All right, that’s helpful. And the second bit I had was on biscuits itself. You’ve talked about market-share gains, could you help us with the volume growth and the value growth for the biscuits overall category and some flavor on how the different sub-segments are looking at and within your growth rates that you posted for the last two quarters now, what is the kind of mix contribution to this besides volume?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So see, there is not always complete match up between our numbers and Nielsen numbers in the overall total market, but we’ve been seeing very good growth and you’ve seen our growth. Our transaction growths are almost at 16% 17% which means that the number of packages that we sell is growing almost 17% in this quarter. And if you were to look at a year-to-date number it’s almost at about 14%. So the transaction growths are very good and that’s what matters to us. Volumes obviously had been low. Volumes are very low-single digits and the reason for that is the kind of price increases that we’ve taken during the last two years. So, that’s where it is, but from a revenue growth standpoint, it clearly is indicative that even the entire industry is growing at double-digit revenue.

Latika Chopra — JPMorgan Chase — Analyst

Sure, and I believe you have fair confidence that..

Operator

Ma’am sorry to interrupt you, may I request you to come back in the question queue.

Latika Chopra — JPMorgan Chase — Analyst

I will.

Operator

Thank you. [Operator Instructions] Next question is from the line of Percy Panthaki from India Infoline. Please go-ahead.

Percy Panthaki — IIFL — Analyst

Hi Varun, on dairy can you give us some idea on what is the capex that you will do over the next two to three years? And secondly, do you fear any risk of EBITDA margin dilution if dairy is becoming a large part of your business and the EBITDA margins there might be lower than the biscuits margins, correct me if I’m wrong in that assumption first of all.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So first, your question on investments, investments are about INR600 crores for starters in all of the lines that I spoke about during my presentation. Will there be more investments? Yes probably for innovation, but that will be very clearly once we’ve read our results of the imported products that I was talking about, only after that, we’ll put in more investments as [Indecipherable] is concerned and even on the other areas, we will put in investments after we’ve proven that some of the products that we’re launching are doing well. The other question, what was the other question that you had?

Percy Panthaki — IIFL — Analyst

EBITDA margin, whether it be dilutive.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

No. EBITDA margin, we will have to see as we go Percy. For cheese we’ve always had a very solid EBITDA margin. Now, with our own factory and with the joint-venture hopefully, that should move-in the right direction. Yes, for a period of time there will be depreciation hit that we will have to take which is fine but I think over a period of time, we should be fine on that.

And the other thing is that even at INR2000 crores, even if dairy was to move to the 3,000 crores in the next few years, by that time, our overall business would have moved much beyond where it is today. So, it will not be more than 8% 9% 10% of our total business, so the impact of this is not as high as you’re imagining it to be.

Percy Panthaki — IIFL — Analyst

Okay, and just checking on data point, which I just said, did you say that number of packs sold grew at about 16%, 17% this quarter?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Yes.

Percy Panthaki — IIFL — Analyst

Okay, and finally, can you give some guidance on the overall capex at a consolidated level for FY23, 24, 25?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So just to a highlight what are the investments that we’re making. We’ve got three lines — three new lines. We’ve got a new factory in UP, we’ve got a new factory in Tirunelveli in Tamil Nadu and one new factory in Bihar which is going to come up. There are some lines which are coming up in Ranjangaon plus the dairy facility and in Orissa, we are putting up a new line.

So basically, all put together the current year is going to be approximately INR750 crores and thereafter I think for the next two or three years it’s not going to be very large. Let’s say, the next two or three years our total investment would be INR250 crores odd.

Percy Panthaki — IIFL — Analyst

Okay sir, thank you very much.

Operator

Thank you. Next question is from the line of Sheila Rathi from Morgan Stanley. Please go-ahead.

Sheela Rathi — Morgan Stanley — Analyst

Yeah, thanks for taking my question. So, two questions from my side. First is a clarification, this has to do with the sustainability slide where you have mentioned 12.8% reduction in sodium versus 2018, 2019, but if I remember correctly from the annual report, we had mentioned that we aspire to have a 6% reduction in sodium, by 2024, so just wanted to get that clarification here.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Yeah, so that’s one area where we’ve had more reduction than what we’d stated for ourselves. So that’s been working well. Manoj, Sudhir do you want to comment on that?

MANOJ BALGI — CHIEF PROCUREMENT OFFICER

Yeah, so you’re right Varun. We had a target of 6% for the sodium on per serving basis, but we did basically roll-out the sodium plan in various products to get to this number.

Sheela Rathi — Morgan Stanley — Analyst

All right, that’s very clear. And my second question Varun was on distribution strategy. I think that’s worked out very well for us, so just wanted to get an idea from you as to what is the aspiration on the distribution front, both on rural side as well as direct distribution there, we have reached a certain level now, where we could be in the next 2 years?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So yes, that’s a very important question and people continue to feel that, how long will this last. I think this is everlasting. While we made great progress there are still territories and states and areas which we still continue to be very broadly distributed. Rural still lags by almost 11 distribution points so we have a long way to go and we will continue to work on it, because it is such an important strategy for us. A very important part of our strategy has been our distribution gains, and that is the one which has kept us away from really getting into fisticuffs with competition. We’ve been driving our own distribution and been gaining traction and share in all of these states. So a long way to go. Short answer is a long way to go and we will continue to drive that.

Sheela Rathi — Morgan Stanley — Analyst

And 15% increase every year could be a fair assessment right?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Yes, absolutely.

Sheela Rathi — Morgan Stanley — Analyst

Alright. Thank you.

Operator

Thank you. Next question is from the line of Vivek Maheshwari from Jefferies. India. Please go-ahead.

Vivek Maheshwari — Jefferies — Analyst

Hi, Varun and team. My first question is on the market-shares, again Varun, so the market shares that you have presented on the slide are value market-share I’m guessing. Would volume market-share also give a similar story?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Yes it will. So we’ve also benefited from the fact that premium products and premium offerings have been gaining over the value offerings, so it will be very similar.

Vivek Maheshwari — Jefferies — Analyst

Interesting, okay. The other question is, you mentioned 16% growth impacts low-single digit volume growth and 16% revenue growth, so does that mean that there has been a shift from larger packs to smaller packs?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

It could be momentary, it could be momentary. It’s not reflective of a long-term trend but yes, this quarter we have seen a 17% transaction growth with a 16% revenue growth. But it’s not like we’ve been saying that forever. But in times like this, you’ve got to the number that there is some amount of down trading which goes off as things become better. So it could be for a quarter or two and then it goes back to the old mix.

Vivek Maheshwari — Jefferies — Analyst

Got it, and lastly Varun, how much will be the price cuts that you will need to take at the portfolio level in the coming quarter?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

It’s not substantial. We haven’t really looked at what number it will work-out to be, and we are not really taking a price cut. What we are looking at is projecting them as promotion, so that it doesn’t look like we are permanently down to a certain price. It will be as a promotion, so that we can take out the biscuit and move back to our price, whenever need be.

Vivek Maheshwari — Jefferies — Analyst

Okay, and at the time of taking up prices, you have had reasonable amount that via volumes so conversely, will also be true as input prices are going down, right?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Yes, we are looking-forward to that, because while inflationary times like this, it’s okay to have very small volume growths and the good thing is that we’ve had great transaction and that’s what matters for us. How many packets — how many consumers are enjoying our products etc, but volume growth also important and we would like to get back on to a volume growth trajectory as well.

Vivek Maheshwari — Jefferies — Analyst

Great, thank you Varun. Wish you all the best.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Thank you.

Operator

Thank you. Next question is from the line of Kunal Vora from BNP Paribas Mutual Fund. Please go ahead.

Kunal Vora — BNP — Analyst

Yeah, thanks for the opportunity. So, continuing on the previous question, so how should we look at volume and pricing contribution in FY 2024? You’ve had double-digit price hikes in FY 2022, another double-digit price hike in FY 2023 team, the growth has been mostly pricing led, how do we look at that mix changing in FY 2024.

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

So, from what we just discussed I don’t think we’re going to see the kind of inflation that you’ve seen in the last two years for some time to come. I don’t want these to be the famous last words, but I’m hoping that I’m right. So with that I don’t think there’s going to be a substantial price increase, it will be only be opportunistic whenever necessary for certain SKU, but we are not looking at the inflation number for next year is looking like about 2.5% to 3% for us. So that’s the kind of price increase that we will be looking at.

Kunal Vora — BNP — Analyst

So with that, would the revenue growth moderate or you think the current growth rate or anywhere close to that is maintainable?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

That’s one area which I haven’t understood ever. When does growth rates pickup, when does it moderate, I’ve never been able to understand. What I’ve understood is how to take share from the market by driving strategies, what happens to the market? I think God only knows, but I’m hoping that the growth rate on the industry continues.

Kunal Vora — BNP — Analyst

Okay, second-last question is, is there a correlation between the milk collection and your revenue as the milk collection doubles, which you indicated, should we expect revenue also to double and when do you get to the 150 KLPD which you mentioned in terms of bill collection?

VARUN BERRY — VICE CHAIRMAN & MANAGING DIRECTOR

Well, 150 would be towards the end but no, it’s not only for the products that we sell-in the market, we will run the lines that we use for our bakery division as well. So, this will help us obviously first, there are some overheads to the extension services that we provide. So we be able to max out and leverage the overheads on those extension services. We will be able to get better-quality product, which will be produced, whether it’s the SMP or sweetened condensed milk or whey powder etc, all of that produced in our own factories for our bakery division. So, there is no real correlation between that and the daily revenues because this is a internal transfer from dairy to our bakery division.

Operator

Thank you very much. We’ll take that as our last question. I now hand the conference over to Mr. Yash Vardhan Bagri for closing comments.

Yash Vardhan Bagri — Finance Manager Daily and New Business

Thanks everyone for spending time with us on this call. We look-forward to interacting with you again.

Operator

[Operator Closing Remarks]