Ruling the Biscuits Markets in India Ft Britannia- A primer on the stock

We come out of a very successful financial year that witnessed economic recovery amidst unprecedented inflationary conditions. As market leaders, we led pricing actions to offset inflation & maintain profitability. However, in this quarter, commodity prices marginally softened & hence, the local competition intensified. In view of that situation, certain price corrections were initiated to remain competitive & continue to drive topline while maintaining profitability

Mr Varun Berry, CEO

Stock data

Ticker	BRITANNIA
Exchange	BSE and NSE
Industry	FMCG

Price Performance:

Last 5 days	-1.22%
YTD	+6.1%
Last 1 year	+19.03%

Company description:

Britannia Industries Limited is one of India’s leading food companies with a rich heritage dating back to 1892. Headquartered in Kolkata, India, Britannia is known for its diverse range of food products, including biscuits, bread, cakes, dairy products, and more. The company has a strong presence in India and exports its products to over 60 countries.

Business Segments:

The company operates in 4 business verticals:

1. Biscuits:

Britannia’s biscuits segment is the core of its business. It offers a wide variety of biscuits, including popular brands like Good Day, Marie Gold, and Tiger biscuits. The segment contributes significantly to the company’s revenue.

2. Dairy Products:

The company sells Cheese, Beverages, Milk and Yoghurt under this division and the dairy products directly reach 100,000 outlets. The segment witnessed the highest growth especially in the cheese products which grew 300% during the year and the company is planning to start 5 new facilities. And to expand its Orissa plant it will improve its back end facilities by procuring 25000 Litre/day from 1000 farmers in Maharashtra.

3. Bread and Bakery Products:

The company is one of the largest players in the organized bread market with an annual turnover of over 1 lac tons in volume and Rs.450 crores in value. The business operates with 13 factories and 4 franchisees selling close to 1 Mn loaves daily across more than 100 cities and towns of India. The company is working on developing differentiated products like Atta pizza, cheese bread etc.

4. Snacks and Cakes:

Overview: Britannia manufactures a variety of snacks and cakes, including its popular brand, Cake Bar. These products are part of the company’s strategy to diversify its product portfolio.

Business Model:

Britannia Industries operates on a business model focused on quality, innovation, and market expansion. Key aspects of its business model include:

1. Product Innovation: 

Britannia continually innovates its product offerings to meet changing consumer preferences. It launches new products and variants to stay competitive in the market.

2. Market Expansion: 

The company has a vast distribution network that extends to urban and rural areas, ensuring that its products reach a wide customer base across India and internationally.

3. Quality Assurance:

Britannia maintains strict quality control standards to deliver safe and high-quality food products to consumers.

4. Sustainability:

Britannia emphasizes sustainable practices in its operations, including responsible sourcing of raw materials and reducing its environmental footprint.

Distribution Network:

The company has a PAN India presence and the products are available in more than 5 Million retail stores across India and the products reach over 50% of the Indian homes.

Global Footprint:

The company derives 5.5% of the revenue from the global Markets and exports the products to 80 countries and has manufacturing units at UAE and Oman. It is also the number 2 biscuit player in UAE with a strong contention to leadership and has a similarly strong market position in the other GCC countries. Recently, the company has also started a greenfield manufacturing plant in Nepal

Capex:

Britannia plans a Capex of Rs 400-450 Cr in FY24 towards the brownfield expansion in

Ranjangaon (Dairy), Orissa and Greenfield facility in Bihar. Moreover, it has commercialized 5 new additional lines each in Barabanki (UP) and Tirunelveli (TN) during Q1FY24.

80:20 Growth Strategy:

The company performed well during the covid crisis by following the 80:20 rule, that is the company focused on 20% of the brands like Marie Gold, Good Day, Milk Bikis & Nutri Choice, which contributes 80% of the companies revenue, were put on priority list which enabled the company to streamline its productivity and increase the efficiency of the production.

Litigations:

The company has filed two cases against its rival ITC in the Delhi High court for alleged infringement of its product packaging trademark by using similar design for ITC’s new biscuit ‘’Sunfeast Veda Digestive’’. Britannia has also filed a case against Future consumer. The company has also filed a case against Future consumer for the usage of the name of ‘Good time’ as it sounds similar to Britannia’s iconic ‘Good Day’ brand.

Tussle over Ownership:

The company was started in the year 1892 while the initial promoters remain unknown yet and the name Britannia was given after 26 years of its inception by the London Investor C H Holmes and the company has 7 owners before resting in the hands of the Wadia Group.

Financials:

What we like:  

1. Part of the prestigious Wadia group:

Britannia Industries belongs to the Wadia Group, a reputed Indian Business house who has presence in wide range of business segments like Airlines (Go Air), Realty ( Bombay Realty), Textiles ( Bombay Dyeing) and Plantations and other business (Bombay Burmah trading Corporation which is also the Ultimate holding company of Britannia Industries)

2. Market Leader in the Biscuit segment:

Britannia is one of leading players in the business segment with leading market share in the Indian biscuit segment. The company has a wide range of Biscuits portfolio across various categories like glucose, Marie, cookies, crackers, cream, milk, and health. The company sells the products under various Iconic brands like Good Day, Tiger, Marie, Nutrichoice and Milk Bikis and many more.

3. Limited impact of local competition:

Management stated that the competition from local players has increased, as input costs eased. However, we believe that the company is well placed to face such challenges. It has already lowered prices of a few products and plans to drive the growth through volumes in coming quarters. Thus, we expect the impact of increasing competition in the market will be limited on the company’s earnings.

4. Positive outlook:

We expect Britannia to deliver market-leading growth from here on as 

1. Raw material prices, while still firm, have or will stabilize at the current levels.
2. Rural continues to remain stronger for Britannia (due to the company’s robust distribution expansion strategy in these regions) while other FMCG companies continue to struggle in this sector. Furthermore, the rural revival is expected to recover the overall FMCG sector in FY24, which will be supported by higher government spending and increased urban remittances. 

BRIT’s own initiatives such as robust portfolio planning through NPD in core and adjacencies along with its continued focus on increasing direct reach, rural penetration, and a share of in-house manufacturing would help it improve its overall efficiency moving ahead. We believe that this will make BRIT stronger in the longer run

Factors to consider:

1. The food industry is highly competitive, with numerous domestic and international players, which can affect pricing and market share.
2. The company’s profitability can be impacted by fluctuations in the prices of key raw materials, such as wheat and dairy products.
3. The food industry is subject to regulatory changes and quality standards, which can affect production processes and costs.

Conclusion:

Britannia Industries Limited is a prominent player in the Indian food industry, known for its strong brand presence and diversified product portfolio. While it benefits from market leadership and a growing dairy segment, it operates in a competitive environment with challenges related to competition and raw material price volatility. Investors should carefully assess the company’s performance and industry dynamics before considering it as a potential investment. Staying informed about Britannia’s strategies and market trends is essential for making well-informed investment decisions.