INDIA – Britannia Industries Ltd, a leading biscuits manufacturer, announced that it expects cost inflation of 4-5 percent in the near future.
The company will evaluate the necessity of a price hike accordingly.
Varun Berry, Vice Chairman and Managing Director, indicated an anticipated increase in the cost of raw materials such as cocoa, flour, and sugar.
“We need to assess which brands and categories can sustain a price hike if necessary. However, any hikes will not be as substantial as those seen previously when inflation exceeded 20 per cent,” Berry told analysts during a post-earnings conference call.
Berry underlined the company’s commitment to ensuring stable growth and profitability amidst these challenges.
“There has been a marginal upward trend in raw material prices, but we have managed it. Necessary price rollbacks have been implemented, and we are now in a consolidation phase. Our volume growth is nearing double digits,” he said.
He also noted that price hikes might adversely affect the recovering demand, particularly in rural markets where consumers tend to opt for the cheapest options within the same product category.
During the April-June period, Britannia Industries experienced significant market share gains in rural India compared to urban centers.
The company is focusing on boosting rural sales by expanding its distribution network. As of June, Britannia has a direct presence in 2.8 million outlets and has increased its rural distributors by 7 percent year-on-year.
Britannia Industries has adopted a strategy to take on regional players. “If there is something that’s required in a certain region in terms of brand, flavour, pricing and recipe, we are ready to do all of that to make sure we cater to that region. That’s holding us in really good stead,” Varun Berry told investors during a conference call.
While talking about distribution, Berry said that in the Hindi belt, the company is currently lagging in comparison to its competition, especially in rural.
“On rural, the width expansion will keep going on, especially in the focus market. This is because we have a large gap in our market share and there is also an immense opportunity in distribution.
‘’Therefore, from a distribution perspective, those focus markets are very critical,” Vipin Kataria, Chief Marketing Officer at Britannia Industries, said on the call.
The company has increased its rural distribution and now has up to 30,000 rural distributors.
Britannia Industries reported a 10.85 percent rise in consolidated net profit to Rs 504.88 crore (US$60.1M|) for the June quarter, driven by volume growth and improved operating margins. Revenue from product sales increased by 4 percent to Rs 4,129.92 crore (US$491.8M) during the reporting period.
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