Britannia expects better sales in coming quarters

For biscuit major, urban sales lagging due to less mobility & delay in reopening of establishments

Bengaluru: FMCG major Britannia Industries is hopeful of getting back to the pre-Covid sales level in the coming quarters as urban consumption stabilizes with rising outdoor activities.

The biscuit maker, which produces popular brands like Tiger and Good Day, has already achieved pre-pandemic growth in its sales in rural areas and traditional trade channels during the third quarter ended December 2020. However, urban demand is lagging the rural growth due to lesser outdoor activities.

"If you were to look at this (December) quarter, I would think that our traditional trade growths and rural growths were above pre-Covid levels. It was the channels and the urban growths which were lagging. If you normalize urban and channels, would the growth be beyond pre-Covid? Yes, it would be," Varun Berry, MD & CEO, Britannia Industries said in the post earnings conference call.

At the beginning of the pandemic, Britannia posted a stellar sales growth of 26 per cent in the first quarter ended June 2020 amid lockdown measures. However, in October-December quarter, sales growth fell to six per cent despite economic recovery.

"At some stage, life is going to normalise and then it's a demand supply which will play out. We are looking at more innovations. We are looking at more categories that will all add to our growths but there's no reason for Covid to create a demand surge in the future as well," Berry said.

Britannia is the market leader in the biscuit category with around 70 per cent of its revenues coming from this segment. It has about 34 per cent market share in the biscuit category in India. It draws 25 per cent of its top line from non-biscuit category, while new products contribute around five per cent to its revenues. The company plans to increase the share of revenue from non-biscuit category to 50 per cent in the long-term from 25 per cent as of now. "Britannia is consistently deepening its rural penetration and in Hindi heartland where its market share is less than half the national average, which should augment its structural growth apart from intensifying its innovation-led new product launches," HSBC said in a note. In the first nine months of the ongoing financial year, the Bengaluru-headquartered FMCG major has added 4,000 rural dealers to its distribution network in its bid to increase its rural reach. It has already crossed the consolidated net profit mark of Rs 1,400 crore, which was the annual profit of last fiscal, during April-December period of FY21. However, analysts pointed out that cost pressure for the company is expected to rise in the coming quarters due to increase in key input prices.

"Input costs rose by just one per cent with a deflation in the flour and milk prices. However with palm oil prices increasing significantly and milk prices gradually rising, rise in raw material prices will be higher than Q3 of FY21," Brokerage firm Sharekhan said in a note. But it noted that the company would be maintaining its margins at the current levels on the back of cost optimisation moves.