Britannia to pump in ~700 cr in 2.5 yrs, says MD
Biscuits major Britannia Industries has its plate full, catering to in-home consumption and rural demand. But, the company is getting futureready, lining up new investments and putting in place its new product pipeline.
Varun Berry, managing director, Britannia, said the firm was looking to double its capital expenditure (capex) from ~300 crore to ~600 crore in two years, led by investments in new plants and categories. “We are looking at additional capex of ~700 crore in the next 2-2.5 years. This will be used to set up three new plants in Tamil Nadu, Uttar Pradesh, and Bihar each. A brownfield project will be executed in
Odisha as well,” Berry said, as the company scrambles to meet demand in these markets.
The company reported 22 per cent volume growth in the April-june quarter (Q1) of FY21 on Friday, beating Street estimates by a wide margin. Revenue rose 26.7 per cent yearon-year (YOY) to ~3,420.7 crore versus Street estimates of ~3,200 crore. While the firm’s operating performance improved on the back of moderate inflation and cost-control measures, Berry said it had grown significantly ahead of the industry.
To put things in perspective, the domestic biscuits market is estimated to have grown between 15-17 per cent in Q1, led by in-home consumption in urban areas and migrants making their way back to the countryside. Tamil Nadu and Uttar Pradesh (UP) are the top two markets for Britannia. In fact, UP has seen 42 per cent growth in Q1, led by strong demand in small towns and cities. Britannia derives 37 per cent of its sales from rural areas, higher than the industry average of around 35 per cent. Berry attributes growth in rural areas to reverse migration, good monsoons and a relatively lower rate of Covid-19 infection in the countryside. He believes that localised lockdowns will have a limited impact on business, unlike in urban areas, which remain vulnerable because of population density.
Besides new plants, Britannia, which gets 80 per cent of its sales from biscuits, will set aside ~300 crore for expansion into new categories and products, including yoghurts, beverages, fresh dairy, immunity-boosting snacks, and biscuits. Trial announced runs of products, its previously- such as croissants and salty snacks, will begin in about six months.
“The strategy will be to focus on the core. But at the same time, we want to bring variety to our portfolio and begin research and development work on innovative products and new launches. All of this will begin in the next 3-6 months as things open up further,” Berry said. While the past four months were spent on ramping up production of the company’s top four brands — Good Day, Marie Gold, Milk Bikis, and Nutri Choice — Berry admits that the company will have to bring its attention back to a wider set of products within its portfolio. More recently, Britannia has increased production of its cream biscuits, including Bourbon, Jim Jam and Treat, as well as other brands, such as 50:50 biscuits, in its portfolio. The need for a wider basket of products also comes as analysts point to in-home consumption tapering in FY22 as the threat of infection reduces and people adapt to the new normal.