Britannia mulls raising product prices 3-5% as input cost rises

Britannia Industries Ltd is planning to increase prices of its products by 3-5% to mitigate the impact of a rise in prices of key raw materials, the management of the company told Edelweiss Securities.

The company, however, did not give any other detail of the products for which prices will be raised or a timeline by when it would increase the prices.

According to the management, prices of key raw material have jumped 18-35% on year, adding to the company's expenses and putting pressure on its margins.

Although Britannia has prudently tackled inflation so far through a combination of cost rationalisation and forward covers, the management believes a 3-5% price hike going ahead is imminent.

Through its cost saving steps, the company plans to save Rs 2.65 bln in 2019-20 (AprMar). The company will continue to pursue its target of becoming a total food company.

Over the past 1-2 years, Britannia has expanded to new categories -- wafers, baked salted snacks, milk shakes, and croissants. On its dairy business, the company plans to double its operations over the next 2-3 years.

Even after entering these four categories, there are a lot of white spaces for Britannia to fill to become a total food company.

The breakfast segment, for instance, is a big untapped opportunity which no packaged goods company in India has been able to fully crack, the brokerage said.

"We believe, a robust product pipeline, entry in new categories and geographies and brand investment will help Britannia sustain its outperformance. We envisage deepening direct distribution coupled with push in rural and weaker markets to drive market share gains," Edelweiss Securities said.