Divulging more on the competition and pricing part Varun Berry, Managing Director, Britannia Industries talks to Restaurant India.
Britannia is planning to invest around Rs 900 cr on the manufacturing, technology and R&D while venturing into dairy segment with launching wider range of products. On the other side with slowing revenue growth in FMCG industry the company is facing the slack of downward revenue shift for its core biscuit category while missing the vibrancy in 7.5 economy growth of the country.
What is an average margin on FMCG products?
Growth for overall FMCG products is fairly slow at this point of time. Margin is low. Volume growth is not there but it is better than last year. Prices have decreased and people are eating products but it’s just that revenue is not there. The country is ready for a double digit growth once again. I think there is a little bit reason of slowing rural economy, agriculture economy is in trouble, monsoon is in deficit, minimum support prices haven’t gone up as much as they were in the previous year and the world commodity prices are so low. It’s a very complicated scenario and that probably is the reason for the overall downward growth for FMCG. I am hoping that with the budget initiatives the industry should start to move in the right direction and the rural market should start picking up.
Is there other category like chips eating into your biscuit market or other players are dragging down the market while you are growing much ahead of the industry?
That hypothesis doesn’t work, because even the companies whose products are competing with us are not declaring very encouraging results. Though, biscuit is the largest revenue generator at Rs 25,000cr category in FMCG it should be growing. Despite every company is launching premium products but the growth is just not happening.
Has the pace of consumers accepting premium products gone down or the consumers have started down trading?
Actually the premium segment is growing faster. What’s really growing slower is the mass and bottom of the pyramid segment. The mass segment isn’t affecting us much and that is one of the reasons that we have been growing faster than the market. The mass segment is 80 percent Parle’s portfolio, 46 percent of ITCs portfolio and 15 percent of our portfolio. We don’t want that to become 30 percent because we are getting into the Hindi belt that is becoming part of our pipe which helps us to push the premium products. Mass is been declining versus the other premium part growing.
What is your take on Patanjali’s aim of taking over all the FMCG brands?
I do think it’s a good company. We are going to watch out how they go forward. We are tracking them and certainly we will watch out for their next steps. They haven’t been much involved into the biscuits market as they have in some of their traditional products, but we will keep our eye on it. I wish them luck and hope they fulfill their dream.
What is your take on 100 percent FDI allowed in food processing? What would be the impact and how do you see the competition ahead?
I do think it’s very good move and it is going to help companies like us. I don’t think there is a gap between implementation and the ground realities. The intent seems to be very clear, government want to go at it and that’s why they have brought it into the budget as well.
What are your investment plans ahead?
We are going to make Rs 900cr investment, 70 percent of it is going to be for manufacturing facility, 15 percent for new technology, 15 percent for R&D centre and other IT initiatives.
What are your future plans of venturing into new segment?
This year we are planning to venture into dairy segment with larger product portfolio and the backend of dairy. It would be a big investment for us. We will have to figure out whether these dairy products will be in the premium or value segment. The measure will be that if there are certain SKUs which is disproportionately priced or lower priced than other parts of that same brand then we will touch that first. I will be able to answer the same in the next three months.
Is it right that you are looking at making considerable revenue from dairy products going ahead?
We haven’t taken a decision on that. We are still in the stage of due diligence and we are working on it.