In an interview to Economic Times, Britannia Industries MD, Varun Berry discussed the business outlook of the FMCG major. Softening of commodity prices should benefit the company, Berry said. The imposition of increased duties on wheat and sugar has kept commodity prices unchanged. Overall, the company saw 250 bps improvement in margins, owing to decline in commodity prices, he added.
Distribution expansion, innovation, and cost-efficiency have boosted the company’s margins to 10% from 6%, Berry said. He added that cost-efficiency brought in bigger improvement as larger plants and high-tech ovens saved costs and energy consumption. Further, the company has reduced waste substantially by 70%.
Berry told ET that the cookie and dairy segments top the company’s pecking order at the moment. The dairy segment is worth Rs 85,000 crores, but the company has been able to garner business of ~Rs 400 crores only over the past 16 years from the segment. Thus, it is putting all possible effort to build a solid business around the segment, which contributes less than 5% to the company’s total turnover, Berry added.
Undeterred by competition
He is optimistic to grow the dairy business from Rs. 400 crore to Rs. 2000 crore in the next five years. According to Berry, dairy is a crucial component of the bakery business. Thus, bolstering dairy will complement the company’s portfolio. Dairy is not a high-margin driven segment and profitability exists only in limited value-added segments, which will be the focus of the company.
Berry agreed that cookies is among the fasted growing segments and expects it to continue to with its dominance in the future. Berry is not concerned about the pace of disruption in the FMCG space as competition remains rational and natural.
Berry reiterated that growth, market share, and profitability are equally important, as the company is working on a strategy that works around these goals. He appeared content with the progress of the company in all categories except premium creams, where it lost 45% market share. Berry ruled out any plans to foray into new categories in the near future.