Analysis of Britannia

Britannia was founded in the Year 1892 and its registered office is in Calcutta. It is a leading national producer of different types of biscuits of which well-known brands are Tiger, Good-Day, Mari Gold, 50-50 and many more. In the year 2004, it was accorded with “Super Brand” of India for targeting the different segments of customer. It has grown exponentially since its inception and has 33% local market share in the bakery product segment. It is also a leading/ prominent market player of other bakery products and dairy products like Ghee, Butter, Nutri-Choice Sugar Oats and Nutri Choice Oat cookies.
India, being a diverse and a huge country of about 1.1 Billion people from different religions and with different earning segments; BIL has different strategy and a variety of product types for all segments of people offering different price ranges. It has cheap products like Tiger biscuits and premium products like Bourbon. BIL is revamping its “GO-TO MARKET” strategy to compete with new international players like PepsiCo and Kraft Foods. The company is restructuring its hierarchy for faster decision making process to suit the present market scenario.

BIL is facing competition from international and local players. Among local players, Parle and ITC are challenging Britannia and among Global players Kraft and PepsiCo are cutting market share of Britannia. Kraft, which recently acquired Cadbury, is the largest food giant in world. The company had separate 'category directors' for its biscuits business, one each under Health & Wellness and Delight & Lifestyle; but has now done away with both and has adopted the strategy of one director-marketing spearheading both the categories. To have a competitive edge over competitors, Britannia has expanded its variants as per changing food taste and growing demands of healthy food in the country. For e.g. launch of “Tiger-Iron Zor” milk, fortified with iron and other ingredients is for health conscious people. The emerging health and wellness trend in the country is a growth potential for Britannia which offers a range of low-fat and sugar free products such as NutriChoice Digestive and NutriChoice SugarOut. BIL’s competitive advantage is its continuous pipeline of innovation and aggressive brand building programs. It has a very robust R and D system to innovate and re-innovate to meet market changing taste and health concerns. Britannia has also targeted premium class customers by different modes of marketing and packaging.
Almost one-third of India’s one billion-strong population trusts in the brands and products provided by Britannia. The raw materials used by BIL chiefly comprise of Wheat, vegetable oil and Sugar and since these are agricultural products, production is nature and climate dependent. Also, a major portion of these materials are imported and hence their price fluctuates depending upon global economic conditions, transportation costs, currency exchange rates, government rules and regulations etc. The profitability of BIL suffers as per the food inflation. Currently food inflation is 16 to 17 %. According to an industry survey, 62% of surveyed consumers said they prefer eating natural and fresh foods. Moreover, 77% of urban Indians are cutting down on fats-the driving factor for changing food habits is increasing due to the awareness created by various media.
For the financial year ending March 31, 2008, the company generated gross revenue of INR 25,848 million as compared to INR 21,993 million, an increase of 18%. The operating profit increased by 99% over 2007 to INR 1,937 million in 2008. Profit after tax increased by 76% over 2007 to INR 1,982 million. "Sales of innovations have increased by 1.5 times in the past two years. Realization on these products is two-five times than the normal variants, while the cake, bread and biscuits range is growing at a CAGR (compound annual growth rate) of 25 per cent," said Amnish Aggarwal, senior vice-president-Research.
In addition, the dairy business is expected to emerge as the next growth driver. "This business has seen 22 per cent CAGR in sales with margin expansion due to huge potential in dairy and focus on higher margin niches," he added.
"Britannia remains one of our top mid-cap picks as an improving product mix drives top line and margin growth, and reasonable valuations (of the stock price) offers sizeable upside," said Gaurang Kakkad, an analyst with Religare Institutional Research.
Britannia will continue to be the leading market player as it is upgrading its product as per customers and aligning its strategy with needs of situation. The only concern is how it will penetrate in international market because for that it has to revamp its product as per country specific needs.
[The article has been written by Pragya Priyadarshini. She is presently pursuing her MBA in HR from IIM Ranchi.]


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