Moving from side of plate to the centre of plate isn't a simple exercise. It is quite a task. As it transits from being a pure biscuit maker to a foods company, Britannia Industries sees opportunities aplenty. Managing Director Vinita Bali discusses the road ahead and challenges in the way with K. T. Jagannathan.
Excerpts.
How are you managing the high commodity cost?
We import refined palm oil. Prices of milk and milk products have gone up by more than 26-27 per cent. Price of cashew nuts has gone up. Fuel prices have also gone up. In Tamil Nadu, the VAT (value added tax) rate has gone up. When fuel goes up, it impacts transportation, distribution and everything. So, we are talking about a basket of food inflation still being 12-13 per cent. The next few months are going to be uncertain. We are focusing on three things - how we manage our revenue, the quality of revenue; launching or innovating; and creating differentiated products. These give us an advantage. We launched Vita Marie and then fortified it. We then extended it to Marie with oats and honey. Each time we do that, we are going up the value chain.
What do you mean by quality of revenue?
We are dealing with margin pressure in three ways — improving quality of revenues, managing costs and innovating to add higher value. In terms of the mix of products and mix of geographies, we make differential margins on different brands. If I sell more of one brand, I improve margins and the quality of revenue improves. If you are a newcomer to the market, you have to think which geographies you need to operate. We are present everywhere. In the last two quarters, profits are good but margins are under pressure. Our measures will enable us to deal with margins.
How has the consumption behaviour been changing?
There have been many changes which have been influencing consumption behaviour. You have more women working. More people are travelling today than earlier. Many have less time today. People are crunched for time and looking for smart solutions from a time and convenience perspective. The fact that more people are working today has created opportunities for companies like ours. You look at BPO (business process outsourcing) companies. More people are working through the night there, munching something. BPOs are a great opportunity for us. As we are selling a light bite, it's a 24/7 consumption opportunity for us. As we are going to have more airports, there will be more shops there. That's also an opportunity for us. As India becomes mobile and as more start working, that creates more opportunities for consumption.
As you enter new categories, you are opening yourself to more competition. How do you intend to deal with it?
Talking about competition in India is quite irrelevant because the market is at a very nascent stage. Packaged food comprises only nine per cent of the total food consumed in India. So, many more competitors can enter the market. There is enough room for everyone to grow. Let us take the per capita consumption of packaged foods. Take the middle-income class. If you look at them on a base of 500 million, we are still much lower than other developing countries in our region such as Sri Lanka, Vietnam and others. While the India growth story is shaky now, it is there to stay. If you look at a market where GDP growth is going to be 5-7 per cent, you are looking at a 14-15 per cent growth for the indu stry. There is higher disposable income. At relatively little economic growth, a large part of your income goes into consumption. If you were to get more money, it is unlikely that you will spend it on food. It is more likely that you spend it on gadgets etc. But if I were a daily wage worker or factory worker and if I got more money, I would go and spend it on consumption / food. India is just beginning to grow.
What are the key challenges in the coming years?
One challenge really is driving profitable growth. Driving growth is not an issue. Driving it profitably is, however, a challenge, taking into account higher input costs, competition and everything else. The second challenge is relevant innovation. We can create all kinds of products, but they have to be relevant. The third lies in our ability to go to market in metros, non-metros, semi urban clusters and rural. The entire go-to-market strategy has become very complex. Earlier it was very simple — you had a few products, a few SKUs, a few kiranas. Guys just went in and sold. Now, we have organised retail. The local retailers have upgraded. We have now maha- and mini-metros. How do you service these markets? How do you segment those channels? How do you do it in a manner where cost to serve does not increase disproportionately especially since the expectations of the retail is also changing. How do you go to market in an intelligent way? That's the whole challenge.
What about brand loyalty?
Loyalty today is not to a brand but to a range of brands. In any case, consumers are not buying one brand. It is not a medicine that they can not change it. People want variety.
The fact that more people are working today has created opportunities for companies like ours. You look at BPO companies. More people are working through the night there, munching something. BPOs are a great opportunity.
