Festival demand is fairly muted: Varun Berry

Festival demand is fairly muted: Varun Berry

Interview with managing director, Britannia

Sheetal Agarwal | Mumbai

November 7, 2015 Last Updated at 22:44 IST

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Britannia posted good results for the September 2015 quarter wherein volume growth was aided by expansion of distribution in rural areas as well as price correction in the form of increased grammage. Varun Berry, managing director, Britannia, spoke to Sheetal Agarwal about the results and demand trends. Edited excerpts:

Throw some light on the demand trends in rural and urban markets? How is the festive demand panning out so far?

The FMCG (fast moving consumer goods) demand is fairly muted. From a category standpoint, rural markets continue to be slow. It seems that there is less money to spend in the market. But we have been aggressively expanding our distribution in rural areas. This has led to a high double-digit growth for us in the rural market. So, we are happy with that. But, unfortunately, we are not seeing similar levels of activity that one usually sees in the festive season. It does seem to be reasonably muted. I keep saying this every quarter that next six months there is going to be a change, but our optimism is not coming through. I still hope that we see the demand uptick in the industry.

What were the drivers of a double-digit volume growth in the quarter?

Our volume and revenue growth is almost the same in the September quarter at about 12 per cent. We have done some promotions and have given extra grammage on packs, which means, effectively we have done price corrections which aided volumes.

Give us the break-up of your Ebitda (earnings before interest, tax, depreciation and amortisation) margin drivers in the quarter?

Commodity cost deflation has added about 200 basis points to our consolidated Ebitda margin of 13.6 per cent. If we had not got the commodity price benefit, it would have been at 11.5 per cent, which is a pretty handsome movement in the margins. Three or four activities have fuelled our margins. One is premiumisation, second is all our efforts to eliminate waste in the system and the third is our cost efficiencies programme that we run on the supply chain replenishment back-end.

What is the outlook on input prices and how much will you pass on to the end-users?

Although minimum support prices for wheat have gone up by almost Rs 75; sugar, palm oil and other commodity prices have been fairly muted. For the next couple of quarters, input cost inflation will remain benign. We will continue to gain 150-200 basis points from that. We will make sure that we stay competitive and give more grammage in our packs.

How have premium biscuits performed in the quarter?

We relaunched the Good Day brand and that is giving us very good results. Our cream biscuits portfolio too is growing well. Rusk is also doing good. The only difference is that in this quarter even Glucose, which has been doing badly for us, has started to grow in double digits.

How are you gearing up to compete with new players such as Patanjali, which are growing rapidly?

We have got a fairly robust portfolio of healthy biscuits under the Nutri Choice brand. Patanjali is a new entrant in the market. They are a formidable competitor. We will have to watch out for them.





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