Britannia Ready To Sacrifice Margins For Double-Digit Volume Growth In FY25

Britannia Industries Ltd. is aiming for double-digit volume growth this year, even if that comes at the cost of margin erosion, according to executive vice chairman and managing director Varun Berry.

"We're on a mission to get the topline to grow much faster," he told analysts during the post-earnings briefing on Monday. "If it means taking short-term pressure on the margins, we will do that. But it's not going to be dramatically different from where we are at (right now). The objective is to ensure we are future-ready." As of March 2024, Britannia's margins stood at 19.4%.

The biscuit major foresees 3-4% inflation after the general elections, with two key commodities—wheat and sugar—likely to remain inflationary.

While the wheat output has been good, the government currently holds a low reserve, Berry said. An increase in government purchases could lead to a potential rise in wheat prices throughout the year. Furthermore, the lacklustre sugar production indicates a possible inflation in sugar prices.

"The outlook for this year is not deflationary but of healthy inflation," he said, adding that the price fluctuations are "manageable" at these levels.

Berry warned that subdued demand trends would persist in the near term, projecting "flattish" sales growth for the first quarter of fiscal 2025. However, he anticipates a pickup once the monsoon arrives and the election results are announced. "After the elections, there will be solid volume growth," he said as he laid out its goal of achieving "double-digit" volume growth.

The owner of Good Day and MarieGold brands said that its volume growth grew twice as much as revenue growth in the quarter ended March. For the full fiscal, however, both volume and revenue were on par. As inflation started to soften, the company made price cuts to remain competitive. This, along with the distribution expansion, helped Britannia regain its market share. The market share of the next competitor is currently 0.77 times that of Britannia, according to the company's investor's presentation.

The Nusli Wadia-controlled company is also preparing to roll out a renewed sales strategy to unlock its next phase of growth. The company plans to pilot this route-to-market strategy 2.0 from October to March. This project will focus on increasing feet-on-street even if it means multiple people focusing on reaching the same outlets. AI-enabled predictive ordering will also be used to enhance salesmen's capabilities and extract higher sales.

The objective of this plan is to multiply adjacent businesses like cake, rusk and bread, while continuing to build the core biscuit category. Britannia's goal is to grow adjacencies 1.5 times faster than biscuits. The adjacencies portfolio contributed 25% to revenue in FY24, according to the company.

In FY25, Britannia will not enter into new categories but rather focus on the consolidated growth of the existing ones, said Berry.

Britannia will continue to expand its footprint to include more villages. "Rural presence and market share are still lower than urban, so we can't take our eyes off it," Berry said. During the year ended March 2024, Britannia Industries added 1.1 lakh outlets to take its total reach to nearly 28 lakh. Of which, its rural outlet count was 30,000, an increase from 28,000 a year ago.