Why Britannia May Foray Into The Savoury Snacks Segment

In Britannia Industries Ltd.'s second quarter earnings call, Executive Vice‐Chairman and Managing Director Varun Berry indicated that the company is actively exploring entry into the savoury snacks segment. Berry highlighted that the company has been conducting market tests to assess how the snacking category aligns with Britannia's existing portfolio and business model. If these tests prove favourable, Britannia may formally consider acquisitions in the snacking industry to expand its footprint beyond its core biscuit offerings.

Britannia, known for its popular biscuit brands, such as Good Day, 50-50, Jim Jam, and Pure Magic, has primarily focused on sweet and semi-sweet biscuits in the past. However, the company's potential venture into savoury snacks would mark a significant shift in its portfolio strategy, aligning with a broader industry trend toward diversification, within packaged foods. Berry’s remarks reflect Britannia’s ambitions to expand its product range and strengthen its position in the competitive FMCG landscape.

Britannia Industries, a major player in the FMCG sector, is grappling with slowing demand and inflationary cost pressures, which have squeezed its margins. In the second quarter, Britannia’s margins contracted to 16.8% from 19.7% in the same quarter last year, reflecting the strain on profitability amid rising input costs.

Revenue growth for the quarter was modest at 5%, and net profit dipped by 9%. Notably, Britannia has refrained from implementing price hikes over the last few quarters, to maintain consumer demand, but has now indicated that it may consider a 4-5% price increase in the coming quarters to offset cost pressures.

At the same time, the snacking industry has demonstrated resilience, with listed players like Bikaji Foods showing strong performance despite broader economic challenges. In the July-September period, Bikaji Foods reported an 18% growth in revenue and a 21% increase in Ebitda, alongside a 14% rise in net profit.

These encouraging numbers underscore the robust demand within the snacking category, which could be a compelling factor for Britannia as it considers diversifying its portfolio. By entering the savoury snacks market, Britannia could capture new growth opportunities, leverage rising consumer preference for convenient snack options, and balance out the pressures faced in its core biscuit segment.