Britannia seeks dairy venture partner; to foray into value-added segments

Nusli Wadia-promoted Britannia is also focussing on increasing its distribution footprint

Nusli Wadia-promoted Britannia Industries is looking to enter into a joint venture (JV) with a global player, to expand its presence in the dairy segment. At present, dairy is a Rs 4,000 million business for the food major.
 
Within diary, Britannia’s focus has been the cheese segment, which includes products like cheese slices, cheese cubes and blocks that have a longer shelf life. With this joint venture, the company is looking to take complete control of the entire process — from collection of fresh milk to processing and then to introduction of value-added products such as cheese deserts, cheese rolls and lollypops, Varun Berry, managing director, Britannia Industries, told Business Standard. 
 
“We are also evaluating whether it makes sense to have a joint venture for some of these categories. Hopefully, in another 3-4 months, we will be ready with the answer,” Berry added. 
 
There is fierce competition in the dairy segment, with existing companies like Nestle, Amul, Mother Dairy and Danone, and new players like Patanjali, Coca-Cola and ITC jostling for space.
 
However, Britannia does not want to get into the commodity market, which includes fresh milk and where the competition is more, and instead focus on the premium segment, where there are hardly any international players, Berry said.
 
“If you are getting into value-added categories, then it’s not that fierce. If you think about it, there are not many international players because it’s a protected business; you can’t import. If you are able to do international quality products with the right kind of taste, then the opportunities are huge,” he added.
 
If the joint venture materialises, this would be Britannia’s second operational JV focusing on the Indian market after the one with Chipita, the Greek baker, announced in February last year.

Britannia holds a majority stake in the JV with Chipita. Together, both companies will infuse around Rs 1,000 million in the venture. The JV will focus on macro snacking categories, including croissant, rolls and other dough products.
 
To make the dairy segment more effective, Britannia has started collecting fresh milk on a pilot basis in Maharashtra. It will go full scale once the proposed food park at Ranjangaon in Pune is operational. “We will have a fully integrated dairy business, starting from sourcing the milk to processing. We will be sourcing milk from almost 25,000 farmers,” Berry said.
 
The Ranjangaon plant will be spread across 150 acres and will be fully integrated. It will house the dairy processing unit and plant for dairy based products, apart from units catering to the JV with Chipita and other segments such as biscuits, rusk, flour mill and warehouse. The plant will be ready by the end of 2019
 
The company is also focussing on increasing its distribution footprint. According to Berry, Britannia has been able to reach 4.8 million outlets, which has given it a strong presence in the Hindi-speaking belt and led to profit growth in the just ended quarter. For example, in the third quarter ended December 2017, Uttar Pradesh has, for the first time, shown a growth of close to 20 per cent. “It’s all about distribution; about taking products to more outlets and making sure we do the merchandising. It’s not about price cut, but hard work,” Berry said.