More price increase unlikely this financial year: Britannia MD Varun Berry

Britannia is unlikely to increase prices of its products any more in FY23 as inflation is just 1 or 2 per cent more than in the previous quarter and some of the raw material prices have already cooled off, its Executive Vice-Chairman and Managing Director Varun Berry said on Thursday.

Britannia, which manufactures fast-moving consumer products in categories such as biscuits and dairy, has increased the prices of its entire product portfolio by approximately 22 per cent in the past 18 months.

Berry told Business Standard in an interview that the company was aiming to increase its revenues from cheese products by five times within the next five years. Currently, only about 2 per cent of Britannia’s total revenues come from cheese product sales.

Britannia Industries and French cheese maker Bel SA had on Tuesday announced a joint venture (JV) to develop, manufacture, and sell cheese products in India and certain other countries. 

Is the company considering any price increase for its overall product portfolio in the rest of FY23? Berry replied: “No, I do not think we are going to take any more price increase till we understand where the commodities are going.” 

“This quarter, the inflation has not been really over the top. It is about 1 or 2 per cent above the previous quarter so we will hold off for the time being and see if the commodity prices are cooling off,” he said.

Berry noted that prices of some of the raw materials have cooled off. “Palm oil has cooled off dramatically. Milk is on the boil because of the lumpy skin disease that has happened to cows, but the government is trying to control that and hopefully that should also cool off a bit,” he said.

Wheat prices have been increasing but with a good crop expected during the wheat season, which is just around the corner, its prices should also cool off, he noted. “That is the reason we are not taking any more price increases,” he explained. 

Britannia’s volumes have not been growing very aggressively but the volume growth has still been positive, he said. “With a 22 per cent price increase (in the past 18 months), it would be generally expected that volumes would not be growing positively. We are seeing reasonably positive volume growth albeit, in very small single digits. I am very happy with that. As things stabilize, the volume growth should rise,” he mentioned.

Britannia currently sells six broad categories of cheese products in India: slices, cubes, blocks, spreads, cream cheese, and mozzarella. “For starters, two more cheese product categories — sachet (affordable and does not need cold supply chain) and portions (spreadable cheese in round box) — will be added in FY23 by our JV,” Berry said. 

On top of that, two more cheese product categories are being evaluated by the JV for launch in FY24, he added. The JV will be called Britannia Bel Foods.

Berry said the company’s cheese-making facility, which has the capacity to produce 15,000 tonnes of cheese per year, in Ranjangaon, Maharashtra, will go live in the middle of 2023. “It is scalable. We have got enough land to add more capacity,” he said.

Currently, the JV is manufacturing 100 per cent of its products through contract manufacturing. When the Ranjangaon facility will go live next year, 70 per cent of the total cheese product production will shift there and 30 per cent of the products will be imported, Berry said. The JV will then not be doing contract manufacturing anymore.

“We will remain a premium player but the difference will be that we will be producing cheese in our own factories now. That will give us some efficiency,” he said.

He said rural areas of the country are not going to be the first stop for the JV's cheese products. “We are currently available in 35 cities. We would probably like to go to 45-50 cities with our current portfolio of (cheese) products by 2023-end,” he mentioned. 

He said with cheese sachets, the company may go a bit deeper to tier-2 and tier-3 cities, taking the penetration to around 75-80 cities till the end of 2023.

“Rural India has been under a little bit of pressure but it has not affected us because we have been making inroads into rural areas with our distribution. So for us, rural India has been performing very well,” he said.