Our distribution reach is driving domestic growth: Britannia's Varun Berry

The Bengaluru-headquartered company's Managing Director Varun Berry tells that with strong domestic growth, the firm will continue to expand into newer categories

Britannia Industries is fast expanding its distribution network in India, but its growth in the international market remains slow. The Bengaluru-headquartered company’s Managing Director Varun Berry tells Bibhu Ranjan Mishra with strong domestic growth, the firm will continue to expand into newer categories. Edited excerpts:

Britannia’s net profit growth has remained healthy in Q3, but revenue growth is below expectation. Any comment?

If you do a like-to-like comparison, in Q3 of FY18, our revenues grew 15 per cent. However, due to accounting changes, last year’s base and this year’s base are not the same. Otherwise, we have shown 13 per cent growth on consolidated basis despite our international business not growing as fast as the Indian business, though it’s a small part of our business.

What is dragging your growth in international markets? How do you plan to tackle it?

The bulk of our (international) business comes from the Middle East and the region has been troubled. Markets such as Syria, Yemen and Libya have shut down and we cannot send products there. Even in the Middle East, the UAE is slowing down a bit. Saudi Arabia is also down because of falling oil prices and the localisation drive. There are currency issues in a host of other regions like Nigeria. These are the places where our business is concentrated. Even though we have some amount of business in the US, Canada and parts of southeast Asia, it is not as big as the Middle East business.

Your focus has been to enter one new international market every year. How is your Nepal plan panning out?

Nepal is panning out well. We have bought the land; almost all the clearances are in place. We are only waiting for the environmental clearance. It usually takes one year but we are trying to crunch it. Hopefully, in the next two-three months, we will have it and then we will start setting up the plant. By the year-end, we should be ready for it.

You had laid out three main priorities for the company — driving premiumisation, increasing the distribution footprint and attaining cost leadership in every segment. How is the progress?

The bridge products between biscuits and chocolates that we recently launched are examples of our premiumisation initiatives. Then, we have launched ‘Treat’, which is certainly better than its nearest competitor. There is a pipeline of products. We have reached nearly 1.8 million outlets directly and almost 4.8 million outlets in total, which puts us among the top five FMCG companies in terms of distribution width. This is the reason for us doing exceptionally well in UP -- the only market in the Hindi-speaking belt which has been eluding us in terms of growth— with a nearly 20 per cent growth in Q3.  

You have been pushing for various cost-saving programmes. What are those and where do you stand?

Not only I but the entire organisation believes in it. This year, our cost savings would around Rs 2.3 billion. This is the highest that we have done in a single year. These are basically efficiency programme, for example, savings in terms of transportation, blocking the energy leakage, recipe optimisation and packaging optimisation.

How is the progress of the JV with Chipita (a Greek company)?

We have started to set up a plant in Ranjangaon in Pune, and we should be in the market by October. So, we are looking at Chipita; we are looking dairy investments. Dairy is going to be a big investment for us. We are looking at other areas within macro snacks. But we are not in a hurry, we want to do it deliberately so that we launch one product category every year out of the basket that we already operate in.

What macro snacking categories are you planning to enter?

There are chocolates, then the JV with Chipita is also going to focus on macro snacks. Beyond that, there are numerous other categories – energy bars, sports bars, salty snacks and others. We are evaluating all of those. Wherever it appears a good fit for our business and gives us the right kind of profits and growth, we will get into that.

Apart from Chipita, you are looking at forging a JV in the dairy segment. But your experience on leveraging partnership and JV route had not been great, for example, Fonterra Dairy and then Danone SA. Any comment?

Those are old ones. There are reasons for that. Danone had a biscuit business that they sold while being in partnership with us. Then, they were only in fresh dairy. Fresh dairy business in India is difficult. How are you going to produce in one place and send it all other places with only 10 days of shelf life? In fact, they tried themselves but it did not work. They shut down their fresh dairy business. So once they lost interest in biscuits and sold their biscuits business to Cadburys, there was nothing common between the two companies.