Britannia: Munch on it

The Britannia stock soared nearly 18 per cent in intra-day trades on Monday but settled just three per cent higher at 1468. At these levels, the stock trades at close to14 times estimated 2009-10 earnings and now that the Wadias will have control over the company, seems attractively valued.

While the settlement between the Wadias and Danone could pave the way for Danone setting up shop in India, it’s unlikely Danone would want to compete in the bakery space. It may want to focus more on milk-based products.

Meanwhile, competition in the biscuits segment is only intensifying. Apart from incumbents like Parle and recent entrants such as ITC,retailers, such as AB Retail have launched their own private labels for the category. Of course, it will be a while before organised retailers have the reach needed to sell large volumes. But, regional brands and private labels could take away share in the long run.

Where Britannia can score is in the premium space — brands such as Bourbon and Good Day continue to do well and products such as Nutrichoice and its variants positioned in the health segment too are gaining share. Of course, the popular Tiger brand continues to clock volumes — in the December 2008 quarter, Britannia’s total volumes rose by as much as 13 per cent even though prices had been increased a few months earlier. Also its strategy of selling products across price points is paying off.