Businesses optimistic on demand, climatic factors a concern: Britannia

Businesses in India are optimistic on demand conditions despite apprehensions about global recession though challenges from a shortfall in monsoon due to 'El Nino' conditions still persist, said leading bakery and food company Britannia Industries.

The trajectory of inflation during FY24 would depend on a host of domestic and global factors, said Britannia Industries in its latest annual report.

"The outlook for the food prices and rural growth would depend significantly on climatic factors and adequacy of monsoon rainfall," it said.

Any shortfall in monsoon due to the 'El Nino' conditions as forecasted, would also have a higher impact on rural consumption and the Indian economy as a whole.

"Availability and prices of input materials like wheat, sugar, milk and edible oil could be affected, thereby posing severe risks to the business growth," it said.

According to Britannia Industries, makers of popular brands such as Good Day, Tiger, NutriChoice, Milk Bikis, and Marie Gold, milk prices are expected to remain high on account of high input costs and good demand.

"Prices of other essential inputs like wheat, sugar, edible oil and fuel continue to be subject to high uncertainty. However, it is expected that a good crop would help keep prices in check and strengthen rural demand," it said.

Besides, the government's thrust on capital expenditure and private sector manufacturing and service activity should also support income generation and bolster economic activities.

"Despite the challenges of inflation, commodity volatility and intense competition, your company expects to continue its good performance on the strength of its resourceful and hardworking employees, strong brands, innovative products, cost efficiency programmes and large distribution network. These factors would continue to fuel further growth and expansion during these turbulent times," it said.

In FY23, the major challenge confronting the food industry was managing inflation in the cost of key commodities like wheat, milk, sugar, palm oil and crude oil, all of which were trading at multi-year high prices, said Britannia.

However, it successfully navigated these challenging circumstances through focused efforts, cost-efficiency programmes, brand marketing and timely price increases, it added.

While talking about segment opportunities, Britannia said for biscuits sector household penetration, the potential for growth in this category is immense.

"The per capita consumption of biscuits in India continues to lag behind the levels seen in developed countries. The possibilities for increasing consumption through innovative, healthy and superior offerings in this category are numerous, which augurs well for your company in view of the established brands and capabilities," it added.

Similarly, for cake, like biscuits is not well penetrated, exists a significant opportunity to expand but high commodity inflation and concentration of innovation at entry-level price points remain a primary challenge for the category.

In bread, there are significant opportunities in newer geographies but increasing competition and continued inflation in key commodities pose challenges to the company's business, said Britannia Industries.