Britannia sees a clear slowdown in rural markets, says Varun Berry

There is a clear slowdown in rural, Britannia Industries Chairman and Managing Director Varun Berry said on Thursday. 

“However, these are macro issues which companies like us cannot sort out. We continue to go on our agenda of building distribution because we know that while we’ve had a weak monsoon and the agriculture economy has not been the greatest this year, we know that this will come back and when it comes back, we will benefit from that,” Berry told investors after announcing the results.  Urbanisation is on the rise and urban, as a percentage or contribution, to the overall economy, has been growing, he said adding that it bodes well for the company with a strong urban presence. The company’s market share is 1.3 times greater and its distribution is 1.2 times more in urban India than in rural areas.

“If you were to take the last two or three years, it's gone up pretty substantially. And so, that's good for us because we have predominantly been urban distributed, a stronger urban company,” said Berry. 

“However, for us, the growth in the last, let's say, 10 years has been much faster in rural because we've been gaining more distribution and making our presence felt in more villages and smaller towns,” he added.  The maker of GoodDay biscuits, which enjoys penetration in households of about 94 per cent in biscuits, also sees potential for growth in other categories. Berry said the consumption of biscuits in India is low and the company has the potential to grow. 

“It's going to be a consumption-led growth here. And if you were to look at it by categories while there are categories like Glucose, Marie and some of our cookies which have got reasonably high penetration between 40 per cent to 60 per cent, there are lots of categories where we have less than 20 per cent penetration in households,” he said. “There are other categories like cakes, dairy, drinks, wafers, cheese, croissants, where you notice that the penetration into households is very, very low. 

And there, we will be looking at a penetration-led growth,” he said. 

On the cost efficiencies front, he pointed out that it has been a strong pillar for the company’s profit growth.

“We have had more than Rs 2,000 crore of cost reduction during this period. And that continues to be a pillar for us even in the future,” Berry said. 

He also said that the company is rapidly evolving in digital marketing and is leveraging digital in e-commerce.

“We are leveraging all of the digitisation that we've done internally to make sure that we have all the data for us to take very intelligent decisions,” he noted. 

The company had resorted to increasing prices when commodity costs were up till about the last six months but as commodity costs fell, it has taken a price cut of 1.5 per cent. When commodity costs were up, the biscuits major had taken a cumulative price increase of about 22-23 per cent.