Mulls raising prices across products to offset rise in input costs.
Britannia Industries, the country’s biggest biscuit-maker partly owned by Groupe Danone, may close some more of its manufacturing facilities and raise prices of its products to offset the rise in input costs.
Britannia is focusing on product innovation and marketing, and outsourcing more of its biscuit-making to boost profit margins. The company suspended its Chennai factory operations, which has a capacity of 1,000 tonnes per month, on April 7, 2008 and diverted the production to other locations or outsourced. The company is now offering severance packages to 200 of its employees of this factory.
Britannia has been producing 48,000 tonnes every month, out of which 40,000 tonnes of production is outsourced.
The Bangalore-based company, which reported sales growth of 20.2 per cent for the quarter ended June 30, 2008, said it aims to cut operating costs by at least 2 per cent this year. And this, the company said, will be brought about by suspending work at a few factories, reducing logistic costs, boosting energy efficiency and improving on technologies.
The biscuit major, which commands a 34 per cent market share, is contemplating hiking prices across its brands to deal with rising input cost pressure.
Addressing the shareholders at the company’s 89th annual general meeting in Kolkata, its chairman Nusli Wadia said with the increase in prices of wheat, flour and edible oil, the company will look at passing the cost pressure to the consumers.
Wheat prices have risen by 20 per cent this year, while sugar has jumped 10 per cent and edible oil 30 per cent. The company will also look at inventory management to cut costs.
“The company may show moderate growth in 2008-09 for biscuits,” Wadia said.
The company is also focusing on innovation and product diversification to push sales, according to Britannia chief financial officer (CFO) Durgesh Mehta. The biscuit-maker aims to strengthen its bread, cake and rusk portfolio with the re-launch of ‘Breads’.
In 2008-09, the company plans to invest between Rs 75 crore and Rs 100 crore in equipment, capacity expansion and new products among others. It has already invested Rs 200 crore in the last 18 months.
“This year the investments are going to be lower because we have already invested in technologies and upgradation,” Mehta explained.
Britannia, meanwhile, is raising its holding in contract manufacturing firms with Wadia purchasing an additional 1.08 lakh shares in one of the biggest contract manufacturers, Ganges Vally Foods. Ganges Vally is a joint venture between Britannia and Chandan Basu, the son of former Bengal chief minister Jyoti Basu. The new shares were bought at a premium of over Rs 40 per share.
