 "Britannia's new MD continues overhaul of key management team")
Varun Berry, who took charge as the managing director of Britannia Industries in April this year, is continuing to make key changes in his core management team. As part of the overhaul, Berry recently roped in Sudhir Nema to lead the research and development (R&D) and quality wing at Britannia Industries, who will also be responsible to drive the company’s innovation agenda and quality assurance. Nema replaces Pascal Ville, who has taken on a position as a consultant for R&D at Britannia.
The company, which has in the past four quarters seen sturdy growth, recently indicated to investors that it is planning new innovations in its product line, by strengthening foundation and building innovation funnel. Nema joins from PepsiCo Asia Pacific, Bangkok where he was director - operational excellence and capability building. Berry, too, joined Britannia from PepsiCo during January 2013. This move to strengthen the innovation team comes at a time when there seems to be an apprehension in the minds of investors about the clarity of innovation pipeline from Britannnia.
The recent appointment of Nema comes closely after Berry roped in Hemant Rupani as vice-president to lead sales. Rupani had also earlier worked with PepsiCo besides various other companies in consumer goods, consulting, and telecom including a stint with Vodafone where he was vice-president (distribution). In addition to this two key hires, Berry had earlier elevated Manjunath Desai as vice-president (strategy and business development) from his earlier role of head of marketing services at Britannia Industries.
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Ever since Berry came on board as chief operating officer during January 2013 and was part of on an organised transition that culminated in his being made the managing director replacing Vinita Bali, who spent eight years leading the company, Britannia has seen exits of key resources including Neeraj Chandra, who was chief operating officer and recently Anuradha Narasimhan, who was vicepresident (marketing).
Berry has been working extensively to drive innovation and drive in efficiencies and spruce up the entire system to deliver more value. Berry, who recently chaired his first annual general meeting along with Wadia Group and Britannia Industries chairman Nusli Wadia, said: “Our team of passionate Britannians is creating a solid infrastructure and culture to take the business to new heights. Our approach is to build each element of the business block by block.”
Britannia, for the first quarter of FY15, had reported a healthy 35 per cent growth in net profit to Rs 114 crore on revenues of Rs 1,773 crore, which grew by 15 per cent. While the profit after tax margin improved 59 basis points (bps) on a year-on-year basis, the earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin improved by 61 bps.
Britannia under Berry has articulated a strong go-to-market strategy, supply chain productivity and efficiency, cost leadership, and brand & innovation as the key focus areas to drive growth. As part of this strategy, Britannia has empowered its personnel with larger roles with increased span of control, leaner and accountable teams, and more cross-functional projects. The company has also driven expansion of its reach by increasing the depth of distribution in urban areas by about 25 per cent, while parallely increasing the rural reach by about 20 per cent.
Barclays Equity Research analysts in their recent report said that Britannia’s stock has a potential upside of 18 per cent. “We see Britannia as a proxy to India’s snack consumption market with healthy medium-term growth catalysts. We expect innovation and premiumisation (as Britannia plans to focus on launches in the top-end segment of the biscuit category) to drive near-term growth, which underpins our 16 per cent revenue CAGR (compounded annual growth rate) forecast over FY14-16E. Furthermore, volume growth expansion in rural areas driven by distribution expansion should provide incremental volume additions,” Barclays said in the note.
On the risk side, Barclays said this target of 18 per cent upside in stock price may be hemmed in if there is less-than-anticipated success for premium biscuit launches as approximately 60 per cent of Britannia revenues are currently from urban segments.
“ITC Foods challenges need to tackled effectively as well for success of Britannia in the premium category and any returns-dilutive M&A (merger and acquisition) in international markets,” Barclays analysts noted.