We are ahead of ITC in creams: Varun Berry

Interview with managing director, Britannia

A day after reporting the best results in its history, Britannia Industries' managing director Varun Berry talks with Arindam Majumder on priorities. On the cards is a move to take on ITC in creams, a segment where it has rapidly lost share to the latter. Also, the much-awaited dairy plans will proceed, beside raising its marketing spending via cricket and films. Edited Excerpts:

Biscuit consumption has taken a hit at the upper end, with tepid consumer sentiment. Britannia, however, has continued to up-trade. What explains your confidence in the upper end of the market when most others appear to be striking a balance between premium and value segment launches?

We dominate the premium end. Seven to eight years ago, ITC came and made some inroads there but we remain the leader. To give you a sense, 15 per cent of our sales come from the value segment; the rest come from the premium end. For ITC, they have 48 per cent coming from the value segment; for Parle, it is 85-90 per cent. It is clear where our priorities lie, based on sales mix.

We are clear that we want to keep growing in the premium segment. No amount of pricing change or trade discounts will help us gain share in the value segment. There are enough and more players operating there. Too much pricing or discount activity could reduce our gross margins in the segment. We don't want that.

But, you have a cushion now, with operating margin at an all-time high of 13 per cent. You can certainly experiment with pricing, right?

No, I don’t think so. If you see, we have grown our operating margin using levers of both volume and price. If we reduce price, that will simply stir up the market and result in a price war. We don't want that.

While you have pipped Parle to become the largest biscuit player in India, the cream segment hasn’t performed that well for you. ITC remains the dominant player there. In cookies, of course, you are the leader.

No, we are the market leaders in the cream segment as well, though we've lost share significantly in the latter. I won't deny that. We were leaders by a huge margin in creams. It is now down to a whisker. But, we still stay ahead of ITC in creams. In the next few months, we will make sure we get our strategy right in creams and get back to where we belong. We will be launching new products in the segment, which I expect will change the game in creams.

Will you rush your dairy plans, now that ITC's entry in imminent?

When you are investing Rs 300 crore in a segment, you can’t be clear in a jiffy. You have to go through a lot of iterations before there is a concrete plan. We are in that stage. Hopefully, we will be clear on the dairy front in the next four months. What we are absolutely clear is that we will not do pouch milk. We will do value-added dairy.

How do you intend to make brand Britannia more visible? Competition for eyeballs and share of voice has only grown in the past few years.

Tell me what works in India? Cricket and films? We had earlier walked away from sports and films. Now, we are getting back to that. We will keep investing behind big properties in these two areas to make ourselves more visible.

What is the company's mandate for its new research and development facility in Bengaluru, given that innovation is a key thrust area for you?

Well, the target is simple — to develop the best quality biscuits at the best price. So, it is going to be a centre for not only biscuits but cakes, rusk, dairy and other adjacent categories. So, it will have a development unit beside a research facility, where we can truly create cutting-edge products. The facility is also next to our plant. So, if we wish to commercialise our creations, that should be easy to do. Investment in the facility is around Rs 45 crore. Hopefully, we will see the benefits of the facility by the fourth quarter of this year.