Regional players eye Britannia's turf

The biscuit market is seeing the emergence of regional players like Priya Gold and Ceylon Biscuits. This will put market leader Britannia under severe pressure as it will seek to defend its market share in the new year.

While Priya Gold is stepping up its presence in the traditional southern markets, Ceylon Biscuits is upping its presence across the country after initially registering its presence in the south.

Said an investment analyst at a leading brokerage on Britannia's future: "The biscuit segment is now infested with manufacturers and marketers and growth will definitely be an issue. There are lot of good moves which Britannia has played out in the marketplace, but as we see it, intensifying competition will squeeze sales and restrict marketshare. Compounding this is the fact of Britannia's lack of forays into fresh categories." Britannia is unavailable for comment.

Commenting on the moves being planned by the competition, the analyst said: "With Priya Gold and others entering southern markets, once Britannia's stronghold, competition in biscuits is hotting up. ITC too has stepped up its efforts in this segment by muscling into sub-segments. Most of the new entrants have not only matched Britannia's innovation, but have also done the same at lower prices. This, coupled with the entry of fresh ones, such as Ceylon Biscuits, could pinch sales."

Britannia in the recent past has fought back with relaunches of some of its brands. In an effort to improve its margins, it recently hiked the price of its best-selling Tiger biscuits by 17 per cent for 100 gms.

"Assuming that 35 per cent of its turnover comes from this brand, a 50 paise hike would lead to a further Rs 11 crore increase in net profit," the analyst noted. Industry sources foresee the company reviewing its pricing strategy for select categories to make them more affordable.

The biscuits industry itself have bucked the slide in the FMCG market and has grown at an average of 10-12 per cent in the last two years mainly on the strength of volumes.

Britannia, with a 44 per cent marketshare, has captured some of this growth with its topline rising by 11 per cent to Rs 1,439 crore in 2003-04. "In the months ahead, we expect the market to grow at 12 per cent following fresh launches and affordable prices," he added.

Britannia, in addition to its marketing strategies, is also bolstering its net margin by various other measures. It is setting up a unit at Uttaranchal which will be operational during 2006-07 and enjoy excise and other tax exemptions for 10 years "resulting in a net savings of Rs 18 crore".

The company is also selling its plant at Mazgaon in Mumbai and apart from the one-time benefit from the sale, it has also benefitted from relocating production elsewhere, the analyst noted.