Britannia foresees poor industry profitability

Britannia Industries, the maker of popular biscuits and dairy products such as Good Day, 50:50 and Little Hearts, said the rising prices of wheat and milk would adversely impact the food industry's profitability in the current financial year.

A top company executive said wheat prices have gone up significantly compared with last year. The price of milk is also on the rise.

"These developments are bound to affect the profits of the entire industry, as the input prices have gone up. This is also forcing companies to revise the prices of their products," Britannia Industries Managing Director Vinita Bali said.

However Britannia, which requires "thousands of tonnes" of wheat for its products, is poised to grow this year irrespective of the price fluctuation, according to Bali.

"We had an impressive top line last financial year (28 per cent growth at Rs 2,199 crore). We are investing on infrastructure and introducing new products periodically, through innovation. We will continue this approach," she added.

India, the second largest consumer of wheat, is expected to produce 73.7 million tonnes this year. But that may not be sufficient. Consequently, the Union government has proposed to purchase 2 million metric tonnes of wheat by the month-end.

The only hope is the recent report indicating a possible decline in wheat prices. "The price may come down as the Indian government is planning imports of wheat and the harvest season is in progress. Companies have a chance to improve their margins," Bali stated.

As part of its initiatives, Britannia has selected Hewlett-Packard India to implement a comprehensive IT outsourcing and transforming project, including infrastructure solutions, SAP application services, consulting and outsourced services. The agreement is initially for a period of three years. However, the financial details were not revealed.

HP India Managing Director Balu Doraisamy said the Britannia contract would enable the Indian subsidiary of the $97-billion global IT major to extend its service offerings to a new vertical (food business) and leverage its worldwide expertise to make the differentiation.