Britannia packs shrink on high input cost

Faced with increased input cost pressures, biscuit maker Britannia has reduced the pack sizes of some of its best selling brands. The weight of some of the stock keeping units of Good Day and Marie Gold has been pruned.

In Good Day's case, its variants (cashew, butter and badam pista) has been reduced from 100 gm to 90 gm while the price has been maintained at Rs 12, 10 and 13 respectively. Similarly, for Marie Gold, the pack sizes have been reduced to 95 and 188 gms from 100 gms and 200 gms respectively.

In comparison, the competition has held on to its pack size. A 200 gm pack of Parle Marie is priced at Rs 12, the same price point as the 188 gms pack of Britannia Marie Gold.

Last year, the company had adopted a similar strategy for its glucose biscuit brand Tiger where it maintained the price point, but reduced the pack size.

In response to a questionnaire, Vinita Bali, managing director, Britannia Industries, said that the revision has been done "to make the company's brands available and affordable for consumers across a diversity of packs and price points".

Analysts point out that with biscuits being a price sensitive category, price hikes were not a preferred option. "In a competitive category like this then, reducing the pack sizes is the next best alternative," said a Mumbai-based FMCG analyst. The biscuit industry has been reeling under input cost pressures over the past year.

"A 10 per cent reduction in size is equivalent to 10 per cent increase in sales," he added. The new pack sizes were rolled out in January and are likely to reflect in the fourth quarter results of the company.

Commenting upon the expected impact, Bali said, "There will be a positive impact on both topline and bottomline."

For the quarter ended December 31, 2006, Britannia posted 26.12 per cent increase in net sales at Rs 567 crore, but profit after tax declined by 94.02 per cent to Rs 20.1 crore. "Unprecedented and inordinate inflation in all inputs, 35 -40 per cent in dairy products and 15 - 20 per cent in key raw materials like wheat, edible oils etc, impacted margins. Biscuit prices to the consumer have remained static for the last 5-6 year," the company had said at the time of the quarterly results.

Bali added that pricing was a dynamic variable and that the company would review its mix including pricing on an ongoing basis. She also didn't rule out undertaking a similar step for other brands in the future.