On the back of a good product mix and reduction in operational cost, Britannia bounced back to higher profitability after witnessing a decline in net profit in the first two quarters of the current financial year. Managing Director Vinita Bali spoke to Debasis Mohapatra about the prospects and concerns of the eatables’ company. Edited excerpts:
What are the factors for increase in profitability of Britannia in the third quarter after a decline in the first two quarters of the 2010-11?
Two major things have contributed towards our profitability — first, we are increasing our product mix which contributes positively towards our revenue. So, our top line has shown a growth rate of 22 per cent during this period. On the cost side, we have aggressively reduced these in all forms in the last two quarters and it started showing results in this quarter. Due to these initiatives, operating margin expanded by 70 basis points during this period.
How much operational cost has been slashed and how did it translate to Britannia's operating margin?
The numbers will be published in our annual accounts soon, hence I can't give them. However, rate of reduction of operating cost has doubled in the third quarter. We have to also acknowledge that this result has been delivered despite inflationary pressure and high commodity prices. While our cost to goods sold have risen to 66.5 per cent in the third quarter from 64 per cent a year earlier, we managed to increase our operating margin by 70 basis points.
Raw material expenditure for Britannia has increased by 28 per cent year-on-year basis. What's your outlook on the commodity prices in the near future?
It's very difficult to predict commodity prices as it has defied all laws of economics in the recent past. Prices of all key ingredients like sugar and wheat among others have gone up when it is expected to fall during this period. On a consolidated basis, commodity cost for Britannia has gone up by Rs 20 crore in the third quarter.
How are Britannia’s seven power brands performing?
Without the support of our seven power brands, we can't grow at this rate. All our power brands have witnessed a growth rate over 20 per cent in the recent past and will keep this momentum in the near future. Also, our new products such as Nutrichoice have supported this trend due to their high margin returns. Our differentiated product category, at present, contributes to 40 per cent to our total revenue. The dairy section is also witnessing double digit growth rate.
You have recently launched products in the ready-to-eat breakfast mixes category along with Time Pass in the snacks segment. What is your plan in these new segments and what will be the future revenue flow from these?
We think our products have a distinct differentiating quality compared to other available products. We also don’t think the space is crowded in comparison to 300 biscuit brands and three to four big companies in salty snacks category. As far as revenue is concerned, we have to wait for two to three quarters before giving any revenue estimate.
How is your overseas operation performing?
Overseas is doing well and the third quarter was good for our overseas operation. Our West Asia operation has witnessed sound growth in this period. Also, these products are available in the large format stores in India. As far as operation in Sri Lanka is concerned, we are exporting there like we do in 30-35 other nations.
