Britannia says consumer demand still sluggish
May 24, 2016
Company generates a majority of its revenue from biscuits, followed by the bakery and dairy segments
"Within our category, FMCG (fast moving consumer goods), demand is a little sluggish. We are talking about Rs 5-Rs 30 products. If demand is sluggish for these, it says volumes of how consumers feel,â€ said Varun Berry, managing director. "It doesn't feel like a 7.5 per cent (annual) growth economy. Demand is slowing for many, many quarters. There is obviously more money in consumer pockets but the optimism is not there.â€
Britannia, based in this city, generates a majority of its revenue from biscuits, followed by the bakery and dairy segments. The stock closed on Monday at Rs 2,680.95, down 8.6 per cent, on the BSE exchange.
To offset slowdown in demand, it says it is trying to optimise costs and build its distribution network in rural India. And, increasing the focus on premium products, a low-volume segment where companies are seeing double-digit growth across businesses.
"If you look at the trends. while the overall demand is going down to lower single digits in theplast three to four years, in every FMCG category, the sale of premium product portions is increasing," says Berry.
He says there is a shift in consumption habits of Indians, who seek better products at competitive prices while rejecting stripped-own ones.
"I don't think people will find it through the Nokia way of a cheap phone with no features. Everyone was clamouring for slightly more expensive and all-feature phones. That is a trend we ought to watch and are able to cater to through our premium products," he says.
It expects government measures to improve rural economy would take time to trickle down and reflect in business growth. "It is best to remain fittest in these times. The wave will turn; this is too big an economy to remain in a slump situation forever. The wave will turn and only the fittest will ride the wave," says Berry.
Britannia is present in most segments of the biscuit category and says it is building a strategy to expand the dairy and parts of the bakery business in the coming years. "We have been able to beat competition in one category. There could be competitors who would have got into multiple categories. Now, versus them, we are like Coca-Cola; we have one big brand and have done a lot of focus on that. Having said that, we are at a time to look a little wider, do it in a more measurable way,â€ says Berry.