Britannia is one of those companies that has had a long headstart in the retail market, established as it was in 1892 in Kolkata. As a result, name recognition for customers is not an issue on an increasingly crowded supermarket shelf. The company has spent 100 years as a public limited firm, with its product basket laden with bread, cake, rusk, dairy products such as cheese, butter, milkshakes, and so on.
Biscuits remain the heart and soul of the company, contributing 75% of its total revenues with popular brands, Tiger, Milk Bikis, Good Day, NutriChoice Digestive, MarieGold and the latest entrant Deuce making it the largest bakery brand in India. The company crossed the Rs.10,000 crore revenue mark in March this year, selling 100 crore packs every month. It has 5 million outlets and 80 factories with a presence in 60 countries.
- Britannia with its Tiger, Milk Bikis, Good Day, NutriChoice Digestive, MarieGold and Deuce is a major premium market player.
- Britannia crossed Rs.10,000 cr revenue mark in March this year, sells 100 crore packs every month, has 5 million outlets and 80 factories with presence in 60 countries.
- Britannia has been on a consistent growth ride with a CAGR of 31% and 29% for PAT and EBDITA respectively over the past five years, since the change in its management
- The operating margins have been strong, doubling over the past five years, from 7% in 2013 to 15% in the year 2018.
- Britannia has entered the wafer segment and is set to launch milkshakes, dairy whitener and croissants
September Quarterly Performance
- The September quarter results came with double digit growth baked into every parameter. The firm saw 12% volume growth and a rich product mix, and revenue grew 13% both YoY and sequentially at Rs. 2870 crore followed by operating profit moving up at 20% YoY and 17% on quarterly basis.
- The operating profit for the firm came out at Rs. 454 crore with a margin of 15.83%, an almost a 100 basis point jump YoY and 52 basis point sequentially. Controlled finance and depreciation costs led to a steady bottom-line as PAT was reported at Rs. 303 cr rising 17% QoQ and just a tad lower at 16.18% on yearly basis.
- The Britannia top management noted that strong quarterly growth was driven by new launches during the quarter, and Mundra facility cost advantage. The Britannia MD Mr. Varun Berry further added that Britannia over the years “has attained a competitive edge mainly due to its strong brand, growing distribution network, R&D, supply chain and tight cost control.”
A turnaround from stagnating revenue
- Parle Products with its legendary Parle G is the undisputed king of biscuits, still ruling more than half of the glucose biscuit market. Britannia with its Tiger Glucose presence is a major premium market player and stands out with its strong branding, supreme taste and premium pricing.
- Next in line here is ITC with its Sunfeast brand giving stiff competition to Britannia in its ‘Marie’ and latest entrant ‘Bounce’ in cream biscuit category. But it’s not just three to tango and the industry is home now to about more than 400 biscuit manufacturers with Priya Gold, UNIBIC, Kraft Foods, Dukes and Cremica in the top ten.
- With revenues stagnating by 2010-11, realization dawned within Britannia that growth would not coming easy with such stiff competition along with rising raw material costs and high inflation. Things took a turn for the better from 2013 with a change in top management and since then there has been a shift in growth. Britannia has been on a consistent growth ride over the past five years crossing Rs. 10,000 crore top line mark in March 2018 with a CAGR of 31% and 29% for PAT and EBDITA respectively.
- The operating margins have been impressive, doubling over the past five years, from 7% in 2013 to 15% in the year 2018. This growth momentum has been achieved on the back of a strong distribution network, recovery in a weak north Indian market, brand consolidation, product re-launches and innovation and cost efficiency programs.
Britannia – A ‘Total Foods’ Company?
- It’s just not biscuits – the oven baked ‘Bread’ in 1954 and Britannia Bread is currently, the largest brand in the organized bread market with a turnover of more than Rs.400 cr annually producing over 1 lakh tons in volume. Britannia Cake entered the baking list in 1963 and then came the Dairy diversification in 1997.
- Around 5% of revenues come from Dairy products with cheese, butter, ghee, yogurt as its major offerings with the upcoming dairy whitener and tetra packed milk shakes to be launched in December quarter. Britannia holds the runner-up position in Cheese available in 14 varieties and the company just has entered wafer segment which as per Britannia MD, Varun Berry is a “completely unexploited market in India” with a size of about Rs.400-500 crores.
The next new entrant by the end of this year is going to be the ‘Britchip’, a croissant through joint venture with Greek company Chipita. It fulfills according to the firm, Britannia’s re branded theme of both nutrition and goodness with indulgent recipes. Britannia after achieving consistent growth over the past five years aims to move on the path of being a ‘Total Foods Company’ and entering uncharted segments like ready to eat breakfast and becoming an end to end macro snack company with pan India presence in the years to come.
The stock has been making higher tops and higher bottoms on the weekly charts an indication that the intermediate trend of the stock is intact. The run in the stock halted at 3400 levels from where the stock got a severe beating. The bear candle right at the top has put the entire bull run under suspicion. The bear candle at the top is the first sign of change in trend. The fall from the highs halted at the Fibonacci confluence zone of 2630-2658 from where the stock has rallied to 3200 odd levels. The bears have again started to gain control and if this becomes a lower high the entire bull trend could be in jeopardy. Therefore the bull trend in the stock is still intact as the higher high and higher low formation is intact.
The stock has still not broken the trend line. The current correction halted at 38.2% of Fibonacci retracement and hence that’s an indication of strength. Therefore the up trend in the stock is intact but some early indication of bears taking control makes me a bit circumspect.