Biscuit industry’s sales growth may drop, says Britannia
Continued weak demand, increasing competition were cited as reasons for the trend in company's annual report
Bangalore: Biscuit makers are likely to see a drop in sales growth over the next few quarters due to still-weak demand and increasing competition, according to estimates by Britannia Industries Ltd.
Industry sales growth is likely to fall to 8-10% this fiscal from 12-14% in previous year, Britannia Industries Ltd said in its annual report. The maker of Good Day and Tiger biscuits expects the growth to rise back to 12%-15% over the longer term.
Britannia also said it would launch a “range of differentiated products/packaging for the high margin segments" in biscuits this year.
In its latest annual report, Britannia said that it will invest Rs25-30 crore in various projects to save costs related to energy consumption and use of alternative fuels.
To cut costs, the firm has been increasing the use of biomass, a cheaper alternative to traditional fuels, over the past few years. The company has also been developing improved baking ovens that lead to reduced emission of heat.
Results have improved significantly at Britannia in past four quarters as stabilizing costs of ingredients such as sugar and wheat as well as cost cuts boosted operating margin to roughly 8% for the year ended 31 March from 5.7% in 2012-13.
Sales growth also improved to 11.8% in the year ended March 2014 from 10.2% in the previous year as price increases helped offset weak consumer demand and the company improved and expanded its sales and distribution network.
With biscuit makers such as Parle Products Ltd, ITC Ltd and others continuing to launch new products and increasing distribution at retail outlets, the biscuit industry is showing no signs of becoming less crowded.
Britannia’s new chief executive officer (CEO) Varun Berry has made launching new biscuit brands his top priority. The company has been criticized for failing to come up with a so-called, market-moving product over the past few years. To fix that, Berry invested Rs10 crore in research and development last year and hired Pascal Ville as new head of research and development.
“Now is the time when we really need to look at consumers, see what they require and take them up the value chain by providing some disruptive products with disruptive packaging," Berry said in an interview on 2 June.
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