Britannia may have sold more biscuits during the covid-19 lockdown than ever before — the earnings may reflect that
- Britannia share price surged almost 38% as investors expect strong growth from the company.
- The estimated 18% to 23% growth in April-June 2020 revenue is better than the company’s previous record.
- The Wadias-owned company makes 80% of its revenue from biscuits but it is also increasing its market share in a key essential product: milk.
This growth rate is impressive not just because it is better than most other companies, this is also better than Britannia’s record before the pandemic. The fact that people were hoarding easily consumable items like biscuits led to a spike in sales. Axis Capital and Sharekhan expect the profit to grow in excess of 50%.
And that is the reason why the stock has run up 38% since March 31 until now as investors expect a blockbuster earnings from the company that makes 80% of its revenue from biscuits.
*as of July 15 3:30 pm
|Stocks||Change since March 31|
It is not just that people wanted to stock up on biscuits but the company ensured it reached everyone who wanted it
Britannia Industries is already known to be eating into ParleG’s market share for a long time now. According to Motilal Oswal, its large brands like Good Day, Milk Bikis and Marie Gold have employed localized strategies to meet the unique needs of different markets and fight local players.
It has also partnered with Swiggy, Dunzo and retailers to sell directly to consumers outside the big cities.
“The company has created a strategy to win in ‘Many Indias’ in order to grow the biscuits business,” said Motilal Oswal report.
Not relying on biscuits alone
Britannia makes nearly 80% of its revenue from biscuits. That is likely to change as the company wants to expand the ‘non-biscuits’ segment. It has plans to make it contribute up to 50% of revenue in the next five years.
The company is also increasing its dairy market share. It has scaled up the milk procurement in Ranjangaon, Maharashtra up to 25,000 liters/day from 1,000 farmers. Its ‘Cream wafers’ is now ₹70 billion category and is growing at a healthy pace, the report said.
Britannia also wants to add 200,000 to 300,000 outlets every year targeting rural consumers. It currently has a reach of 2.2 million outlets and about ₹200 crore to ₹300 crore to spend on increasing this reach.
New product launches
According to Motilal Oswal, the reason behind Britannia’s great market penetration can also be the range of products including Britannia Treat Burst, Britannia Treat Stars and Britannia 50-50 Jeera, Treat-Tiramisu and Red Velvet and Little Hearts Strawberry that it launched last year.
It also re-launched Good Day biscuits, the most popular brand of the company, and NutriChoice Cream Crackers, NutriChoice Thin Arrowroot with an improved product mix, visual product differentiation.
New categories introduced over the past few years, now contribute 2% of sales, which is encouraging, the report said.
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