The rule was simple: Twenty percent of the brands and SKUs (stock keeping units), which contribute to 80 percent of Britannia’s revenue, were put on priority list. For the biggest premium biscuit maker, it was not tough to make the shortlist: Good Day and cream variants, Milk Bikis, Marie Gold, and Nutrichoice. “These are all high throughput varieties,” underlines Berry. The 80:20 formula gave the biscuit maker an instant advantage on four fronts: It streamlined productivity gave more flexibility in manufacturing capacities resulted in ensuring efficiencies in factories and distance travelled by the products and brought laser-sharp focus in execution.
The results showed, and how. In the April-June quarter, Britannia posted revenue of ₹3,384 crore, a spike of 26 percent over a year ago. Operating profit surged to ₹669 crore, a jump of 91 percent and profit after tax (PAT) zoomed by 118 percent to ₹546 crore. Berry attributes the success to his team. “It was a big challenge, but they did a fantastic job and got us ahead of the pack,” he says, adding that bread and rusk—which come under the adjacent business of Britannia—grew faster than biscuits. “Within dairy, cheese was fantastic during this period,” he says. Rolling out a new campaign on cheese with Bollywood actor Saif Ali Khan, Berry lets on, gave the brand a good momentum. “That’s the story of the first quarter,” says the FMCG veteran, who joined Britannia in 2013 as chief operating officer.
From just 7,000 RPDs in March 2015, just a year into his stint as MD, Berry took the figure to 19,000 in March 2020. Along with going deeper into the hinterland, Berry deployed a slew of other ammunition: Direct telesales, SMS blasts, distributor points’ pickup, retailer survey and digital campaigns. Expanding its footprint in urban India, which gives 62 percent of revenue to Britannia, was equally impressive. Direct reach to retailers was increased from 19.7 lakh in March to 21.5 lakh in June.
Starting factories early, even before the unlock phase began, gave Britannia a headstart. It ramped up volumes, improved productivity, and added new capacities through contract packers. In terms of distribution, it started direct sales from factories to cut the transit time. Optimising marketing efforts, Berry explains, was made possible because the company didn’t have enough products to put into the market. The company, he adds, maintained its focus on five strategic planks: Distribution, marketing, innovation, cost focus and developing adjacent businesses. But what’s most striking about Britannia under Berry is the way he has improved profitability. While operating profit margins have jumped from 5.7 percent in fiscal 2013 to 14.5 percent in fiscal 2020, PAT margins have leapfrogged from 4.2 percent to 12.3 percent during the same period.
An aggressive Britannia taking on rival Parle head-on in the Hindi heartland is another area where Berry scored high. “He knew Parle was extremely strong in rural areas,” says Roy. The strategy, therefore, was to go deeper into the hinterland. The move has worked. The four hitherto weak Hindi-belt states for Britannia—Uttar Pradesh (UP), Rajasthan, Gujarat, and Madhya Pradesh—have grown at a CAGR of 16 percent between 2017 and March 2020. In fact, UP has become the second biggest state for the biscuit maker. Robust performance in the Hindi belt has resulted in Britannia increasing its overall value market share over its closest rival in the last two years. While in FY18, Britannia had a 30.8 percent share, Parle was close on its heels with 29.1 percent, according to the industry executives quoting Nielsen market numbers. In FY20, the gap has increased to five percentage points (see box). Britannia, underlines Roy, is a transformed company under Berry.
Meanwhile, Berry focussed on the basics. He invested in the R&D centre, doubled down on premium products and cakes, pushed direct reach and distribution, tried to understand the needs of the youth, and started venturing into new categories—rusks, croissants, milkshakes, salty snacks and wafers. Over the last two years, the contribution of new products to revenue was between 4 percent and 6.5 percent. The idea was to transform the predominantly biscuits company into an FMCG player. “Britannia has a vision of becoming a global total foods company,” says N Venkataraman, CFO at Britannia. The company entered into four new categories during 2019-20. These, along with others in the pipeline, will become the growth engines for the company in the coming years, he adds.
Salty snacks, a massive but highly competitive segment, is another category that Britannia is taking a stab at. Berry points out the category potential: ₹25,000 crore. “Though the segment we are operating is ₹8,000 crore,” he says, adding that the company has been doing pilots in two set of markets: One dominated by branded players, and the other peppered with local players.
Brand strategists question the move to transform into a foods company. “The category of biscuits is huge. There is no need to become a foods company,” says Harish Bijoor, who runs an eponymous consulting firm. If one puts one head deeper into biscuits, he lets on, one will see how humungous the category is. While the branded biscuit market is an estimated ₹37,000 crore, there is a massive opportunity to eat into the large unorganised market. Britannia’s singular focus on premium cookies exposes its underbelly: Lack of gusto in the mass glucose category. Britannia, he stresses, should stick to the knitting. “Just because you have a savvy distribution system in place does not mean that you must put all kinds of things into it to carry,” he contends.
Berry is sticking to the vision and goal of transforming Britannia into a total foods company. “The dream is to keep increasing biscuits to whatever extent possible and to keep getting the icing on the cake through other categories,” he says The trick, he adds, is to ensure that biscuit growth is not hampered. Biscuits are still the fastest growing category. The contribution (of biscuits to revenue) at some stage will start to fall as the dairy and cake momentum starts to pick up, he adds.
For the time being it’s 80:20 for the maker of the 50-50 biscuit brand.
First Published: Aug 31, 2020, 10:34
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