Britannia Industries reports strong demand growth in rural and urban markets
Britannia Industries witnessed a surge in demand across both rural and urban markets, with the Hindi belt showing exceptional growth, leading to market share gains. The company is restructuring its distribution network and focusing on rural markets, while also seeing significant contributions from quick commerce for innovative products.
ETMarkets.com Biscuit major Britannia Industries' managing director Varun Berry said there has been an uptick in demand across both rural and urban markets. The company's growth rate in rural India was in double digits in the April-June quarter, while in urban it was 'very high single digits' including general trade, retail chains and e-commerce, he said.Talking to analysts during the company's first quarter earnings call on Wednesday, Berry said the Hindi belt has been 'really good' this quarter with four states growing in very high double digits. He did not specify which four states. The Hindi belt typically includes markets like Bihar, Haryana, Jharkhand, Chhattisgarh, Himachal Pradesh, Uttar Pradesh, Rajasthan, Madhya Pradesh and the National Capital Region.'The growth (in Hindi belt) is 2.7 times of what it was for our other states. This led to a market share gain of 65 basis points (bps) during Q1 in the Hindi states,' Berry said.
A basis point is a hundredth of a percentage point. Britannia has improved its market share in the Hindi belt where it gained market share in some regions.
The optimism in demand for daily necessities such as biscuits comes after more than 12-13 quarters with consumption impacted for a prolonged period due to high inflation in daily lives amidst marginal to little growth of earnings for the vast majority of the people.While rural areas showed some early signs of demand recovery in the last 1-2 quarters, this is the first time there is definitive sign of urban demand recovery.As per latest government data, India's food inflation in June is -1.06% as compared to last year's same period due to lower prices of vegetables, pulses, meat and fish, cereals, sugar, confectionery, milk and dairy products, and spices.Britannia is restructuring its distribution by creating larger distributors which impacted the performance in the East where several regional players ate into its market share.'We are focussing on our rural markets by focussing on our distributors, where we are planning to take our distributors to full scale distributors, as when they become full scale distributors, it becomes even better,' said Berry. He said the local players in East benefitted a bit from the company stumbling there.Britannia's chief commercial officer Vipin Kataria said out of the total digital commerce business, almost 75% is from quick commerce. Total digital commerce is 4% of its overall business.'The category is very salient in quick comm, so that is how the entire ratio is changing… Our innovative products, like for croissants almost 35% of the sales is coming from ecommerce, the Pure Magic star that we recently launched, almost half of that sale is coming from quick commerce, and similarly for brownie and other innovations,' said Kataria.Berry said the adjacency business for the company is doing well -- rusk grew double digit with improvement in profits, wafers grew 2.7 times of biscuits, and 40% growth in general trade for dairy.Britannia on Tuesday reported a marginal 0.8% year-on-year (yoy) drop in standalone net profit at Rs 498.27 crore for the first quarter ending June 30th, while standalone revenue from operations grew 8.8% yoy at Rs 4,452.74 crore.
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