6 days ago
After a turbulent FY25, Britannia expects commodity prices to stabilise going forward
New Delhi: Packaged foods company Britannia Industries does not anticipate "wide fluctuations" in commodity prices going forward. Executive vice chairman, managing director, and chief executive officer Varun Berry said the price outlook for commodities should be "quite stable".
The outlook is driving consumption in core categories and remains one of the primary agendas for the company, Berry said during the company's earnings call on Wednesday. 'We are closely monitoring policy interventions and the harvest output, which impact commodity prices and also will be a very critical thing for us.'
"But having said that, I think from hereon we do not see the kind of wide fluctuations that we've seen on commodity, and we always perform much better in stable conditions during the turbulence in commodity prices, like what we've seen in the last two years…we have covered most of our inflation in through our price increases. We are done with that, and we are in a good position today
On Tuesday, the maker of Marie Gold and Tiger biscuits reported a consolidated net profit of ₹ 520 crore for the June quarter, up 3.17% year-on-year. It was, however, lower than analysts' estimates of ₹ 570 crore.
Consolidated revenue from operations during the quarter grew 8.75% to ₹ 4,622 crore. Operating margins for the company fell 135 basis points year-on-year due to inflation in key raw materials and higher employee benefit expenses.
Britannia's shares dropped 4.5% on the National Stock Exchange to ₹ 5,385.00 on Wednesday following the results.
On the commodity front, Berry said that the company saw a "stable quarter" after a very turbulent FY25. While flour prices are still up 8% year-on-year, they are trending downwards sequentially. Sugar prices were up 3% year-on-year.
'Palm oil while sequentially it's been negative but versus the same quarter last year we've had an inflation of 45%… Cocoa also sequentially has come down while there is a 35% inflation versus last year,' he said.
Berry said the company has been able to sustain margins while remaining competitive.
"We've been able to fight the regional players as well, and we've been able to make sure that we keep the momentum going, also investing behind key brands and scaling up innovations, we've been able to do that quite well and we are in the process of launching a lot more innovations during this year,' he said.
Britannia implemented a 2% price increase in the third quarter of last fiscal year, which is expected to add approximately ₹ 100 crore to its revenue. Price hikes also continued in the following months.
'We've taken our price increases today. We are in a good place. We've also been able to create a war chest for ourselves to be able to spend if we need to, in specific territories, specific states, against specific players,' he told investors.
"So we are going to fight many battles in, smaller territories and we are doing a specific analysis on each one of these competitors and I think we are in a very good place to be able to do so now with the inflation-deflation cycle behind us and having been able to mitigate inflation with all the measures including cost efficiency program,' he added.
The company reported a marginal uptick in consumption in both urban and rural markets in the June quarter, along with moderating inflation. This helped the company return to double-digit growth. Britannia's rural growth in the June quarter was in double digits, and urban growth was in very high single digits.
'This urban growth includes the general trade, the modern trade as well as the e-commerce numbers. We are focusing on our rural markets where we are looking at taking our distributors to be full scale distributors,' Berry said.
'When we started this (distribution) program, we had appointed rural distributors, where the supervision was pretty good. But when they become full-scale distributors, the supervision becomes even better and the whole working style becomes more organized.'
"…there is better extraction from the existing distribution infrastructure that we have created. The high potential outlets are being focused…We've also got the sales program for key urban accounts. We are revamping that program, and that's helping us as well,' he added.
