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(double digit) in the previous two decades (prior to my coming on board); hence, I was attracted by the offer to join the company. It also had a strong and good foundation, it was just about making the go-to-market approach stronger, adds Chandra, looking at various initiatives taken by the management in the recent past. Today, the results are here to see. One, in the last two years, BIL has managed to hold on to a market share of around 35 per cent (Parles share is 36 per cent) of the Rs8,000 crore industry, which is growing at the rate of 8 per cent per annum. ITC and Surya Foods (Priya Gold) command a market share of 9 per cent and 12 per cent respectively, among the organised sector players. Two, in the case with BIL, the operating margins from 6 per cent (2006-07) has bounced back to 7.5 per cent (2007-08), whereas ITC has been losing money. However, with commodity prices rising on a quarter to quarter basis, the environment is getting challenging for food companies, as prices of key raw materials such as wheat flour, refined palm oil, skimmed milk powder and other dairy products, as well as energy, are rising. Currently, the industry is operating in an high and unprecedented cost scenario. The result is huge pricing pressures with limitations on price hikes for the entire industry and a shrinking profit pool. Wheat and oil prices are already showing an increase of more than 20 per cent. In addition, steep increase in crude oil prices and hikes in

Tiger uncaged
Capitalising on its power brands, Britannia has mapped out a strategy beyond Indian shores

n June 2003, when Sunil Alagh, the then high-profile CEO of biscuit major Britannia Industries Ltd (BIL) quit the company, it was in a crispy shape; high with a market share of close to 47 per cent. Then for two years, Nikhil Sen, the COO, ran the company, when it started losing ground. The market share had dwindled to 39 per cent by 2005. Worse still, the companys operating profit margins, which was 11 per cent, had dropped to 6 per cent, combined with the fact that the senior executives were in exit mode. To sum it up, the company faced a crisis of confidence. The management, taking stock of the situation, roped in Vinita Bali as successor to Alagh in January 2005. An FMCG marketing veteran, Bali had previously worked with beverages giant Coca-Cola in its global headquarters in Atlanta, besides a stint with Cadbury in England, South Africa, Nigeria and India. Bali readily accepted BILs offer. Besides the challenge of steering the company, it was time I came back to India. In BIL, I saw an opportunity to bring back my learnings of over the years and apply them to an Indian company. Bringing the international experience to domestic turf, now I see an opportunity to put BIL on the global map, explains Bali, MD who in her first year at BILs headquarters in Bangalore saw to it that systems and processes were put in place. Then she took forward what Alagh had initiated the transformation of the company from biscuits to a diversified food and dairy products manufacturer, as well as re-positioning of the Britannia brand and launch of the mass market brand, Tiger. In this direction, I started chalking out strategic moves that could be made in the market place. It has a strong trustworthy brand. I have grown up with it. Initially, I looked for low-hanging fruit in terms of manufacturing, selling, marketing and distribution. I found some

PHOTOS: SORAB MEHTA

We are the most profitable bakery company, says Bali

untapped areas and opportunities to invest in enhancing productivity. In all this, we made assets more productive, adds Bali, pointing out that Britannia continues to be the most trusted food brand of India. In a survey conducted by AC Nielsen ORG-Marg, consumers voted brand Britannia among the Top 10 most trusted brands across categories for the fifth successive year. Across all categories, it was rated as the seventh most trusted brand in 2008. In the last two years, with an increased focus on expanding the portfolio of offerings and presence across price points, we have penetrated across demographics and geographies, explains Neeraj Chandra, VP & COO at BIL. Chandra had started with Hindustan Unilever, where he learnt about sales and marketing. Around three years ago, when Bali was looking for the right athlete for the job, she had spotted Chandra. BIL had a robust history of growth
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such as Priya Gold and later to ITC. We understand that the company lost about 3 per cent market share to ITC, especially in the mid-segment, states Abhijeet Kundu, analyst at Antique Stock Broking. Taking on new players Interestingly, ITC entered the biscuit segment in 2003 as a part of its overall foray into the growing foods sector. During this period (2003 onwards), BIL has faced immense pressure from the aggressive approach of this deep pocket player. Within a short period, ITCs Sunfeast brand straddled multiple product and price segments and now commands a space in the minds of consumers. Products like Dark Fantasy, Golden Bakery, Butter scotch creams, Orange Marie, etc, deviated from the established offerings and have created a favourable consumer disposition, says Chitranjan Dar, COO, ITC Foods Division, who feels that ITCs foray into biscuits has been tremendously aided by its proven strengths in fields as diverse as consumer understanding and brand building, distribution and logistics, manufacturing and supply chain,

petrol and diesel prices announced by the government has resulted in a significant increase in price of packaging materials, freight and production cost. Yes, margins are down, but we are the most profitable bakery company, admits Bali. We are in the same boat as others. It is cause for concern, adds Bali, looking at input cost reductions where the management has been shutting manufacturing units, as a strategy to optimise savings of cost. Also in the
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cent volume growth), but cost push has created pressure on the operating (EBIDTA) margin, pushing it down 250 basis points. The launch of valueadded products and variants has helped Britannia grow rapidly. Instead of a price war with ITC, it is launching products like Nutrichoice, a range under the Tiger brand, and variants of its cream biscuits. The company also aims to strengthen its bread, cake and rusk portfolio with the re-launch of breads. These measures should help it report higher growth rates and better profit margins in the future, says Amitabh Chakraborty, president (equity) at Religare Capital Markets. From the stock market point, FMCG is a defensive bet, and under current circumstances, the sector is finding favour with the investors. With the recent initiatives taken by the company, like reduction in weights in few packets by around 10 per cent without reducing the price, we expect the company to see an improvement in profit margins, states Shirish Pardeshi, senior analyst with Anand Rathi. Initially, BIL had lost its market share to regional and smaller players

company-owned manufacturing units, it has started channelising waste heat of the ovens into manufacturing. We have done technology changes in the process and manufacturing side, says Chandra. Almost 85 per cent of the biscuits are made by contract manufacturing units. As a strategic initiative, we are increasing our holdings in contract manufacturing firms to have greater control over quality, etc, discloses Bali. Recently, BIL has purchased Ganges Valley Foods, one of the biggest contract manufacturers, located at Dankuni, West Bengal. Britannia and its subsidiary have majority stake and control over the company. Outsourcing helps the company to control costs, as plants are low cost, labour is not in the books of the company and there is enough flexibility to alter production plans, states a Motilal Oswal research report on BIL. BILs latest results (quarter ended September 2008) showed good traction in revenues (up 27 per cent on a 17 per

Wadia-Danone face-off

he relationship between the French company Groupe Danone and the Mumbai-based Wadia group, headed by Nusli Wadia, began a decade ago when the two came together to fight the late Rajan Pillai for the control of Britannia Industries Ltd (BIL). They then formed ABIH Holding, a 50:50 JV, as a special purpose vehicle registered in the UK, which hold 51 per cent in BIL. This relationship was leveraged further and, in 1995, a new JV was formed between the two. This new entity, Wadia BSN India, was meant to manufacture and sell food products and beverages in India, covering all Danone products. But, till date, this venture has not moved. According to the Wadia-BSN agreement, if either party becomes aware of any new business opportunity relating to a food or beverage product in India, it is supposed to convene a meeting of directors to decide whether it would be in the

best interest of the company to pursue such an opportunity. If the directors of the two companies do not agree, either of the two could go solo and exploit the opportunity. So, on 20 October 2006, Groupe Danone made no secret of its plans to establish a direct presence in Indias growing consumer space and informed Nusli Wadia that there is an investment opportunity in an Indian company called Avestha Gengraine Technologies (Avesthagen) and that they plan to invest and take about 5 per cent stake, much to the chagrin of the Wadias. This sparked off the bitter on-going saga between the two. Prima-facie, there are three issues between Danone and the Wadia group: Britannia owns brand Tiger, which has been launched by Danone in Southeast Asia as its own; Danone wants to enter the packaged water and food business in India without

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from 50-60 per cent to 75-80 per cent. The shift and growth in favour of the organised market is primarily attributed to the implementation of valueadded tax and the removal of excise duty on all biscuits with MRP up to Rs100/kg, providing the opportunity for players like BIL to contain consumer prices without burdening them with commodity inflation. Biscuits and confectionery has tremendous growth potential as the penetration in India of these categories is low and per capita consumption is much lower than in the West. Competition is going to be tough with new players entering in the category. It is going to be true for any high growth category with limited players, says Pravin Kulkarnii, GM, marketing, Parle. Looking at the breakup in BILs biscuit sales (which form 89 per cent of the companys total sales, contributing Rs2,329 crore in 2007-08), 45 per cent comes from the premium segment (Good Day, Nutrichoice, Treat and Bourbon), while the contribution from the mid segment (Marie, Milk Bikis and 50:50) and mass market (Tiger) is 25 per cent and 30 per cent respectively. Both premium and mass markets are growing at 20 per cent, while the mid segment is growing at 10 per cent, thus leading to an overall sales growth of BIL at 17 per cent. Tiger drives growth In the premium category, the key growth driver would be Good Day while, in the value-for-money category, Tiger would drive the growth for BIL, says P. Shyamsunder, VP and a two-decade-old veteran with BIL, currently responsible for quality and information systems. He has to look after some 70-odd outsourcing units, supported by BILs own employees posted at these locations, where he conducts training programmes at the shop floor level. In order to contain the market share, in the last few years, we strategically focussed on the cookies and glucose category. In the case with cookies, we strengthened the brand position through the launch of variants and higher ad-spend and in the case with glucose, we introduced small priced

product development and R&D. ITC is doing what any new player in the market does imitating and emulating the leader. And cash from the cigarette business certainly helps, points out Bali. But unlike BIL, ITC has been losing money in this business. ITC is focussing on improving profitability and attaining profits. The company is working in its biscuits product mix, which has led to pruning and going slow on low margin products. This, in turn, could lead to lower competition in the glucose segment for BIL. Overall, we could witness consolidation in ITCs biscuit portfolio, and hence, lower competition for BIL as a whole. Additionally, the competition from smaller and regional players have also reduced, with higher input cost inflation containing their scope for scaling up of operations in a growing economy, observes Kundu. Another player that has become aggressive is Surya Foods that manufactures the Priya Gold brand of biscuits and commands about 12 per cent market share. We are not focussing on glucose, which is about 5 per cent of our sales. If you remove glucose from Parle and Britannia, then we may be
involving the Wadias; and as Danone holds part of the equity and not a holding stake in BIL, the Indian company is reluctant to share the accounts with Danone, as was done previously when BILs business was consolidated with Danone. Although Wadias have moved the court regarding the first two issues, there are reports that both parties will agree to an out-of-court settlement and one of the partners is most likely to buy out the other partys stake. The shareholder issue has no impact on how we run or execute strategy, explains Bali, looking at the day-to-day running of BIL. All said and done, the clarity of single ownership will help the company management to focus more on the business. However, one must remember that, in the past, the ownership of BIL has changed hands four times (since it started as a small business with an initial investment of Rs295 in Calcutta in 1892), but there was no indication of loss of business on this account.

Chandra: We are expanding our market from the kids to grandfathers

the highest seller of premium brand of biscuits, says Shekhar Agarwal, director, Surya Foods, which has 23 variants Butter Bite, Kids Cream, Marie Lite, Cheese Cracker, Cheez Bit, Big Boss and Bourbon Cream, among others. Like BIL, Agarwal, too has plans to enter into the cookies, cakes and confectioneries segment. Trial production is going on for cakes and cookies and will hit the market shortly. We are also entering into chocolates, wafers and clairs, and trial production is going on at Haridwar, adds Agarwal, who runs the IRCTC food kiosks at various railway stations. Cakes, cookies, chocolates, wafers etc. can be pushed easily at these kiosks as well and we can exploit our ready distribution network. We are regularly increasing distribution strength. These new products fit into our overall aim of becoming an integrated food company over a period of time and these new products offer new growth avenues. Clearly, the fight for the top slot is between Britannia and Parle. But a trend that could help organised players like Britannia, Parle, ITC and Surya Foods grow, is the shift of biscuit consumption from the unorganised to branded market. According to statistics, in the last three years, the organised biscuits market share has increased
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international footprint. Already, 5 per cent of BILs turnover comes from exports; she wants to double it in the near future. Her destinations are places where the consumption patterns are similar to India. In March 2007, Bali had already made Middle East the first international stop for BILs geographic expansion, when it acquired a 70 per cent stake in two Middle East companies Strategic Food International, Dubai, and Al Sallan Food Industries in Oman. Both these are regional players in biscuit and cookies in the GCC markets with brands like Nutro, Family Choice and Bakers Pride. In addition, these companies export their products to over 30 countries spread around the world. The Middle East is one of the fastest growing markets with synergies in terms of consumer profile, tastes, habits, attitudes, etc, and provides a huge opportunity for growth. BILs brands gains access to the distribution channels of these companies, explains Bali. Guided by identity of the growing markets and the risk profile BIL can live with, Bali has extended BILs international operations to Sri Lanka to create a profitable business in the current year. We will pursue acquisitions as a strategy to expand to international locations. Although we export to developed markets like the US, Canada, Australia, Singapore, etc, we have no plans to acquire companies in West Europe or the US that are showing negative growth. Why beat our heads when opportunities lie in neighbouring countries, she reasons. Regarding the domestic scene, When the GDP is growing at 9-10 per cent, people have more money to spend on everything but, at 5-6 per cent, they are careful, feels Bali. But, one must remember that we are still in a growth phase; hence, we are in a better position, concludes Bali, saying that though these are challenging times for FMCG players, with BILs building blocks in place, it is one cookie that will not crumble easily. But then, if the crack deepens in the ongoing legal tussle between Wadia and the French major Groupe Danone, it could add a twist to BILs tale.
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packs to reach out to the maximum population, and to increase convenience of consumption, says Bali, a marketing wizard, who has used all the knowledge she gained in her previous jobs with MNCs to make this 90-yearold company occupy more shelf space than the competition. There were also a slew of innovations that came from BIL. For instance, in the glucose category, it added variants like coconut, creams and banana. Then, we also got on to the health and vitality based platform, points out Bali, where through the Nutrichoice brand BIL has variants like Nutrichoice 5 grain, Nutrichoice sugar out and Nutrichoice digestive biscuits. The company has been able to leverage this health pitch effectively, says a competitor. In promoting baked is healthier than fried, we are expanding our market from the kids to grandfathers, focussed to reach people, where they are and giving them a variety to choose from, explains Chandra, pointing to the fact that for impulse consumption BIL launched Chota packets, which opened new opportunities in its go-to-market approach. We got involved with the consumption movement, adds Bali. In the bread, cake and rusk business, BIL crossed the Rs270 crore mark in 2007-08. This business had doubled in two years, as we had also acquired a 50 per cent stake in the Bangalore-based company, Daily Bread. The strategic stake in Daily Bread is expected to help us understand the bread business in a better manner, says Chandra. Daily Bread has grown in excess of 50 per cent during the year. Our focus is to drive profitable growth and we are constantly evaluating opportunities to enhance the business model and have gone ahead with franchisee operations in places like Goa. We have received an overwhelming response and extended these products nationally. The segment of bread, cakes and rusks is growing rapidly. Brand building and innovation are key drivers of strong growth and one will continue to see more products in these categories from the BIL stable, promises Bali, who is

The key growth driver would be Good Day, says Shyamsunder

banking on product innovations, new marketing initiatives and outsourcing, to act as the three key pillars that will give a boost to BILs profit margins. In this direction, she is all set to take any hard decisions that would help BILs bottomline which last year improved by 77.5 per cent to Rs191 crore from Rs107 crore in 2006-07. Beyond biscuits Over the years, leveraging on the three growth vectors of brand, geography and channel, BILs product line has gone beyond biscuits to packed milk, cheese, butter, buttermilk and yogurt. Like the breads, cake and rusk business, Bali activated the dairy business which BIL always had but did not invest time and money into. We are trying to create a consumption occasion for our customers throughout the day: breakfast, lunch and dinner and also in between, says Bali, trying to grab a large portion of the consumers wallet. Our strategy is simple: to get more people to buy and enjoy more of our brands anytime, anywhere everyday. Now that Bali is satisfied with BIL staging a comeback, she has started to practice some of her early learnings gained in her jobs overseas. I want to take BIL to the relevant markets, discloses Bali, with plans to build BILs
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