Britannia ups bakery volumes play with 4.5 mn outlet reach

Britannia is fast catching up with rival Parle in terms of distribution reach in a bid to outsmart the biggest bakery product player in the volume play.

"We are available in 4.5 million outlets out of 7.6 million outlets which has helped us to narrow the gap with the company which is available most, our biggest competitor. The gap is now down to 1.2 million, against 1.6 million about six years back," Britannia managing director Varun Berry has claimed before analyst without naming its bigger rival.

Efforts by dna to get response from privately held Parle for comments on the statement made by the Britannia MD didn't fructify.

Chauhan family owned Parle which claims to be India's largest manufacturer of biscuits and confectionary, and Britannia, controlled by the Wadias, have been locked in a fight for supremacy over the bakery and the biscuit industry.

While Britannia, with a market share of 28% in value terms in April 2015, edged past Parle, having a share a tad lower at 27.5%, thanks to a premiumisation strategy, Parle still commands a much bigger share in volume terms through greater reach.

Bakery and biscuits reaches out to 7.6 million outlets. Out of this Britannia was getting to just about 10% directly till about three years back.

"We have almost doubled this and we are now getting to 1.3 million outlets directly, which gives us the ability to execute merchandising and displays through our sales force," he said.

"The management remains focussed to grow brands and expand its distribution channels," KR Choksey said in a research note.

In fact, improvement in distribution is seen by Britannia as the single biggest factor behind a constant double-digit volume growth in all the four quarters of fiscal 2016 against just 2% in fiscal 2014.

While more villages are being penetrated helping the company achieve 30% growth in rural markets, Britannia still remains weak in the Hindi heartland.

"We still have some way to grow and would now start focusing on smaller villages. We were weak in hindi speaking states but have made good progress, where in Gujarat we have grown 26%. In UP we have grown at 9% and this market would be our focus this year," Berry said.

For rural markets, Britannia is taking a hub-and-spoke model whereby 8,000 distributors are being appointed to service villages which are more than 5,000 population.

Costly cookies

Cost pressure is building up on Britannia, which might raise its product prices by about 5%.

"Material prices have started to trend upwards with all four commodities forming bulk of our consumption like flour, sugar, RPO (refined palm oil)and crude oil that goes into energy for baking. They are going into a stage where it needs some pricing action. About 5% inflation is what we expect and we need to take pricing action to get numbers which will help us to mitigate that inflation," Berry said.

Is in contrast to the fourth quarter when Britannia reduced prices on the back of soft commodity prices.

"Since volume grew by 10% (in Q4FY16) while revenue grew by 8%, we had passed on some of the benign change in commodity prices to consumers," he said.