Any indication of how April and May is shaping up, early days for May, but April has shaping up from that growth point of view?
I would not want to give details, but we are quite confident that by the end of the quarter, the market would quite likely stabilize on the domestic front. On the West Asia front, we have anyway taken measures to ensure that the supply channels that we have now are not dependent on the Hormuz Strait. So, we are quite confident that we will do better this quarter.
Specific question was what kind of pricing you will need? If local players are vacating INR 4.5, INR 9, you will also need the price hike or maybe grammage cuts. What kind of grammage cuts or price hike is needed as of now?
Wheat is a bit deflationary. But fuel is highly inflationary, laminate is highly inflationary. Many of our other biscuit colleagues are moving towards to the full price points, and that is happening gradually as we see. Selectively, we will have to take price increases, and this includes both grammage adjustment and some of the packs which are above INR 10, some kind of a price increase. So, both of them are factoring.
Does it mean that, let's say, what was not visible in your case, which is benefits of GST rate cut in second half, could be visible in FY '27? If you can share your views on how FY '27 looks like in terms of both growth and margin.
In the medium to longer term, the GST rate cut is obviously going to benefit the industry, and Britannia being a leader is also going to benefit that maybe even more. As far as the INR 5 and INR 10 price points that you talked about, with the pricing stabilization, we obviously expect that the channels where we may have felt a bit of pressure will come back to normalcy. We also know that the biscuit industry starts to have a sequential growth from June onwards when monsoon starts to hit and when children start going back to school.
Could you share your thoughts on whether you expect FY '27 to result in a stronger sales growth than what we saw in FY '26 because of the pricing component? Or basically just trying to appreciate or understand the domestic demand environment.
We are very confident that our portfolio, the strategy that we have in terms of creating demand, the higher advertising spend and the marketing investments that we are doing in the retail trade, along with the strategic levers that I showed you of our strategy on premiumization, on future platforms, on the Many Indias that we have created, we are quite confident that we will be able to generate demand and have a good year. But obviously, we have to execute that as the year goes on. The team is extremely confident that we will be able to manage the demand environment and come out on top.
You mentioned that the dual pricing, especially in wholesale, et cetera, has been the problem area. Would you be able to give us some kind of rough idea, had that problem not been there, how much has that problem dampened the sales growth by? Is it like 200 bps, 500 bps, 700 bps?
If we take a look at the wholesale and the rural channels where this dual pricing has had an impact, so obviously, it would have impacted our sales. Now it is hypothetical for us to say whether it's impacted by 200 or 300 or 400 basis points. But yes, it did have an impact. We also see transactions, and we can see that there has been an impact on transactions. What we are very confident is that with this price stabilizing, that 200, 300, 400, whatever you're saying, is the real number will come back to us.
On the RM inflation you are seeing and the price hikes you've already taken, if you can just give a color on that. On a broad basis, you give color on the overall RM, but as an index level, what kind of inflation you are seeing and what hikes you have already taken?
Wheat is a positive for us, although in the last 1 month because of rains and some poor quality of wheat arrivals, the price has gone up. But about 1 month back, it was good. But it is going upwards. So wheat is going upwards. Palm oil is also higher, although we are covered, but we know that palm oil has a connection with fuel prices. Sugar is more or less normal. Fuel is a challenge for everybody. So, we use LPG, we use CNG, and the inflation on that is openly available in the market, which is also what we are having to pay.
Should you then not see a significant increase in value growth once the transition has happened? Because as a company, you would realize a lot higher on a per pack basis given the lower GST. And therefore, should we not see a much faster acceleration in growth as things stabilize? Should it not be significantly above normative levels given this dynamic?
We are also positive that we will have a good realization. But because of the issues in the market in the last 4 or 5 months, we have not been able to see in what way this trend will move. But if it happens like that, we are happy that you brought it to the fore.
On margins. Given the cost pressures and also your initiatives on innovation and the strategy, is there any implication for EBITDA margins for FY '27? Could you have some impact as you invest in these and also face cost pressure? Or do you think you have enough cost-saving efforts to mitigate these investments?
Britannia has a history of being very tight in its operations and very strong cost-effective program measures, which obviously have been put into fore. When we spend, we will also be selective and try and put our marketing mix model in such a manner that while we invest more, we invest where our returns are better. While the operating environment is tough, the fuel inflation, the laminate inflation is there for us. But the team is confident that within a certain band, we'll be able to manage it.
On the competition side, what are you seeing? And second, difficult choice, but if you have to make between let's say, growth margins for you versus market share, how will you design your strategy from the next few months perspective?
If the number 2 player has said that they are experiencing double-digit growth, then obviously, it could be that they have had a certain volume advantage in these particular channels, which could have happened. And secondly, choice between market share and margin. I think we have to keep going stronger on market share, but we are also adept at managing margins. So it is a careful orchestra which we will play very nicely. We don't want to compromise on what we have. We will be much more smarter in our allocation funds, marketing where it makes an impact. We have growth ambitions, but we will also be able to manage the margin profile.
What has led to the stand-alone growth being lower at 6.5% versus the 12% growth that we had witnessed in November, December and 9% in Jan and Feb? If manufacturing was hit in Oman and the other region, then would that not be sitting in the consol sales numbers? So I wanted to understand what has led to the stand-alone sales number also being lower.
We did not have manufacturing issues in West Asia. We manufactured but we were not able to dispatch. We moved our manufacturing to Mundra so that we don't have to manufacture ex-Oman because the sea routes that you have ex-Mundra are much more accessible to reach to various markets. On the domestic India business - we had a reasonable first 2 months in the quarter. The West Asia impact hit us in March. There is a certain challenge post the GST transition - close to 60%, 65% of the biscuits that we sell are at INR 5 and INR 10. The price transition on that, because of some dual pricing in the market, has caused some challenges in our rural channels and in our wholesale channels because of some dual pricing existing. We have seen some kind of a transaction slowdown in those channels. But with the pricing getting normalized, we can see that during this quarter, they will get normalized, and hence, volumes in those channels will come back.
The confidence of normalization is coming from the other competitor, which had not moved to the INR 5 and INR 10 packs. Any confirmation if you can share with us?
The market is moving. The West Asia conflict has introduced inflation, and hence, people are anyway moving to the INR 5 and INR 10 price point and hence the market should stabilize. In the non INR 5 and INR 10 segment, we are growing in healthy double digits. The INR 5 and INR 10 from a consumer point of view, from a price point doesn't really get impacted, and hence, that market behaves a bit differently and is also highly dependent on how the trade reacts and how the trade stocks you. But the rest of our portfolio is growing in healthy double digits, and we are very confident that in very short period of time, these channels will also come back to normalcy.
Other FMCG categories are telling us because of GST rate being lower to, say, 5% in most cases, compliance has dramatically improved. So, if you could tell us in biscuit this was a key benefit. Is there a compliance big improvement? Are you a bit under-indexed on INR 5 and INR 10 on quick commerce?
Compared to the other channels, the INR 5 and INR 10 sells lesser on e-commerce. I don't think any of the channel partners will come back and say that Britannia did not supply or did not run programs on INR 5 and INR 10. The channel contribution of e-commerce towards these lower price points is much lesser. From a compliance point of view, I think the 5% GST rate will anyway help in compliance, and I don't see an issue there. The issue of compliance not improving or changing from the INR 18 to INR 5 price point is not a question for us.
When you say you don't push, what does it mean? I can't see INR 5 and INR 10 on e-commerce based on whatever I have checked. Not pushing means no discounting. Is that what you mean? Because I don't see availability also?
It works on algo. The algo would be based on incentives. If there is a discount, you will see them right up on your screen. So, we do not actively promote them, and therefore, it is only through search mechanism, or if you have bought it previously, that it will be visible. Because there's no point actively promoting these packs. It's always better to put your money behind the premium packs.
Just to understand that dual pricing issue. Competition was selling pack for INR 4.5 and INR 9. So does it say retailers, I believe we're making higher margins on their packs versus your packs. Is that the main cause and because of that, like you could have lost some market share in the interim?
The benefit of GST rate cut will be more visible in packs which are of a higher pricing configuration. On a INR 5 and INR 10 biscuit, it is not visible so perceptibly. In terms of some of the competition selling at INR 4.50 and INR 9 and some of the wholesalers wanting to give more preference, from a market share, let me point out that the price realization is also for those players, INR 4.50 and INR 9 versus INR 5 and INR 10. So, from a value share point of view, if you look at that, I don't think it would make much of a difference. But it could be from a transaction point of view some wholesalers and rural markets would probably want to stop that more because they see an opportunistic moment where they can make a higher margin.
When you say a good growth, basically, what I'm trying to understand is the pricing something that you believe will have a higher impact, price elasticity or your belief on how it would pan out is what I was trying to garner.
If the players are having to take a price increase, there has already been a price drop which has happened because of GST. So, I think you are coming back to a situation which is somewhat equal to what was there maybe 6 to 7 months back. And the demand situation at that time was quite good. So, I don't think that pricing either a bit upwards or either a bit downwards is going to have any major impact from an elasticity point of view. This category is vibrant. There is a lot of action. And we are confident that even with the small increase in price, which is being necessitated because of the conditions, the demand situation will remain fairly strong.
What is the volume growth that we saw in the last quarter, 4Q?
So we had a volume growth of close to 5.5% upwards.
If you can call out what is the kind of growth. Apart from this affected portfolio, what is the growth in the rest of the portfolio?
The rest of the portfolio which is not impacted - rest of general trade, key accounts where I'm growing in healthy double digits, modern trade is growing even stronger. E-commerce is upwards of 50%. Modern trade is upwards of 15%, 16%. So where the consumer is interacting directly, as they used to interact directly also in these channels before GST, our growths are very healthy, which is why we are very confident that this is just a temporary blip.
The large food companies that have reported, the other snacking categories like chocolates and noodles, they have shown close to about 30% kind of sales growth. So, is it that the consumer behavior is shifting and the type of snacks that they want to consume, there is a little bit of shift in the market share of snacking activity between different categories?
I don't think snacking consumption shifts happen so dramatically that chocolates will start growing at 30% and biscuits will slow down. The price elasticity of sales for these categories, they have benefited more from the GST reduction. So, if GST reduction is showing a noticeable drop in price because many of these categories are independent of the INR 5 conundrum, obviously, growth will go up. I don't think that the consumption shift over 1 quarter is anything to be read. I think it's a function that the true benefit of GST as it was supposed to be is reflecting on those categories earlier and much faster.
The other expenses growth of 18% on a top line growth of only 7%, what is driving that?
We are gradually also upping the investment in brand and advertising. So one of the reasons for that is that we have upped our advertising expenses from last quarter, and we will be investing more vigorously in our brands.
On the dual pricing and the Jan, Feb, March growth split. This dual pricing did not have any impact in Jan, Feb and it particularly only impacted March. If you remove the West Asia impact completely on the international business, then would Jan, Feb, March, the core India business be steady?
I think you misread what we said. The impact of the dual pricing has existed through January, February and March. In March, we have to add the specific challenge coming from West Asia. So that's how we read it.
On the GST impact on price point packs. What we have seen in many other food categories is because of the mathematics of INR 5 and INR 10 pack when the GST goes down, your net realization per pack obviously goes up. Should the same logic not play out in biscuits also whilst the price issue is over? Or do you think biscuits are already different, and therefore, if you give higher grammage, the transactions can actually drop in terms of the number of packs?
I think biscuits is also a bit impulsive and is also a bit planned purchase. So, if you are giving a bit more biscuit or a bit less biscuit, I don't think from a consumer transaction point of view, it has a bigger impact because it's a part of routine shopping basket, people keep buying it regularly. So, for our biscuit category, the GST change, I think, is very silent unless there is a dramatic shift where you have to reduce the grammage so much or something which becomes noticeable to the consumer, which is not the case here.
When you mentioned the 9% number, was that the growth for the domestic operations for the Q4 quarter and the impact on the consol growth of 3% was because of the international impact of West Asia?
The domestic business was growing at more or less close to 9%, 9.5%, which we have said. And the small pressure that we had in the month of March was only because of West Asia. And going back to the questions to previous back, to this domestic growth of 9%, 9.5%, you have to add whatever basis points we have lost potentially because of this dual pricing in these particular channels.
Based on the current inflation because, obviously, the spot prices are much higher than what raw material may be holding, what will be the ballpark inflation that we are facing right now?
In terms of palm oil, we are covered for the next 5 months. And I think we have a favorable rate against the market. Also on wheat, we are one of the most proactive and aggressive buyers and we have a good reading of the market. So also on wheat point of view, the inventory that we have right now for the next, I believe we are now already covered for about 5.5, 6 months is also at a price which is attractive even if you had the carrying in the inventory cost. So the inventory that we are holding right now is a favorable one.
This volume growth number, 5.5%, is in terms of grammage, right? In terms of total grams or whatever kgs, tons? If you look at price point packs, 65% and the fact that GST rate was cut quite a bit, that itself would have given like more like 7.5%, 8%. So in terms of number of packs basically, there would be a reasonable decline in this quarter. Is that fair?
Yes - 5.5% volume growth is in terms of grammage. A lot of the INR 5 and INR 10 packs sell in the wholesale and rural channels and we can see a result of stress in number of transactions. So your observation obviously is correct, which we are very confident will get corrected as we go ahead in the next few months.
On the strategic pillars - the hallmark of Britannia for the last 10-plus years was relentless focus on cost efficiency. And then that consequence was margin expansion. The sense that I got from your commentary so far is that we have reached a scale where we need to reinvest in brands and operations. Should we say that the band that we are currently is a very comfortable band, and from here on, the nonlinearity that we saw past decade wouldn't be at least in the near future?
The relentless focus on cost and efficiency is now ingrained in the DNA. And even this year, we have a very aggressive plan to do that. But we also realize that we have to create new pillars for growth, and this includes, again, investing in our brands, premiumization, creating new verticals for growth, readdressing India in the way we want to address as Many Indias. So, all that will get added to the fact that we will be very sharp on our cost and the efficiency program. As we move ahead, you will need to see new growth vectors for us as we also want to move is a more complete foods company.
On innovation adjacency and future platforms. Should we interpret that Britannia will be adding more platforms? Or you'll add more platforms in terms of expansion? Do you believe that this can be done organically? Or like many of your peers, you will also go inorganic way to bridge the gap?
We will be adding more platforms, and you will hear about that because I think we have to broad base ourselves and there are new opportunities, and I think we need to address those new opportunities in the way that Britannia would want to address them. Inorganic play is a part. See, we have not been - we have not done that, but there is active scanning and there is a very serious intent. But what we want to acquire has to tick a few boxes for us. Number one, it has to help us do something new. It has to help address a consumer need which we are not addressing or it has to get us some skill or technology or capability which we don't have. Where it ticks some of these boxes, we will be ready. We also have created a new platform on health. So that also would be an active consideration as we will expand this in the coming months.