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Britannia Focusing on the masses - Views on News from Equitymaster
 
 
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  • May 12, 2000

    Britannia Focusing on the masses

    Britannia Industries Ltd. (BIL), the biscuits and dairy products major has identified the mass market as its thrust area. The company plans the topline growth of 20% every year, which will be achieved through its major revamping exercise, new products introduction and cost control measures. It is aiming to generate growth mainly by generating volumes.

    ZipSip - Milk on a move
    The name ZipSip was meant to convey to consumers that he could have milk on the move, in convenient packs. However it was misunderstood by consumers as a flavoured drink with preservatives and additives. Earlier this year BIL had launched its ZipSip in chocolate, strawberry, pineapple, mango and elaichi flavours. BIL has relaunched Zip Sip in a completely different brand name Milkman under which it recently launched its ghee. While the Zip Sip packs sported bright, cheerful colours, the new packaging stresses the fact that the product is 100 per cent milk and zero preservative. The idea is to drive it in that the product is high on nutrition and completely free of preservatives, which is important to the health-conscious new consumer. The brand will now be available in a larger number of outlets, including popular picnic spots and hang-outs, as against Zip Sip, which depended on the company's traditional distribution and retail network.

    Dropped the plan to foray into ultra heat treatment (UHT) market
    BIL in a bid to transform itself from a pure bakery company into a food one was planning to enter the plain milk segment in the previous year. As the company has a large distribution network and the UHT market is in a nascent stage, it could have captured a share of 30%. However, the plan has now been shelved as it is of the view that the UTH foray would only serve the top-end of the market and not cater to the mass segment. The company believes, the milk sold in the tetrapacks will not generate sufficient volumes due to its premium pricing.

    Nevertheless, the company has identified the dairy business as a significant area of growth including products such as cheese and dairy whitener. The contribution from this segment to is expected to touch 25% of its turnover in the next few years (currently less than 10%).

    BIL is trading at a P/E ratio of 34 times its 9 months FY00 annualised earnings. Its market cap to sales ratio of 1.4 times is amongst the lowest in the FMCG industry. BIL faces the stiff competition from the giant Hindustan Lever, which can be a possible threat to its biscuits business after its acquisition of Modern Foods Industries Ltd. To sustain market share in the increasingly competitive environment, the company has to generate volume growth with continuous new product introduction in the price sensitive food market.

     

     

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