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Britannia Thinking Better

May 24, 2000

Britannia Industries Ltd. (BIL), the leader in branded biscuits marker is diversifying into the growing dairy business. The company is revamping its strategies by introducing new products and a new brand for its dairy business. New strategies for growing faster
BIL is planning to introduce a clutch of sub - brands for specific product categories under the mother brand Britannia. Sub-brands will be used to give focus and to create distinct images for its new product categories and to get economies from brand building.

  • Extending the health franchise: BIL has extended the Nutri - Choice range of biscuits to Nutri Choice Goodmorning, Nutri Choice Junior and Nutri Choice Isabgol. The new range aims to make biscuits relevant at any time of the day. It has also launched Nutri Choice VitaMarie Gold fortified with vitamins, minerals and proteins. Over the time the company plans to develop its Nutri Choice brand as one of the larger brand in its portfolio.
  • Milkman brand: BIL has developed milkman brand for its dairy products. The company claims a share of 33% of the organised cheese market and 15% of the milk powder. Its butter, milk and ghee are also positioned well in the market. The dairy business, which currently accounts for 9% of its total revenue, is expected to contribute around 15% by 2003. BIL will introduce value-added products under the dairy segment in new packs to reduce the packaging cost.

Introduction of the dairy products under the new brand logo will give critical mass to the company and visibility at the distributor and retail level. The category in India is expected to grow at the rate of 30% per annum. However it faces the strong competition from other beverages and fruit juices requiring high spending for the milk category to remain in the market. The company will be able to grow its topline with the introduction of 3-4 new products in a year diversifying its product portfolio.

Valuations
At the current market price of Rs 500, BIL is trading at a P/E of 24 times its 9 months FY2000 annualised earnings. In the past, the company has enjoyed P/E in the range of 45-50. The company has reported excellent financial performance for the 9 months ended FY2000. Its topline grew by 13% to Rs 8.6 bn and net profit jumped up by 28% to Rs 369 m. It has also declared bonus in the ratio of 1:2. Valuation is likely to be re-rated once the perception of the investors changes.

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