X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Britannia: Biscuit King, for how long? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 6, 2000

    Britannia: Biscuit King, for how long?

    Britannia – the largest manufacturer of bakery products in India dominates the branded (organised) biscuits segment with a 38% (value-terms) market share. It is also a dominant player in the organised bread and cakes segment. Currently, Britannia is focusing on expanding its business to dairy products like cheese, butter, flavored milk and dairy whiteners. Group Danone, France (the largest food processing company in the world) owns a 22% stake in Britannia.

    The margins in its key business of bakery products have never been very high, but to counter this Britannia over the last few years has shown traces of being an innovative marketer. In order to expand its market it has redone its whole image to target the ‘health and nourishment’ conscious Indian consumer. As a result of this, the company has been able to record a 17.5% CAGR (compounded annual growth rate) in its turnover over the last three years. Profits have grown at a CAGR of 33% during the same period. The operating margins of the company therefore, improved from 5.6% in FY98 to 7.3% in FY00.

    Britannia’s 1QFY01 results were also heartening. Higher bakery and dairy product sales powered Britannia's topline by 16% y-o-y to Rs 3.3 bn. The quarter saw biscuits volumes grow by 15% led by its new launches Vita MarieGold and Nutrichoice Good Morning. The company managed to improve its operating margins to 7.9% in 1QFY01 (7% in 1QFY00). The growth in margins would have been even better, but for the hike in excise duty rate of biscuits and cakes from 8% to 16%.

    But clouds are beginning to form over Britannia’s ‘Good days’. Hindustan Lever Limited (HLL) has bought over the government owned Modern Bakery. This is a sure sign that this marketing behemoth will enter the bakery segment in a big way. Another competitor, Parle has also geared up and has entered the market with a slew of new products. All this may be bad news for Britannia from one angle. On the other side, increased competition from HLL and Parle could lead to market expansion benefiting the organised bakery segment as a whole.

    Currently, the organised biscuit segment accounts for only 1/3rd of the Rs 80 bn total biscuits market. So there is huge scope for improvement there. But all marketing skills of Britannia will be put to test if the company wants to capture a huge chunk of the unorganized market.

    Britannia quotes at a P/E multiple of 34 times its 1QFY01 annualised earnings at the current market price of Rs 639. At its 52 weak peak the stock traded at a P/e multiple of over 60 times.

     

     

    Equitymaster requests your view! Post a comment on "Britannia: Biscuit King, for how long?". Click here!

      
     

    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    Britannia: Margin Expansion Trend Continues (Quarterly Results Update - Detailed)

    Mar 11, 2016

    Britannia declared results for the quarter ended December 2015. The company's revenues were up by 10% YoY, while profits came in higher by 51% YoY.

    Britannia: Strong momentum continues... (Quarterly Results Update - Detailed)

    Nov 25, 2015

    Britannia declared results for the quarter ended September 2015 recently. While revenues were up by 12% YoY for the quarter, profits came in lower by 20% YoY.

    A Little Gem in the FMCG Sector (Sector Info)

    Jul 18, 2016

    Will investing in Bajaj Corp yield high returns on account of a rural revival in sight?

    Parag Milk Foods Limited (IPO)

    May 4, 2016

    Should you subscribe to Parag Milk Foods' initial public offering?

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    BRITANNIA SHARE PRICE


    Aug 18, 2017 03:12 PM

    TRACK BRITANNIA

    • Track your investment in BRITANNIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    BRITANNIA 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE BRITANNIA WITH

    MARKET STATS