Britannia Case Study
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Transcript of Britannia Case Study
Pre-MBA/MSc Management Programme
University of Bath
RESEARCH PROJECT D:
CASE STUDY ANALYSIS OF
BRITANNIA INDUSTRIES LTD.
By
Boyu Sun (Sunny) 139167241
Daoqin Gao (Dora)
Hezi Zhang (Hezi) 139271799
Worawee Khernamnuai (Wee) 129419279
0
Abstract
Britannia was the largest bakery manufacture in India. Due to a successful initiative
the company intended to scale up the manufacture, distribution of social products and
sustain the business. Thus, the CEO started to make a policy to develop and expand
the social products. Based upon the movement, we found out the shortcomings
including profit decreased, limited marketing strategy, and potential competitors.
Therefore, the given recommendations were saving costs, cooperation with
government or outsourcing, brand management and improving the quality of products.
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Table of Contents
Introduction 3
Background 3
Methodology 4
Findings
Internal Environment 5
External Environment 7
Conclusion 9
Limitation and future research 10
Recommendations
Internal Environment 10
External Environment 11
References 13
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Introduction
Britannia was a bakery manufacture in India. In 2009, the company had started to
supply specially fortified biscuits to small groups of school-going children. The
movement offered the company an awareness of the widespread national problem of
malnutrition and ambition to extend the brand.
However, Vinita Bali, chief executive officer, faced two challenges- how to scale up
the manufacture and distribution of social products, and how to develop the social
product into a sustainable business. In order to overcome the difficulties, Bali made
several important policies. The report analyses those main plans in finance,
marketing, competition and external environment factors.
Background
Established in 1892, Britannia was the largest manufacture of bakery products in
India, with 28-per-cent share of the$3- billion Indian biscuits and bread market. The
company was known for launching variation of existing and new products to cater to
customers. Thus, product innovation leads Britannia stand out among the competitors.
In 2010, the Indian government operated the Middle Meal Scheme, providing cooked
nutrient meal to primary school children, which aimed at combating malnutrition- the
most important problem in Indian even across global. Britannia joined the policy,
offering specially fortified biscuits to children and revealed the importance of social
products. Therefore, the company attempted to scale up the manufacture and
distribution of social products and even develop them into a sustain business.
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Methodology
Both qualitative and quantitative data were applied to analyse the problems that
Britannia is facing and provide recommendations
The qualitative data including:
Case study from the University of Bath
Online journals
Basic SWOT analysis of Britannia Industries Ltd.
The quantitative data involves:
Financial exhibit and graphs of Britannia
External problems:High requirement;Fierce competition
Internal problems:Financial strategy;Marketing strategy
Britannia
External recommendation:Cooperate with stakeholders;
Outsource;Improve quality;
Keep balance of products;Gain public supports
Internal recommendations:Decrease producing cost;
Brand management
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Findings
Internal environment
Financial issue
The financial report of Britannia Industries Ltd. between 2007 and 2011 showed that
although the income rate was increasing every year, net profit remained between 3%-
5% (See figure 1). The main reason behind this scheme is high expenses. In 2007, the
total expense is 21,733 million Rupees. Then double in 2011 to 44,829 million Rupees
which is 68% of total expense. Note that the highest expense is raw materials such as
sugar, flour and oil (See figure 2). Not only the cost of material, but cost of labours
and distribution also increased every year because Britannia plans to invest labours in
urban areas which costs high salary rate and expand a large number of new stores
which costs high distribution cost.
Even through Britannia faces the financial problem, they still want to extend the brand
and expand the supply chain. However, Britannia production capacity decreased every
year from 163,500 in 2007 to 152,100 in 2011 which is inconsistence with their
expansion state. According to Freidenfelds (1980), failing to consider production
capacity while expanding the business might lead to operation management issue
which can pull the company to financial crisis. It could be claim that if company
wants to expand the business, it should aware of the financial background and
calculate the financial ability before starting new projects.
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2007 2008 2009 2010 2011 0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
0
250
500
750
1,000
1,250
1,500
1,750
2,000
22,951
28,096
34,599 38,311
46,700
21,733 25,990
32,817 36,917
44,829
1,551
1,774
1,514
1,030
1,342
Britannia Industries Performance
Income Expense Net profit
Figure 1: Britannia industries performance between 2007 and 2011 (Units: Indian rupees millions)
(Source: Company annual report)
67%7%
7%
6%5%
4%3%
Britannia industries expenses
Cost of materials Advertising and sales promotion
Carriage, freight and distribution Conversion charges
Other operating expense Employee costs
Depreciation and interest
Figure 2: Britannia industries expense in 2011
(Source: Company annual report)
Unit: Indian Rupees Millions
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Marketing strategies
The trend of Asia-Pacific biscuits market increases every year. The market grew by
3.9% in 2011 and reaches a volume of 1,934.5 million kg (See figure 3). That is a
challenge for Britannia to build a sustainable business in India biscuit market.
However, Indian has a large number of malnutrition. As Gillespie (2003) points out
that India has many manufactures of food and beverage but pregnant woman and
children still suffer from malnutrition. This might be viewed as either a problem or an
opportunity for Britannia’s marketing strategy which did not consider enough to
educate fortified products biscuit and did not offer enough product varieties to Indian
customers.
Year Million kg.
2007 1,659.3
2008 1,724.8
2009 1,791.8
2010 1,861.7
2011 1,934.5
Figure 3: Asia-pacific biscuits market volume between 2007 and 2011
(Source: Marketline)
External environment
Cannot meet the need at the national level
According to the case, in India, there are several limitations for the development and
expansion of social products. The most important reason is the speed of its
implementation cannot meet the need at the national level. There are four aspects
about this problem:
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Firstly is lack consciousness of malnutrition. Since malnutrition is not infective and
cannot be transmitted, people in India do not have general conscience and
consciousness of malnutrition. Moreover, malnutrition is not only associated with
poverty, but also related to gender, age and other factors.
Secondly is small share in food market. According to the case, the India food and
beverages market was valued at almost $300 billion in 2009, while the health and
wellness food products only accounted for about $725 million. Therefore, there is still
a large demand in the health food market.
The third issue is capacity limitation. Although cooperate with various stakeholders,
such as government agency, the corporate sector and community can improve
productivity and reduce costs, the company needs more upfront investments and
larger business scale.
The last issue is innovator of the health food market. As being the first India biscuits
company, Britannia’s first step in the society food industry has significant influences
on the market and followers, especially the potential risks, for example, how to attract
customers and how to make a strategic marketing plan successfully.
Intense competition
Competition in bakery products was fierce in India, not only coming from local
companies, such as Parle Products, ITC, and Surya foods, but also international
companies, such as GlaxoSmithKline, Kraft Foods as well as Pepsico. These global
companies along with having greater financial resources also have substantially
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greater marketing and distribution resources. Aggressive marketing and other
competitive action pursued by these large companies, besides innovative products and
price wars by national players, would make it more difficult for Britannia to sustain
its leadership position.
Volatility in raw material prices
The primary materials used by Britannia to produce and manufacture its products are
wheat, sugar, fats and oils. On a global and regional basis, these raw materials are
susceptible to significant price fluctuations due to supply and demand trends,
transportation costs, government regulations and tariffs, changes in currency exchange
rates, price controls, the economic climate, and other unpredictable circumstances.
Conclusion
There is no doubt that fortified biscuits are the solution for the nation-wide
malnutrition even though most people lack the recognition on the importance of this
food. However, if the company cooperate with the government and educate the
customers to know fortified biscuits, it would be a bright future for Britannia to sell
this product while competing with other counterparts. It is possible that Britannia
scale up its business from India to the world and nutritious products could be a
sustainable business based on the large scaled selling.
Limitations and Future Research
Although this report has prepared carefully and achieved most of its aims, there are
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still some inevitable limitations. First, since most data of this report is based on this
case, the completeness and accuracy of the findings is unavoidably limited. Second,
due to the limited time, this report focus on the qualitative analyses of Britannia’s
marketing strategy and financial issues mostly. In order to provide appropriate
recommendations, a strategic plan about how to scale up Britannia’s social products
successful and how to sustain its business with product development and expansion
should be devised. Additionally, findings and recommendations need more
quantitative and qualitative analyses to provide the reasoned evidences.
Recommendation
Internal environment
To begin with the recommendation for the internal problems, the solution for
problems of this company is also significant for its development in the future.
First of all, saving cost would be a fast way to deal with the financial issues. Britannia
industry could cooperate with the sugar supplier and flour companies to lower the
price of these materials. In addition, to cut the payment on employees, the biscuits
manufacturer may recruit the workers from rural location settings where the salary is
much lower than in the urban area. Moreover, choosing an appropriate location of the
biscuit factory also has an impact on the fee of distribution. More precisely, if the
factory is closed to the school where the students are the targeting market, the time
and the cost on transportation will reduce obviously. As a result, all the cost decrease,
the profit will increase.
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Having addressed the financial issues, next internal recommendation is about the
solution for the marketing issues. The core of the marketing strategy is the skills on
brand management. As known from the research, the flavour of this kind of fortified
biscuits is limited even though it is really healthy and nutritious. As a consequence,
the department of food producing should explore and experiment new flavour for
meeting the demand of consumers. Except the repeat customers, it is still a large
potential market in the group of who has no recognition of the importance of fortified
biscuits. Therefore, this company should educate the public to know the malnutrition
and to trust the fact that this product is the solution of malnutrition. This educating is
a hard work for only a company due to the large scale and the long term. However, it
would be a social campaign if both the government and the company participate in
this educating. Then, there would be a number of consumers to purchase these
biscuits in a national-wide level.
External environment
As has been indicated in the finds, there are four main problems faced with the
Britannia Industry. It seems to be essential for the company to solve the problems in
order to scale up the business and build the sustainable development. The
recommendation, therefore, is to solve the external and internal problems face with
Britannia Industry.
Initially, the company is likely to benefit greatly from the good relationship with the
stakeholders according to the theory of the stakeholder. The existing cooperation with
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the government like Integrated Child Development Service and Midday Meal Scheme
are aimed to provide nutritious food for young children and lactating mothers. The
company can also strengthen the relationship with community-oriented organizations.
Furthermore, outsourcing may enlarge their producing capacity immediately as well
as decrease the operational cost. These two methods might be efficient to enable the
implementation to meet the need of the national level.
Then, it is vital for Britannia to gain competitive advantages. There are three ways to
win over the competitors. Firstly, improving quality of the products is an effective
way appeal to more consumers. For example, the company can improve the taste of
the biscuits or add more minerals into the healthy food. Secondly, keep a balance of
the low-price and high-price products. It is shown in the figure 4 that the gross margin
of high-price products is 20 times larger than that of the low-price, therefore, the
company may gain more profits by exploring high-price products. Meanwhile,
appropriate amount of the low-price products and satisfy the low-income consumers,
which might also make Britannia more competitive. Another way to beat the
competitors is to gain more support from the government by conducting projects. It
may enhance the reputation as well.
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