Project Report

Project Report Marketing Management – 1

Britannia Industries Limited

Submitted by: -

Group 12, Section A Kailash Mittal (18026) Pranav Kumar (18041) Rajat Karol (18044) Ravi Singhania (18045)

Indian Institute of Management, Lucknow

Britannia Industries Limited 2

Contents

• Executive Summary • List of Figures and Tables

• Introduction

• Market Analysis

• The 4 C’s

• Environment

• Internal Analysis

• Strategy

• Conclusion

• References


Executive Summary

Britannia Industries Limited (BIL) has emerged as the largest food product company in India. From being a stodgy company with a recognised brand name it has transformed itself into the largest food companies in India. A strong brand name, superior quality products and an enviable distribution network helped BIL to become the market leader in the Indian biscuit market. BIL's main business is biscuits which contribute to over 85 percent of its turnover. BIL has approximately 40% volume share and 48% value share in the organized biscuit market in India, much ahead of its competitors. The aim of the company is to make every third Indian a Britannia consumer by year 2006. The Britannia brand is rated as second most trusted brand in India, and that makes the entry into higher segment difficult for even majors like Hindustan Levers and Nestle. The rural penetration of the branded biscuits segment is also significant. Towns with populations of less than a lakh contribute significantly to the industry's turnover, with some estimates placing it at 40 per cent. However, rural markets largely consume lower-priced varieties, and it is here that branded biscuits meet with stiff competition from the unorganized sector. Sensing an existing market the Tiger brand of biscuits was launched in 1998. , Britannia has achieved tremendous success with the Tiger brand. The brand has an estimated annual sale of close to Rs1.5bn and has garnered 20-25% market share in the glucose biscuit segment. Rural market accounts for majority of Tiger sales. With the decontrol of the biscuit market, several large global players have entered the category and more players are expected to set up shop in the country over the next few years. However new players will have the daunting task of setting up a distribution network besides adapting their products to meet the taste preferences of local consumers. The new entrants are likely to enter into distribution arrangements with established domestic food companies. Britannia with its well entrenched Sales and distribution network and strong brand equity is well equipped to handle this onslaught from the global MNCs. Britannia has forged ahead in the race to carve up the unorganised sector with a slew of innovative offerings and a revamped Brand identity that includes a new logo and state of the art packaging. With a combination of quality and innovative products at competitive costs due to lower operational costs and well established delivery mechanisms it is easier to accept the vision of making make every third Indian a Britannia customer by the year 2006


List of Figures and Tables

List of Figures Figure 1: Wheat Price Trends in India Figure 2: Sugar Prices in India Figure 3: The Distribution Channel Figure 4: Market Share of various players Figure 5: Radar Screen showing the overall competition for Britannia Figure 6: SWOT Analysis Figure 7: Ansoff’s Matrix List of Tables Table 1: The Pie Table 2: Major segments in biscuit industry in India Table 3: Growth in Retail Outlets in India (In millions) Table 4: Price Range based classification of various products of Britannia and its competitors Table 5: Sales figures of BIL Table 6: Break up of Costs to the company


Introduction

Britannia Industries Limited (BIL) was incorporated in 1918 as Britannia Biscuits Co Ltd in Calcutta. During the ’50s and’ 60s, Britannia expanded operations to Mumbai, Delhi and Chennai. In 1989, J M Pillai, a Singapore based NRI businessman along with the Groupe Danone acquired Asian operations of Nabisco, thus acquiring controlling stake in Britannia. Later, Groupe Danone and Nusli Wadia took over Pillai’s holdings.

In 1977, the Government reserved the industry for small scale sector, which constrained Britannia's growth. Britannia adopted a strategy of engaging contract packers (CP) in the small scale sector. This led to several inefficiencies at the operating level.

BIL saw a remarkable transformation during the early 1990s, through a sharpened focus on branded products. From 1994, BIL pruned its wide-ranging business interests to focus on value-added products. Between 1990 and 1995, BIL divested a range of unrelated business interests in soyabean extraction, edible oils, export of cashew nuts and shrimp, granites and software. By 1996, BIL had achieved a degree of focus in its core business of bakery products and biscuits. The bread segment, which accounted for half of BIL's revenues at that time, however continued to stagnate. The segment was price-sensitive and sales were adversely affected due to the intense competition.

In April ’97, the Government de-reserved the biscuit sector from small scale. Britannia has expanded captive manufacturing facilities and has modernized and upgraded its facilities in the last five years. It has also forayed into the Dairy Business with the launch of Cheese, Butter, Ghee, Dairy whitener and flavored milk products.

A large part of products are also outsourced from third party producers. Dairy products are out sourced from three producers - Dynamix Dairy based in Baramati, Maharashtra, Modern Dairy at Karnal in Haryana) and Thacker Dairy Products at Howrah in West Bengal.

Britannia Industries Limited is now one of the largest food companies in India. A strong brand name, superior quality products and an enviable distribution network helped BIL to become the market leader in the Indian biscuit market. BIL's main business is biscuits which contribute to over 85 percent of its turnover. BIL has approximately 40% volume share and 48% value share in the organized biscuit market in India, much ahead of its competitors. Remaining revenues came from bread, cakes, dairy products and exports. The company is focusing now on increasing its share in the milk products market. The aim of the company is to make every third Indian a Britannia consumer by year 2006.


Market Analysis

Biscuits Market

India has the second largest biscuit industry in the world (after China). The biscuit market in India is valued at over 80 billion rupees currently. With an annual consumption of over 2 million tones, the biscuit industry is largely captured by the unorganized sector, which caters to about half of the total market.

Penetration Product Market size (Rs m)

Market size ( '000 tonnes)

Growth (%) Urban Rural

Bakery Items 70,000 - 8% 60% 20% Biscuits 35,000 1,100 7% Cakes 750 70 4-5% Bread 11,000 1,400 3-4%

Table 1: The Pie

The biscuit market in India is characterized by low margins and high level of fragmentation. Awareness is nearly 100%; however, penetration is lower in rural areas at 15-20% and at 60% in urban areas. This is mainly because these products are consumed as snacks, and do not form part of the main course meal. Volumes, brand loyalty and strong distribution networks drive this market, which is growing at 6-7% annually. The following table gives a break up of biscuit industry in different segments.

Segment Market share

Britannia's brands Competitor brands

Glucose 36% Tiger, Tiger Oro Parle-G, Ampro, Bakeman's Glucogold

Arrowroot / Marie

18% Mariegold, Jacob's Thin Maritime, Bakeman's Marie

Milk 12% Milk Bikis Parle Supermilk, Bakeman's Milkobix

Salted 6% Snax Monaco Sweet & Salted

8% Fifty-Fifty Krack-Jack

Creams 7% Elaichi Cream, Pure Magic, Orange Cream, Bourbon Choclate Cream Jim Jam

Parle Orange Cream, Bakeman's Cream Crunch, Horlicks, Sandwich Biscuits


Sweet Cookies

9% Good day, Little Hearts, Calypso Coconut, Nice, Top

Bakeman's Butter-Yums, Horlicks Bakeman's Cookiez, Parle's Hide & Seek

Wafers & others

4% Chekkers Rik Rak

Table 2: Major segments in biscuit industry in India

Entry and Exit Barriers As most of the biscuit market is captured by unorganized sector, there is a scope of good names to make an inroad into the market. But the growth opportunities are restricted in the lower segment. In the premium segment, the market is largely captured by Britannia, which has developed a strong brand identity. The Britannia brand is rated as second most trusted brand in India, and that makes the entry into higher segment difficult for even majors like Hindustan Levers and Nestle. Parle Products has developed a strong brand reputation in the non premium segment. It has a 65% volume share in the glucose biscuits market, which comprises of 36% of total biscuit market in India. The product Parle G is the largest selling biscuit brand in the world (Source: Business Standard, March 14,2002). Another entry barrier is the small margin in lower segment. So a company looking to make an inroad into this segment has to rely on volumes of sales.

Cost Structure

The cost for the industry mainly comprises of the raw materials.

The key input for biscuits is wheat. In addition, sugar is also a key input. Major companies in this segment buy wheat flour from roller mills, and are, hence, insulated from fluctuations in wheat's procurement prices.

Local production of wheat and sugar has been substantial in recent times and for most of the late nineties, companies producing wheat-based items have been comfortable. For wheat and sugar, the free imports regime has also kept open-market prices on a leash. Things have now taken a turn for the worse. Import duties on both wheat and sugar have been hiked substantially.

The price of wheat in the Indian market, which had declined to less than 1000 per quintal, now rules at slightly higher than 1,000 per quintal after the hike in the import duty to 50 per cent in December 1999. Prices are expected to remain firm. This is despite another bumper wheat crop expected during the year. For sugar, Mumbai's S-30 variety, whose prices had declined to close to Rs. 1350 per quintal, now trades at close to Rs. 1,500 per quintal.


In the case of wheat, though the rolling mills will have to absorb a portion of the increase in wheat procurement costs by strong buyers such as Britannia and Parle, the higher open-market prices are certain to percolate down to these companies as well. Overall, the higher prices of inputs will mean margins on a leash for these companies in the short-term. If prices keep rising, and are eventually passed on, it may threaten the industry's growth rates. This remains to be seen.

Figure 1: Wheat Price Trends in India Figure 2: Sugar Prices in India

Distribution Channel

Figure 3: The Distribution Channel

In India most of the grocery stores are small where the retailer is the only interface between the products and the customer, thus it is the retailer who influences the purchase decision the most. It becomes imperative to give him a good margin and other sales driven schemes. Organized retailing, however, has been a recent phenomenon and is relatively undeveloped. There are no large super market chains/ shopping malls. Consumers are unwilling to pay a premium for convenience shopping as their counterparts in the western countries do.

Rural Penetration and Unorganized Sector

The rural penetration of the branded biscuits segment is also significant. Towns with populations of less than a lakh contribute significantly to the industry's turnover, with some estimates placing it at 40 per cent. However, rural markets largely consume lower-

Factory Distributors Wholesalers Retailers


priced varieties, and it is here that branded biscuits meet with stiff competition from the unorganized sector.

According to official statistics, the contribution of the unorganized sector, which sells biscuits loose, is as high as 50 per cent.

While the presence of a large unorganized segment could mean that a sizeable population can be converted into branded biscuits consumers and, therefore, represent huge market potential for companies in the organized sector, the fiscal duty structure still favors the unorganized sector. Except for select low-priced varieties, the excise duty on biscuits is a hefty 16 per cent.

The retail outlet in India can be broadly categorized as follows:

• Grocery stores • General purpose stores • Food stores • Pan bidi shops • Chemist/ drug stores • Cold chains • Others

Growth in Retail Outlets

Year Urban Rural Total 1978 0.58 1.76 2.35 1984 0.75 2.02 2.77 1990 0.94 2.42 3.36 1996 1.80 3.33 5.13

Table 3: Growth in Retail Outlets in India (In millions)

(Source: www.indiainfoline.com)

The relative share of grocers dropped from over 50% in the early 90's to 35% in the late 90's. Chemist outlets on the other hand, have been expanding their product range to include high margin FMCG products from shampoos to ketchup. Panwallas are also emerging as full fledged consumer product outlets. Since the major percentage of the sales is from kirana shops the major objective of the distribution channel is to make the product available at all these outlets.


The 4 C’s

Who is the Customer?

The major customer segments based on usage and demographics are:

1. Children from SEC A & B Households who consume premium biscuits on a regular basis.

2. Customers of low cost glucose biscuits. 3. The tea-time consuming customers. 4. The youth segment which is brand conscious. 5. The traveler who wants a quick, filling and healthy snack.

BIL has posed a major focus on its customers. According to its Chairman Sunil K. Alagh “success comes from being a part of the consumer’s life”. BIL has sought to build customer loyalty and retention by providing consistent quality and through emotional bonding. This emotional edge has been attained through effective communication and providing products for different moments of consumption. The customer has come to expect the best brand value and innovative products from the Britannia stables at attractive prices.

Competitors

Players in organized sector

• Domestic National Players a. Britannia b. Parle c. Bakeman’s d. Champion e. Kwality f. Priya

• MNC’s a. SmithKline Consumer b. Kelloggs c. Sara Lee d. Heinz e. Excelsia (Nestle) f. United Biscuits

• Other small scale producers a. Ampro Food Products b. Lucky Biscuit Company c. Champion Biscuits d. Crown Bakery e. Dalmia Biscuit Pvt Ltd f. Dey Bakery g. Indian Foods Pvt Ltd


Britannia40%

Parle27%

Bakeman8%

Others25%

BritanniaParleBakemanOthers

Competitive Position The entries of new MNC’s have not posed a direct thereat to Britannia, as these MNC’s have positioned their brands in the premium/health segment. Britannia has maintained market leadership with a 40% volume share and 48% value market share in the organized sector. FMCG major HLL is expected to venture into the segment. Britannia has been aggressive in new launches and marketing during the last 2 years anticipating the competition. It has also recently acquired Kwality Biscuits, gaining a strong foothold in the southern market.

In the overall biscuit market, Britannia and Parle are two major players with 15% and 10% market shares respectively. In the organized biscuit market, Britannia has close to 40% market share, while Parle has around 30% share. Bakeman's has a market share of 10%, mainly with a larger share of the cream biscuit segment. Smithkline Consumer has close to 8% market share with its Horlicks and Boost brands. Other players like Nutriene (now acquired by Sara Lee), Kwality etc have about 3-4% market shares each. Kwality Biscuits Pvt Ltd, a Bangalore based company has been expanding its presence to other parts of the country.

Figure 4: Market Share of various players

Glucose Segment

The glucose segment accounts for 35 percent of the overall biscuit market. Parle's Parle-G is the leader in the Glucose segment, wherein it has an estimated 55% market share. Britannia has re-launched its Glucose -D and Circus brands of glucose biscuits under the Tiger brand. With attractive packaging, low pricing, and heavy advertising, Britannia has achieved tremendous success with the Tiger brand. The brand has an estimated annual sale of close to Rs1.5bn and has garnered 20-25% market share in the glucose biscuit segment. Rural market accounts for majority of Tiger sales.


Other Segments

Salty biscuits (Parle’s Monaco and Britannia's Snax) and sweet-salty biscuits (Parle's Krackjack and Britannia's 50-50) are the other two most popular segments in the biscuit market.

Other Parle brand in the popular segment is Super Milk. However, Parle has been unable to establish its presence in the premium segment. It has recently launched Hide and Seek, chocolate chips biscuits which will compete with Britannia's Bourbon.

Britannia's other main brands are Marie, Nice, Milk-bikies, Good Day, Pure Magic, Little Hearts. Recently Britannia has also launched its new ranges of Treat Biscuits.

Entry of Global Players

In the past, several major MNCs like Cadbury, Brooke Bond and Nestle tried to enter into the biscuit segment but were not successful. These players found it difficult to compete with the unorganized players in the lower/ popular segment of the market. In the upper end of the market, market size is small and there are established players with strong brand equities and a well-entrenched distribution network. Ultimately, they pulled out of the product category.

With the decontrol of the sector, several large global players have entered the category and more players are expected to set up shop in the country over the next few years. The leading global players who have entered the biscuit segment are.

Nestle SA: - Nestle is the largest producer of biscuits in the world. In India, Osem International of Israel had set up a joint venture with Dabur for the manufacture of bakery products. The joint venture, named Excelsia Foods, currently markets the Creamwich brand of cookies. With the global acquisition of the Osem group, Nestle acquired 40% stake in Excelsia Foods. Nestle SA has increased its stake in Excelsia to 60% by acquiring an additional 20% equity from Dabur A new biscuit brand Kidz - animal shaped biscuits in chocolate and plain flavors, has been launched. Targeted at children, the biscuits are positioned on the fun-platform and are packed in pouches.

United Biscuits: - The $3.25 billion British-owned multinational food company, and the second largest biscuit manufacturer in the world, is launching its popular McVitie's Digestive brand in India. It will also launch other brands like Hob-nobs, BN pocket and Ginger Snaps. McVitie's Digestive is the largest selling brand in the UK The biscuits will be directly imported by the Company and will be available in nearly 12,000 retail shops in these major cities. The biscuits will be priced at a significant premium as import duty is high at 60%.. UB has a market share of about 19 per cent in the European biscuit market. It also has significant operations in other countries such as China, Malaysia, Japan, Singapore, Russia and US.

Kelloggs: - It has also entered the segment with the launch of its digestive Breakfast Cereal Biscuits.


Sara Lee: - Another leading global player has acquired the biscuit business of Nutrine, a south based confectionery firm.

Over the long-term, the relative share of unorganized sector is expected to decline gradually. Existing players with strong brands and established distribution networks will continue to expand their market. New players will have the daunting task of setting up a distribution network besides adapting their products to meet the taste preferences of local consumers. The new entrants are likely to enter into distribution arrangements with established domestic food companies

The overall competition for BIL can be captured in a radar screen as shown in the following figure.

Figure 5: Radar Screen showing the overall competition for Britannia

Current Trends

Market research shows that traditional Indian snacks like samosas are being replaced by biscuits. Biscuits like Little Hearts, Maska-Chaska are redefining the market by creating new customer segments and satisfying varying needs.

Parle Bakeman’s PriyaGold

PepsiCo Haldirams Nestle HLL Uncle Chipps

McDonalds Pizza Barista Hut Dominoes KFC Starbeans


Environment

Biscuit market in India is operating in a rapidly changing environment. There are a lot of amalgamations going on in the biscuits industry -- takeovers, capacity expansion, launches etc. More important, the change is mostly in the organized sector. According to experts, the organized sector may soon overtake the unorganized sector in volumes. Today, it produces 10-11 lakh tonnes per annum while the unorganized sector accounts for another 9-10 lakh tonnes. As per studies, in the last year and a half, the organized sector has bitten off more than a 7% share from the unorganized players. Moreover, the organized sector is growing at 14% annually while the unorganized sector's growth has slowed down at 8%. In 1997, the government removed biscuits off the list of products reserved for the small-scale sector and the results are showing. Till 1995, the local biscuit producer, Meghraj, was the number one brand in Uttar Pradesh. Today, they have been forced to downsize operations to survive. As the big players rapidly expand capacities and advertise on a big scale, small firms are getting squeezed. According to Naveen Khanna, Director Super Snacks, "Many small-scale players will have to shut shop as they can't compete on quality and packaging".

The Rs 10-crore Ampro closed its shop in 1997 as a result of stiff competition from Britannia. Several other biscuit brands produced out of Hyderabad, but with a strong presence in northern India, such as Amber and Shalimar are no longer visible there. Small players like the Delhi-based Asian and Apsara, too, are struggling to survive. But with stacks of regional brand recall, they are good takeover targets. Bangalore's well-known Kwality Biscuits is a tasty morsel for any big player. It has five manufacturing units in Bangalore with a capacity of 24,000 tonnes per annum and has two strong brands in its kitty -- Kwality Glucose and Pusti. The company has recently been acquired by BIL which hopes to get a much larger share in the market.

Government Regulations

The duty on biscuits was raised from 8 per cent to 16 per cent in the 2000-01 Budget. However, bowing to pressure from the Federation of Biscuit Manufacturers of India, 50 per cent of the excise was exempted for biscuits with a maximum retail price of Rs. 5 for a weight not exceeding 100 grams. This effectively reinstated the status quo for low-priced biscuits such as Parle-G and Tiger. Overall, it has maintained the potential for price differentials between low-priced branded biscuits and unbranded biscuits. At the same time, the differential between low-priced varieties and high-priced varieties appears set to widen.

While the presence of a large unorganized segment could mean that a sizeable population can be converted into branded biscuits consumers and, therefore, represent huge market potential for companies in the organized sector, the fiscal duty structure still favors the unorganized sector. Except for select low-priced varieties, the excise duty on biscuits is a hefty 16 per cent.


Technological Advancements

BIL is expanding capacity not only by tying up with more franchisee manufacturers, but has also picked up equity in some cases. This will allow Britannia's franchisee manufacturers to make use of its exclusive technology. For instance, in the next few years it will be making fresh investments in proprietary technology for products like Little Hearts and Maska Chaska. BIL continues to upgrade its information technology systems to support the growth in operations and growing needs of the changing market place. IT is putting in place comprehensive Enterprise Resource Planning system to cover all facets of its operations. The first phase of this exercise is expected to be completed soon.


Internal Analysis

Product

Britannia Products Competitor’s Products Tiger Parle-G Milk Bikis Bakeman’s Milkobix Fifty Fifty / Maska Chaska Krackjack Good Day Marie Gold Marie Choice Snax Monaco Treat Fun Center Little Hearts Hide and Seek

Table 4: Price Range based classification of various products of Britannia and its competitors

Price

The various biscuits have been priced in the categories as visible from the above table. Tiger is in the lower segment in the range of Rs. 4/- per pack. On the other hand Good Day and Little Hearts are in the premium segment costing Rs. 12/- and Rs. 8/- per pack respectively. Fifty-Fifty and Marie Gold are in the medium range with a price range of Rs. 5 to Rs. 7 per pack.

Tiger has been priced such to cater to the mass market. Owing to the success of Tiger now the prime focus is the premium segment with the biscuits such as Little Hearts and Good Day.

Performance

The following table gives the sales values of BIL for the last four years.

Period ended 03/98 03/99 03/00 03/01 No. of months 12 12 12 12 Sales value(Rs mn) 7,248.0 8,621.6 9,783.7 11,073.0 Sales volume(unit) 144,213.0 167,467.0 192,646.0 214,214.0 Unit realisation (Rs/unit) 50,259 51,482 50,786 51,691

Table 5: Sales figures of BIL


At a time when growth rates for most FMCG products have wound down to single digit, Britannia has managed to sustain a fairly healthy growth in its sales revenues. This is on account of several factors. From the table it can be seen that the company has shown a sustained growth of approximately 8-10% over the last few years where the overall market growth has been approximately 6% over these years. The major component of growth comes from the increasing sales of Britannia Tiger Biscuit introduced in 1998. The contribution from the rural market has increased from 14% in 1998 to 40% in 2001. This can be attributed mainly to Tiger which is the only product in the glucose biscuit segment. This has also helped the company to make inroads into the glucose biscuit segment (comprising 36% of the total biscuit industry) which has been majorly dominated by Parle’s Parle-G. Now the company has a 27% share in the glucose biscuit market.

While growth rates in the mid-priced and premium biscuits have flagged, it is Tiger which has kept Britannia's biscuit business roaring. Meanwhile, the company kept up the high-decibel promotional campaign to make known its other major brands -- 50:50, Mariegold, Bourbon, Pure Magic, Nice, Snax and Milk Bikis. Britannia Khao World Cup Jao and Britannia Khao Crorepati Ban Jao have been among the more successful of these campaigns.

Three, to pep up overall growth rates, the company has also been leveraging its brand image to establish a foothold outside of the highly competitive biscuit market. Over the past couple of years, it has launched a slew of dairy products (processed cheese, flavoured milk, butter, ghee and dairy whitener) and ethnic snack foods such as Aloo Bhujiya and Chana Choor.

Cost

The major cost of Britannia comprises of raw materials like wheat flour, hydrogenated oil and sugar. The following table provides the break up of the cost for the last four year period.

Cost break-up (Rs m) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change Raw material 1,571 1,812 15.3% 5,093 5,529 8.6% Staff 250 234 -6.4% 701 671 -4.3% Others 1,050 1,052 0.2% 3,342 3,502 4.8% Total expenditure 2,871 3,098 7.9% 9,136 9,702 6.2%

Table 6: Break up of Costs to the company

The operating margin has improved from 4.1% in 1998 to 7.7% in 2002. Raw materials and packaging costs have dropped approximately by 10%. The VRS is beginning to show effect on the company's staff costs, which declined by over 4% to Rs. 671 m in 9m FY02. The workforce has been pruned from close to 5000 down to 4000 personnel.


Overall in the nine months of FY02, Britannia has improved operating margins by 140 basis points to 9.9%.

Advertisements form a major component of costs for BIL. The company has associated itself with the Indian Cricket Team and is targeting the cricket lovers with schemes like Britannia Khao World Cup Jao, The match with the Lagaan Team, getting the likes of Sachin Tendulkar and Saurav Ganguly as brand ambassadors have bolstered the advertisement spending. Despite sustaining a high-decibel promotional campaign over the past two years, Britannia's adspend-to-sales ratio hovers at around 7 per cent, lowest among the major FMCG companies in the country.

SWOT Analysis

Strengths

• Strong Brand Equity • Robust and wide S&D network • Consolidated product range • Low and stable input prices

Weaknesses

• Not being able to upstage Parle as the undisputed leader of the Glucose biscuit segment

• Biased towards the low volume premium segment

Threats

• Removal of the excise exemption on low-priced biscuits

• Removal of QRs on biscuits • Incursion plans of HLL, Nestle

Opportunities

• Foray into the unorganized market • Expanding category by positioning

biscuits as healthy snacks. • Use of products from parent company

portfolio.

Figure 6: SWOT Analysis


Strategy

Line Stretching

Realizing the mental block against premium bakery products Britannia employed a two-pronged strategy in biscuits. To gain volumes BIL continued to back glucose biscuits aimed at the mass, and for margins it continued to stack up its portfolios with new brands and variants. As a result, the unorganized segment that had dominated over 60% of the biscuit market in 1995-96, now sees its share shrunk to around 50% levels.

Targeting Niche Segments: Foray into Health Foods

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. This is an important strategy for promoting consumption of snack foods, which many families do not associate with nutrition.

Biscuits under the umbrella brand Nutri, positioned on the nutrition platform have been launched recently. 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.

Product re-launches for Top of Mind Recall

BIL undertook an exercise to relaunch many of its products in order to strengthen its competitive position. It entered new segments, which were not large markets but offered scope for value addition and higher margins. Formulating new product launches for the lower end of the market became the top priority, since BIL was weak in the low price segment, which accounted for almost 50 percent of the volumes. With easy access to Danone's technology, BIL officials were confident that product development costs could be kept under control.

The Ansoff Matrix: A strategic Analysis

According to the Ansoff Matrix as applied to BIL we see that the current biscuit market in India has virtually reached saturation levels. The current market expansion has been due to the organized sector biting into the unorganized market. The unorganized market is estimated at 1500 crores. BIL has thus visualized a foray into new mission sector by coming out with Tiger biscuits. This gave it an inroad into the rural market.


Ansoff’s Product/Mission Matrix

Present Product New Product

Present Mission Market Penetration Product Development

Market Development Diversification New Mission

Figure 7: Ansoff’s Matrix

On the other hand with its older range of products such as the Marie Gold it has seen to offer the customer better taste and better visual appeal by a state of the art packaging. This has given it a market penetration focus by a better top of the mind recall and more visibility.

It has also introduced a number of new and innovative products in the higher end range such as Treat and Jim Jam, which have been great successes since their introduction. Overwhelmed by the success of the Tiger brand the company has now launched a variant of Tiger biscuits called the Tiger Cashew. This should help the company snatch more market share in the Glucose biscuit market.

Packaging

In the late 1990s, BIL began to pay more attention to packaging. BIL focused its capital spending on state-of-the-art high volume and specialized packaging machines. In a deviation from its traditional practices, BIL also began to use vernacular language labels. BIL attempted to improve the shelf life of its products by making its distribution pipeline shorter.

Brand Identity

In 1997, BIL changed its logo. The existing logo seemed to be too closely linked with the bakery business, and the association hindered the diversification efforts. Market Research survey revealed that though Britannia was one of the most trusted brand names, with tremendous emotional goodwill, it was perceived as old-fashioned and slow moving. The Britannia brand needed to get itself a more robust identity. Research also revealed that there was very little memorability of the existing brand logo. BIL wanted to ensure that the new identity also communicated modernity and dynamism. The new design also had to be appropriate to the business the company was in. Using the


identified core values, BIL repositioned the brand and advertising strategy to come up with the new corporate slogan, `Eat Healthy, Think Better.'

Expansion of Sales and Distribution Network

While it took 11-14 weeks for a typical fast moving consumer product to reach the consumer, BIL's distribution cycle-time was 6-9 weeks. BIL chalked out a long-term plan to make its brands available in towns with a population of less than 5000. In 1999, BIL increased the total number of its outlets to 1.2 mn (from 0.25 mn in 1995); 60-70 percent of the new outlets were in the rural and semi-urban markets. They had storage facilities for up to 10 days, and were quickly restocked by the company's wide distributor network.

Long Term Outlook

In the longer term the bakery segment is likely to see competition getting even more intense with new entrants especially MNC’s. Marketing wars would get even more cut throat as players try to convert consumers of unbranded products to branded products. The urban areas are likely to continue seeing new high end products in all categories of the bakery industry. But the road for this segment’s growth would be slow and steady.


Conclusion

BRITANNIA Industries has sure come a long way from being a company with a stodgy but well-recognized brand name and an inconsistent financial performance in the mid 1990s. After a thorough overhaul of the operational structure, a revamp of its product portfolio and an ambitious foray into new areas, such as dairy products and snack foods, the company has managed to turn in robust financial performance over the past four years. BIL has also confounded critics by showing above the industry average growth which has been mainly attributed to its innovative offerings. BIL has consistently launched a new variant almost every quarter. It has pruned its product line and gone to its core products after revitalizing them through state of the art packaging and better visual appeal while at the same time explored new markets such as the rural market.

With a strong market share and a steady stream of innovative product launches it is not idle boast to say that Britannia intends to make every third Indian a Britannia customer by the year 2006.


References

1. The Cookie Wars Rage - Shuchi Bansal (With Meenu Shekar & G.S. Radhakrishna)

Business World, 20th September 1999 2. Parle to Launch Biscuit range for Premium Sector - Mrinal Kanti Dey

Asian Age, 26th March 2002 3. Parle G largest selling biscuit brand in World - Shweta Jain & Reeba Zachariah Rediff.com, 14th March, 2002 4. Britannia campaign hopes to cash in on World Cup fever

Business Line Tuesday, 8th October, 2002 5. Whipping up an FMCG excitement - Neeraj Jha

ExpressIndia.com, 19th June, 2000 6. The New Language of Emerging Markets Financial Times - Amitava Chattopadhyay and Niraj Dawar 13th November, 2000 7. HDFC Securities Limited.com 8. Britannia Industries: Pare exposures - Aarati Krishnan

Business Line Sunday, 3rd February, 2002 9. Business Line, Investment World,

15th April, 2001 10. Britannia cuts price of key product to spur volumes - Tarun Narayan

The Financial Express, Monday, 25th June, 2001 11. http://www.equitymaster.com/f-detail-next.asp?dispname=&symbol=BRIT&keyword=&start=11&image2.x=13&image2.y=8

12. www.parle.com

13. www. Indiainfoline.com

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