Britannia hit as local rivals return

livemint.com:

₹4,011 crore in the June quarter (Q1FY24). The margin performance was a letdown, too. Small wonder, Britannia’s shares fell by almost 3% on Monday.

The main problem is that volume performance has been underwhelming. In Q1, volume was flat year-on-year, and revenue growth was price led. But with pricing growth expected to taper, it is crucial for volume to gain traction.

Here it does not help that there is sluggishness in its rural markets. In general, as local competition resurfaces with receding inflation levels, it is a threat for Britannia. True, it has widened the market share gap with the No.

2 company in the biscuit portfolio. But Britannia’s market share was largely flat in Q1 versus FY23 as local players captured more share. To remain competitive and drive market share growth, the company would deploy the necessary pricing strategies.

Britannia expects FY24 to be flat from a pricing growth standpoint. “Lower pricing should drive volumes higher going forward but as it stands today, H2FY24 looks challenging from topline (given price-cuts) as well as bottom line (higher margin would be in the base by then) perspectives, unless volumes offset the hit from lower pricing," said analysts at JM Financial Institutional Securities in a report on 4 August. However, there is a silver lining.

The number of packs sold by Britannia in Q1 was up by 9% year-on-year despite flat volume. In view of this, it expects volume to recover gradually in terms of tonnage as well. Coming to profit margin, the new year has begun on a somewhat dull note for Britannia.

Recall that in FY23, Britannia saw gains from lower cost of wheat. This is not the case now. Britannia’s Ebitda margin in FY23 had expanded by 179 basis points (bps) year-on-year