SWOT Analysis of
Britannia Industries Limited
Strategic and SWOT Analysis Report of Britannia Industries Limited
COMPANY OVERVIEW
Britannia
Industries Limited (Britannia or ‘the company’) is engaged in the manufacturing
and distribution of bakery and dairy products such as biscuits, bread, cakes
and rusks, milk, butter and cheese. The company primarily operates in India. It
is headquartered in Bangalore, India and
employed
2,190 people as of March 31, 2013. The company recorded revenues of INR61,854.1
million (approximately $1,131.9 million) in the financial year ended March 2013
(FY2013), an increase of 12.8% over FY2012. The operating profit of the company
was INR3,474.9 million (approximately $63.6 million) in FY2013, an increase of 39.5%
over FY2012. The net profit was INR2,595 million (approximately $47.5 million)
in FY2013, an increase of 30% over FY2012.
SWOT ANALYSIS
Britannia
is engaged in the manufacturing and distribution of bakery and dairy products
such as
biscuits,
bread, cakes and rusks, milk, butter and cheese.The company has a portfolio of
top selling food brands. Britannia produces and distributes premium brands such
as 50:50, Good Day, Little Hearts, Milk Bikis, Marie Gold, Maska Chaska,
NutriChoice, Pure Magic, Treat and Tiger. An extensive portfolio of global
brands facilitates customer recall and enhances Britannia's market penetration capabilities.
However, intense competition could lead to pricing pressures, thereby
decreasing the profitability of the company.
Strengths
Strong
brand portfolio
Britannia
has a strong portfolio of top selling food brands. The company's premium brands
include 50-50, Good Day, Little Hearts, Milk Bikis, Marie Gold, NutriChoice,
Pure Magic, Treat and Tiger. The company is one of the trusted brands in India.
For instance, Britannia was rated as the Most Trusted Food Brand and second
Most Trusted Brand across all product categories by consumers in an independent
survey conducted by an industry source and India's leading business newspaper. This
is the 12th consecutive year that consumers chose Britannia among the Top 10
Most Trusted Brands. Furthermore, Britannia holds nearly 30% of market share in
the India’s biscuit category. It also has about 21% market value share in the
cheese category, distributing to approximately 30,000 outlets. Britannia is
also one of the largest players in the cookies segment. With a wide portfolio
of brands and choice of product category, the company is able to differentiate itself
in the market, nurture customer loyalty, and reduce its business risk. A strong
brand portfolio not only facilitates customer recall but also enhances
Britannia's market penetration opportunities.
Focus
on innovation
The
company has a strong orientation towards product innovation. Through its
ability to innovate
and
extend its brands and products, the company plans to strengthen and sharpen its
brands. The
company
launched egg-less fruit cake under brand name Britannia Veg cake; Treat Chocoz,
a new cream range; and new flavors and addition in its fruit cake range, in
2009. Further, in 2010, the company added the Milk Bikis Almond Cookies line to
its existing Milk Bikis category and expanded its health biscuit brand,
NutriChoice, to the diabetic friendly essentials range. In the beginning of 2011,
the company entered into the branded breakfast food sector with the launch of
Britannia Healthy Start, a new range of ready-to-cook breakfast mixes. In
addition, to enhance its presence in the healthy milk based drinks, the company
launched TigerZor Choco Milk and TigerZor Badam Milk during the same year.
Britannia also launched new tea time biscuit, Vita Marie Honey Oats, in 2011.
This biscuit is made up of two visible layers of oats and wheat fiber that help
to reduce cholesterol by removing bad cholesterol from the body.
Britannia’s
continuous focus on research in the areas of nutrition, ingredients, packaging,
process
technology
and food safety enabled it to launch new products, to improve products with
upgraded technology and cost efficiencies, and to upgrade packaging of its
products. In FY2012, Britannia launched several new and renovated products
across the entire portfolio, including NutriChoice Multigrain Thins and Roasty,
Pure Magic, Treat Fruit Creams, Marie with Honey and Oats, 50-50-Snackuits,
Good Day Fresh Bake Butterscotch and Chocolate Ecstasy. In FY2013, the company’s
new product launches included a wide range of Time Pass Classic Salted biscuits
and a new coffee variant in Bourbon.The company also upgraded packaging to
differentiate consumption occasions and consumer segments. It introduced
tighter packs for Good Day and Tiger brands, and transitioned from polyvinyl
chloride (PVC) to polypropylene (PP) trays for greener packaging. The
introduction of new brands and innovative product ranges has been one of the
strengths of the company and has helped it in retaining its leadership position
in the Indian market. Product innovation adds to strength of the company's
power brands and enables it to stay ahead in the competitive market.
Dominance
in the higher margin non-glucose biscuit segment
The
Indian organized biscuit industry has been largely dominated by Britannia and
Parle. The operational strategies of both the companies have however been
different. Britannia till now has
been
a major player in the non-glucose segment while Parle primarily caters to the
glucose segment. Britannia offers several premium products such as Good Day,
Bourbon, and Treat in the higher margin non-glucose segment. Parle, except for
its Hide & Seek brand of biscuits, mainly operates in the lower margin
glucose and Marie segment. As per industry estimates, the premium biscuit segment
is expected to grow at a higher rate compared to the glucose segment whose
contribution by value decreased to 24%
in 2011–12 from 33% in 2009–10. Britannia with majority of its sales from
non-glucose segment is well positioned to tap the higher margin segment. Furthermore,
the company can leverage the profitability and cash flow generated from the
premium segment to fuel the growth and offset the price-war in other segments.
Besides, the changing demographics and improving disposable income coupled with
the improving economic condition, increases the potential of growth in the
premium segment. Additionally, the premium biscuit segment's volume growth
prospects have improved as a result of heightened focus on smaller packs and innovative
products. Britannia with its favorable sales mix and strong brand portfolio can
utilize the opportunity to further its market share.
Weaknesses
High
dependence on Indian market
In
spite of making forays into other international markets, Britannia is still
dependent on the Indian market for majority of its revenues. As compared to
this, Mondelez International, the US foods major, is expanding its presence in
the Indian biscuits market. Mondelez International manufactures and markets
packaged foods in around 165 countries. Furthermore, it generated $35,015
million in revenues in the financial year ended December 2012, with
approximately 82.9% of its revenues derived from international operations.
Britannia, on the other hand, derives almost all its revenues from Indian
market.
In a competitive
environment, high dependence on Indian market not only exposes Britannia to the
vulnerability of the local market conditions but also limits the growth
opportunities. Besides, the company is also deprived of the economies of scale
and benefits which its competitors enjoy because of their global operations.
Opportunities
Emerging
Indian dairy industry
The
dairy industry in India is expected to grow significantly. According to
industry estimates, the
dairy
industry is expected to grow at a compound annual growth rate (CAGR) of nearly
15% during 2013–20. Increasing consumption of value-added products, including
yogurt, cheese, ice cream and baby food, are expected to drive this growth. In
addition, the milk consumption growth rate is also expanding significantly; it
was almost double the milk production growth rate in recent years. Britannia,
apart from biscuits and breads, also markets and sells dairy products
comprising cheese, dairy whitener, curd, butter, and clarified butter. Besides,
the company is also focusing on the flavored drinks market. With recent launch
of milk-based healthy drinks such as TigerZor Choco Milk and TigerZor Badam
Milk, the company further enhanced its flavored drink portfolio. The new
launches and strong brand equity of Britannia would enable it to target and
penetrate the consumer group with ease. This would increase the revenue sources
and growth opportunities for the company in the next few years.
Increasing
demand for healthy food products
Consumers
worldwide have become more health conscious in recent years. Increasing number
of
consumers
are opting for natural, fat-free and healthy food products. Food items
containing trans-fat are losing market share as they are linked to
cardiovascular diseases. The trend is also visible in changed Indian
consumption habits in recent past. According to an industry survey, 62% of
surveyed consumers said they prefer eating natural and fresh foods. Moreover,
77% of urban Indians are cutting down on fats. The most important factors
driving the ongoing strong growth of health and wellness products include the
rising health awareness among Indians and the widening availability of
information from various media.
The
emerging health and wellness trend in the country is a growth potential for
Britannia which offers a range of low-fat and sugar free products such as
NutriChoice Digestive and NutriChoice SugarOut. NutriChoice SugarOut is the
first biscuit without added sugar in the Indian market. The company sells most
of its biscuits fortified with vitamins and micro-nutrients. Besides, the
company decided to relinquish the use of trans-fats from its baked products
range. In addition to these, the company entered the breakfast market with the
launch of Britannia Healthy Start, a range of ready-to-cook breakfast mixes, in
2011. In the same year, Britannia launched new tea time biscuit, Vita Marie Honey
Oats, further expanding its product portfolio in the health and wellness
category. Later in the year, the company launched its new range of Health
Breads, including honey and oats bread, multi-grain bread, 100% whole wheat
bread and multi-fiber bread. During FY2013, the company expanded the reach and
distribution of NutriChoice diabetic friendly products across the country by almost
50%. As part of its healthy snacking portfolio, it offers Tiger brand, with
each serving designed to deliver 25% of RDA of iron. Other brands that the
company offers as part of its healthy snacking portfolio containing
micro-nutrients include Milk Bikis, Britannia Marie Gold, VitaMarie, Britannia Bread,
Tiger Chocolate and Badaam Milk and Britannia Flavored Yoghurt.
With
the emphasis on healthy foods increasing, the company can leverage its brand
strength to
introduce
new products into the health and wellness space and enhance its product
portfolio.
Growing
biscuit industry in rural India
The
biscuit industry in India is growing at a fast pace. According to industry
sources, the Indian
biscuit
industry is expected to grow at a rate of 15% per annum in the next five years,
and is one of the key categories in the Indian fast moving consumer goods
industry. Rural markets account for more than half of the biscuit sales in
India.The penetration rate of biscuits in rural markets (50–60%) is lower
compared to that of the urban markets (75–85%) according to industry estimates.
The company offers various biscuit brands including Tiger, Good Day, 50-50,
Marie Gold, Treat, Milk Bikis, NutriChoice, Time Pass, Pure Magic, Little
Hearts, Nice Time, and Vita Marie Gold. The company's strong market presence in
the competitive Indian biscuit industry could be leveraged to tap the growing
demand from rural markets and increase its revenues.
Threats
Intense
competition
The
company faces intense competition from local and international companies in its
primary business segment, biscuits. Parle, ITC, and other local players are
challenging the company's market share in India. In 2003, ITC forayed into
biscuits market with the launch of Sunfeast range of glucose, marie and cream
biscuits. Currently, Sunfeast has well-established presence in almost all
categories of biscuits. ITC is rapidly increasing its market share in the
premium cream biscuit segment by expanding its product offering in this
segment. Besides, the entry of international companies like UK's United
Biscuits and GlaxoSmithKline has intensified the competition. Also, other major
multinationals like Mondelez International and PepsiCo entered the Indian
biscuits market. PepsiCo launched Aliva baked crackers in 2009, and continued
to expand by launching six new baked variants under Aliva in 2012. PepsiCo has
an established distribution network in the country which could be used to
penetrate the Indian biscuits space. On the other hand, the acquisition of
Cadbury by Mondelez International has opened up avenues for the large food
giant to enter the lucrative Indian biscuit market. Mondelez International is
banking on the premium brand value of Cadbury and its distribution strength to
launch its biscuits, chocolate and snacks brands in India. In 2011, Mondelez International
launched Oreo cookies into India’s biscuit market through its subsidiary
Cadbury. Mondelez International, with
revenues of $35,015 million in the financial year ended December 2012, and
PepsiCo, with $65,492 in revenues during the financial year ended December
2012, enjoy competitive advantage in term of cash and financial strength over
Britannia. These global companies along with having greater financial
resources, also have substantially greater marketing and distribution resources.
Aggressive marketing and other competitive actions 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 the company to produce and manufacture its products
are wheat,
sugar
and vegetable oils. On a global and regional basis, these raw materials and
components 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 unforeseen
circumstances.The company’s cost of sugar purchases grew by 17% in FY2013,
compare to FY2012.
Since
the wheat and sugar production depends upon monsoon, an unfavorable monsoon
could affect the supply of these crops, pressurizing the already steep prices
of the inputs. Moreover, India imports
majority of its vegetable oils consumption, exposing the prices to the exchange
rate
fluctuations. Any adverse volatility in
the raw material prices or exchange rates could materially affect the company's
profits.
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