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

 Contents

• Executive Summary

• List of Figures and Tables

• Introduction

• Market Analysis

• The 4 C’s

• Environment

• Internal Analysis

• Strategy

• Conclusion

• References

Britannia Industries Limited 2

 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

Britannia Industries Limited 3

 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

Britannia Industries Limited 4

 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.

Britannia Industries Limited 5

 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.

Product Market size Market size Growth Penetration

(Rs m) ( '000 tonnes) (%) 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 Britannia's brands Competitor brands

share
Glucose 36% Tiger, Tiger Oro Parle-G, Ampro, Bakeman's
Glucogold
Arrowroot / 18% Mariegold, Jacob's Thin Maritime, Bakeman's Marie
Marie
Milk 12% Milk Bikis Parle Supermilk,
Bakeman's Milkobix
Salted 6% Snax Monaco
Sweet & 8% Fifty-Fifty Krack-Jack
Salted
Creams 7% Elaichi Cream, Pure Magic, Parle Orange Cream,
Orange Cream, Bakeman's Cream
Bourbon Choclate Cream Crunch, Horlicks, Sandwich
Jim Jam Biscuits

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 Sweet 9% Good day, Little Hearts, Bakeman's Butter-Yums,
Cookies Calypso Coconut, Nice, Top Horlicks
Bakeman's Cookiez, Parle's
Hide & Seek

Wafers & 4% Chekkers Rik Rak

others

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.

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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

Factory Distributors Wholesalers Retailers

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-

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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.

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 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

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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.

Others
25%
Britannia Britannia
40%
Parle
Bakeman Bakeman
8% Others

Parle
27%

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.

Britannia Industries Limited 11

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.

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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.

McDonalds

Pizza Barista
Hut PepsiCo
Haldirams
Nestle Parle
Bakeman’s
PriyaGold HLL

Dominoes
Uncle Chipps

KFC

Starbeans

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.

Britannia Industries Limited 13

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.

Britannia Industries Limited 14

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.

Britannia Industries Limited 15

 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

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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.

Britannia Industries Limited 17

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 Weaknesses

• Strong Brand Equity • Not being able to upstage Parle as the

• Robust and wide S&D network undisputed leader of the Glucose
• Consolidated product range biscuit segment
• Low and stable input prices • Biased towards the low volume
premium segment

Threats Opportunities

• Removal of the excise exemption • Foray into the unorganized market

on low-priced biscuits • Expanding category by positioning
• Removal of QRs on biscuits biscuits as healthy snacks.
• Incursion plans of HLL, Nestle • Use of products from parent company
portfolio.

Figure 6: SWOT Analysis

Britannia Industries Limited 18

 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.

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 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

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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.

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 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.

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 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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