Britannia Industries Ltd:Annual Report 2023-24 Analysis

Britannia Industries Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Britannia Industries Ltd. was established in 1892 in Kolkata (then Calcutta), India, by a group of British businessmen. It began as a small biscuit company with an investment of ₹295.

Headquarters Location and Global Presence #

The company’s headquarters is located in Bengaluru, Karnataka, India. Britannia has a significant presence in India and exports its products to over 60 countries across North America, Europe, Africa, Southeast Asia, and the Middle East.

Company Vision and Mission #

While a specific publicly stated vision and mission statement are difficult to pinpoint precisely, Britannia’s actions reflect a commitment to:

• Providing high-quality, nutritious food products.
• Being a leader in the Indian packaged food industry.
• Creating value for its stakeholders.
• Innovation and expansion in the food sector.

Key Milestones in Their Growth Journey #

• 1892: Established as a biscuit company in Kolkata.
• 1918: Acquired by Gupta Brothers.
• 1924: Calcutta branch of Balmer Lawrie & Co. becomes a shareholder.
• 1979: The company is renamed Britannia Industries Limited (BIL).
• 1990s: Restructured its operations and focused on core brands.
• 2000s: Expanded its product portfolio beyond biscuits into dairy, bread, and other categories.
• Present: Continues to be a leading food company in India with a focus on innovation and expansion.

Stock Exchange Listing Details and Market Capitalization #

Britannia Industries Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). As of late 2023/early 2024, its market capitalization is approximately around INR 130,000 Cr. (This figure can fluctuate; refer to financial websites for real-time data.)

Recent Financial Performance Highlights #

Britannia’s recent financial performance typically shows consistent revenue growth and profitability. Look to the company’s annual reports and quarterly results for specific figures on revenue, net profit, and earnings per share (EPS).

Management Team and Leadership Structure #

Britannia is led by a board of directors and a management team. Key roles include:

• Chairman & Managing Director: (Check Britannia’s website for the current incumbent)
• Chief Executive Officer: (Check Britannia’s website for the current incumbent)
• Chief Financial Officer: (Check Britannia’s website for the current incumbent)

The company has a hierarchical management structure with various functional heads reporting to the CEO.

Notable Awards or Recognitions #

Britannia has received numerous awards and recognitions for its brand, product quality, and sustainability initiatives. These include awards for:

• Brand recognition and brand value.
• Product innovation and taste.
• Sustainability and corporate social responsibility.

Their Products #

Complete Product Portfolio with Categories #

Britannia’s product portfolio is diverse and spans several categories:

• Biscuits: Glucose biscuits (Britannia Glucose D), cream biscuits, crackers, cookies, Marie biscuits, digestive biscuits (NutriChoice).
• Dairy: Cheese, butter, ghee, milk-based drinks.
• Bread: White bread, brown bread, fruit bread.
• Cakes: Cup cakes, bar cakes.
• Rusk: Toasted bread.

Flagship or Signature Product Lines #

• Britannia Glucose D: A popular glucose biscuit, a staple for many Indian consumers.
• Good Day: Premium cookie brand with various flavors.
• Marie Gold: Light and crispy biscuit.
• NutriChoice: Health-focused range of biscuits and crackers.
• Tiger Biscuits: Aimed at children.

Key Technological Innovations or Patents #

Britannia focuses on process and packaging innovations. Recent innovations likely involve:

• Developing healthier biscuit and snack formulations.
• Improving packaging materials for sustainability and shelf life.
• Optimizing manufacturing processes for efficiency.

Manufacturing Facilities and Production Capacity #

Britannia operates multiple manufacturing facilities across India. Specific production capacity figures are usually not publicly disclosed in detail, but the company has a significant scale of operations to meet national and international demand.

Quality Certifications and Standards #

Britannia maintains various quality certifications and standards, including:

• ISO certifications: For quality management systems.
• FSSAI compliance: Food Safety and Standards Authority of India regulations.
• Potentially other international certifications depending on export markets.

Any Unique Selling Propositions or Technological Advantages #

• Strong Brand Recognition: Britannia is a well-established and trusted brand in India.
• Extensive Distribution Network: Enables widespread product availability across the country.
• Focus on Innovation: Continuously develops new products and improves existing ones.
• Quality and Safety Standards: Commitment to providing safe and high-quality food products.

Recent Product Launches or R&D Initiatives #

Britannia continually launches new products and expands its existing product lines. Information can be gathered from press releases and company announcements, but often involves launching new flavors, sizes, or variations of existing popular items.

Primary Customers #

Geographic Markets (Domestic vs. International) #

Britannia’s primary market is India, with a strong domestic presence. The company also exports its products to numerous countries worldwide, with a focus on:

• Middle East
• Africa
• Southeast Asia
• North America
• Europe

Distribution Network and Sales Channels #

Britannia boasts a very extensive distribution network in India, reaching both urban and rural areas. Sales channels include:

• Retail stores: Supermarkets, grocery stores, convenience stores, etc.
• Wholesalers and distributors: To reach smaller retailers.
• E-commerce platforms: Online sales through various e-commerce websites.

Major Competitors #

Direct Competitors in India and Globally #

• Nestlé India: Competes in biscuits, dairy, and other food categories.
• Parle Products: A major competitor in the biscuit market in India.
• ITC Limited (Foods Division): Competes in biscuits, snacks, and packaged foods.
• Unilever: Competes in the dairy and packaged foods segment.

Comparative Market Share Analysis #

Britannia, Parle, and Nestlé are typically among the top players in the Indian biscuit market. Market share data can fluctuate; refer to industry reports and market research for up-to-date figures.

Competitive Advantages and Disadvantages #

• Britannia Advantages: Strong brand reputation, extensive distribution network, diverse product portfolio, focus on innovation.
• Britannia Disadvantages: Competition from established multinational and domestic players, price sensitivity in the Indian market.

How They Differentiate from Competitors #

Britannia differentiates itself through:

• Brand Equity: Long-standing brand with strong consumer trust.
• Product Innovation: Continues to launch new and innovative products.
• Distribution Network: Extensive reach across India.
• Quality Focus: Commitment to providing safe and high-quality products.

Industry Challenges and Opportunities #

Challenges:

• Rising Raw Material Costs: Affects profitability.
• Intense Competition: Requires continuous innovation and efficient operations.
• Changing Consumer Preferences: Requires adaptation to new trends and demands.

Opportunities:

• Growing Demand for Packaged Foods: Increasing urbanization and changing lifestyles.
• Expanding Rural Market: Untapped potential in rural areas.
• Health and Wellness Trend: Opportunity to develop healthier food products.

Future Outlook #

Expansion Plans or Growth Strategy #

Britannia’s expansion plans likely focus on:

• Expanding Product Portfolio: Launching new products and entering new categories.
• Strengthening Distribution Network: Reaching more consumers in both urban and rural areas.
• International Expansion: Growing its presence in existing and new international markets.
• Strategic Acquisitions: Acquiring companies to expand its product portfolio or market share.

Sustainability Initiatives or ESG Commitments #

Britannia is increasingly focusing on sustainability and ESG (Environmental, Social, and Governance) initiatives. These likely include:

• Reducing Environmental Impact: Implementing energy-efficient manufacturing processes, reducing waste, and using sustainable packaging materials.
• Social Responsibility: Supporting local communities and promoting ethical sourcing practices.
• Governance: Maintaining transparent and accountable business practices.

Industry Trends Affecting Their Business #

Key trends:

• Health and Wellness: Increasing consumer demand for healthier food products.
• Convenience Foods: Growing demand for ready-to-eat and convenient food options.
• E-commerce: Increasing online sales of food products.
• Sustainability: Growing consumer awareness of environmental and social issues.

Long-Term Vision and Strategic Goals #

Britannia’s long-term vision is likely to remain a leading food company in India, with a focus on:

• Sustainable Growth: Achieving profitable and sustainable growth.
• Innovation: Developing new and innovative products to meet changing consumer needs.
• Social Responsibility: Contributing to society and the environment.
• Becoming a total foods company.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics (Standalone) #

• Revenue from Operations: Increased from ₹15,618.42 crores in FY 2022-23 to ₹16,186.08 crores in FY 2023-24, showing a 3.6% growth.
• Operating Profit: Grew from ₹2,546.69 crores in FY 2022-23 to ₹2,799.63 crores in FY 2023-24, marking a 9.9% increase.
• Profit After Tax: Decreased from ₹2,139.30 crores in FY 2022-23 to ₹2,082.05 crores in FY 2023-24, a (2.7)% decline.
• Net Profit Margin: Decreased from 13.5% in FY 2022-23 to 12.7% in FY 2023-24.
• Operating Profit Margin: Increased from 16.3% in FY 2022-23 to 17.3% in FY 2023-24.
• Return on Net Worth: Decreased from 76.6% to 62.1% from the baseline of 2023 to 2024, Driven by change by increase in net worth.
• Debtors Turnover Ratio: Decreased from 56.8 times in FY 2022-23 to 50.3 times in FY 2023-24.
• Inventory Turnover Ratio: Decreased from 40.4 times in FY 2022-23 to 38 times in FY 2023-24.
• Debt Equity Ratio: Improved from 83.7% in FY 2022-23 to 57.8% in FY 2023-24.
• Current Ratio: Improved from 1.1 times in FY 2022-23 to 1.2 times in FY 2023-24.
• Interest Service Coverage Ratio: Increased from 17.9 times in FY 2022-23 to 19.9 times in FY 2023-24.

Business Segment Performance #

• The Company’s operating segment is identified as ‘Foods’. Consolidated revenue from operations increased by 2.9%, and operating profit grew by 10.1% in FY 2023-24.

Bakery Business #

• Biscuit: Strategic pricing actions and brand investments led to sustained market leadership despite macroeconomic challenges.
• Cake: Growth was observed in both Sliced and Non-Sliced formats, particularly at the ₹5 and ₹10 price points.
• Rusk: Experienced a rebound in the second half of FY 2023-24, regaining growth momentum.
• Bread: Focus on driving the category through both Sliced and Non-Sliced varieties.

Dairy Business #

• The organized segment experienced rapid growth, with packaged liquid milk, cheese, and yogurt driving growth.

Adjacent Business #

• Cream Wafer: Exhibited growth potential, positioning the Company for leadership in this category.
• Centre-Filled Croissant: Increased consumer adoption and urban market penetration.
• Salted Snacks: Entered the healthy snacking market, expanding its presence in the savory snacking segment.

International Business #

• Focused on strengthening brand equity, product innovation, and expanding local operations. Sustained double-digit value growth across regions, driven by distribution expansion and improved execution.

Major Strategic Initiatives and their Progress #

• New Category Entries and Product Launches: Launched 22 new products, including healthy snacking options, to expand its product portfolio.
• Digital Transformation: Leveraged digital technologies to strengthen distribution, enhance marketing, and improve operational efficiency.
• Manufacturing Expansion: Commissioned a new greenfield factory in Bihta, Bihar, and scaled up production lines in multiple factories.
• Fortifying core brands: Through targeted advertisement campaigns.
• Market leadership through innovation: Via product launches, design improvements.

Risk Landscape Changes #

• Geopolitical Tensions: Ongoing conflicts, particularly the Russia-Ukraine war, impact commodity prices (wheat flour) and business operations in the Middle East.
• Climatic Changes: Irregular crop patterns and climatic changes (El Nino, heat waves) pose risks to rural growth and commodity prices.
• Increased Competition: Softening commodity prices led to increased competition from local players.
• Pricing Pressures: Balancing pricing strategies amidst inflation, global factors, and consumer sensitivity.
• Fluctuating Commodity Prices: Mainly sugar, wheat, Milk, Chocolate.

ESG Initiatives and Metrics #

Resources #

• Achieved a 28% share of renewable energy in total electricity consumption.
• Reduced specific water consumption by 32.84% from the 2019-20 baseline.
• Recycled 52.29% of total water withdrawal.
• Achieved plastic neutrality for the third consecutive year, processing ~45,000 tonnes of plastic.
• Conducted ESG assessments for 453 suppliers, representing 87% of total spend.

People #

• Impacted ~2.3 lakh lives through the Malnutrition Reduction Program.
• Benefitted ~3,000 farmers through the Dairy Farmer Extension Program.
• Increased female employee representation to 12.57% and implemented support initiatives.

Growth #

• Reduced sugar content by ~1.9% per serving and sodium content by ~2.4% per serving.

Governance #

• Implemented programs for corporate governance, sustainability performance verification, ethical labeling, risk management, and responsible information management.
• Sir Ness Wadia Foundation improved health, nutrition and awareness by impacting to 39.024 beneficiaris by enhancing nutritional intake and dietary diversity.

Management Outlook #

• Optimistic about growth prospects due to government spending on infrastructure, rising incomes, and a strong domestic market.
• Continued investment in power brands, product innovation, cost efficiencies, and distribution network expansion are expected to drive growth.
• Anticipates a gradual recovery in rural consumer expenditure and a positive impact from a favorable monsoon.
• International Business faces challenges from geopolitical tensions, localization of workforce, and trade barriers, but growth is expected in key markets through strategic initiatives.
• Focus on becoming a ‘Responsible Global Total Foods Company’ by strengthening brand equity, diversifying products, and deepening market penetration.

Detailed Analysis #

Britannia Industries Limited: Standalone Financial Analysis #

Balance Sheet Analysis: 3-Year Comparative (INR Crores) #

Significant Changes in Major Line Items (>10% YoY) #

• Capital Work-in-Progress: Increased by 80% (FY 2024 vs FY 2023) and 223% for FY2023, indicating significant ongoing expansion/upgrade projects.
• Non-Current Investments: Decreased by 29% (FY 2024 vs FY 2023) after increasing by 59.6% in previous FY. Indicates redemption of Non-current investments.
• Loans Receivable (Non-current): Decreased from 150 crores to 0, indicating the company has no long-term loans.
• Deferred Tax Assets (Net): Decreased by 26.28% (FY 2024 vs FY 2023).
• Tax Assets (Net): Increased by 51.47%, potentially due to advance tax payments or tax credits.
• Cash and cash equivalents: Increased significantly from 9.09Cr to 240.85 Cr
• Loans Receivable(Current): Decreased by 17.8%.
• Assets held-for-sale: Decreased by 80.2%
• Borrowings (Non-current): Decreased significantly by 41.6% (FY 2024 vs FY 2023).
• Other Equity: Increased by 10.97%, reflecting retained earnings and/or other reserves.
• Other Non-Current Financial Liabilities: Increased by 8.99%.
• Trade Payables: Increased by 15.6%
• Other Current Financial Liabilities: Decreased by 36.88%.
• Provisions: Increased by 8.32%

Working Capital Trends #

Working capital is a measure of a company’s short-term financial health. It’s calculated as Current Assets minus Current Liabilities. Analyzing the individual components reveals more.

• Inventories: Remained relatively stable, indicating efficient inventory management.
• Trade Receivables: Increased by 24.6%, suggesting potentially longer collection periods or increased credit sales, warranting further investigation.
• Cash and Cash Equivalents: A very significant increase from 9.09 Cr. to 240.85 Cr., shows the company is building a strong cash position.
• Short-Term Borrowings: Increased, but the massive increase in cash and cash equivalents offsets this.
• Trade Payables: Increased in line with business growth.

Overall Working Capital Assessment: The increase in current assets is largely financed by operations.

Debt Structure and Maturity Profile #

• Debt to Equity Ratio: 57.8% in 2024, down from 83.7% in 2023. The company reduced its reliance on debt.
• Long-term vs. Short-term Debt: the mix shifted. In FY24, a large portion of borrowing is short-term. in FY23 long term debt was significantly higher.
• Interest Coverage Ratio: 19.9 in FY2024 from 17.9, which is a sign of an improving ability to service the debt.

Off-Balance Sheet Items #

• Contingent Liabilities:
  • Claims/demands not acknowledged as debts: ’ 14.44 crores (31 March 2023: ’ 29.76 crores)
  • Bank guarantees and letters of credit: ’ 124.00 (31 March 2023 : ’ 60.71)
  • Letters of comfort / awareness / support: provided to subsidiaries. These are not guarantees but could have financial implications if the subsidiaries default. The amount is significant for Strategic Food International Co. LLC, Dubai ( 11.35 crores and 11.19 crores).

Britannia Industries Limited - Financial Analysis FY 2023-24 #

Revenue Breakdown by Segment/Geography #

• Segment: Foods
• Geography (Consolidated):
  • India: FY 2023-24: ₹15,732.18 crores
  • Outside India: FY 2023-24: ₹1,037.09 crores
  • International business contributes approximately 6% of revenue.

Cost Structure Analysis (Standalone) #

• Cost of Materials Consumed: FY 2023-24: ₹7,394.74 crores
• Purchases of Stock-in-Trade: FY 2023-24: ₹2,033.36 crores
• Employee Benefits Expense: FY 2023-24: ₹565.28 crores
• Finance Costs: FY 2023-24: ₹151.40 crores
• Other Expenses: FY 2023-24: ₹3,121.87 crores

Margin Analysis (Standalone) #

• Operating Profit Margin: FY 2023-24: 17.3%; FY 2022-23: 16.3% (Improved)
• Net Profit Margin: FY 2023-24: 12.7%; FY 2022-23: 13.5% (Improved excluding exceptional items)

Non-Recurring Items (Standalone) #

• Exceptional Items: FY 2023-24: Expense of ₹2.90 crores (Voluntary Retirement cost); FY 2022-23: Income of ₹(227.74) crores (Profit on sale of investment).

EPS Analysis (Standalone) #

• Basic EPS: FY 2023-24: ₹86.44; FY 2022-23: ₹88.82
• Diluted EPS: FY 2023-24: ₹86.44; FY 2022-23: ₹88.82

Britannia Industries Limited - Financial Analysis FY 2023-24 #

Cash Flow Analysis (Consolidated) #

Operating Cash Flow (OCF) #

Increased to ₹2,572.98 crores from ₹2,526.21 crores in FY 2022-23. Major adjustments include depreciation and amortization (₹300.46 crores), and net gain on financial assets measured at fair value through profit and loss(₹25.17 crores).

Investing Cash Flow (ICF) #

Net cash generated from investing activities was ₹506.76 crore, a significant change from an outflow of ₹1,386.44 crores in the previous year. Major components include the purchase of property, plant, and equipment, capital work-in-progress, and intangible assets (₹561.52 crores outflow), and proceeds from the sale of non-current investments.

Financing Cash Flow (FCF) #

Showed a net cash outflow of ₹2,830.48 crores, primarily due to the repayment of borrowings, and dividends paid.

Working Capital Management Efficiency (Consolidated) #

• Debtors Turnover Ratio decreased to 50.34 times from 56.75 times the prior year, indicating a slightly longer collection period.
• Inventory Turnover Ratio decreased to 38 times from 40.37 times.

Dividend and Share Buyback Trends (Consolidated) #

• Dividends paid during FY 2023-24 amounted to ₹1,734.25 crores.
• A final dividend of ₹73.50 per equity share was recommended, subject to shareholders’ approval.
• The total dividend payout for FY2023-24 will be 1770.38 Crores.
• No share buyback program is mentioned.

Liquidity Position (Consolidated) #

• Current Ratio: Improved to 1.2 from 1.1 in the previous year.
• Cash and Cash Equivalents: Increased significantly to ₹322.80 crores from ₹102.38 crores at the end of FY 2022-23.

Key Performance Indicators #

Profitability Ratios (3-Year Trends) #

• Return on Equity (ROE): FY24: 62.1%, FY23: 76.6%, FY22: Not Directly provided, but FY22 and FY23 were higher, showing a decrease in FY24. The decrease is attributed primarily to increase in Net worth.
• Operating Profit Margin: FY24: 17.3%, FY23: 16.3%, FY22: The document doesn’t have data of FY22, shows increase in FY24.
• Net Profit Margin: FY24: 12.7%, FY23: 13.5%, FY22: The document doesn’t have data of FY22, there is a decrease, indicating a reduction in profitability relative to sales.

Liquidity Metrics #

• Current Ratio: FY24: 1.2, FY23: 1.1. It is Slightly improved, indicating a marginal increase in short-term solvency.

Efficiency Ratios #

• Inventory Turnover Ratio: FY24: 38, FY23: 40.4. A slight decrease is observed, suggesting a minor slowdown in inventory conversion.
• Debtors Turnover Ratio: FY24: 50.3, FY23: 56.8. It has decreased, indicating a longer collection period for receivables.

Leverage Metrics #

• Debt/Equity Ratio: FY24: 57.8%, FY23: 83.7%. A significant decrease indicates a reduction in financial leverage.
• Interest Coverage Ratio: FY24: 19.9, FY23: 17.9. It shows Increase demonstrating an improved ability to cover interest expenses.

Working Capital Ratios #

• Number of Days of accounts payable: FY24:54.62, FY23:48.31. It has increased, showcasing that the business is using the credit period efficiently.

Britannia Industries Limited Financial Analysis (FY 2023-24) #

Revenue and Profitability #

• Consolidated Revenue Growth: 2.9% (₹ 16,300.55 crores to ₹ 16,769.27 crores).
• Consolidated Operating Profit Growth: 10.1%
• Consolidated Profit after tax(Owner’s Share): -7.8%
• Consolidated Profit before tax: grew from 2657.17cr to 2913.47cr
• Standalone Revenue Growth: 3.6% (₹ 15,618.42 crores to ₹ 16,186.08 crores).
• Standalone Operating Profit Growth: 9.9%
• Standalone Profit after tax: -2.7%
• Net Profit Margin (Standalone): Decreased from 13.5% (FY 2022-23) to 12.7% (FY 2023-24).
• Operating Profit Margin (Standalone): Increased from 16.3% (FY 2022-23) to 17.3% (FY 2023-24).

Market Share and Competitive Position #

• Sustained leadership in the biscuit category despite increased competition.
• Facing increased competition, especially from local players in the Rusk Segment.

Key Products/Services Performance #

Bakery Business #

• Biscuit: Faced macroeconomic headwinds, but pricing actions and brand investments helped maintain performance. 50 50 Golmaal was a major successful launch.
• Cake: Showed substantial growth in large packs and higher price points, particularly in Modern Trade and E-commerce. Launched Veg Layer Cake at ₹ 5 and Plum Cakes at affordable price points.
• Rusk: Experienced a rebound in the second half of the year, regaining growth momentum. Introduced Cake Rusk and Multigrain Rusk.
• Bread: Growth in both Sliced and Non-Sliced varieties. Launched Millet Bread and Crème-fill Rolls.

Dairy Business #

• Launched ‘Britannia The Laughing Cow Cheese’ (Cheese Triangles and Creamy Cheese Sachets) and ‘Britannia Winkin’ Cow Bourbon Milkshake’.
• Scaled up operations at Ranjangaon dairy facility.

Adjacent Business #

• Cream Wafer: Category growth, with good consumer acceptance of Treat Creme Wafers.
• Centre-Filled Croissant: Increased penetration in key regions (South and East).
• Salted Snacks: Launched Makhana (Fox Nuts) under ‘The Better Snack Co.’ brand.

Geographic Distribution and Market Penetration #

• India: Operations across all states (PAN India). Rural distribution was a focus area, with growth achieved in focus states despite overall rural slowdown.
• International: Presence in over 80 countries, with key focus regions including the Middle East, Americas, Africa, and Asia Pacific. Double-digit value growth across regions, driven by distribution expansion, improved execution in GCC, and growth in Egypt and Kenya.

CAPEX and ROIC #

• Total Capex (FY2023-24)(Standalone Basis): ₹412.72 Crores.
• ESG Specific Capital Equipment Investment: ₹21.2 Crores.
• ₹45 Crores are also planned for increasing renewable energy.
• Return on Net Worth (Standalone): Decreased from 76.6% (FY 2022-23) to 62.1% (FY 2023-24), primarily due to an increase in net worth.

Operational Efficiency Metrics #

• Debtors Turnover Ratio (Standalone): Decreased from 56.8 times (FY 2022-23) to 50.3 times (FY 2023-24).
• Inventory Turnover Ratio (Standalone): Decreased from 40.4 times (FY 2022-23) to 38 times (FY 2023-24).
• Interest Service Coverage Ratio (Standalone): Increased from 17.9 times (FY 2022-23) to 19.9 times (FY 2023-24).
• Specific water consumption reduced by ~32.84% from the 2019-20 baseline.
• ~52.29% of Total water withdrawal was recycled.
• Sugar Content per serving has been reduced by ~1.9%, Sodium content by ~2.4%

Growth Initiatives and Challenges #

Growth Initiatives #

• New category entries and product launches, aiming for a ‘Global Total Foods Company’ vision.
• Digital transformation across distribution, marketing, and operations.
• Greenfield factory commissioning and expansion of existing lines.
• Strengthened ESG initiatives.
• Focus on rural distribution expansion.
• Leveraging R&D for product innovation, including healthy snacking options.
• International business: Focus on brand equity, product diversification, local operations, and distribution.

Challenges #

• Rural slowdown and adverse weather conditions impacted consumption.
• Increased competition from local players.
• Fluctuating commodity prices (wheat, sugar, milk, chocolate, edible oil).
• Geopolitical tensions in the Middle East and Russia-Ukraine conflict impacting input costs.
• Maintaining cost efficiencies and driving demand.
• Growing Preference for Local Players.

Risk Assessment Analysis #

Strategic Risks #

• Severity: High. Rural slowdown, adverse weather conditions, and geopolitical tensions have created macroeconomic headwinds, affecting consumer demand and potentially impacting market share.
• Likelihood: High. The annual report describes various factors driving down, impacting the operating landscape.
• Trend: Increasing. External factors continue to influence the operating context.
• Mitigation Strategies: Investments in brands, judicious price increases, focus on input cost management, expanded rural distribution, and new product innovations, redefining sales and distribution strategy, marketing using breakthrough technologies, leveraging industry 4.0 to Optimize Cost and quality, strengthening sustainability initiatives.
• Control Effectiveness: Partially Effective. The Company demonstrated resilience, driving growth despite challenges.
• Potential Financial Impact: Reduced revenue growth, pressure on margins. The report details the impact on revenue from opperation which grew by only 2.9% in FY2023-24.

Operational Risks #

• Severity: Medium to High. Supply chain disruptions, due to geopolitical issues and climate change and fluctuating commodity prices (wheat, sugar, milk, edible oil), present significant risks.
• Likelihood: Medium to high, based on management statments indicating their effects.
• Trend: Increasing. Climate change and geopolitical instability continue to affect commodity availability.
• Mitigation Strategies: Prudent procurement decisions, investments in technologically superior factories, implementation of Energy Management Systems, and water stewardship programs.
• Control Effectiveness: Medium. The Company has achieved some success in reducing specific water consumption and increasing renewable energy share, but challenges remain.
• Potential Financial Impact: Increased production costs, reduced operational efficiency. FY2023-24 saw an increase in the GHG emmissions intensity (scope 1+scope 2) by ~3% as compared to the previous year.

Financial Risks #

• Severity: Medium. Fluctuations in commodity prices represent a primary financial risk.
• Likelihood: Medium to High. Volatility is mentioned as an ongoing issue in the FMCG sector.
• Trend: Fluctuating. Softening of some commodity prices, but other pressures are present.
• Mitigation Strategies: Hedging activities, leveraging cost efficiencies and prudent financial management.
• Control Effectiveness: Partially Effective. The Company’s financial ratios show changes (e.g., Return on Net Worth decreased by 19%), indicating some impact from financial risks.
• Potential Financial Impact:: The Report gives no specifics in this report.

Compliance/Regulatory Risks #

• Severity: Medium. Changes in government regulations and tax regimes can impact operations.
• Likelihood: Low to medium. The Company has had no material non compliances for the period.
• Trend: Stable. No significant increase reported.
• Mitigation Strategies: Robust Compliance Management System, adherence to Code of Business Conduct.
• Control Effectiveness: High. No significant non-compliance or penalties were reported during the last three years.
• Potential Financial Impact: Limited direct impact mentioned, but non-compliance can lead to fines/penalties.

Emerging Risks #

• Severity: Medium. Increasing competition from local players, and shifting consumer preferences towards healthier options.
• Likelihood: Medium.
• Trend: Increasing.
• Mitigation Strategies: New Product Launches, “Global Total Foods Vision” initiatives , R&D, and entering new product catagories.
• Control Effectiveness: Partially Effective. The Management report states constant innovation in formats, flavors, textures and price points driving growth, but it’s an ongoing effort.
• Potential Financial Impact: Affects pricing strategies.

Strategic Analysis of Britannia Industries #

Long-Term Strategic Goals and Progress #

• Britannia aims to become a “Global Total Foods Company,” expanding into new categories and launching new-to-market innovations.
• Significant progress in ESG initiatives, recognized with SKOCH ESG Awards. The company aims to achieve best-in-class ESG practices.
• The company is scaling up its manufacturing footprint with the commissioning of a greenfield factory in Bihta, Bihar and 14 lines scaled up in existing factories, supporting long-term production capacity goals.
• Increased investments have been made to eliminate plastic trays from their product portfolio.
• Increased investments to enhance manufacturing and distribution capabilities, prioritizing value creation through expansion, specifically in E-commerce, and premium channels.

Competitive Advantages and Market Positioning #

• Sustained leadership in the biscuit category despite macroeconomic headwinds.
• The company leveraged regional nuances and digital innovation to fortify core brands and build brand affinity.
• Successful launch of ‘50 50 Golmaal’ in the cracker space poses a challenge to competitors.
• Entering growing categories such as Cakes, Cream Wafers, and Salted Snacks, leveraging strong brand, and nationwide presence.
• Successful launch of Cheese, pursuant to the joint venture with Bel SA.
• Recognized as Kantar BrandZ Most Valuable Food Brand, ETBrandEquity Digital Brand of the Year, and Marketing Team of the Year at the Indian Marketing Awards, indicating strong brand recognition and market leadership.
• International business achieved double-digit value growth across all regions for the second consecutive year.

Innovation Initiatives and R&D Effectiveness #

• Launched 22 innovative products during FY 2023-24.
• Focus on the optimization and reduction of sugar & sodium content across its product portfolio, along with enhanced nutritional ingredients amid growing consumer consciousness.
• Successful product launches such as Makhana (Fox Nuts) under ‘Better Snack Co.’, Energy and Protein Bars under ‘Be You’, and expansion of Good Day portfolio.
• Partnership with a UK-based institute to develop biodegradable packaging.
• Investments in automation and technology upgradation for new product launches in existing and adjacent categories.
• R&D expenditure for FY 2023-24 was ’ 46.11 Crores, representing 0.29% of Sale of Goods.

M&A Strategy and Execution #

• Joint Venture Arrangement with Bel SA, a renowned French cheese maker, resulted in the launch of ‘Britannia The Laughing Cow’ brand and other disruptive cheese products.

Management’s Track Record in Execution #

• Successful navigation of a volatile business environment with strategic pricing actions, brand investments, and cost management.
• Successful expansion of rural distribution.
• Rapid adoption of marketing technology.
• Effective leveraging of digital transformation to enhance distribution, marketing, and overall efficiency.
• Consistent recognition as a “Best Employer” and awards for quality circle implementation indicate effective management practices.
• The company has re-appointed BDO India LLP and GNV and Associates as Internal and cost auditors.

Capital Allocation Strategy #

• Significant investment in manufacturing capabilities, including a greenfield factory and scaling up existing lines.
• Capital investment of ~ ’ 21.2 Crores made to derive efficiencies in power and fuel consumption in own factories.
• Planned investment of ~ ’ 45 Crores for increasing the share of renewable energy to 57% of total electricity consumption.
• Investment in R&D to support product innovation and sustainability initiatives.
• Recommended a final dividend of 7350% i.e., ’ 73.50/- per Equity Share, resulting in a total dividend payout of ’ 1,770.38 Crores for FY 2023-24, subject to the approval of shareholders.

Organizational Changes and Their Impact #

• Mr. Susheel Navanale was appointed as the Chief Information Officer of the Company w.e.f. 3 April 2024, reflecting an emphasis on IT and digitalization.
• The company increased its investments in its R&D capabilities.
• Implementation of the “Water Stewardship Program”
• ESG assessments for 453 suppliers.

Britannia Industries Limited (FY 2023-24) Segment Analysis: Foods (Bakery & Dairy) #

Management Guidance and Assumptions #

• Continued resilience expected through brand investments, pricing adjustments, cost management, and competitiveness.
• Gradual recovery of rural consumer expenditure anticipated.
• Potential impact from commodity price fluctuations, geopolitical tensions, and climate change acknowledged.
• Continuous innovation and investment in power brands and focus states planned.
• Management to leverage distribution networks, cost efficiencies, and adapt to consumer preferences (especially in healthy snacking) to manage risks and opportunities.

Market Growth Forecasts #

• Organized Indian Dairy Industry: Revenue growth expected due to demand for value-added products, rising retail prices, and liquid milk sales.
• Cream Wafer category: Growing category.
• Center-Filled Croissant category: Expanding, with significant consumer acceptance.
• Packaged savory snacking: Witnessing double-digit growth.

Planned Strategic Initiatives #

Bakery Business #

• Scale up distribution of key biscuit brands.
• Introduce product innovations in biscuits, cakes, and rusks.
• Undertake marketing transformation, including digital campaigns.
• Expand manufacturing capacity in the rusk category.
• Invest in premium channels like modern trade and E-Commerce.

Dairy Business #

• Focus on core dairy brands and expand the product portfolio.
• Scale up operations at the Ranjangaon dairy facility.
• Increase distribution reach through conventional channels and E-commerce.
• Leverage premium milkshake and cheese portfolio.

Adjacent Businesses #

• Increase presence and market share in the cream wafer category.
• Increase awareness of the Croissant category among Indian consumers.
• Drive growth in Salted Snacks through distribution in mass segments and innovation in premium segments.

International Business #

• Strengthen brand equity, expand local operations, and deepen penetration in established export markets.
• Focus on chocolate-based products, crackers, and healthy offerings.
• Develop alternative distribution channels in the US.
• Address challenges posed by geopolitical conflicts, fluctuating commodity prices, and workforce localization.

Capital Expenditure Plans #

• Investments planned for greenfield plants and additional production lines in existing plants.
• ₹21.2 Crore invested in FY 2023-24 to drive efficiencies in power and fuel consumption.
• ₹45 Crores allocated for increasing renewable energy share.
• Investment planned in technology for new product launches and automation.

Efficiency Improvement Targets #

• Implement an Energy Management System and energy-efficient bands in ovens to achieve ~3% reduction each in energy and fuel consumption.
• Continue cost optimization through reduction of sugar and sodium content in products.
• Focus on cost efficiency measures, controlled overheads, and optimized sales promotion expenditure in international business.

Potential Challenges and Opportunities #

Challenges #

• Rural slowdown, pricing pressures, and changing consumer preferences.
• Increased competition from local players due to softening commodity prices.
• Geopolitical tensions and climate change impacts on commodity prices (wheat, sugar, milk, chocolate, edible oil).
• Increasing consumer sensitivity to pricing, consolidation.

Opportunities #

• Rising demand for healthier food options in urban and Tier 2-3 cities.
• Digital transformation and E-commerce growth for customer engagement and distribution.
• Expanding distribution footprint, particularly in rural areas.
• Government spending on infrastructure and a strong domestic market.
• Potential for growth in the fragmented and unorganized Rusk category.
• Leverage technology, expand operations, and increase market presence in the Dairy category.
• Significant growth prospects in the Cream Wafer, Centre-Filled Croissant, and Salted Snacks categories.
• Growth opportunities in emerging international markets like Egypt and Kenya.

Scenario Analysis and Sensitivity to Key Assumptions #

• Favorable Monsoon: Positive impact on rural demand and harvest, stabilizing prices and supporting growth.
• Unfavorable Monsoon/El Nino: Potential adverse impact on weather patterns, harvests, and rural demand, leading to industry challenges.
• Sensitivity to Commodity Prices: Fluctuations in prices of wheat, sugar, milk, chocolate, and edible oil could impact short-term prospects. Effective management of input prices is crucial.
• Sensitivity to Geopolitical Risks: Ongoing conflicts and tensions can affect wheat flour prices and international business operations.
• Sensitivity to Consumer Preferences: Quick adaptation to evolving preferences, particularly for healthy options, is essential.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The Statutory Auditors, M/s. Walker Chandiok & Co LLP, issued an unmodified opinion on both the standalone and consolidated financial statements for FY 2023-24. The audit reports contain no qualifications.
• The auditors used a materiality threshold, but it’s not disclosed.

Key Accounting Policies and Changes #

• The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) as per Section 133 of the Companies Act, 2013.
• Revenue recognition follows a 5-step approach as per Ind AS 115, recognizing revenue upon transfer of control of goods to the customer.
• Property, plant, and equipment are depreciated using the straight-line method over useful lives prescribed in Schedule II of the Companies Act, 2013.
• Inventories are valued at the lower of cost (computed on moving weighted average basis) or net realizable value.
• There were no New standards or amendments from MCA applicable from 1 April 2024.

Internal Control Effectiveness #

• The auditors issued an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
• The Company has a Compliance Management System and a Code of Business Conduct to ensure the effectiveness of internal control processes.
• The Company maintains accounting records and an audit trail feature, but exceptions exist at the database level for SAP S4 HANA, where direct data changes are not logged.

Regulatory Compliance Status #

• The Company complied with the mandatory requirements of Regulations 17 to 27 and certain clauses of Regulation 46(2) of the SEBI Listing Regulations, 2015.
• The Company is maintaining records and states to be generally compliant with provisions of the Companies Act, SEBI Regulations, and other applicable laws including, Food Safety and Standard Act, 2006.
• The Company has complied with Secretarial Standards SS-1 and SS-2.
• The Company is subject to ongoing litigation and potential penalties from prior periods, including those from regulatory bodies such as SEBI and stock exchanges, but no penalties were imposed last three years.
• No instances of non-compliance by the Company, penalties, or strictures imposed by Stock Exchanges, SEBI, or any Statutory Authority, on any capital market-related matter were reported during the last three years.
• The entity has paid dividend in accordance with section 123 of the companies act 2013, to the extent it applies to payment of dividend.

Legal Proceedings and Potential Impact #

• There are pending litigations related to direct and indirect taxes, and other claims. The total amount of claims against the Company not acknowledged as debts is ’ 14.44 crores. The Company is doing assessments of their litigations with the help of subject matter experts.
• The Company assesses these disputes on a case-by-case basis, and based on management, and legal advice, provisions are made.
• The Company is using an external subject matter expert to address any risks and monitor the status of cases.

Related Party Transactions #

• All related party transactions during FY 2023-24 were in the ordinary course of business and at arm’s length.
• No materially significant related party transactions that could conflict with the Company’s interests were identified.
• The Company has a policy on the materiality of related party transactions.
• A statement of related party transactions is presented to the Audit Committee quarterly.

Subsequent Events #

• Subsequent to the financial year end, on 3 May 2024, a final dividend of ’ 73.50 per share was recommended, pending shareholder approval.
• Mr. Susheel Navanale was appointed as the Chief Information Officer of the Company w.e.f. 3 April 2024
• No other material changes or commitments affecting the financial position of the Company between the end of the financial year and the date of the report were identified.