Any company that has made a significant turn in its business journey would have a serendipitous moment to thank. For India’s biscuits market leader, the Bengaluru-headquartered, Rs 14,000-crore (FY22 consolidated revenues) Britannia—a part of The Wadia Group—that moment came six years ago. Company chief Varun Berry was mulling the need to strengthen the non-biscuits portfolio, given how fast the country’s tastes were changing in an era of retail shelves stacked with a bewildering array of lip-smacking snacks. Berry, who had been Britannia’s boss for about two years at the time, recalled a gentleman that his erstwhile employer PepsiCo had partnered with in Mexico and Eastern Europe, a man with a formidable reputation in bakery snacks. “They [PepsiCo] had a partnership with him then, though I did not know him at all,” says Berry.

Not sure what to expect, Berry dialled the man, Spyros Theodoropoulos, who was then in Greece. Theodoropoulos was the Founder and long-time Managing Director of Chipita, the Athens, Greece-headquartered baked snacks major that was eventually acquired by Mondelez International in January 2022. The call went through, went well, and the rest, as they say, is history. “He turned out to be very proactive and in two months, his team was in our Bengaluru office,” recalls Berry. “They were very forthcoming and the ability to move fast was a delight.”

My mandate is to sustain the transformation at Britannia from a digital point of view. We must be innovative and provide value to the customer and employees

Rajneet Singh Kohli
CEO & Executive Director
Britannia

But why Theodoropoulos? It was a tactical move by Berry, who was then trying to understand how Britannia could leverage the croissant in India. For the uninitiated, Chipita’s flagship product is the hugely popular croissant 7DAYS. Given the subsequent happy experience, this incident taught Berry, now 61 and Britannia’s Executive Vice Chairman & Managing Director, a valuable lesson—if something is not your core, it is a good idea to work with a partner.

The croissant is a European bakery snack. And so the easy option for Britannia was to import and sell. However, the Indian palate is different and a desi approach was more practical. “We struggled to fine-tune the taste. A one-year project went on for over two years,” recalls Berry. It was initially test-marketed in West Bengal and  Tamil Nadu, but there was still some work to be done on the recipe front. It was in the beginning of 2022 that the team got it right, says Berry. There were many iterations—Indians like a milk chocolate flavour in the cream, preferred fluffy bread instead of the layered version used in Europe, or just the right kind of wheat, which initially came from Australia before Britannia finally got it going with a supplier in Delhi. When Britannia Treat Croissant hit the market last May, it was a resounding success and it suddenly opened up a world of opportunities. “On the same manufacturing line, we can now do a strudel. For the croissant, we will have another line in Kolkata, which is really the home of the product,” says Berry.

This success (let’s get to the numbers in a bit) has given Berry the confidence on Britannia becoming a total foods company. Biscuits, where it is the market leader and one where it continues to grow, brings in 80 per cent of the company’s revenue (it was over 85 per cent seven to eight years ago). But now with the portfolio boasting cakes, dairy, breads, rusk and wafers, that equation needs to change. “Over the next five years, we want to double our total business, and the non-biscuits part should bring in half the revenue,” Berry outlines. Ambitious? Yes, but Berry is convinced it can be done. Rather, it must be done.

Varun Berry
Executive Vice-Chairman and Managing Director
Britannia Industries

The strategy for Britannia is to go for adjacencies. If biscuits, a baked snack, is the core, the approach is to move into rusk, cakes and croissants. “We will move from A to B to C and not A to Z,” emphasises Berry. Does total foods mean a play in, say, atta, rice or salt? “We are a little away from that. Our strength is ready-to-eat and there is a substantial opportunity,” he says calmly. Picking the example of chocolates, Berry explains it is not baked but a snack. “Our right to succeed is limited and, maybe, we could do it through an alliance. For now, the adjacencies are attractive.”

Getting a new product out is a time-consuming process. Plus, success rates in fast moving consumer goods for new products are at a low 10 per cent. So, companies do not leave anything to chance. By all counts, with sales of Rs 170-180 crore currently, the croissant has been a success for Britannia, which Berry says has not surprised him. Research indicated that while the category did not really exist in India, most of the population with a sweet tooth was likely to go for a centre-filled product. “Croissant is a fairly technical product and not easy for a small manufacturer,” he says.

Since this [an endto-end operation in dairy] has not really materialised for Britannia, they are forced to operate in the higher value-added categories like cheese and milkshakes

K.S. Narayanan
Food and Beverage Consultant

The boxes Berry would like to tick before making a new foray are simple—it does not have to be a large category but Britannia must have a reason to succeed apart from offering volumes and high profitability. Given Britannia is one of the best performing consumer stocks (see graphic ‘Up, Up and Away’), the pressure to sustain high margins is unabated. The success in croissants and its Indianisation strikes a chord with Abhijeet Kundu, Senior Vice President of Research at Antique Stock Broking. “We are increasingly getting more westernised in our food but with a big local touch. The inherent advantages for a category like croissant are low penetration and a huge spike for growth,” he explains.

Sitting in Britannia’s old corporate office in Bengaluru’s Old Airport Road neighbourhood (the newer one is in faraway Whitefield), Berry gently sips on a dairy variant the company recently launched—Winkin’ Cow’s almond salted caramel milkshake. Nodding his head in approval, he is glad you have liked it as well. The large office, reminiscent of an era gone by and characterised by formality, is in stark contrast to Berry’s collared T-shirt and blazer. Joining him is Britannia’s CEO & Executive Director Rajneet Singh Kohli, who came aboard last September from Domino’s, preceded by a long stint at Coca-Cola. “My mandate is to sustain the transformation at Britannia from a digital point of view. We must be innovative and provide value to the customer and employees,” he states. As he, too, indulges in the milkshake, Kohli speaks of the plan to launch a cold coffee flavour. “The idea is to democratise consumers and at Rs 40, it will be very competitively priced.” Interestingly, the Winkin’ Cow brand name was chosen after the teams sat in a room undisturbed for six hours when the initial options did not make the cut.

Britannia entered the dairy business in 1997, albeit the turnover is still only Rs 600 crore or 4 per cent of the total, despite multiple launches and relaunches. “The truth is we have not done enough, but the good thing is we make money,” says Berry. This segment is familiar territory to Berry. At PepsiCo, he ran the dairy and juice business in many geographies including India through a joint venture with Saudi Arabia’s Almarai. However, convincing the Britannia board to invest in dairy was arduous. “It was the longest project I ever worked on,” he confesses.

For about seven years, he made 34 presentations. “By then, I had met every dairy manufacturer across the world and the feedback was uniform. They said Britannia was a good bakery company, but were unconvinced about what we could do in dairy,” recalls Berry with exasperation.

Till then, the company’s dairy business was a contract manufacturing model, most of it (primarily cheese and curd) coming from Schreiber Dynamix’s plant in Baramati, about 100 km from Pune. The Britannia board heard Berry out patiently each time before asking the same question—why would you want to invest Rs 700 crore in a new plant when the revenue is lower and not growing? “There was interest but obviously a trigger was required,” he says. The trigger was provided by the government setting up a food park in Ranjangaon and giving incentives. A Rs 700-crore plant was set up in Ranjangaon, an industrial area in Maharashtra. Each day, Britannia collects 70,000 litres of milk for its dairy business, and has a target to double that.

[In] this business [salty snacks] you need to have a very tight cost structure... Besides, you just can’t take your eyes off quality or innovation

Chandubhai Virani
Founder
Balaji Wafers

Berry is clear that he will do only value-added products and rules out anything that is commoditised, such as pouched milk. “It is not profit-accretive. In time, you will see a Greek yoghurt, a fresh lassi or even a mishti doi,” he explains.

The idea is to be flexible with strategy and that means working with a partner (like the croissant story) if that is advantageous. Last November, Britannia inked a joint venture with France’s Bel SA to develop, manufacture (this will be in Ranjangaon) and market cheese products in India. The deal saw the French company, known for brands like Laughing Cow, Kiri and Nurishh, pick up 49 per cent in its arm Britannia Dairy for Rs 262 crore. The deal will entail it infusing another Rs 215 crore in the venture, which will eventually be called Britannia Bel Foods.

Cheese, says Berry, is at Rs 3,000 crore (the dairy market in India stands at a mammoth Rs 15 lakh crore today) but growing at over 20 per cent each year. “It is fair to say we now have more steel in the ground on our dairy business and can hit revenues of Rs 2,000 crore. In fact, we now have a Laughing Cow and a Winkin’ Cow,” he quips.

K.S. Narayanan, a food and beverage industry veteran, says dairy is difficult simply because of the domination by cooperatives, most notably Amul. “To have an end-to-end operation in dairy requires substantial investment and commitment in developing the milk collection system in select geographies. Since this has not really materialised for Britannia, they are forced to operate in the higher value-added categories like cheese and milkshakes, which are much smaller.”

“Britannia will have to get it right on salty snacks,” is Berry’s response when you ask him how critical the category is. Today, the presence is still limited and he candidly says it has not gone beyond the test marketing phase. The conundrum for a company like Britannia when it comes to snacks is to deal with high volumes and margins lower than what it is used to. Today, the organised market for salty snacks is around Rs 40,000 crore, according to industry estimates, and expected to grow at 12-15 per cent over the next five years—clearly an opportunity that is too big to miss.

In about three years since its entry into this category, Britannia has a small portfolio (sold under the Time Pass brand as western salty snacks and with a revenue of Rs 30-40 crore) and one gets the impression it has been conservative. “Maybe we have not been fast enough, but it takes time to build this business. It is a crowded space with almost no entry barriers,” says Berry. With a capex of Rs 2-3 crore, a snacks player can easily generate a turnover of Rs 50 crore. Contrast that to croissants, where Britannia invested Rs 120 crore and the maximum turnover will be Rs 400 crore. According to him, international companies (the likes of PepsiCo) bring their experience from other countries, which includes potato farming apart from having well-known brands (Lay’s and Doritos being examples).

We are increasingly getting more westernised in our food but with a local touch. The inherent advantages for a category like croissant are low penetration and a huge spike for growth

Abhijeet Kundu
Senior VP-Research
Antique Stock broking

In India, the salty snacks landscape is dominated by the likes of Haldiram’s, Bikaji, and Prataap nationally, with thousands operating regionally or locally. Take the case of Rajkot-based Balaji Wafers, which had a turnover of Rs 4,000 crore in FY22, with net profit margins over time at 5-6 per cent, compared to at least 12 per cent for Britannia. Its Founder, Chandubhai Virani, outlines the challenges in running a snacks business in India. “In namkeen [salty snacks], you have a high cost of raw material compared to biscuits, for instance, where maida or wheat come at around half the price. Then, you deal with something like potatoes where the price fluctuates,” he explains. At one point, all his business came from his home state, Gujarat, but now with his products selling in 15 states, that proportion is at 40 per cent. “This business needs to have a very tight cost structure and for us, the factory and warehouse are housed in the same premises. Besides, you just can’t take your eyes off quality or innovation.” His company has a portfolio of 50 products, which includes namkeen and wafers in several variants.

The combination of a snacks market growing impressively on a large base plus consumers upgrading is enticing. “However, 80 per cent of the mass-market snacks are sold in the Rs 5 or Rs 10 price points. To successfully operate in this segment would require a very localised, intensive distribution system covering a wide spectrum of outlets,” points out Narayanan. Inevitably, that means lower margins. That said, the premium snacking category, though much smaller in size, is growing rapidly. “It is this market segment that plays to Britannia’s strengths of innovation and distribution.”

Much as an overwhelming proportion of Britannia’s revenue comes from biscuits, it is not sitting quiet. In fact, it quite literally wants to nibble at every opportunity. The company’s biggest markets are the South and East. Going national is important for Berry, but again with an element of flexibility.

In mid-2021, the iconic Milk Bikis biscuit, for which Tamil Nadu is the biggest market, was launched in north India. With actor Pankaj Tripathi as the brand ambassador, this was a 100 per cent atta variant with a “Doodh Roti ki Shakti” line. Berry says people in the North, a large terrain for Parle Products along with the West, understand this very well. “My theory is that the biggest product successes are those with universal appeal, but in India it is difficult since food habits change every 100 km. We are still a very small player in a large market like Uttar Pradesh, but this kind of region-wise approach is important.” Likewise, in Tamil Nadu, a Milk Bikis Classic has been launched.

In the cookies segment, Britannia has an overwhelming presence thanks to Good Day, a Rs 4,000-crore brand and the largest by revenue in the company’s portfolio. Industry officials, quoting Nielsen numbers, say Britannia is the market leader with around 33 per cent share, while Parle Products is at 28-29 per cent, followed by ITC at 10 per cent. While that is the overall picture, the story varies across segments, where competition gets really hot. For instance, ITC’s Mom’s Magic, a high-visibility brand on mass media, is directly up against Good Day. Berry believes his rival’s share has been capped, with Britannia still accounting for around 35 per cent share of cookies.

According to Antique Stock Broking’s Kundu, Good Day is to Britannia what Surf is to Hindustan Unilever. “It is a key driver of premiumisation. Through smaller packs, it reaches out to the masses and yet, there is a premium quotient that comes with it,” he says. It is Britannia’s “carrier brand” or the one distributors and retailers must stock. “We will need to increase penetration in smaller markets and take the premiumisation route with, say, a chocochip. There is no limit to how much we can do,” says Berry.

In many ways, it requires an innovative approach to go about the business across all categories. Kohli speaks of “doubling down” the route to market. “How do I get more chemists to stock NutriChoice (a digestive biscuit) or just accelerate our plethora of launches? We must focus on a few things—premiumisation and what our core is.”

The effort to reach out to more outlets and the number of rural distributors is up 2.8x in the past five to six years, taking the total to 28,000. Gaurav Dua, Senior Vice President and Head of Capital Market Strategy at Sharekhan by BNP Paribas, points out that Britannia’s core biscuits business continues to grow faster than the industry, helping it sustain market share gains. “The third quarter of FY23 was the 39th consecutive quarter of share gains and is mainly on account of strong distribution expansion, especially in the rural markets, and consistent new product launches,” he says. The new launches in the premium and health & wellness segments include Biscafe and NutriChoice Seeds, Herbs & Protein, which according to him, have delivered revenue growth of 5x and 4x, respectively. “Meanwhile, 50-50 Golmaal reported a 2x shift in revenue and Milk Bikis Classic was up 60 per cent on a year-on-year basis,” says Dua.

The rub for Britannia is cream, where ITC’s Sunfeast range has over 25 per cent market share. Like cookies, this too is a high-growth category (14-15 per cent in value terms, when the overall market is at 10-11 per cent) and at one point, Britannia dominated it with Bourbon, Jimjam and Pure Magic; today it has a little over 20 per cent. “Yes, it is a challenge and in the next six months, you are going to see some spectacular work on cream. We lost a bit of momentum and need to regain it,” admits Berry. Typically, the high-growth segments alternate between cream and cookies, with Britannia wanting to consolidate in the former. “You will see some violent action,” he says quite confidently.

The question in the minds of most folks is: what will the entry of Reliance Retail in FMCG mean? Those familiar with Reliance’s plans say its model will focus on the supply chain and ensure retail outlets are more in touch with consumers’ needs. Berry picks his words carefully when he says they have scale: “But FMCG is a tough terrain and quite different, too.” Quickly, he smiles when you ask him about the missing links in Britannia’s portfolio. “There is a lot of steam left in biscuits and for a segment like cakes, this is only the beginning,” he says. In the organised Rs 1,500-crore cakes business, Britannia is among the largest, yet can only grow. “We did bar cakes and can now look at value-added or centre-filled. Within croissants, the possibilities are endless, plus there are opportunities in cereal bars or protein bars. We are also evaluating makhana and ready-to-eat popcorn.”

What will please Berry is not just for biscuits to sustain its healthy growth story but also its contribution to the larger pie dropping. “The non-biscuits portfolio needs to take off. In the last 10 years, the biscuits business has steadily gained share and grown faster than the market,” he says. He is quick to add that the non-biscuits piece “also has to grow faster and will grow faster”. Clearly, he is expecting consumers to help themselves to a generous share of Britannia’s portfolio. If these beginnings can hold out, there is something to look forward to.