As inflation bites, Britannia to cut pack sizes; keep prices unchanged

Britannia Industries will take higher grammage cuts instead of increasing prices in a bid to tackle rising inflation, the firm said.

The biscuit major took a 10 per cent price hike in financial year 2021-22 (FY22) and resorted to reducing pack sizes as an indirect way of increasing prices.

In the previous financial year, the ratio of grammage reduction was 65 per cent, which will be higher in FY23.

The management said it would hike prices by 10 per cent if the current levels of raw material prices sustain.

“There have been geopolitical factors which are aggravating the inflation scenario and I don’t think that it’s abating in anyway…

"Because of our forward commitments, we have been able to control some of our costs, however, the commodities have still witnessed inflation of 17 per cent and 14 per cent for the quarter and full year respectively,” Varun Berry, managing director of Britannia Industries, told investors in a post-earnings conference call.

Berry also said there is nothing more important than taking the right amount of price increases and that is what the company has been doing.

“We have not been able to keep pace with inflation because we never estimated the kind of inflation that we’ve seen. But we continue to take judicious price increases,” he said.

The company has also improved on cost efficiencies over the years, and is now five times more cost efficient than it was in FY14, it said.

A point of concern that Berry highlighted is that wheat production in the country has been lower than expected due to severe heat.

Also, the crisis in Ukraine and Russia will impact wheat availability globally.

“This is a year we will have to take calls on a month-on-month basis,” Berry said.

In the hindi heartland, the states of Chhattisgarh and Rajasthan have slipped in performance for the company, but Berry told investors those states are opportunity areas where the company will get back to speed.

In the March quarter, the company witnessed mid-single-digit volume growth while it reported a net profit increase 4.3 per cent year-on-year (YoY) to Rs 379.9 crore as margins were under pressure due to higher raw material costs.

The cost of raw material consumed in the quarter rose 21.3 per cent to Rs 1,858.7 crore, while its margins stood at 17 per cent, compared with 18.2 per cent in the year-ago period.

The maker of Good Day biscuits saw its revenue from operations rise 13.4 per cent YoY in Q4 to Rs 3,550.5 crore.