Ladies and gentlemen, good day, and We lcome to the Q3 and nine months FY 2023 Earnings Conference Call of Mrs. Bectors Food Specialities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Bector, Managing Director and Promoter. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. On behalf of Mrs. Bectors Food Specialities Limited, I extend a very warm welcome to all participants on Q3 and nine-month FY 2023 financial results discussion call. Today, on this call, I have with me Mr. Manu Talwar, Chief Executive Officer, Mr. Ishaan Bector, Whole-time Director, Mr. Suvir Bector, Whole-time Director, Mr. Parveen Kumar Goel, CFO, and Whole-time Director, and Orient Capital, our investor relations consultant. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on exchanges and our company's website. Firstly, I am pleased to share that we have crossed previous full year revenue and EBITDA in nine months of current financial year. I'm glad to share the company has reported strong quarterly and nine-month financial numbers, supported by revenue growth in both domestic and export markets.
The company is satisfied with the double-digit revenue growth for both biscuits and bakery business. As we mentioned in our previous earnings call, we are strengthening our leadership team to lead our business and support functions. The company continues to increase its distribution footprint in existing and new geographies, build manufacturing infrastructure, digitization in selling and distribution, along with marketing and brand initiatives. In Q3 FY 2023, the revenue grew by 40% on year-on-year basis, witnessing good growth across business verticals and improved our EBITDA margin to 13.9% as compared to 12.6% in Q3 FY 2022. We will continue to increase our competitiveness by innovating and introducing new products in the premium category of biscuits and bakery. Our consistent performance is reflective of our strategic clarity, marketing initiatives, excellence in execution, strengthening core team, technology adoption, and increasing distribution reach.
Also, I am pleased to share that we have declared interim dividend of INR 1.25 per share. Now I will discuss the Q3 financial performance. The consolidated revenues for the quarter stood at INR 368 crores, versus INR 263 crores in Q3 FY 2022, thus registering a growth of 40% on a year-on-year basis. In biscuits, biscuits segment revenue for Q3 FY 2023 stood at INR 219 crores against INR 157 crores in Q3 FY 2022, thus registering a growth of 40% compared with Q3 FY 2022. This includes domestic and export biscuit segment. Biscuit segment has grown by 50% as compared to Q3 FY 2021.
Both domestic and export business has grown by higher double digits in Q3 FY 2023 as compared to same period last year. Bakery. Bakery segment revenue for Q3 FY 2023 stood at INR 127 crore against INR 92 crore in Q3 FY 2022, thus registered a growth of 38% compared with Q3 FY 2022, including retail bakery and institutional segments. Bakery segment has grown by 77% as compared to Q3 FY 2021. Both retail and institutional bakery has grown by higher double digits in Q3 FY 2023 as compared to the same period last year. Margin. EBITDA stood at INR 51 crore, saw a growth of 54% year-on-year. Our EBITDA margin for Q3 FY 2023 was 13.9% as compared to 12.6% in Q3 FY 2022.
PAT stood at INR 28 crore, saw a growth of 79% Y on Y- year-on-year basis. Our PAT margin for Q3 FY 2023 was 7.5% as compared to 5.9% in Q3 FY 2022. Moving to nine months performance, the consolidated revenue for nine months FY 2023 stood at INR 1,016 crore, versus INR 736 crore in nine months, FY 2022, thus registering a growth of 38% on a year-on-year basis. Biscuit segment reported a revenue growth of 34%, which stood at INR 604 crore in nine months, FY 2023, as compared to INR 450 crore in nine months, FY 2022, including domestic and export sales. Bakery segment revenue, nine months, FY 2023, stood at INR 360 crore, against INR 244 crore in nine months, FY 2022, thus registering a growth of 47% year-on-year.
EBITDA for nine months, FY 2023, stood at INR 127 crore, saw a growth of 31% year-on-year, reported an EBITDA margin of 12.5% as compared to 13.2% in nine months, FY 2022. Sales stood at INR 62 crore, saw a growth of 33% year-on-year. With this, I would request to open the floor for questions and answers. Thank you so much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rahul Dani, Monarch Networth Capital. Please go ahead.
Yeah, thank you for the opportunity, sir, and congratulations on a very good set of numbers. I have a couple of questions. My first question is about the distribution. Just want to know, you know, you had given a target line in the last call, where have you reached, and what is the outlook there? My second question is regarding how the export market is panning out for us, if you could just throw some color. My third question is regarding the update on the CapEx plan and where have we reached so far?
So, thanks, Rahul, for your best question. Let me take up your first question on distribution first. Yeah. So what we have shared in the previous two calls also, that we are on a journey of strengthening our distribution. And distribution is strengthened with taking four key actions. First of all, to expanding on the Feet on Street, where we told last time also that we have done that. We had a target of expanding the Feet on St reet to 850, and, which we have reached, and, to expand our distribution. Second thing which, we had want to do on the import side, was to bring the capability and have a well-designed sales training program. So, our company, Potential Learning, created a joint learning, and training program for the capability building of the sales team.
We executed the first leg of that, which is again showing a good result, and we have just started the second leg of that training side. Third thing was to implement or digitize the sales through SFA. So we have implemented SFA in April, May of this year. This is a through which we are able to track the all the sales KPI, whether all the beats, how many people are the beats are starting on the right time, what are total calls we are making, how many calls are productive, what are the line source. So all these KPIs are being monitored on a daily, weekly, and monthly basis to improve that. So these are the three KPI action or three input KPIs, which we are are working upon and have worked upon.
And we had a clear-cut target that by March 2024, we will double our direct reach outlet to 320,000, and we are on the way. We are progressing absolutely well to achieve that target, and by this March, we will be at the midway point. And we just got a latest AC Nielsen report also, which also kind of validated that we have moved and we have now reached total outlet reach, which is indirect outlet reach of 600,000 outlets. So this is on the distribution side. And I missed out one point. Last time we also briefed you that we'll be implementing DMS, which is Distributor Management System, which we have partnered with Botree . The implementation is underway.
By March, we would have implemented all our large distributors, and the balance will be done in the H1 of next financial year. So this is the on distributor side. Rather, this morning with the team, and I reviewed the distribution plan for the next financial year also. So we are on. We have executed as per our plan so far, and we are on the right path to keep expanding and taking it forward into the next financial year. Your second question was on the export side, and as our MD said in the speech also, that we have grown there, both in domestic and international export market. So export market is doing very well for us. We have not only grown well, we have also improved our realization very well in the international market.
And we are as of now focusing more on Middle East market to, you know, make it a critical market over the next three to four years' time. But it doesn't say that we are not focusing on other market. Our focus also continues to the North America, Canada, and East Africa side. So export is doing well for us, very well for us. It is growing in almost all the geographies, with a large focus on distribution and execution in the Middle East market, and objective is over the next three to four years' time is to be able to make a strong Cremica brand market in Middle East. The last question, which you were on the CapEx, which, again, in line what we briefed last time to you, with one addition.
Now, so we have Rajpura, we adding two more lines. This is work, this is progress, it is well in time. And in quarter one, both these lines, adding almost 2,000-ton capacity per month, will be commissioned in the quarter one of next financial year. Other than that, we are also expanding the daily capacity for the NCR and the nearby cities. So we are putting up a bakery line in Bhiwadi, which is close to NCR, and this line will be commissioned in the quarter two of next financial year, which will give us an additional capacity of 8,000 pieces of bread on a daily. Third, what we told you last time was that we are finalizing a plan of putting up a state-of-the-art bakery plant in Khopoli, and that work is in progress. Land has been acquired.
We are in the final stages of negotiating with machinery suppliers, and layout of the factory has been almost finalized. This will be commissioned in 2024 to 2025. The other one was putting up a biscuit plant in MP. So that also plans have been finalized, and the work of boundary line construction has started. Plant construction should start in another 40 to 60 days time, and we can again expect this plant to be commissioned in the financial year 2024 to 2025. So these are our supply chain manufacturing CapEx plan in terms of expanding our capacity to keep feeding into our growth.
Sure, sir. Sir, just one last question from my end. Just on the margin front, you know, you had alluded to about 14% by end of Q4, but you've already achieved that, right? You're almost there right now. So what's your outlook on margins, and where do you see this? And if you could just help us with the number of, in exports of our brand versus outsourced brand, the percentage.
Well done. Our division between our own brand and outsourced brand is just about close to 50/50. So just to answer that. On a margin side, Rahul, I think we've been maintaining that we are doing a journey of 30% to 40% and consistently delivering it, right? So, so I would say that we are, we are still on the journey of, you know, delivering this journey of 30% to 40%, and deliver it consistently before we take the next leap of moving from 14% to 15%, which we aspire to reach over the next few quarters.
Sure, sir. Thank you so much, and all the best.
Thank you.
Thank you. Our next question is from the line of Percy Pantaki with IIFL. Please go ahead.
Hi, sir. For the biscuits segment, can you give some flavor as to how different is the growth rate in the domestic versus the exports?
It's very similar. It's interesting that as of now, it's very similar. Both are in high teens.
Sir, isn't it closer to 40%?
Yes, revenue growth, yes, it's between 30, it's about 30%. So it is between 30 to 40, both are in the same range.
Okay, understood. And, how much of this growth, in your view, is coming because you are expanding distribution and, there is an initial sell-in into the channel, which would be driving some part of this growth? So can you probably try and quantify how much is the impact of that?
It is largely because of distribution expansion and selling execution, SMB execution. So I would say there are two parts to it, and I will explain to you. One is the distribution expansion and selling, improving the sales execution in the marketplace and the distribution. These are the two large factors of sales growth.
So what I'm trying to get a handle here, and don't get me wrong, your efforts are very much appreciated. But sometimes what happens is that when we expand the distribution, then somehow after a few months, it doesn't work out, and we may not get repeat purchases. But in the initial, sort of few months, we get the benefit from the fill-in into the channel. So I am just trying to pass that channel expansion-led sales growth out, so that even in the worst case, if those new outlets do not have repeat purchases. Then we can still bank on at least the other outlets which have been serviced since the last several months or years, and that part of the growth is at least secure. So I just wanted to understand that.
So, just to explain to you, and really for any, any FMCG company, right? So what we said, by hiring more people on street, by training them, by measuring their performance with sales force automation, and now going to DMS, we are going to double our outlets from start of this financial till March 2024, then increase our outlets and reach to 320,000. So as long as we are able to do it, this sales will continue to show a momentum, right? And we are at a very low level of coverage. We have a large ground to cover. So as a company, we have a large ground to cover, so we, this is a worry for a company which are at very high level of penetration, right?
We have a long journey to do in terms of adding our distribution, adding more towns and geography to keep expanding, and in the same city also to add more outlets. So, and that's primarily the journey which is done by every FMCG, which moves up the distribution expansion.
Secondly, I wanted to understand for the B2C breads business, what is basically the change in salience of the non-north market? So basically your Mumbai, Pune, Bengaluru, et cetera. What percentage are they contributing today versus what percentage they were contributing two or three years ago?
I would request Nishant to pitch in, because, I know the current one. Nishant, are you there?
Yeah, yeah, yeah. So, firstly, you know, I would request you to sort of look at it not as north, west, and south, because, you know, initially we were only in you know, the Delhi NCR market. What has now also opened up for us in north is the outstation areas, which I have also been mentioning on the previous calls. So for us, you know, north also was a city-focused territory, which is now sort of becoming bigger in terms of opening up new cities, you know, outside.
You know, for us, our largest growth is coming from the north, but it is not only on account of Delhi NCR. It is also on account of opening newer cities outside of Delhi NCR, where we are now getting stronger in terms of market share in cities in Uttar Pradesh, Haryana, as well as just starting Punjab.
Can you name a few of these cities?
So it would be Agra, Jaipur, you know, Chandigarh, you know, these would be the big ones. We have also started on its way to open up Lucknow, but this is still at a very nascent stage. So, I mean, we are focusing on the big cities to get market share, which will also help us put up infrastructure, you know, new plants, in the years to come to support larger markets.
Any reason why we have not seen that same kind of success in West or South?
No, we've seen great success in West as well. We have, in West market, we would also be growing at about 35% on a volume basis, and that's why we have been, we have also taken up some outsourced capacity, and are also in the plans of opening up our new plant in Khopoli. So, the brand is growing well in all markets. I'm just saying that it's not, you know, our contribution of North, South, West would probably remain the same, because North is also being fueled by many other cities in the North.
Understood. And lastly, on export biscuits, can you give some idea as to how we are getting this explosive kind of growth?
Hello?
Hello.
We have also, Suvir, you can answer this.
Yeah, hi, hi, Percy. So we're really expanding with new markets. We are also newer customers. Now, to give you an example, like how our CEO Manu was saying, we are really penetrating into the Middle East. So we've appointed now this talk of brand, Cremica, in almost all of the GCC markets. So whether it be Qatar, Saudi, Bahrain, or even if you go to the market, we'll have our products present in the market. And, we are also trying to penetrate in markets where we're trying to enter the leading, you know, where the things are given some promotion. This is all these are sales, and also the focus in trying to work with established retailers, so that in growing this, in growth-
…Thank you. Mr. Percy Pantaki, may we request that you return to the question queue for follow-up questions, as there are several participants waiting their turn. Thank you very much. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one to two per participant. Should you have a follow-up question, we would request you to rejoin the queue. Our next question is from the line of Mr. Harit with Investec. Please go ahead, sir.
Yeah. Hi, good evening. I just had two quick ones. You know, one was on the brands. So, what's the differential in growth between, say, the domestic piece and the institutional piece? Are they broadly similar or there's a big gap there this quarter?
So, Harit, you're asking about institutional-
The brand.
Between the institutional and B2C business of AP, right?
Right. Right, right.
So, both these businesses are going in double digits in their high teens, right? Both have a fairly similar kind of growth in a range. But both are growing high teens, just to answer your question. The volume increase in both in this quarter is in high teens.
Okay. And the second question, you know, was on margins. So I think you mentioned 13% to 14% is the journey that you're at, and, you know, you'll move to the next one over a period of time. But if you look at the material cost environment right now, you know, how are you seeing it? Do you see incremental pressures over the next, say, couple of quarters or next two to three quarters as, you know, the new season of retail to kind of come through? In that context, you know, how do you look at pricing, given in certain parts of your business, so you don't get, you know, pricing immediately, like in institutional, where it's an annual kind of a number. So how are you thinking of that?
Are you fairly confident still of 13% to 14% in spite of possible headwinds going forward?
Yeah. So Harit, on Anuj here. So the, you know, the, basically, if you look at, our business, you know, the last year had been one of, very, very difficult years, you know, because, with high, very, very high inflationary, and we took time to increase our prices. Now, what has happened is our price increases have happened, you know, and, the complete full year price increases will come into the company. Also, what we see, softening of certain, raw materials, you know, which will definitely assist the company, you know, to, to, you know, achieve these, targeted, numbers. So we are working towards it. I do not feel there would be a challenge on, getting the numbers right on the EBITDA and the income.
Great. So those are my two questions. And wish you all the best. Thanks.
Thank you.
Thank you. Our next question is from the line of Prithvi Raj with Unifi Capital. Please go ahead.
So my first question on the growth outlook for the coming years. So you had a phenomenal FY 2023. On this high base, how are you looking at growth for each segment? And can you break up the growth between expanding the distribution reach and what is the like-to-like growth number?
So in terms of growth, I know we have a very impressive growth this year across our business segment. So, but our plan for next year, which is still in the, you know, last stages of finalization, we are looking at a high-teens growth. So-
This is for volume or revenue, high teens?
Revenue, yeah. High teen growth in revenue. We, we're looking at that.
How much of this is because of adding new distribution outlets, and how much is because of the existing outlets?
So it's very difficult to differentiate that how much, what percentage will come from the new outlet. But you see, the growth will come from two ways. The existing outlets, we need to increase our throughput and we need to premiumize. Very important, we are on the journey of increasing our contribution, and we've done fairly decently, but we have a much stronger plan for next year.
Thank you, sir. That's all from my end.
That is our plan. Can you hear me?
Yeah, I can hear you now.
Right. So that's the plan we have, to do a journey of premiumization. But along with that, there is a strong plan of driving our distribution and taking it up. So both these factors combined, will help us, to you know, achieve our high teen revenue growth, so the both, in both the segments.
Thanks, sir. That's helpful.
Thank you. Our next question is from the line of Mr. Amit Purohit with Elara. Please go ahead.
Yes, sir. Congratulations. Thank you so much for the opportunity. Just sir, on the distribution side, you indicated that you have made some plans. If you could highlight, I remember last year you were talking about some 5 lakh outlet reach. Now we have reached to close to about 6 lakhs. So what is the, you have highlighted the direct reach outlook of 3 lakh 20. I just wanted to know what would be the overall reach, maybe FY 2024 and going forward, if you would help.
So, as I said that by March 2024, on a direct reach, we want to reach a 320,000 outlet mark. When we started the year, we were at 160,000, so we want to double the outlet over 24-month time. As we are doing this journey, AC Nielsen reports that we have moved from a 500,000 kind of indirect reach to close to 600,000. So, we expect a similar kind of growth to come to us in the next year also, by March 2024. Right? So it is very difficult to find out the exact equation of between direct to indirect, but taking the trend line, I think that it will be by end of March 2024, it should be reaching close to 700,000, approximately, with indirect reach of ours.
Okay. And just, yes, just from the bakery side, and comparing the states, so, you know, which according to you, or how do you position each when you enter into new markets, and which is the easier one, as of now? I mean, relatively, I know, both would be tough to get into the markets, but I'm generally saying that where the acceptance from the consumer or your positioning is better and hence easy to scale up.
So firstly, you know, both businesses are different. Only handicap which bakery business has, that it's a short shelf life business, so you can definitely can't dispatch, or you can't have a market beyond 200 kilometers, right? So in like a biscuit, definitely there is an ease that you can produce and make it travel, say, 500 kilometers. So if you are supplying from somewhere, from a plant in Punjab, I can still send it to eastern UP, which can travel 400 to 600 kilometers, right? But that's, you know, handicap in bakery business, that you need to have a sourcing location which is within approximately 200 kilometers.
So, so that's one big differentiation which is there, because bakery products have to be, you know, serviced, they have a short shelf life, they have to reach an outlet early morning at six, seven, 10. So that's the one large difference. Both brands are strong enough. Just to share with you, like, we launched our biscuit also in three cities of west and south, which is Mumbai, Pune and Bengaluru. Now, we were very delighted that, you know, we got a very good response of acceptance of our brand in these markets. It's a general thing, which only reflects on the quality and the strength of our brand, which is there.
Okay. And any experience from the UP? Because now you said that, you have both biscuit as well as, breads now in UP as well, right? Any specific markets that you are like, even biscuit is also, in the, large towns, or biscuit is more in the, smaller towns, whereas the bakery is.
So, biscuits today is in all large and medium-sized towns. And we have a plan for next financial year, where we want to, you know, cover majority of medium-sized towns of UP. UP is definitely a priority market for us in the north of India. And the UP market has started doing well for us, and we have aggressive plans to expand our distribution in UP.
You would describe the improvement in UP to largely to the implementation of the distribution tree, I mean, GTM and plus DMS and auto.
Absolutely. GTM and selling execution, improvement in selling execution.
Sure. And sir, last question, I mean, just for bookkeeping, what would be the CapEx, FY 2023 you would spend and FY 2024?
Sorry, I didn't get you.
The CapEx number for FY 2023 and 2024.
So CapEx, I just said, we are spending about INR 75 crore on two lines, which we are putting in Nashik. We have, as I briefed that we're putting up a plant and expanding a bakery plant in Bhiwadi, where we have an approximate CapEx of around 22 odd crore. We have an approximate CapEx, which we'll be investing in the... Okay, this is the two particular CapEx, which will mature in the year of 2023 to 2024. Rest will be CWIP, which will mature in 2024 to 2025.
Sure. Sure. Thank you so much.
Thank you. Our next question is from the line of Alisha Mahawla with Envision Capital. Please go ahead.
Hi, sir, good evening. Thank you for taking my question. So my first question is with respect to the employee expense, which is seeing a sequential growth, and while we understand that the company is in team building, adding feet on street, when do we expect this to stabilize? Or how much more can we expect this to... As the business is growing and entering new markets, what type of growth are we anticipating?
You know, can you repeat? You're saying that you want to understand on employee first, right?
Yes. That is increasing sequentially, and we do understand that the company is team building. They're adding feet on street, et cetera. I just want to know when will we get a more stable run rate, or what would that number be like?
... So, just to briefly on that, that feet on street is, we are adding is on the distributor or we're adding area distributor basement, right? They are not on the company rolls. So they are a low cost, and that what we will need to add. Even next year, we will be adding fair amount of, ADFRs to expand our distribution. Because as we are planning to grow our distribution aggressively, and we have a lot of ground to cover, I particularly see that our addition in the sales force through ADFR route will continue for next few years to come. It will not. But yes, our, we will have our efficiency coming in, sales as a cost to, sales as a percentage to revenue, right?
As our throughputs of the distributors will keep going up, then, they will be more independent, and our support in terms of that cost will keep coming down over the next two years' time. So I would say it will take at least two more years to kind of stabilize. But yes, we're very confident as we keep growing in next year and next to next year, our cost of sales as a percent to revenue will only improve.
If I understand correctly, the employee costs will continue to keep going up, but like you're saying, the efficiencies will ensure the percentage of revenue doesn't cross a certain threshold?
Yes.
It will take about two years to stabilize.
Yes.
Sure. And, in terms of other expenses, we've seen almost flat number on sequential basis. So is it because power fuel is now starting to come off, or is it that we spend slightly less on marketing or during the quarter, and maybe we'll see a bump up in future?
I know. No, no, it's a market. If you look at other expenses at 19%, last quarter, if I remember, was at 20%. So it will remain stable around this, right? And because primarily, this went up in this year because of 3 reasons, right? One is, we had a larger contribution of exports, and exports as well Indian domestic, logistic costs had kind of gone up. Second was because of travel, because a year before that, travel was literally zero because of COVID. And another reason, our travel is back, both domestically and nationally. Entire sales team, non-sales team, export team, they're all traveling. Third reason was that we had expanded our marketing investments over the last few months, which we'll continue to do that, right? So it will remain stable around this percentage.
Understood. With respect to what an earlier participant was asking, that, raw material stocking in the first season, and we are seeing some amount of, cooling of the power and inflation between last year, but price increase is already in the channel. So, with the incremental margin, are we expecting to invest that back in the channel or invested towards, maybe building more, on the marketing side, or will we, consider retaining some of this?
You know, actually, our next year AOP plans are under finalization now, and, hopefully within the next, further 15th of March, we will be able to close it. And then, you know, at that time, then we will truly come to know how we're gonna be, you know, supporting, the whole, business. But otherwise, you know, things look positive, than the last quarter. You know, we, we're going to we went the Q1 last year to this quarter, this, this year, Q1, calendar. So it, it's going to be, I believe it's better, but the numbers will get closed, by probably in the 2022.
Okay, sure. And just one last question, are you considering the-
Also on the employee cost, you know, when we're talking about feet on street, people increasing our feet on street, that's, you know, those people are not on our roads, right? So they, they do not add to the employee cost. So as a percentage, we are going to see a dip in the employee cost.
But there'll be an increase in commission, which will come in other expenses.
Well, not really, because most of our teams have already joined in, because this last year was more about building infrastructure. Well, if you see 40% growth coming in, you know, this is because of a lot of work which has been done by our CEO, Mr. Manu Talwar, our sales heads, you know, and our infrastructure team, our IT team. You know, there was a lot of work, so most of the people have joined us. So it's only certain people who would need to come in. So we don't expect any major costs coming in, you know.
No, I'm saying that when I understand the employee cost, it will not come in employee cost because they are not on our payroll, but some amount of incentive will have to be shared with them, which was probably part of other expenses, and it's not employee expenses.
Yeah, yeah, yeah. That is, that is perfectly okay. That's okay. That's a very small percentage, you know, and it's also linked to premiumization, it's linked to number of things. So also, when we count the number of shops, you know, we do not count any shop which doesn't bill less than INR 200. So when we are going to talk about 320,000 shops, the minimum billing to that shop has to be INR 200. So, you know, so that is another very big thing, right? So, yeah.
... Got it. Just one last question. We are expecting, you know, healthy expansion of our distribution network, and we still have a lot of white spaces in terms of geographies or areas that we have to address. Despite that, our next store growth aspiration continues to be in high teens. Is that slightly conservative?
Yes. We expect ourselves and we want ourselves to grow higher.
Okay, cool. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. Thank you. Our next question is from the line of Vidhi Dadia with Raedan Securities. Please go ahead.
Good evening, sir. Thank you for the opportunity. I have just one question to ask. As per referencing the data points on the Q2 earnings call, the retail reach in new geographies was 5,000. What are-- what is the number now, and what is the potential target reach we are looking at?
Current number is 10,000.
Ten thousand.
Yeah.
Okay, sir. All right. Thank you.
Thank you. A reminder to all participants, to ask a question, please press star and one on your touchtone telephone. The next question is from the line of Resha Mehta with GreenEdge Wealth Services. Please go ahead.
Yeah, thanks. So, if you could highlight that, you know, we had started with direct distribution of biscuits in western south with Mumbai, Pune and Bangalore, with around 5,000. So have you added maybe new cities where you can see it, and how are we seeing the traction in those cities?
So we have finalized a plan for the next financial year to expand in western south. And we would be adding the almost 10 more cities in next year. But our plan will be out, and we'll be happy to share directionally, how much, how many more cities we want to add in south and west to grow our distribution. So first is, we need to also grow into cities where we are not, because, you know, all these three are very big cities. They have a great potential, but alongside, we want to be expanding into the new cities in the next financial year. And so we are discussing and finalizing that plan. We'll be able to share it with you by 50.
But, there'll be at least 10 more cities or more, we'll be adding in the next financial year.
In the retail bakery side, so again, apart from Mumbai, Pune, Bengaluru, have you started supplying to cities like Jaipur, Chandigarh, Agra, Ludhiana, like we had called out in the previous calls?
Yes. So we have expanded our footprint very aggressively in this financial year outside of Delhi NCR, which are the cities you are mentioning. And that is also one of the reasons that we are putting up a plant, bakery plant in Bhiwadi, Rajasthan, which is about an hour distance from Gurgaon, to strengthen not only our NCR region supplies, but also to feed into the upcountry cities and make them grow faster.
Right. And lastly, if you could share, you know, what is the revenue contribution for nine months from modern trade and e-commerce? And, we did highlight that there, you know, there are around 5,000 modern trade outlets, and we are targeting to reach 2,000 outlets by this financial year end. So where are we on that? And, would all of Bector's products are both on the bakery as well as the biscuit side, be present in, you know, these modern trade outlets?
So if you see modern trade outlets on the biscuit side, there is a universe of around 6,000 outlets, right? And we are as of now we have reached approximately 2,300 out of those 6,000 outlets, right? And that's what we had targeted for this year. We have a plan to achieve 50% of that penetration in the next financial year. So that's primarily on our penetration on the modern trade side and the food commerce side, right? That's where we are.
What is the revenue contribution from these two channels put together?
Revenue contribution from these two channels is close to approximately, you know, 13% to 14%.
Okay. And would it be fair to say that, modern trade would be having a higher, much higher channel in the revenue in, biscuits things like,
Sorry, your voice was breaking. Much higher?
Yeah... safe to say that in west and south, in, let's say, Mumbai, Pune, Bengaluru, the revenue contribution of modern trade food commerce will be high?
So yes, our modern trade food commerce contribution in bakery is higher. But in terms of on a biscuit side, we aggressively started our journey of expanding into modern trade on south and west, mainly from this year only. So our contribution of west and south is it started growing well, started penetrating well. So yes, in the next year, you should see a much higher contribution of modern trade, food commerce, e-commerce for both the sectors.
Got it. Thanks, and all the best.
Yeah, thank you very much.
Thank you. A reminder to all participants, please restrict yourself or limit yourself to one or two questions per participants. Should you have a follow-up question, we would request you to rejoin the queue. Our next question is from the line of Saptarshi Chatterjee with Centrum PMS. Please go ahead.
Thank you, sir. Thank you for the opportunity, and congratulations on a super set of numbers. My first question is on the, like, if you can indicate, what would be the differential of, retailer and distribution margins for us versus the national players? And for how long, if it is higher, how long period do you give wanting to continue this?
So yes, definitely from the leader, right, who is almost 13x of ours. Our retailer and distributor margins are marginally higher than their size. And, we do have a plan as we keep expanding and growing, we would, we would keep rationalizing them over the next, you know, next few years. As of now, we don't have any definitive plan in place that how much we'll reduce, you know, over the next three years' time, but that definitely is a part of our plan, that as we keep expanding and strengthening our territories and geographies, there we will start reducing the gap on our margins given by us versus our market leader in that particular territory.
Understood, sir. And secondly, like, because we are implementing distributor management system and sales force, and we are tracking the sales of our outlets, is it possible for you to quantify or maybe indicate in coming quarters, what would be the, like, growth on the existing outlets, or maybe the outlets that you have acquired in quarter two? What would be the growth on those outlets Q over Q, so that we can understand some indication of how the growth in the new outlets or repeat purchase is happening on the new outlets?
Yes, we should be able to, with help of SFA and DMS, which we are implementing now. Over the next two quarters, we should be able to also look at that data, that what is the growth, what is the frequency, what is the throughputing thing? We should be able to look at data and influence and work on that data.
I know, sir, it is. But is it possible to quantify anything, currently?
Clearly, currently. You see, all these digitized tracking, they, they have accuracy of anything close to 80% to 90%, and they give you directionally correct data for even the best of the FMCG. So yes, they should be able to indicate directionally that how it progresses. And that's how we also use data to improve our sales performance.
Understood, sir. Very excellent. Last question: What would be the advertisement and sales promotion and freight cost in nine months as a % of revenue?
Come again, sales promotion and advertisement?
Advertisement and sales promotion, and the freight cost in nine months as a percentage of revenue.
Okay, so, our sales promotion in marketing sizing expense is almost in the range of 7% to 8%, right? And, out of the sales promotion, or you can say that, marketing side, which is approximately 2% to 2.5%, and, that's also sales promotion. So that's broadly the kind of breakup there.
And the freight cost?
Our freight cost, basically domestic and including exports, is approximately in the range of 5.1%.
Okay. For the biscuits?
No, this is combined, I said.
Okay. Okay, sure. Thank you. Thank you so much. This is very helpful.
Thank you. Our next question is from the line of Ayaz Motiwala with Nivalis Partners. Please go ahead.
Yes, sir. Thank you. Good evening, sir. My question is, regarding the other expenses. They've grown very sharply in this particular year and in the last few years. So you have shared an explanation of adding people, also the change of, the sales, personnel from inside with the movement outside to the distribution staff. So can you share a little more details on that, please?
You know, let me start with employee expenses first. So if you would notice, on a nine-month period as well as in the nine months previous and across the board, we were around 13.6% last year, and this year it's 11.9% on the employee cost side. So employee cost side, certainly we have a good reduction in terms as a percentage of revenue over last year, right? So that's it. On the other expenses side, definitely we have moved up 17% to 19%. So I was giving a reason. There are three prime reasons. A, in the previous years, there was literally no travel, so the travel has come back because during COVID years, travel was not happening, both domestic and international. So that travel is back.
We have a little bit of freight cost as you from quarter now we went up. And
Sorry, sir, I'm not able to, I'm not able to hear you correctly, sir. Your second point, point was?
Can you hear me now?
Yes, much better, sir. Thank you.
Okay. The other expenses have definitely moved up from 17% to 19%. There are three prime reasons for that to happen. One was on the travel side, because literally during COVID years, there was no travel happening. Now, both domestic and international travel is back, and which is necessary to grow the business. Second, there has been increase in the fuel and the freight cost, and our contribution of export has also gone up, which has led to a slightly higher jump in the freight cost, right? And also on the fuel side, in the manufacturing, there has been a steeper increase at that side. So that is impacted, right? Last, is that we have augmented our investments on the marketing, which you can see very well in the last quarter also and this quarter.
So that, that's the kind of a third reason which has led to this increase. But we're very confident now we'll be able to stabilize in this percentage as we move forward and as we keep growing our business.
Sure. That's very helpful. Just as a follow-up on that, you had just shared to the earlier question, I think a breakdown on the sales and marketing investments and the percentage that you talked about.
Yeah, yeah.
19, 19 odd %, would you- what you called out, about 7% to 8% is on account of sales and marketing investment-
No, no.
Advertising.
Let me clarify this. You see that I said that we spend about 7% to 8% in sales promotion for marketing put together, in which marketing is a 2.5%, two, 2.5%, and the sales promotion doesn't come in other expenses, right?
Yes.
So that is entire BTL and the promotion expenses which move into sales and it we get deducted from the gross revenue when the P&L is presented. So it's not as other expenses line.
Okay. So, sir, you're saying, since we want to take this is a key point you have making and it's very helpful. You're saying the core advertising, which is above the line, about 2.5% to 3%, is part of the other expenses.
Yes.
Whereas the BTL.
2% to 2.5%.
From sales.
Yeah, 2% to 2.5% is will be part of the other expense.
So, this number of 19 includes only 2, 2.5% of advertising core, and the other is below the line, and that's debited or netted off from sales.
Yes, but some part will be also part of this, which goes into the sales expenses, so which is also part of it.
Right. So I think one more clarity. You have shared this, but I was a little unclear. You had talked about making very strategic investments on people front in the last two to three years, efforts of which are showing up in this kind of stupendous 40% growth in this quarter or this nine months. Some very good numbers have come. Now, in terms of investments on people and coming on the payroll, if you could reclarify what are those, which is the pace of growth of that investment will not happen, is what we are trying to all understand, right? So if you can explain that, some sort of number of heads or whatever that you've hired.
I think in a couple of quarters back, you were talking about the feet on street and distribution expansion that has been added, and that pace of addition will not happen. So we can appreciate that employee cost or other expenses not expanding in line with sales, because you're linking sales to be growing at high teens. So that, what is today at 40%, these costs don't bite you. In fact, your margins have gone up. So if that you could explain, that would be very helpful. That's my question. Thank you.
So we added a management leadership strength in this financial year, right?
Mm-hmm.
Which was required for growth of the company. Majority of leadership position have been hired, and there are only very few which are in the pipeline. So the intensity of leadership hiring is not going to be the same as this year, as Anoop, as MD, also briefed you. So yes, that's how it's going to be. So majority of leadership positions are already hired. People have joined. There are few, very few in the pipeline, which will be closed over the next two months time. So your intensity of hiring will not remain the same, which was in this financial year.
Sir, if I may ask you one quick question, and if you permit me. On the Indian breads, I see a picture of some Indian breads in your presentation, which is looking quite interesting and impressive. So what are these Indian breads, and is there a market which is, you are trying to get to break into, or there is really a ready market?
No, so it's a... See, bakery is a fast-growing market for India. There is no ready AC Nielsen kind of or other data available. These are some external research reports.... from we have picked up, the data and shared with you guys, but it is a, it's a fast-growing market, in the bakery sector. We have a aspiration over the next four to five years to become a pan-India player, and we are on that journey to, to be a strong English Oven bakery brand pan-India over the next four to five years time.
Okay. So, the Indian breads are basically the kulchas and others which you have described in the past, is that?
Okay, you are referring to those Indian breads. Okay, yes.
Yes, specifically Indian breads, which I'm trying to understand what type of breads are these, and are we gonna see, you know, frozen naans and parathas, et cetera, which is a business in other parts of, the world, including America or Southeast Asia? And are you seeing that as a market opportunity? Those are questions.
Yeah. So, you know, what is happening is that, in the last three months, you know, quarter, we have upgraded and now we are a supplier to Subway, right? We have started supplying to Subway. So we are currently not into Indian breads, you know, we would not be there, but currently there is enough business, you know, which is an opportunity where there is more value addition, you know, like sourdough bread. We just, in our English Oven brand, we have just launched Rusk, you know, which has just got launched two months back, and it has shown a very promising business which is coming on the Rusk side also. So, you know, the journey is more aligned towards the products which are aligned to us.
Currently not on the side of parathas or Indian breads.
Sure. Sure. Thank you very much, sir. I'll come back. I have another few questions if time permits. Thank you.
Thank you. Our next question is from the line of Arpit Shah with Stallion Asset. Please go ahead.
Hello? Hello.
Yeah, please. Please go ahead.
Yeah, I just wanted to understand a few number keeping points. On the 40% growth, what will be a realization growth, volume growth, and the mix change?
What will be the-
Realization growth, volume growth, and the mix change growth.
Our realization growth as a is about 10% to 11%.
Okay.
Largely driven by the latter.
Got it. In the INR 368 crore, what will be the share of exports and what will be the share of domestic revenues?
Out of what, sorry?
Out of INR 368 crore, our total revenues this quarter, what will be the share of exports and what will be the share of domestic revenues?
Our exports are approximately 25% of our revenues. Overall revenues as a company.
Got it. What will be our share of retail and institutional revenues in the INR 368 crore?
Pardon? Sorry.
What will be our share of retail and institutional revenues?
Our institutional sales is approximately 12-odd% of our company.
And the rest is 88% will be retail to distribution channels?
Pardon?
The rest, 88%, would be through distribution channels?
Yes, including exports, no? I told you, exports is also there.
Yeah, so exports would be distribution, would be retail or it would be institution?
Out of 100, export is 25%.
Okay.
Our institutional business is around 12 odd%, right?
Got it.
We have around a small percentage of contract manufacturing, and balance is entirely B2C.
Got it. Got it. And in the current revenue run that we are having around INR 1,200 crore of revenue, so what will it take for us to reach a INR 2,000 crore revenue in the next two or three years?
Yeah, that's what we are aspiring and going for that, we should reach that benchmark over the next, you know, next three more years.
Got it. The margin run that you're targeting is around 13% to 14%, right? On the operating side.
No, no, no, no. We are saying that we want to stabilize consistently, deliver 13% to 4%, and then move our journey to take up 14% to 15% over the next few quarters.
Got it. Got it. Thank you. Thank you, sir.
Pleasure.
Thank you. That was the end of our question and answer session. I would now like to hand the conference over to Mr. Anoop Bector for closing comments. Over to you, sir.
Thank you everyone for joining us. I hope we have been able to answer all your queries. In case you require any further details, you may please contact us or Orient Capital, our investor relations partner. Thank you so much.
On behalf of Mrs. Bectors Food Specialities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.