Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Mundra from Investor Relations. Thank you, and over to you, Mr. Mundra.
Thanks, Neerav. Good morning, everyone. This is Mayank from the Investor Relations team. I welcome you all to the Britannia Earnings Call to discuss the financial results of Q1 2024-2025. Joining us today on this earnings call is our Vice Chairman and Managing Director, Mr. Varun Berry; Executive Director and CEO, Mr. Rajneet Singh Kohli; Executive Director and CFO, Mr. N. Venkataraman; Chief Commercial Officer, Sales and Replenishment, Mr. Vipin Kataria; Chief Manufacturing and Procurement Officer, Mr. Manoj Balgi, and Chief Marketing Officer, Mr. Amit Doshi. The analyst deck is uploaded on our website. Before I pass it on to Mr. Varun Berry, I would like to draw your attention to the safe harbor statement in the presentation. Over to Mr. Varun Berry with remarks on his performance.
Good morning, everyone. Thank you for joining the call. So let me just jump in straight off to slide number three. Good news on the consumption front. The quarter has been, the growths on value and volume have been about the same, at about 6.6, 6.5% for the FMCG industry. The rural growths are starting to come back, which have been lagging urban for some time. And, you know, that's something which will help us overall get better growth. So, the reason for the same are obviously better monsoons, moderate inflationary conditions, as well as employment. You know, there's some employment data which is showing that rural employment is at an all-time high. So things are looking a little better.
Still not out of the woods completely, but definitely better than where we were. Going to the next slide, the performance scorecard for Britannia. We did our revenue from operations were INR 4,130 crores, which was a 4% growth on a 12-month basis, and a 13% growth on a 24-month basis. Our operating profit was at 16.5%, which was at a 10% growth on a 12-month basis and a 51% growth on a 24-month basis. So I would say good results in the current environment. Our market share on the next slide is also looking good. Our trend continues. We've continued to gain share, and we are hoping that we will be able to keep that track going.
Our strategic pillars, which you're all aware of, distribution, marketing, innovation, growing adjacencies, cost efficiencies and sustainabilities. Let me take you through each one of these and where we stand on these. So, driving efficiencies in distribution, our direct reach is now at 28.2 lakh outlets. Our uptick in rural distribution, we've gone up to 30,000 rural distributors. And, if you look at our rural performance, it's a better performance than what it is for urban, which is good. As we've seen, there's a little revival in the rural economy as well. So we are keeping our, you know, credo of going, you know, getting equal share in rural as we have in urban.
As you know that we have a higher share in urban than we have in rural. We are keeping that going. The next slide is about our sales transformation. You know, this is basically a complicated chart, but you've just got to remember what we are trying to do. We are trying to do real-time data for all of us in the system. What this has done is this has increased the face time of the distributor salesmen, which is up 42%, so they are on their handheld and they are getting real-time data all the time. All our outlets, which are directly handled through our distributors, are geotagged.
As a result of that, the time spent in the market by our salesmen is also up. If you were to look at what we are doing, on our route to market, which is going on with Bain, basically, what we are trying to do is leverage our high potential outlets to make sure that all of our key categories and SKUs are available in these outlets. We are looking at upscaling our salesmen capability in these high potential outlets. We are also looking at upgrading technology for better productivity, and there will be an increase in the number of salesmen, which is mentioned as increased feet on street. Now, we've already started...
The project has been on for about a couple of months, and we've already started some pilots in the top metros to validate what is going to work for us in the long run. We are banking a lot on this project, and hopefully, this will be able to give us great results in the future... On the next slide, which is slide number 10, if you look at, you know, our capabilities in organized channels, you know, if you look at the first quarter, we've seen much higher growth for our adjacency business as well as our new businesses in the modern trade or the organized trade channel.
The building blocks of which have been a very agile supply chain, which is focusing on fill rates, a modern marketing, which is based on social media, digital, et cetera, upskilling of our salesmen, and best-in-class service levels for our customers. Next slide, slide number 11. Building, you know, we've been continuously building on our business as far as e-commerce is concerned. We know that it's an important channel, albeit small for us right now, but it's a test bed for innovation and new categories. We can do precision targeting with real-time consumers. You know, product ideas which are based on social media trends as well as, you know, consumer feedback, and reviews and ratings.
It's a channel which can be used by us for a lot of our current premium products, as well as making sure that we do products which are actually what the consumers are looking for. And this is giving us good results. We've been seeing great growth in this channel. So hopefully, you know, it's today at—Vipin, at about what, 4% of our total sales?
Yeah, Warren. So we are at about 4%, but, I think the difference between us and other companies is that we purely focus on B2C.
Mm-hmm.
You know, there's a lot large component of B2B which other companies have. But I think, that's one big differentiator that we are creating.
No, absolutely. So we are not interested in the B2B business because that disrupts our distribution efforts. So we are purely concentrating on the B2C business, as Vipin said. Okay, moving on to the next slide, which is slide number 12. We've made some sustained investments in brands to drive consumer engagement. As you know, that the biscuits brand was you know, a slightly more traditional marketing you know category. What we are trying to do is, we are trying to make it a little more alive with more, you know, let's say, interesting products, as well as interesting marketing ideas, which are more alive to what's happening today. And we've done that with Britannia Khao, Paris Jao on some of our brands.
We also did it with Jim Jam Pops, where we launched the victory biscuit when the Indian cricket team won the T20 World Cup in Bombay. And similarly, a lot of other interesting initiatives which the marketing team has led on Good Day, on Little Hearts, NutriChoice. Next slide, some of the other marketing initiatives in adjacency areas. You know, we've had rusk advertising on the Jio mobile app. We've had the Cow Corner for Winkin' Cow during IPL, which was a very interesting idea. And other IPL campaigns which, you know, we did on some of our other products, and tactical consumer promotions, which we run across our portfolio of brands. Next slide, slide number 14.
We've been recognized for the efforts because, you know, Amit and team have brought a differentiation to the way we've looked at marketing, and they've been rewarded by, you know... They got the brand of the year, you know, in the Shark Awards. You know, out of home, we were number one, the number one brand. In home, we were the number two brand, et cetera. You know, it's good fuel for the team that's doing so much of interesting work. The next slide is on innovation. We've launched Pure Magic Stars, which is a very interesting product. And the jury is still out.
It's just launched in the market, so it'll take some time for us to tell you how it's doing, but it's been really appreciated by consumers. We've also launched 50-50 Golmaal, which is a variant of the earlier product that we'd launched. This is a butter garlic. And these are all doing well. The in-market products are the base Golmaal, Jim Jam Pops, and Butter Jeera, which was done only for modern trade, and these are doing quite well. We've got a very robust innovation pipeline, which will cater to the regional preferences and drive premiumization within our portfolio. Next slide is on adjacency. We have seen a resurgence in our adjacency business. You know, the Fudge It product has been doing extremely well. Croissants have been doing very well.
Our Rusk and Millet Breads have also done well for us. Similarly, on cheese and on drinks, you know, drinks has been a good story for us, especially lassi. So we, we've been doing better than what we were doing. Still a lot of hard work for us to be able to get to, you know, 1.5x the growth of the base business, but we are working towards that. Our international business has also been doing really well, with good profitability. And Nepal is a, you know, a validation of our strategy of seeding products and then establishing our manufacturing footprint in the country. This business used to be a INR 20 crore business, and today we are at what, Venkat? About INR 180 crore in Nepal?
INR 170 .
INR 170-INR 180 crore business in Nepal. So, we are doing well, and there are some other countries where we are also looking at the same strategy to be able to establish ourselves so that we don't burn the bank. At the same time, we establish a footprint in these countries through a slow and steady strategy. On our cost leadership across verticals, our strategy remains the same. Our truck upsizing with, you know, full utilization, distance traveled by our products, digital adoption, renewable energy, fuel consumption, and our line throughput. And in 2024-2025, we will be at 8 x what we started in 2013-2014. So this continues. We continue to target 2% of cost efficiencies every year. Moving on.
Just to give you an idea of our manufacturing footprint, you know, it's a very interesting footprint with 54 factories located across the country. 16 of these are our own factories, which give us 65% of the total requirement that we have across the country. We have third-party factories, which are 38. We've got 154 manufacturing lines, out of which 81 are in our own factories, with annual capacity I've already spoken about. Now, you know, we've got a mega food factory, which is in Ranjangaon. We've got fully integrated factories in which have got you know 4+ lines and have more than one category. And then we've got small factories which give us the ability to be nimble.
So we've got a very robust and a very solid manufacturing footprint, which is holding us in good stead in the current times. Just a quick look at our Ranjangaon dairy operations. So we are now collecting about 300,000 L of milk in Ranjangaon. Out of which 90,000 L and we are scaling up this 90,000 every month. 90,000 is directly through our you know partner farmers. These are about 3,300 farmers across 105 villages, with 70 milk collection centers that are created in and around our factory. We do a lot of developmental initiatives, which is farmer training programs, animal health camps, and we also provide quality fodder and seeds to our farmer friends.
Our program results have been that we've improved farmer retention to now 95%. Our farmer yields are up 13% over the last two years, and we've had improved quality of milk, you know, that we receive at our factory. We've now got a processed cheese plant, which is commercialized. We are doing cheese blocks, we are doing cheese cubes, cheddar cheese, we are doing slices. So, and we are looking... We've got a quick scale-up across formats, and our product quality today is much better than what it is. We are working on making sure that we leverage the technology that we put in our factory to get much better productivity than what we've got in the past. Just wanted to give you an idea of this operation because I thought it was important.
Next slide is on ESG. You know the four building blocks that we have, people, growth, governance, and resources. We continue to work on these. We've been recognized as the best three sustainability initiatives of the year in 2024 at the Global CSR and ESG Awards, which was conducted by Brand Honchos. The key initiatives included water stewardship program, sustainable packaging, employee wellbeing and development, community development programs, and we also did a Har Pocket Ab Dustbin program. The campaign was in Q1 of this year. We continue to do our employee volunteering program, which is on plastic waste collection across you know across our factories and across our offices.
We won some awards, which I won't dwell on, but I must compliment the ESG team from bringing us from, you know, being at the bottom of the pack to where we are today. And we hope to be right at the top in times to come. Now, getting to cost and profitability, slide number 22. Commodity costs are going up marginally. Flour costs are up, sugar costs are up, palm is the balancing factor. Cocoa is through the roof. The cocoa costs are completely through the roof. Laminate costs, so the two, three costs which are balancing out flour, sugar, and cocoa are palm, laminates, and corrugated boxes. One that is not here is also milk.
While milk powder is okay till now, but, you know, milk costs are up. So, in times to come, SMP costs will also be up. So we are seeing a trend of prices going up marginally. But these are, this is inflation that we can manage, and we are hoping that it remains within that manageable range. Next slide is on, you know, what we are looking at. We are stepping up investments on brand and innovation. We've actioned pricing actions wherever necessary to drive, you know, to make sure that we remain competitive. And we've also delivered cost efficiencies across all our functions. We are closely monitoring the commodity situation, and, you know, we are assessing its impact.
I think it's important that we balance the commodity increases as well as the competitive pricing actions, and we've done it quite well till now. Our strategy will remain to focus on driving market share and a top-line growth, which had been evading the Indian FMCG industry for some time. Getting to the financial results. So, I've already spoken about this. We've grown 4% as far as top-line is concerned, on a 12-month growth basis, and 13% on a 24-month basis, with a revenue of INR 4,130 crores. Next slide is on operating profits. Operating profits are at INR 680 crores, which is 16.5% of our net revenue. Growth of 10% on a 12-month basis, and 51% on a 24-month basis.
Getting to the ratios, net sales are up 4%, operating profit up 10%, profit before tax up 13%, profit after tax up 14%. These are all before exceptional items. The ratios are at the bottom. Profit from operations, 16.5%. Profit before tax, also at 16.5%, and PAT at 12.2%. So that's all I have for you. Let me open the doors for questions. Over to you.
Thank you very much. We'll 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 your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. A request to all the participants, kindly restrict to two questions per participant, and join the queue again for a follow-up question. The first question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks, and, congrats on the volume growth. My first question is on the cheese business. So I noticed that you have mentioned on profitable growth. My specific question is, do you need to work further on the pricing aspect? Because, I remember a few quarters back, you had said the pricing premium is high for Britannia in cheese, and you would like to reduce that. So where are we in terms of that? Second is, would you have a market share in cheese? Because, clearly that opportunity is very high, given the kind of technology you bring to the table, the huge facility you have now. Any numbers you can share with us, directionally, how you see market share next three years in cheese?
So, Abneesh, yes, pricing, we've taken a few actions as far as pricing is concerned. Now we are... our premium is slightly lower, but we are working on seeing if there's any further, you know, a possibility of us becoming more competitive. So, that quest for, you know, pricing equality continues, and that will also come with the efficiencies building in our lines, because we've just commercialized our lines. We are still building the efficiencies. So hopefully, over the next three, four months, we'll be able to bring something more to the table. What was your other question, Abneesh? I missed it.
Share.
Share.
Market share.
The market share on cheese, we are very small, Abneesh. We, you know, it's predominantly we are number two in the industry. But we are in just in about double digit numbers, while... So there's a lot of bunching at the bottom with the, you know, low 2%-3% share. So a lot of players are at 2%-3% share. We are just about in double digits. And Amul is, you know, 6x our share. So that's the story as far as cheese share is concerned.
So yes, you are right, there is opportunity there, and we've got to look at now that with our tie-up with Bel and Laughing Cow, you know, having a interesting brand to talk about, the product categories that we are in, you know, the new innovation that we can bring to the table, our own factory with efficiencies, and all of that put together, if we get everything right in the next three to six months, there could be a lot of potential as far as the cheese market is concerned.
Sure. Thanks. My second question is on the demand side. So in the B2C, in Q1, there were two headwinds and one tailwind for biscuit consumption. One headwind was hot beverages consumption, which went down. A lot of Indians consume biscuits along with tea and coffee. So did that suffer? Second one was hot out-of-home travel was severely impacted. So was your INR 5 pack or INR 10 pack impacted in any of the brands? There was one tailwind also, a lot of election rallies. Of course, in election rallies, there is a good consumption of biscuits and snacks. So would you like to call out any of these either in terms of negative or positive? Because 8% volume growth was a good number.
Similarly, on B2B demand, Varun, any insights, because that was a key focus area a few quarters back, QSR, restaurant, et cetera?
Well, B2B demand, I, I didn't... Did I speak about that? Not, not for biscuits, Abneesh. But you're right.
Non-biscuits.
Yeah, non-biscuits, yes. We're making great progress there, but biscuits is not a big part of our overall agenda, but still has been going up. You're right about hot beverages. Our products are consumed with hot beverages and, you know, it's a good point that you bring to the table. We've got to evaluate this and understand if there is any correlation there. Out-of-home, we didn't see any negative impact, although, you know, the growths are what they are. They're not where we would want to be. We would have wanted the growths to be at least 2.5 times what they are currently, and we are hoping that we'll get back to those numbers. Election rallies don't, do not impact us that much, Abneesh.
You know, we've seen it in the past as well. It doesn't give us an up or a down in any way, and we sailed through those this year as well.
Thanks, sir. That's all from my side. Thank you.
Okay.
Thank you very much. Participants kindly restrict to two questions per participant, and join the queue for a follow-up question. Next question is from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, sir. Sir, with the marginal inflation that you have seen in commodity costs, how would you, how do you think, could you share your thoughts on the FY 2025 pricing growth? How do you see that?
No, we, we might have to take a little bit of pricing, but it will not be what we saw in the past. If you remember in the last, you know, for about 20 months or 18 months, we saw inflation of 22%, and that's what sort of gets us off track, because those are the kind of numbers which impact consumer, you know, consumption, et cetera. So, I don't see that happening. Even if there is inflation, it'll probably be in the range of 4%-5%. And to that extent, we will have to figure out, you know, which are the brands, which are the categories, where we go ahead and take some pricing, if required.
Got it, sir. So, okay, so some pricing, but, depending on how it kind of pans out, but it looks benign in that sense. Got it. Sir, on the adjacent businesses, I just wanted to check, would it be possible to share where do we stand at the EBITDA margin level now? And whether that is the focus when you highlighted that there's a focus on consolidation in this category, or that margin trajectory is something that we would be... I mean, your thoughts on that one, please.
We do not do a, you know, separate consolidation on our adjacency business level. But if you look at our overall margins, and I frankly haven't looked at EBITDA margins, but if you look at your net margins, they are reasonable. Cake and rusk are in the double-digit territory. You know, rusk would probably be accretive to our overall margins. And bread, as you know, we used to be negative margins. We've brought it to a stage where they are almost touching a double-digit margin. So that's a great achievement in a category like bread. And you know, croissant, the gross margins are fantastic. We continue to invest. The gross margins there are probably 25% more than what they are on our base category.
Obviously, we are investing in that category, and, you know, that's necessary at this stage because it's a fledgling category. Dairy is the one where we've made some investments, so there is need to look at EBITDA margins, because there is depreciation there. But dairy is again in investment mode. We really want to make sure that we invest in this category, and we start to see gains as far as our top line and our overall business is concerned.
Got it, sir. No, thanks a lot for this. That's all from my side. Thank you.
Thank you. Next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi, team. My first question again was actually on pricing. So the deflation in pricing this quarter seems to be slightly more than last quarter, correct me if I'm wrong. And do you see that any incremental changes here going ahead? Does this anniversarize very quickly, or do you expect some more deflation in the coming quarters to continue?
No, there is no deflation, really. What... I think what you're alluding to is the fact that we have taken price rollbacks. So basically, if you look at it, our rollbacks have been, you know, on for some time now. But now is the time to start to consolidate. We've done what we had to. There might be a few promotions here and there, but as far as rollbacks are concerned, we've done what we have to. As we were saying, we expect a 4%-5% inflation in the coming months, you know, on the back of flour and sugar and cocoa. So, and if that happens, we will start to take slight price increases in the future.
Understood. Just to follow up on this, so the carry forward effect of the year-on-year price decline, that then you're saying should, could continue, even though there's no incremental price cut that you are taking or rollback price you are taking?
Yes, yes. Because of the base, because it's probably not in the base, you might have a slight difference in our volume growths and our revenue growths, but it'll even out. The good news is that the volume growths are now coming close to double digits, and that's what's gonna keep us in stead as we, as we go forward.
One last question is the other operating income. There is a very sharp spike, YoY. Is there any bunching of PLI here, and any sense of what could be the steady state run rate here?
In Ranjangaon, no?
Ranjangaon.
Yeah. So, this is for our factory in Ranjangaon. So, as you know, that we are qualified as a ultra mega plant, but that was subject to us reaching a certain, you know, investment. And as we reached that investment, we got some benefits from the past year. So that's what's coming there.
Thank you.
Yeah.
Arna, I'll request you to come back for a follow-up question.
Sure.
Next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead.
Hi, Varun. Recently, I saw your baked snacks, extruded Time Pass, in a shop in Bombay. So is this something recent? Because, till now, I think it was a South India kind of launch. And any kind of views you have on how you want to take this forward?
This is in experimental stage, Percy, so we are doing some market tests, et cetera. So, you know, it's in that stage to figure out if we have a solid right to succeed. So, you know, it's at this point in time, it's not like a rollout across the country or anything like that. As you know, we've put up two lines, one in Ranjangaon and one in the south in Bangalore. And both of these lines have very small capacity. We can do about 200 tons a month. And we are using these lines to do some experimentation, figure out what works, what doesn't work.
Varun, hasn't it been really too long for it to be in test phase? Because it's been, like, 5+ years since we first launched this product. So what is really holding us back here? The market opportunity is huge, and it works on distribution, and we are the kings of distribution. Whatever little contribution is required of a brand, that also we have. And I understand margins are lower, but it's a incremental absolute profit opportunity. So what is really holding us back here?
Well, there are two or three things, Percy. One is obviously the outside opportunity. See, if you look at the outside opportunity, yes, the total market is large, but you look at the number of operators in this category, there are about 2,600 salty snack operators, right? And what I hear from the market is that all of the organized players have not been really gaining. It's the, you know, the small operators who've been gaining because they are giving more grams in bag. And obviously, when you give grams in bag, you have no profitability. And you know, so all those things need to be tested. The second is internal. The second is that internally, we've got different products, right?
One is a product that sits in the shelf, which is biscuits and cake and rusk and croissant and all of that. And this is a product category which is hung outside, right? So it's an impulse category, and so our internal ability to do justice to that also has to be tested. I agree with you. It's taken longer than what it should have, but we don't want to do anything without really being 100% sure of success. So I do not worry about you know, a little more time, but we have to be sure-footed. And if we are not sure-footed, believe me, I will not launch it. That also I'm very clear about.
My second question is on the margins. So, for the last several quarters, we have been clocking margins of about 19%+ . This quarter, we've come to about 18.2%, and that, too, with some bunched up one-off of Ranjangaon. So going ahead, what is the sort of margin roughly that we are targeting? Is it going to be a 19% + number, or are we at this 18%-18.5% kind of number for the next four quarters-eight quarters now?
That's a very pointed question, and I can't give you a pointed answer. But let me give you what I feel. I think it's the time to drive top line right now. We, as a FMCG industry in India, have suffered the top line growths that are required. You know, I would not mind if my margins stay at 16% rather than going to 18%, but it's important that we drive top line. And I'm not saying that we will compromise on margins. We will do whatever is necessary to get margins as well, but the time is to drive top line.
Okay, sir. That's all from me. Thanks, and all the best.
Yeah.
Thank you. Next question is from the line of Mihir Shah from Nomura. Please go ahead.
Hi, sir. Congrats on your good volume performance. Thank you for taking my question. Sir, on the pickup on volumes, I wanted to check if there is any element of higher than usual in-home consumption that you are seeing due to the extreme heat wave. And also with the price rollbacks that you have initiated, do you think these volumes can sustain and inch up further as we were thinking about, or these numbers can probably go down from here?
No, you know, you know, I wish I had the ability to predict this, but in a country like India, getting to high single digit volume growths should not be a big issue at all. And we've been seeing it for years and years. It's just that we've had a lull for about two years, three years. But... And that's because we've taken a lot of pricing because of the high inflation. So the objective will be to continue to see volume growths in our business. And, you know, we will do whatever is necessary to be able to get there.
Perfect, sir. Got it. Sir, secondly, I wanted to check on the other expenses bit. It seems that the costs have gone up. Is this largely due to higher ad spends, or are there any other elements to it? And historically, other expenses in 1Q are usually lower as an absolute basis versus the remaining part of the year, which indicates that if other expenses inch up for the remaining part of the year, then the margins can come under pressure. So how should one think about this line item, the margins on operating level?
No, we will. See, it's not. We don't balance out our ad spends, you know, by quarter. So, there are, you know, this is our high quarter, right? So we did spend a little more than what was budgeted, and that will get evened out as we go forward. But yeah, essentially, it was ad spends that we spent on, and I think we were able to get a bang for our buck during this quarter, with good volume growths.
Perfect, sir. Understood. So if I can ask one bookkeeping question on the, other operating income side. Should we expect INR 120 crores to sustain or INR 60 crores to, you know, roll back to INR 60 crores, of the PLI benefit? Maybe Venkat can give some indication.
Yeah, uh...
...So, let me answer it this way. Like Varun mentioned, Ranjangaon facility will start being counted as an ultra mega facility starting April this year. So which means the incentive that we will be eligible for will be higher. And also, the units in UP and Bihar will start getting the benefits. So I'm not answering you the question directly, but these are the two-three things that are going to help improve the operating income going forward.
Thank you very much. Mihir, I'll request you to come back for a follow-up question. Participants, kindly restrict to two questions per participant. Next question is from the line of Binay Shukla from PhillipCapital. Please go ahead.
Thanks for the opportunity. Question is on focus market. Since you have been emphasizing a lot in your focus market, and this is growing much faster than the company's overall growth. And I also do understand that the growth is mainly driven by the distribution expansion or investment in the brand building. So my question is, how much there is a skill gap between you and number one player in the focus market in terms of market share now versus three years back? Second is, what was the key learning for you from your focus market, and those success you wanted to replicate the same in your weak market? So when I say weak market, I mean where you are number two or number three player. And our last question is, what percentage of revenue is coming from your focus market?
Because that will give us some little direction from the future growth perspectives, given the rural recovery is on the track and the ongoing RTM, 0.2 initiative is going on. Happy? Yeah, that's all, thanks, sir.
It's a very loaded question with many sub-questions in it. I'll try and answer it as much as I can. So our focus market performance has not been great. Let me put it straight across. I had expected much better performance there. And the reason for that is that, you know, the rural markets are still coming out of that phase where rural was lagging urban. And there's a little bit of downtrading happening in some of the markets as well, where people are going to the lowest common denominator and the cheapest product in the markets. So our performance this quarter, as far as the Hindi Belt is concerned, has been average, I would say. And the endeavor will be to take it to above average as we move forward.
What do the Hindi Belt markets contribute to our business, Vipin, do you know?
Yeah. So it will be 15% odd. You know, the other clarification I just want to also put on the table is that, see, there are shades of these focus markets. So in some focus markets, we are doing fairly well, whereas wherever there is a large value resurgent, that's where the struggle is, and that's making the performance average. So our average contribution is about 15% odd. Over the last 3, 5 years, we've been growing at 1.5x, so the salience of these focus markets are going up every year.
Yeah, going up every year, and but the resurgence that we expect has not happened this year, which we are working towards getting. And, 15%, Vipin, and what is the industry contribution?
Industry contribution will be almost 1/3, because these are large markets like UP, MP, Rajasthan, so it will be-
Yeah, so that, that's the point. The point is, for us, internally, it's 15%. For the market, it's about 35%, so we have a lot of ground to cover.
How much there is a still gap between you and number two player in terms of market share now and when I look at three years back?
Very big. See, we are not doing a big bang strategy where we are saying that we'll go from a 10% share to a 40% share. That's not gonna happen. It's a slow and steady gain. As you've seen, we've been gaining about one share point a year for the past, you know, eight, 10 years. So we are now at about, let's say, close to a 18% share. And the number one player is still at about 50% share. Am I right? Or 40%.
Yeah. So the number one player is 3x, or RMS, and we would be at that 17%, 18% share, but I think that's the head space. So that's the opportunity, that we've got a very large head space between us and the large competitor. And like you said, that there are a lot of these markets where we are number one and number two, so we are picking up learnings from these markets and trying to improve our distribution, our assortment, our marketing effort to go up. You know, the other thing which Venkat also spoke about is the investment in these states, which is, let's say, you know, Barabanki factory, and, you know, that will help us giving, you know, more competitive assortment to the market. So I think it's a, it's a long-term gain.
I think last five years, seven years, we have done well. I think this is a phase, like Varun is saying, where we have stagnated a bit, but I think we are fully on and focused on that agenda, and I think next three, five years, we will you know, certainly narrow the gap.
Hello, sir. Last question on biscuit side. Recently, a north biscuit company highlighted that they have experiencing higher competition from the market leader through the aggressive consumer promotion. So my question is that, the aggression was restricted to north and west market only, or is it also we have done consumer promotion eastern market? Because what I have observed that two strong regional brands called Anmol Industries and Bisk Farm, who are around INR 1,700-INR 1,800 crore revenue size, and they are also expanding their footprint in eastern belts. So I'm just little keen to understand about market share in eastern belts. So have you witnessed any marginal market share loss, or is it more or less same, given the biscuits industry is growing at the same pace in eastern market?
No. So, see, the growths are about the same across. I would say, the growths have been anemic for some time now. What our strategy is, our strategy is to become, you know, act like a nimble regional player. So if there is something that's required in a certain region in terms of, brand, flavor, you know, whatever else, pricing, recipe, we are ready to do all of that to make sure that we cater to that region, and that's holding us in really good stead. Now, the companies that you're talking about, some of these regional companies have been, you know, extending their footprint across the country, and hence, their growths might look big at this point in time.
But overall, you know, the regional, in the regions that they had started, the growths are pretty much the same as what you've seen for us.
Thank you. May I request you to come back for a follow-up question? Participants, please restrict to two questions per participant. Next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah, thanks for the opportunity. First question is, if you look at the pace of distribution expansion, it seems to have slowed down. Earlier, you were expanding your direct reach, rural distributors by double digit every year. Now that number has come down to, like, mid to high single digit. So is the low-hanging fruit behind and, like, how should we think about the volume growth in that context over the next 3 years-5 years versus what we've seen in the recent past?
No, so, as we just said, there is still, you know, a lot of opportunity as far as distribution is concerned, especially in the Hindi belt, where, you know, obviously we are lagging our competitor big time, and especially in rural. So, while you're right, it has come down and the focus. So we, as we've always said, our strategy is depth in urban markets, width in rural markets, right? We will continue on that strategy. We will. Now, what we are doing with Bain is to make sure that we build that depth in our urban markets. However, having said that, width in the rural markets strategy will continue to make sure that we become more and more salient in our weak areas.
Also in some of our, you know, strong areas where we have opportunities in rural, in small towns, et cetera, that strategy will continue. Vipin, do you want to comment?
Yeah, sure. Okay, Vipin again, this side. So like Varun said, see, so, you know, while numeric distribution is important, I just want to also apprise everyone on our weighted distribution. So in our urban markets, our weighted distribution is almost 95%, so we reach all, close to 95% of the weighted outlets. At an overall company level, we are at about 90% weighted distribution. And therefore, going forward, it's going to be more about extraction from the right type of outlets, and therefore, this entire project that we are doing with Bain & Co, which is about identifying the ultra-high potential outlets, and how do we sell the relevant range, how do we sell more, diverse categories.
On the rural, while the width expansion will keep going on, especially on the focus markets, because, like we have a large gap in our market share, there is also an immense opportunity on distribution. And therefore, from a distribution perspective, those focus markets are very critical. On the non-focus markets, what we are doing is, we are going and populating and extracting a lot of priority markets in rural, because that is where a lot of category sits. So I think, today it's more about horses for courses and not about, you know, just keeping increasing the distribution. And therefore, you know, the relevant set of geographies, you will see width increase. In metro, in the large markets, even in rural, there is an extraction opportunity, and that's what we are planning to do going forward. Thanks.
Understood. Second and last question is, last quarter you had mentioned that, you'll target double-digit volume growth in second half, and, there could be 3%-4% pricing contribution. Going by the discussion on this call today, it looks like pricing could even be slightly negative, and you are aspiring for high single digits volume growth. Have I understood this right? And, if you can please, clarify how you're thinking about second half.
The revenue growth depends on how we are cycling, because from last year onwards, we've taken quite a bit of price decreases. But having said that, we have come to a stage where we are now getting double-digit volume growths. Towards the end of the last quarter, we were almost at the. We were at, actually, double-digit growth. So, we are in a position for that to happen. It's just that last year's base will put us, you know, below our revenues of last year. But as we start to get to, you know, the next quarter, we will have to also evaluate some pricing actions because of the inflation that we are seeing.
Very difficult to say at this stage how the volume price equation will work. But I would say a quarter from today, it'll probably even out, and we will start to see volumes almost be equal to the revenues.
Understood. That's it for me. Thank you.
Yeah.
Thank you. Next question is from Shirish Pardeshi from Centrum Broking. Please go ahead.
Yeah. Hi, Varun. Good morning, and thanks for the opportunity. I have a bigger question. On slide nine, you have given the DMS application, and you did some mention that some pilot, which you are doing. So quantitatively, after implementation of this Bain project, what is the materialistic change we have seen? Is the SKUs per order has gone up? Is the packet growth some indication, if you can help us to understand.
Yeah. So SKUs, SKUs have gone up. Also, that's because the salesman is spending more time with the customer in the market. And that's our biggest objective. And I'll hand over to Vipin in a second. But the biggest objective that we have is to have depth, and that means having more SKUs in the outlet, and that's what we've worked on as a part of this. Go ahead.
Yeah. So, Shirish, there are two parts to the slide. The left side is, you know, done internally. For the last five years, we've been building this backbone, which is right from, you know, our distributor management system to handle, which is today, you know, AI-driven. Then we've got a continuous replenishment system, which connects to the depot. And then there is geo-tag and geo-fence. And then, even in rural, what we have done is that more than 60% of orders are today captured through the digital app, right? So this is what we have done internally. Eight, nine months back, the feeling was that we have done this internally, but we need to get this outside in perspective, and that is where Bain & Co was onboarded, right? So, you know, we... So, like Varun mentioned previously, it's only been two months.
We have started slicing the data. We are discovering that, you know, there is a lot of scope, especially in the top end of the book, and the pilots have just started. So, today, no shift attributable to this new project has come. What we are saying is that in this quarter, next two, three months, we are piloting different concepts, and probably the tangible gains will start coming in quarter four of this year or quarter one of FY 2026. So right now, this is because this is a very large project, there is a lot of data, there is a lot of market types. So the next two, three months is when we are doing a lot of pilots, testing out what's the concept, and then blueprinting, and then will be the phase of scale-up and getting the tangible benefits.
Vipin, his question is on tech-enabled sales transformation. His question was on that, that ever since you've done that, what are the-- what is the impact that you've seen on the business?
Yeah. So on the left-hand side, like I said, Shirish, so, there are tangible gains. One is, you know, what you can see is that close to two hours of market working has gone up, and that impacts the extraction from the outlet, as well as increase in the numbers of lines or number of categories. What it also does is that it basically takes out any kind of corruption in the system. So a salesman cannot be a ghost salesman. He has to go to the market to pick orders. The entire distributor management system basically makes sure that we have got the right stock, and therefore, the out-of-stock instances are reduced.
All of these are fairly quantifiable, and we have got, you know, robust dashboards and tracking mechanism to make sure that all these sales and distribution efficiencies or KPIs move northwards, every month.
Okay, that's helpful. My second question, Varun.
Yeah.
We have made a lot of investments in dairy, and I think-
Yeah.
- you made further acquisition of 36%. So-
Sorry?
There was some announcement that we have made some further acquisition in the Ranjangaon. So,
Acquisition?
No, no. We're taking a 26% stake-
Uh.
in that company which is supplying solar power.
Oh, no, no. That's, that's a solar power.
No, no, I-
That's nothing to do with dairy.
No, no, I'm only saying that there is a lot of effort which we have put in, in dairy business. So-
Yeah.
In INR 4,100 crore, what could be the contribution of dairy? Because you said, you wanted to achieve around 10%. So where we are in that journey, and maybe specifically on the drinks portfolio, what would be the contribution, and cheese, if you can split?
So, drinks, we will end at over INR 200 crores, maybe INR 220-odd crores this year, which is, I would say reasonable. Cheese growth, and cheese business, what is the total cheese business, Venkat, this year?
This, coming year.
Coming year.
It will be upward of INR 250 crores.
So cheese will be about INR 250 crores, which is very small for that category, although that category is also not very large, but, we can certainly do better there. Drinks is, also crossing INR 220 crores now. So both these categories would be, you know, a bulk of our dairy business today, which will be about what? INR 700 crores?
INR 700 crores.
Our total business, dairy business would be over INR 700 crores, out of which cheese and dairy put together would be about INR 460 crores, INR 470 crores.
This is your aim to deliver in 2025, or this already has happened?
No, that's the run rate that we have currently.
Okay. Okay.
Yeah.
That's really helpful. Maybe you can say that what is the gross margin we are at this time? Because you, you mentioned that milk prices are up, so maybe if you have a ready number, what milk price procurement we are doing now?
Gross margins are pretty much in line with our overall gross margins. It's just that the investments and the depreciation, which is, you know, looking at a lower net for us. But net margins are, gross margins are pretty much the same. Slightly higher, in fact, slightly higher than our core business.
Thank you, Shirish. Ladies and gentlemen, we'll take that as the last question. I will now hand the conference over to Mr. Mayank Mundra for closing comments.
Thank you everyone for spending time with us on this call today. We look forward to interacting with you again.
Thank you very much. On behalf of Britannia Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.