Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Mundra from Investor Relations team. Thank you, and over to you.
Thanks, Srishti. Hello, everyone, this is Mayank from the Investor Relations team. I welcome you all to the Britannia earnings call to discuss the financial results of Q4 and financial year 2023-2024. Joining us today on this earnings call is our Vice Chairman and Managing Director, Mr. Varun Berry; Executive Director and CEO, Mr. Rajeet Singh Kohli; Executive Director and CFO, Mr. N. Venkataraman; Chief Commercial Officer, Sales and Customer Initiative, Mr. Vipin Kataria; and Chief Marketing Officer, Mr. Amit Doshi. The analyst presentation 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's remarks on the performance.
Good morning.
Ladies and gentlemen, we've lost the management connection. Please stay connected while we reconnect them. Ladies and gentlemen, we have the management team back on the call. Sir, we are sorry. Please go ahead.
Yeah, good morning to all of you, and thanks for being on the call. Let me jump into the presentation. So, on page three, the point here, I'm not gonna delve much deeper than this, but the point is that India is doing much better than all the other countries from a GDP growth standpoint. However, the only point to be made is that private consumption is down. The GDP numbers are looking good because of the gross fixed capital formation that's happening in the country. However, we are confident that as we go through this year, you know, things will change on the private consumption side as well. Moving on to page five. This is our performance scorecard for the full year 2023-2024.
So if you look at it, our revenue from operations for this year is INR 16,546 crore, which is, four percent... which is a 4% growth from a revenue perspective, if you look at it from a one-year perspective, and a 19% growth, from a 24-month perspective. Operating profit is a very healthy 17.3%, which is, growing at 10%, on a one-year perspective and 43% on a two-year perspective. Moving on to the next slide, which is slide number six, which gives our, Q4 performance. Q4, is, four thousand and fourteen crores in revenue, three percent up, on a 12-month, growth and 14% up, on a 24-month growth.
Operating profit is 17.6%, which is actually higher than the full year number, but down 4% versus last year. Last year, this quarter was a very solid quarter that we'd had. However, if you look at a two-year perspective, we are up 42%. Moving on to the next slide, which is slide number seven. Share numbers are looking much better after we've made the interventions which were required. We had taken price increases, and as the inflation started to die down, there were some pricing interventions which were required, which we made, and as a result of that, our pricing competitiveness has increased, and our share is moving in the right direction once again.
Now getting to slide number eight, which is the regular slide that we talk about our strategic pillars. So, as you all know, the strategic pillars are distribution marketing, leading in innovation, building an adjacent business, cost efficiency and sustainability to drive profitable growth. We consistently have been sticking to this framework, so I'll take you through one by one. Driving efficiencies in distribution. We've expanded direct distribution from March 2023, we were at 26.8 lakh outlets. In March 2024, we are at 27.9 lakh outlets. We've strengthened our rural distribution by going from 28,000 rural distributors to 30,000 rural distributors. Our focus states continue to grow faster than our overall growth. You know, so we are building heft in our focus Hindi states.
Moving on to the next slide, which gives an idea of, you know, what we are doing to enhance capabilities in organized channels for better extraction. See, organized channels are easy to get into. Everyone, you know, who gets into the food business first looks at organized channels and then, you know, if you give the right margins, et cetera, you'll be available for consumers to buy. So it has been very important for us to really, you know, up our game as far as organized channels are concerned. And if you look at on the right-hand side, which is the building blocks. Basically, what we've done is we are building a future-ready organization to compete with all of the startups.
We are leveraging modern marketing methods, which is digital, social media, et cetera. We are, you know, making sure that our innovation is showcased in all of these channels. We are also promoting our premium products to make sure that they move faster and are more in front of the consumers, you know, compared to others. Agile supply chain is something that we've moved a lot on this year to make sure that we ensure range and real-time replenishment. We've also made our service levels go up pretty dramatically. Within what are our service level this year versus last year?
Our service levels have gone up by 15%. We are at, north of 90%, which is best in class, both in B2B trade as well as e-commerce. In terms of accounts, we have a service level which is in excess of 93%. So that has also led to, you know, a solid availability on these, platforms, and we are focusing, majorly on all the adjacent categories and new businesses.
So that's what we've done in this area. However, I must say that we still have a long way to go because, you know, this was one area where we had not put as much focus as we are putting in the last year. It, it's again, you've got to remember that, you know, this is very easy to throw discounts and, you know, get some heft. So we will have to make sure that we make this into a very sustainable business. But if you look at the left side, we've seen decent growths on biscuits, better growths on the adjacency business and solid growths on the new businesses that we've launched. So that is where we are as far as organized channels are concerned.
Now, getting to the most important, you know, project that we have for this year, which is our Route-To-Market 2.0. Now, the objective is very clear. It's to unlock growth potential. It's to create bandwidth within the system to make sure that we are able to get more products to flow through our Route-To-Market. Now, you know, it's obviously very critical that we leverage all the data that we have in the system, and we bring in a AI angle to make sure that we do this the right way. But let me talk you through this, because to my mind, this is very, very important. So what did we do in Route-To-Market 1.0? We split the salesman.
This was done in 2014-15. In the top outlets, in the top cities, we split salesmen. We got an extra salesman to sell, you know, a separate set of brands and SKUs. And that has been giving us pretty good results from then onwards. The objective of Route-To-Market 2.0, which is starting off, we are actually, we've just kicked off the process, is to make sure that we multiply adjacent business revenues while continuing to grow our core and building it even further. So the points really are, we are trying to rewrite our outlet segmentation to focus on the high-pot outlets.
We will align a service architecture to service these high potential outlets, obviously, by increasing the feet on street with a split portfolio. And this time, we are not gonna restrict ourselves to a two salesman. If there is a requirement in certain outlets for three salesman, four salesman, we will go, you know, the way which will give us the best results. We are looking at upscaling our salesman capability as well, so that they have, you know, it in them to extract the right and more from these outlets. We are building an AI-enabled predictive ordering to make sure that we assist the salesmen in their sales efforts to sell to drive range selling.
We are also upgrading, you know, the sales force automation or the handhelds that we have, to aid quality selling. So, the project has been kicked off. The pilot is planned for H2 of 2024-2025. It's gonna take time. The total project is about 11-12 months, Vipin?
Yeah.
So, it's a long project, but we want to do it very diligently and in a lot more detail than we did in the past. Okay, moving on to slide number 12, which is the marketing support. We have been providing tremendous marketing support to all our brands. Good Day, the TVC has been very well received. Marie Gold, we continue to do what we've done in the past, and we've got, you know, a TVC to support not just the brand, but also our support on the program, which we have had for five years, Amit?
Yes, we are in the fifth year, getting into the fifth year now.
Just talk about that quickly.
... Yeah, so, we started this journey five years back, and we saw a big change in how women, big changes in the society as far as women homemakers are concerned. And there was a clear direction that they were wanting to step out of their home, and just tie it up and start their own ventures, and make an economic activity outside of just managing their homes. And this tied up very well with our brand's purpose, which is to enable women to do more and be more. We started off with a Britannia Marie Gold My Startup Challenge, and for the last four editions, we've had almost a million plus entries every year.
Over the last four years, we've funded 40 businesses out of business ideas, out of which 28 have become a reality. As Varun will touch upon in the next slide, we've now built on top of this, to build a comprehensive digital ecosystem to support these women entrepreneurs, through the year and through their journey.
Thanks, Amit. NutriChoice, we are today the only digestive brand which uses atta for our products, and there is no maida in any of the NutriChoice products today. And that's a powerhouse which is doing extremely well. Milk Bikis, we have Ashwin and his own entire family in the DVC, and that's doing very well in the south. And the northern effort is also going well. We have Atta Milk Bikis, which is doing extremely well in the Hindi belt as well. Rusk, you know, it's core communication. And for Winkin' Cow, we had a very interesting intervention on associating Winkin' Cow with the Cow Corner in cricket. And our milkshakes are doing extremely well.
It's the second summer with our PET, and we are seeing some very good volume numbers. Moving on to the next slide, which is slide number 13. Amit, do you wanna talk us through this?
Yeah, sure.
Yeah.
Now, we've got the privilege to have a real powerhouse of brands which have gained trust of consumers over decades, and it's true, every generation, one has to stay relevant. That's really the intent of our modern marketing charter, which is to recruit consumers of the future, build engagement around our products, and further deepen the brand purpose that we stood for for so many years. Now Good Day is a brand which is rich in its name itself, and it stands for small moments of joy and happiness in the day. We're building a deep program on social media to build relatable content for the daily and to be a part of culture and to be a part of their everyday.
We also ran a very popular activation in this quarter called the Bank of Small Dreams, which received a lot of buzz and acclaim on social media. I did touch upon how Marie Gold is engaging with the growing desire of women to start up. We announced on Women's Day India's first exclusive online ecosystem for women-run businesses, where women entrepreneurs can come and list their businesses for free and without commission. They can access mentors and also train up to build their businesses in the future. On World Health Day NutriChoice announced the launch of NutriPlus, which is a comprehensive health monitoring app with an artificial intelligence-led algorithm at its heart. We've simplified multiple health metrics for Indian consumers into one simplified health score, and therefore democratizing health measurement.
We also have products that are much loved, and we realize that consumers anyway use our products, whether they are biscuits, cakes, or cheese in making recipes. I'm very happy to share that we've announced two destinations, one called Britannia SnackInc., and the second one is Cheese It Up, which is in partnership with the Times of India, which will connect consumers with recipes and therefore build more engagement around our brands.
Thank you, Amit. Also, on page 14, you will see that we've, as I said in the beginning, we've taken, measured, pricing actions to make sure that, we stay, competitive with our brands. These are some of the brands where we've taken those actions. The next slide is about innovation. We've had some consistent performance with some of the innovation products that we put in the last, year. We did Jim Jam Pops, Treat. You know, Treat is an interesting, story. You know, we were always a me-too, so to say, to, you know, the largest cream brand. We decided that we need to have an archetype which is, unique.
We had it in the fruit creams side of the business, with a hole in the biscuit, and we did the same for our Choco Vanilla and our Choco Choco creams as well. And we've seen that with a distinct look and feel, this is giving us very good results. Similarly, 50-50 Golmaal continues to do very well. We've launched some new products as well. We've got the Fruit-and-Nut Good Day, which is for modern trade. We've got the Cake Rusk. And we've got, you know, the bourbon milkshake. All of these are, you know, at a revenue contribution of about INR 275 crore on an annualized basis. Our adjacent businesses, which is the next slide, have been doing well.
Cake, the base formats did well in the traditional trade. The specialty products, we leveraged e-com with, you know, with very good sequential growths. Rusk has been a double-digit volume growth. We struggled for a bit after COVID, but we are back with a bang. Bread, the growth has been led by the healthy part of the portfolio with improved profitability. Cheese, you know, we've had a good growth. You know, we've got some very exciting products today. We've got The Laughing Cow portions, which is the round box that you must have seen. I think the potential for that product is a lot more than what we've been able to achieve. So we are hoping that this year we will see dramatic results.
We've also commercialized our cheese factory in Ranjangaon, and we've started to now, you know, make the products and supply to the market as well. Are they in the market yet?
It's just moving into the trade.
It's just moving into the trade, and I must say that the quality of products is fantastic, because the quality of milk that we are collecting from our farmers is just very, very good. Drinks, we are leveraging the ongoing summer with a very focused distribution drive, and we are capitalizing on established brands and Bourbon to enhance brand awareness and encourage trials. Lassi, we've improved our product. We've also improved our value proposition. We are selling our lassi at INR 20 now, and we've got one new contract packer in the East, and things seem to be moving in the right direction, as far as our drinks are concerned.
The international business has performed well this quarter as well as this year, and this is led by the GCC as well as Americas. Nepal has been a very consistent performance, albeit at a very small base. But the fact is that this is an experiment which we feel very proud of. We started the business with exports from India. We established ourselves, then we built a factory there, and we've been able to build a very strong business in Nepal, and we are hoping that we'll be able to replicate this in more countries as we go forward. On the cost efficiency side, we've had a very good year. So 2023-2024 has been 7x of what it was when we started off in 2013.
So, it's very good to see that, you know, the management team has been taking this program really, really very strongly forward. And, you know, the components of this, you're aware of, it's about, you know, the big components. There are many more smaller components, but the big ones are truck utilization, distance traveled by our products, market damages, renewable energy, which is a very big one, fuel consumption, and the line throughputs that we have in our plants. And we are making good progress in all of these. ESG, just to remind you, you know, ESG, our construct, which is on the right-hand side, four strategic pillars: growth, governance, resource, and people. These four pillars are supported by eight levers.
These eight levers are split into 26 programs, and these programs have very strong KPIs and targets for each one of us. We have a three-year strategic plan in place for all of these KPIs, and the performance of KPIs is a part of the public disclosure and individual performance ratings for all our managers. Now, some of the achievements this year have been: we are in the top quartile as far as FMCG India is concerned. We have 2.3 lakh beneficiaries through our Britannia Nutrition Foundation, versus 1.98 in 2021, 2022. We've been awarded the best employer for the fifth consecutive year in the Kincentric Employer Study, India, which was done in the last year. That's the first section.
Second, we've been identified as one of the 1,000 leading listed ESG firms by Dun & Bradstreet, and we feel very proud of that. We've had a 33% reduction in water intensity compared to base year, which is 2019-20. And this is more relevant today because of the situation that exists in some of the states where water is becoming a real issue. We've completed ESG assessment for 453 out of our suppliers. We've launched a marketing campaign, which is Har Pocket Ab Dustbin, on preventing littering in public spaces, and we've got a lot of love for that campaign.
We've been awarded three accolades, two gold and one silver, in the ESG category during the SKOCH Awards in 2023. So, with that, moving to the results, the cost and profitability results, which is on page 20, which gives the commodity situation. So flour and sugar have seen an inflation, but have been balanced by palm, laminates and corrugated boxes. So the commodity situation has been softish this quarter. On page 21, you know, cost and profitability front, we continue to invest behind our brands and innovation. We've actioned measured pricing actions in specific channels, as I've already told you, and we've delivered very solid cost efficiencies across our function. Our outlook, we are closely monitoring the commodity situation and assessing what are the actions that we need to take as we go forward.
We, we remain vigilant on the competitive pricing front, and our strategy will be to remain focused on driving market share while sustaining profits. Frankly, we are gonna drive top line hard this year. It's tough. The year, you know, what, what, how the last year ended will sort of, you know, continue for a few months. But we are hoping that as the monsoons start to come and, you know, the, the election results come, et cetera, things will look much better. So we are gonna make it, you know, a, a mission to make sure that we get the top line to grow much faster. On the financial results front, page 23, slide number 23.
On a 12-month basis, if you look at our revenue trends, we have grown 24%, right, on a 12-month basis. The same number on a 24-month basis is how much?
Fourteen percent.
14%. Is 14- No, that's... What happened here? Got disconnected.
Uh, this is-
Ladies and gentlemen, we've lost the management connection. We'll just give a few minutes, please. Ladies and gentlemen, we have the management team back on call. So please go ahead.
Sorry, guys, sorry, we got cut off. I don't know where we got cut off, so I'm gonna take you through the revenue trends slide once again. So, on a full year basis, we've grown 4%. If you look at the 24-month growth on a quarter-to-quarter basis, it's 14% for Q4, and the average is what? About 18, 19-
Nineteen.
19% for the full year. Operating profit trends, we've grown on operating profit number by 17.3%, right? And if you look at our operating profits also, they are pretty good. You know, on all the quarters, we've been at a very healthy operating profit number. And the 24-month growths are looking very solid for all of the four quarters, 22%, 58%, 52%, and even for the fourth quarter, it's at 42%. Now, going to the you know, the, the, the P&L, basically, so if you look at it on a Q4 basis, a 3% growth on net sales, and a 14% on 24 months. On a full year basis, 4% and 19%.
Operating profit for the quarter, -4%, but 24 months is 42%. Full year, 10%, and 43% on 24 months. PBT, again, pretty similar, and PAT is also similar on Q4, as well as for the full year as well, right? So, and if you were to look at profit from operations as a percentage of revenue, it's among the highest that we've ever achieved. So it's at 17.3% this year. Profit before tax is at 17.6%, and PAT is at 12.9%. So healthy numbers, I would say, pretty good performance in the situation that, you know, the top line growths were not happening.
However, I would say that the task for us is to make sure that the top line grows much faster as we go forward, and that's what we are gonna focus on in this year. With that, we'll open the house for questions. Over to you.
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. In order to ensure that the management is able to answer queries from all participants, kindly restrict to two questions at a time. You may join back the queue for follow-up questions.... Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks. My first question is on your key raw material, wheat, and how you see pricing this year at the customer level? So currently, wheat crop collection is happening. I understand it seems better than last year, but wanted to get your sense on the full season. How do you see that? Second, related question is, you said top line driving it hard will be a key focus. Last one year, what I'm seeing is your volume growth is picking up every quarter, but the net sales growth is limited because of overall negative pricing at the effective level. If your commodity remains soft, how do you see overall pricing for the full year?
Because if that doesn't pick up, the volume growth remains strong, but if the pricing isn't much, then the overall, top-line momentum will not change meaningfully. So wanted to understand that.
So thanks, Abneesh. So Abneesh, when I say top line, I would say that our focus is gonna be to make sure that we grow volumes. We have been growing volumes, and I think our outlook on this year is not deflationary. Our outlook on this year is slightly inflationary, which is a healthy inflation of 3%-3% or thereabouts. The commodity situation, see, while the crop seems to be fine as far as wheat is concerned, the government holding has been reasonably low, so there is gonna be a government buying because of their you know programs. So I would think that the wheat outlook is slightly inflationary during the year. While in the infl...
Until the elections, things will not move, but beyond the elections, I think it will be slightly inflationary. Similarly, sugar crop has not been, you know, a great crop. It's not bad, but it's not, you know, as good as the last year crop. So sugar is also gonna be slightly inflationary. So I would say it's gonna be a manageable inflation year, and we are making sure that we take whatever interventions that are required to, you know, get to our planned numbers as far as commodity is concerned. So we've started to buy. We've also made sure that we have a full program in place to get the best prices for the commodities that we buy. Does that answer your question?
Yes, quite helpful. One related question, Varun, will be on your RTM 2.0. So, you have mentioned that this will be pilot project in H2 of FY 2025, which means FY 2026 will be the real year in terms of benefit and going ahead after that. So wanted to understand, when you are saying a hard focus on growth coming back, FY 2026, could you talk about in terms of at least some benefits, what could be there? I understood the process, but in terms of KRAs for this project for FY 2026, what could it be?
No. So, I put everything on that slide. If there's more detail required, we can chat about that separately, Abneesh. But frankly, the pilot is to make sure that... See, we are doing this with Bain, as you know, and the process has already started. We just want to make sure that we put all ducks in a row, then we test it out in a pilot market, and then we roll it out. So you're right about the fact that the full impact will be towards the end of this year. Now, obviously, all of those items that I had listed on that slide are going to be ticked. And with that, obviously, you know, the benefits are gonna be that the adjacency businesses will get their time in the sun.
We will make sure that, you know, our quality of salesmen is right up there, and they are doing range selling and selling more SKUs, and, you know, we have a better presence in all of these high-potential outlets. So I think it's all reasonably clear, but if there's anything more that you need, we are very happy to chat with you separately.
Thank you.
Yes.
We'll take our next question from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, I just wanted to ask, the adjacencies that you highlighted, the non-biscuits portfolio, what is the current share of sales? And, more importantly, how do the margins contrast in this portfolio versus the biscuits business? Would you be able to give us a qualitative sense?
Sorry, just, just repeat that. Your voice wasn't very clear.
Sorry, sir. Is this better?
Mr. Mehta, can I request you to use your handset mode, please?
Give me one second, sir. Yeah, am I audible...? Is this better? Sorry.
Yes, it's better.
Yeah. I just wanted to check, sir, that in the non-biscuits portfolio, what is the revenue cadence right now? And could you give us a sense on how do the margins stack up, versus the biscuits portfolio for this business?
Adjacencies, are you talking about adjacencies?
So yeah, the non-biscuits, basically, the adjacencies. Yes, sir.
... It's about, it's about, 25%.
So would you give us some qualitative sense on how the margins would be for this segment? Is this better than biscuits, similar, slightly lower? Any sense over here, sir?
Average would be maybe slightly better. The gross margins. The net margins will not be, but the gross margins will be slightly better.
Got it, sir. And sir, just a bookkeeping question. You know, wanted to just understand, A, are there any one-off costs in the other expenses incurred in this quarter? And then what were the volume growth was for the quarter? That's all from my side.
There are no very small. There's nothing worth mentioning as far as this quarter is concerned. There was, you know, the advertising and sales expenses have been higher this month because we've not been supporting our brands as well as we should because of the inflationary environment that we went through. So I think overall situation is that we are now getting back to a normal way of doing business. It's not like, you know, what we've seen in the last two years.
Thank you. We have our next question from the line of Latika Chopra from JP Morgan. Please go ahead.
Hi, thanks for the opportunity. Varun, let me just begin from what you said. You're looking towards normalized way of running business. For FY 2024, you had, you know, revenue growth of 4%. Could you split, what was the volume growth and, the price growth or deflation during FY 2024? Extending that a bit, you talked about 3% odd inflation that you anticipate in FY 2025. What is the normalized volume growth expectations, given all the interventions, you know, that you are doing in the business? That's the first question.
Yeah. So, the situation on volume and revenue is, for the last year has been they are almost at par, right? So volume and revenue are the same. However, if you look at it by quarter, it's a very different story. So, the last quarter, the volume growth is two times the revenue growth, right? So, I think the volume growth this year, we expect them to be, quite solid. Obviously, barring the entry into the year, which is, pretty similar to, the year that's gone by, and post-election, post-monsoon. You know, I would think that post-election, post-monsoon, we would be aiming towards a double-digit volume growth for sure.
Understood. The second question was on margins. You know, your gross margins have continued to surprise despite price cuts. Wanted to understand what is the optimal margin expectations that we should build into next year? You ended FY 2024 with almost a gross margin of 42%, a better margin of 19% for the domestic business. So do you think there is further upside on these, from these levels, considering, you know, commodity prices are a bit benign? You talked about a bit of inflation coming back, post inflation, elections, and you also, you know, kind of, you know, alluded to need for more AMP, you know, and plus, investment in all the initiatives you're doing. So I know, you know, so how should we think about margin outlook?
You know, given there's a big focus on top-line momentum, would you give away some margins, or you think these are sustainable margins? Thank you.
No, so the objective is not to give away margins, but to make sure that we spend the right amount in terms of innovation, in terms of brand building, in terms of all the projects that we are doing. So, you know, we have this GT RTM project, which we spoke about. We also have a replenishment project coming up to make sure that we make that more efficient. So I would say, not a major change from what we've seen. Upsides, I would not expect upsides on this, but not a major change from where we are today.
Thank you.
Yeah.
We'll take our next question from the line of Sheela Rathi from Morgan Stanley. Please go ahead.
Thanks for taking my question. Just to follow on the margins question, would it be fair to say that near term there could be some negative impact coming on margins, given, you know, the RTM 2.0, which we would be initiating, which could have some upfront cost versus the cost savings which we could have in future years? Second part to this is, you know, the NPD to sales number, is that correct, that INR 275 crore is the NPD number, which is, you know, about 2% of the overall sales? This, I would believe, is much lower than where we want it to be. And third is, you know, the focus around the adjacent portfolio.
You know, how should we think of margins on that aspect, especially, you know, over the next 12 months also?
No, so our target for the entire set of NPDs is north of 3.5%. So this, we've spoken about the NPDs that we put on that slide. So, we will continue with that, you know, target of 3.5% of overall revenue as far as, you know, the NPDs are concerned. As far as margins are concerned, see, the way we look at it is that this year is a year of top-line growth. If it means taking a short-term hit on margins because of all the projects, because of all that we are doing, we will be willing to do that. But it's not gonna be dramatically different from where we are at. So, that's the objective, really.
To make sure that we are future ready, we have a very solid business model as we move ahead from here, and this benefits us in the future. And similarly on brands, you know, we will make sure that we, you know, spend the requisite amounts on our existing powerhouse brands, as well as some of the new products that we are launching. So, that's how we've planned it. It's not gonna be a dramatic change, but might be a slight change from where we are at, which obviously will come back in due course.
Understood. And just a bookkeeping question, you know, when you talked about the adjacent portfolio at 25%, where would dairy be, right now, and where do you expect that to be, say, in the next 2-3 years?
So dairy is, we have. As you know, we've taken a big punt on dairy. We've invested fairly large sums of money in creating a back end. And, you know, we've also got a very strong partnership, which is the joint venture with Bel for cheese. So our expectations on dairy are big, right? We, I wouldn't say that we've achieved what we had planned for ourselves. We are short of that. But, I'm confident that with, you know, now our plant going on stream, we are producing really good quality products, plus, you know, Bel bringing in their expertise, their products.
I don't know if you know, but, you know, this, these portions that we have selling in the market are currently coming from Vietnam, from the Bel factory in Vietnam. Similarly, the sachets are also made in Vietnam. So at some stage, once we get to the threshold on these products, we will start to produce them in the country. That will give us a lot more competitiveness. We are looking at a lot of innovations beyond that. See, till now, what's happened is that, everyone's been doing the same thing. Everyone's been doing a block, you know, a cube and, slices. We are the first ones to, you know, buck the trend on that and bring in products which are very different, right? So we will continue to do that.
And the milkshakes have been doing well. You know, we, as a company, we are not a soft drink company, so we initially struggled to make sure that we understood, you know, how to deal with a product like this. You know, so I think we are getting there. And despite that, despite our, you know, inadequacies as far as soft drinks are concerned or milkshakes are concerned, we've done extremely well. Now we are building that expertise within the system. We are also making sure that in this RTM 2.0, we bring that to life as well. So I think the outlook on dairy to me is fairly positive.
We will make sure that we do all that's necessary to, you know, make ourselves very different from all of the others in the marketplace.
Thank you. We have our next question from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi, Varun. Your first,
Mr. Mitra, we request you to use your handset mode, please. You're not clearly audible.
Okay. Is it better now?
Yes, please go ahead.
Yeah. My first question was, Varun, you have a focus on growth this year. Do you think it will be driven more by the biscuits portfolio or a big scale-up in the adjacent fields? And if adjacent field is a big scale-up, you know, do you think your existing portfolio is good enough, or do you have plans to add more segments to some of these adjacent fields that you operate in?
Yeah. No, so it's a good question. See, our focus from biscuits can never go away, because that's a bulk of our business, and growth on biscuits will always be a very important focus for us. However, the objective really will be that the adjacency business grows at one and a half times what our biscuit portfolio grows at. And this year we are not gonna do too much more as far as new categories are concerned. If you think about it, we've entered a lot of new categories, and we would want to consolidate our position in those categories and make sure that we build heft in those categories this year. We've got a lot more on our plate as we go forward.
We've got a lot more in our funnel, but we will desist from doing that to make sure that we get a very strong sense of growth. And also, you know, till our RTM 2.0 is ready, we don't want to create too much confusion in the sales system. So that's our plan for this year. But if you think about it, we've got a lot more categories to build, which we've launched last year.
Thanks so much, sir. My last question is on pricing. Varun, you mentioned this quarter, like, pricing is probably like -3%, if I assume volume is level of your revenue. Your comment on a 3% inflation next year, would it be fair to assume it's more back-ended, you would expect first half to still be a deflation and significant pricing in the second half to get to that inflationary outlook for the top line?
See, it's not about first half. I think the first quarter is flattish, but as we go forward, post-election, we will start to see inflation is my forecast. And I'll be very happy if I'm proven to be wrong. But it seems that post-election, we will start to see, you know, 4, 4% kind of inflation.
Thank you. We'll take our next question from the line of Mihir Shah from Nomura. Please go ahead.
Thank you for taking my question, sir. So anecdotally, so my question is on market share. Anecdotally, you know, the small and regional players seems to be doing well. However, we see that you are also gaining share. Are you also seeing any trend about small and regional players doing better, and they have, like, you know, doing better now? Or how should one triangulate these, pieces about both small doing better and you also gaining share?
Okay, that's a very interesting question. Now, let me give you my point of view on that. See, what happens is that, once there's a very large margin that is seen in a category, especially with the market leader, there are a lot more players which come into the country and which start to do that business, right? So, frankly, it's, you know, the point is that that's what happened, right? Post the inflationary environment when, you know, we took a lot of pricing, everyone saw our profits because we declare our profits every, quarter. And, you know, a lot more competition started to come in, and we started to see them move up in terms of share.
However, on delving more into it, we figured out that their share situation was because of their spreading their wings from their core market. Because these local players usually come into one state, and they are regional players. Then, you know, some of them were spreading their wings into other markets and gaining share. However, it's not easy to do that. Now, you can do that in organized trade, because organized trade, you can throw money and, you certainly get facings. But, doing it in traditional trade has its own pitfalls. And then, you know, you start to get product back, et cetera, et cetera. So what we've seen of late is that while people spread their wings, they, you know, started to feel the pressure in newer markets.
We've seen these shares stabilize of late. I think that the trick really is that you've got to keep, you know, the profit to a certain level. If you go way over the top, then even a new player can come in and, you know, start to eat at, you know, bite at your ankles, in some way or form. And we've learned it. We're gonna make sure that we apply this, not just in our biscuits business, but in some of our other businesses, like cake and rusk as well. And I think we've done it quite well in bread.
The other categories, we'll make sure that we understand how to contain these local players, without really, you know, taking a cut on our profits. Overall profits.
Thank you.
Yeah.
So that clarifies, thanks, sir, for that. So my second question, actually, I just wanted to borrow your confidence on the volume growth double. I believe you said double-digit volume growth is what you're gunning for in FY 2025. And also there will be some inflation of 3%-4% odd. So how should one really again think about this, you know, dichotomy again, you know, in, with inflation will also be there, but will also lead to double-digit volume growth?
Sorry, I missed that question completely.
Yes. With ongoing inflation, how do you expect to grow in volume?
Yeah. No. So see, if you look at our base volume numbers, they are not great numbers. And I do think that the market is ready for getting back to the growth. See, if you think about it, the last decade or so, you know, for most businesses, volume growths have not been where they should have been, right? If you look at the previous decade, you know, that was the decade where volumes, revenues, everything was booming. I think it's time that most consumer businesses now start to see, you know, the positive positives coming out of the economic growth in the country. I think it's been a little bit of push and pull, but hopefully, this year we will start to see that come back, is my forecast.
... Thank you. We'll take our next question from the line of Harit Kapoor from Investec. Please go ahead.
Yeah, good morning. My first question is on the distribution side. So, while you did you know mention about you know the RTM 2.0 that you're looking at, how do you kind of think of it for the next, say, 12-18 months? Would that project take precedence over expanding, say, direct reach and strengthening rural distribution? Or do you believe that this you know both will go hand in hand? Just wanted to get your sense on that.
No, these will both go hand in hand. See, this project, RTM, that RTM 2.0 that we are talking about, is more at the top end, right? And, it's about the high potential outlets getting the right amount of service, the right kind of salesmen, you know, the right bouquet of brands and SKUs. And the distribution expansion project is more about, you know, the bottom end of the pyramid, which is about rural distribution. And, you know, even today, our rural presence and our rural share is still lower than our urban presence and urban share. So, we cannot take our eye off our rural agenda, and hence, both will go hand in hand.
So just to slice it into three segments for you. So the top end really is the organized trade, and we have seen pretty good growth in modern trade, e-commerce, as well as the market share increase. The next one are these high-pot outlets, which Varun is talking about. And today, you know, the entire service architecture is obsolete, which we are planning to upgrade, which means that, you know, these high-potential outlets will be able to sell more diverse categories. We'll be able to give them more service. The third part really is the urban, where there is a massive growth which is happening both from consumption point of view and also outlet addition point of view. So therefore, that's the area where, you know, this entire distribution expansion has to really accelerate. And the fourth is rural.
So rural, we are under-leveraged both from market share point of view, the direct distribution point of view. And, you know, the intent there is to keep adding more number of villages, the salient villages, so that we can extract more and more from rural as well.
Got it. And just one last question on the organized channel part. You know, what is the share of this organized channel piece for you now? You know, it's shown that all three businesses have done very well in FY 2024, new, adjacent and biscuit. So what's the share of the overall mix now for you?
So overall mix, as in you're talking about the contribution of, the product-
Yes, the contribution.
Or you're talking about biscuit market share?
No, the contribution of modern trade and e-commerce to your overall revenue.
Contribution of modern trade and e-com to our overall business is what? About 15%?
Yeah.
15%. So, it's the e-com part is what? About 3.5%?
Yeah.
3.5 and 12.5, or 12 approximately, is the number for this. So but, you know, we see this to grow, but not dramatically. This will go from 15 to 16, maybe 17, as we go forward. And just to remind you, this is our share in this channel is about the same as our share in overall market. And our potential in this—in these channels is a lot more, because, you know, from innovation standpoint, from the quality of products and the salience of brands, et cetera, we are much stronger in this channel. So the objective will be to get some traction and move our shares up in this channel.
Thank you. We'll take our next question from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah, thanks for the opportunity. I just needed some data points. So if you can give us a broad split of the existing categories in FY 2024. You mentioned that it contributes about 25%, which is about INR 40 billion. Can you talk about how large is individual products, cake, rusk, dairy, bread, croissant, if you can give us a broad breakdown?
So cake, rusk, dairy are about the same size. Cake, rusk, dairy, bread, are about the same size. All four businesses are about the same size. And then we have the fledgling businesses, which is croissant, which is, you know, about, what would that be as a percentage? About 0.7%. And we've got some other small businesses which are negligible really, because we've just started off the bars business, the makhana, et cetera. All of those are very, very small, so that's not worth mentioning. But the four businesses are about the same size. So you can just take... Yeah. And international-
Will it be like INR 9 billion-INR 10 billion? Like it will be INR 8 billion, around INR 8 billion?
You're talking in dollar terms?
No, no, I mean, like, rupee terms.
Huh?
Cake, cake, rusk, et cetera, will be what, like-
Billions.
Million rupees?
Billions. He's talking billions. Okay. Yeah, about that much. Yeah. You're right.
Okay.
Yeah.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Mayank Mundra for closing comments. Over to you.
Thanks, everyone, for spending time with us on this call today. We look forward to interacting with you again.
Thank you. On behalf of Britannia Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.