Ladies and gentlemen, good day and welcome to Britannia Industries Limited Q1 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ayush Agarwal, Investor Relations. Thank you, and over to you, sir.
Thank you, Nirav. Good morning everyone. This is Ayush from the investor relations team. I welcome you all to the Britannia earnings call to discuss the financial results of Q1 2025-26. Joining us today on this earnings call is our Executive Vice Chairman, Managing Director and CEO Mr. Varun Berry, Executive Director and CFO Mr. N. Venkataraman, Chief Commercial Officer, Sales and Replenishment, Mr. Vipin Kataria, Chief Manufacturing and Procurement Officer, Mr. Manoj Balgi General Manager, Marketing, Mr. Siddharth Gupta, General Manager, Marketing.
General Manager, Corporate Finance, Mr. Ramamurthy Chairman. 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. Berry with the remarks on performance.
Good morning everyone and welcome to the call. If we can jump into the presentation straight away, getting on to our agenda quickly, I'll take you through the business overview, move on to the strategic priorities, the cost and profitability outlook, and finally the financial results. The first slide of the business overview, we've had pretty good revenue growth. I can say that it's double digits. It's just about 20 basis points lower than double digits, so you added 9.8% growth, a 12-month growth, and a 14.2% 24-month growth. Profit after tax is a 3% growth for 12 months and 14% for 24 months. Getting to the next slide, which is the commodities as far as our market share is concerned. The market share slides show we improved our market share versus our organized players. In 5 out of 7 regions we've gained share.
There are 2 regions where there's some work to be done. Overall, while market share remained flattish from a Nielsen perspective, I think other players in the industry have not grown as fast as us. The fact is that we seem to be doing reasonably well as far as market share is concerned. There are a few issues which we need to work out and we are working on those. I personally think that our momentum is on our side both on revenue as well as on market share. Getting to the commodity side now, on commodities we've had a reasonably, I would say, stable quarter. On an overall basis, if you look at the full year, it's been very turbulent. Flour, there's been, versus Q1 of 2025, which is the corresponding quarter last year, it's an 8% inflation.
Palm oil, while versus sequentially it's been negative, so we've had a deflation sequentially, but versus the same quarter last year we've had an inflation of 45%. Sugar, again, within those boundaries, so pretty manageable. Cocoa also sequentially has come down while there's a 35% inflation versus last year. Laminates and CBBs both have been within those guardrails and pretty manageable. Moving on to the strategic priorities, which are what we discuss every time: efficiencies in sales and distribution, innovation and adjacencies, sustainability, brand, and cost efficiency. I'll take you through that. As far as distribution is concerned, we've seen an uptick both in urban as well as rural. Our rural growths have this quarter been double digits and urban is very high single digits. This urban includes the general trade as well as the modern trade as well as the e-commerce numbers.
Now what are the enablers as far as the growths are concerned? We are focusing on our rural markets where we are looking at taking our distributors to be, you know, full scale distributors. When we started this program we had appointed rural distributors where the supervision was pretty good. When they become full scale distributors the supervision becomes even better and the whole working style becomes more organized. We are looking at taking our rural distributors to be full scale distributors which is helping us. Second, obviously there is better extraction from the existing distribution infrastructure that we have created. The high potential outlets are being focused on through our RTM project. This is not just for the base business but it's got, you know, excess focus on the adjacency businesses and we are seeing that pay up for us.
We've also got the sales program for key urban accounts. We are revamping that program and that's helping us as well. Obviously e-commerce has been doing really well for us. We've been gaining share in that segment although it's still only 4% of our overall business. Moving on to the next slide which is driving the Hindi belt. Hindi belt. This quarter has been really, really good. All four states have given us very good growths, very high double digit growths and the growths are 2.7x what they are for our other states. This has led to a market share gain of 65 basis points over Q1 in the Hindi states. That agenda is going quite well for us on the marketing program. Some very exciting marketing programs. The Good Day programs continue. We've had a very good campaign and that's giving us good results.
We've had this 50/50 program with Ravi Shastri which has been doing pretty well. The advertising has been appreciated. The connect is being made. Jim Jam continues to advertise. We tied up Gokesh for Milk Bikis and that advertising is on air. We also did inclusivity campaign during the Pride month where we also brought in our largest competitor into it which became quite a discussion point. Marie Gold, the startup show continues and is doing very well for us. Now coming to innovations, some very, very exciting innovations. You are aware of Pure Magic Stars and the Harry Potter Pure Magic Choco Frames, the Butter Jeera Good Day and the Fruit and Nut are doing very well for us. We are just in the process of launching Pure Magic Choco Tarts. It's just getting into the market as we speak. There are two flavors.
One is the chocolate and the second is the hazelnut. These are very exciting products and we are hoping that these will become big blockbusters. We also launched 100% millet NutriChoice, a very exciting product. Again, it's got no sugar, no added sugar in it and it doesn't have palm oil. This is a very, very good product which has gone into the market. We are launching Milk Bikis Smart which is on the whole concept of chess. In fact, the biscuit itself has the chess personalities on it and we've got this enriched with DHA which is a good ingredient for kids to grow up with the right thinking abilities. As a result of all of our innovations, our premium product salience has gone up by 310 basis points. This question comes up in every meeting that we have with all of you.
We thought that we'll just preempt this and give you this number early. The adjacency builders, the next slide. The adjacency business has been doing quite well for us. Rusk has been growing double digits and high double digits and even the profitability has improved dramatically as far as Rusk is concerned. Croissants, mid-20s kind of growths and we've gotten to a break even as far as profitability is concerned. After all the spends that we do on ANSP, very good gross margins we make on this product and this is moving very well in the market. Wafers again, it's growing very well a lmost a 30% growth here and our market share has moved up. In this category also, we were late starts in this category but we are gaining strength very, very quickly. Dairy, we've done extremely well in general trade where it's like a 40% growth.
Even in e-commerce we've got very good growths. We still have to get our modern trade agenda right because there are price players who continue to hammer on price and we are in the process of making sure that we get modern trade under our belt as well. As far as drinks is concerned, every company has reported negative numbers but we've had on milkshakes, we've had a double digit growth despite the early monsoons, etc. That's doing quite well for us as well. Moving to the ESG agenda. Manoj, you want to speak on the ESG.
The progress on the ESG KPI as we track has been good this quarter. We have moved 4% in terms of our renewable electricity consumption. In terms of specific water consumption reduction, we are ahead of the target, and we have had about a 3.5% reduction this quarter. The diversity agenda is being driven where we have had, in the women's factory workforce, about a 1.8% increase over the previous quarter. Through our CSR arm, the Britannia Nutrition Foundation, the number of beneficiaries that 1.8%.
1.8% of the contribution increase, not 1.8%.
Yeah. Britannia Nutrition Foundation, the number of beneficiaries reached has increased by about 3.5% over the previous call book. We have got multiple recognitions this quarter. We were recognized with multiple accolades for the global CSR and ESG awards for 2025. Six of our factories won the CII EHS Excellence Award, and Dun and Bradstreet has recognized us as one of the leading ESG entities in India.
Manoj has been leading this right from the time we started. I'm very proud of our achievements here. Obviously, a mountain to climb, but a very good start as far as ESG is concerned. Now, moving on to cost and profitability. On the cost front, sustaining margins while being competitive was our agenda, and I think we've been able to do that quite well. We've been able to fight the regional players as well, and we've been able to make sure that we keep the momentum going, also investing behind key brands and scaling up innovations. We've been able to do that quite well, and we are i n the process of launching a lot more innovations during this year.
The outlook, you know, obviously driving consumption in the core categories remains our big agenda. Closely monitoring policy interventions and the harvest output which impact the commodity prices also will be a very critical thing for us. Having said that, I think from here on we do not see the kind of wide fluctuations that we've seen on commodity and we always perform much better in stable conditions during the turbulence in commodity prices like what we've seen in the last two years. It's always difficult to navigate price increases and, you know, estimate what it's going to lead to, etc. We have covered most of our inflation through our price increases. We are done with that and we are in a good position today. Okay, moving to the financial results. So 12-month growth of 10%.
I'm taking the license to call 9.8%, 10%. If you were to look at it, you know it's INR 4,535 crore consolidated revenue for us during this quarter and this is not our peak quarter usually. It's good to see the movement here. Now getting to the next slide. I've taken you through it so I won't drain this slide, but a 3% growth on PAT and PBT. Even if you were to look at profit from operations almost at 15%, profit before tax at 15.5%, and profit after tax at 11.5%. That's where we are at. We've also had, you know, this, the SAR revaluation which happens which is an impact of INR 52 crore to our overall profit.
If you were to, you know, look at it without that, the operating results are very good with a 10% top line and if you disregard the SAR for a second, while you can't do it, it would be a 13% bottom line growth. With that, we'll open the house for questions from you.
Shall we open the floor for questions? Thank you very much. We'll now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the attached to the telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. First question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks. Congrats on near double digit sales growth. My first question is on the market share and overall local player dynamic. Your specific question is number three player, ITC has called out in their Q1 release that biscuits has been one of the key drivers for their growth. Now, five, six years, of course, number three player has been quite rational. Is there any resurgence of the number three player? On your comment on local players coming back, why in only two regions you faced a market share issue? Why was it restricted to two? Why not in all the seven regions? Could you clarify which are those players and which are those regions? That is my first question.
Let me answer your second part first. The region that we've had a little bit of turmoil is the East. The reason for that is not the regional players, but it's an internal restructure of distribution that we are doing. We are looking at mega distributors and trying to create infrastructure for the future. As a result of that, there's been some amount of turmoil. That is one region where we've lost share and that is one region where also you tend to have a lot of local players. I guess the local players have benefited on basically our stumbling a bit in the execution there. I think we've got things under control and we are in the process and we'll come back. The Tiger always takes two steps backwards before it launches itself.
We are in that position where we've taken those two steps backward and now we are in the position to launch ourselves. I think we'll come back much stronger there. That's one reason for the— What was the other question Abneesh?
T he number three player ITC.
Yeah, yeah, no, no, ITC has been very, very rational, actually. We have no complaints with any one of our competitors. You know, it's been a very, very good ride as far as, you know, competition is concerned. There's nothing dirty happening anywhere. All of our competitors have been playing the game as it should be played, which is on brands, which is on distribution. They've been very good. There's nothing which is, you know, looking out of whack. I don't think there's, you know, the shares are within that band, and it continues to be there.
Varun, one, two quick follow-ups on this first question. These are small follow-ups. One is the mega distribution which you are doing. Obviously, that is being done for some reason. Is my assumption correct that long term they should drive margin profile better? This is a transition issue. On your comment on alternate deflation inflation comment, generally when this happens in any category, the number one player suffers. Would you say that this issue of inflation followed by deflation and vice versa, that impact on you from a demand side is not something you are too much worried on?
No, we are not worried. While we were in that cycle, we were worried. I think now we are in stable territory, so we are not worried. The reason for doing the mega distributor is to get better control on our distribution, making sure that we have to deal with one mega entity and make sure that we put in the right processes. It is a fragmented region with a lot of distributors, so we are trying to just restructure it and see how we can take it to the next level.
My last question is on the adjacency business. In Croissants and Wafers, have you now become the number one player already? In dairy, the 40% growth in GT is there, is that a base effects issue? What is the sustainable growth here now?
The sustainable growth there is, you know, as far as GT is concerned, I think we can continue to get that kind of growth for a number of years because with, you know, our now being price competitive, there is a long way we can get that GT business to do a lot better than what it's done in the past because we were at a 25%-30% premium to our largest competitor. I think that will continue. The contribution of GT to our overall cheese will continue to grow. That doesn't preclude us from making sure that we get our other channels right. That's what we are working on currently.
No thanks, that's all for me.
Thank you.
Thank you. Next question is from the line of Mihir Shah from Nomura. Please go ahead.
Hi, Mr. Berry and team. Thank you for taking my question. Firstly, on the volume growth, it seems to be just about 2% volume growth, and the momentum versus what we saw in the fourth quarter seems to have gone down. While most of the other consumer companies are seeing an improvement in momentum when it comes to volume growth from 4Q to 1Q, is there any impact of this distribution or region that you're doing impacting this volume growth? That's one. The other one is, do you see any green shoots or trend change for volume growth trajectory to get better in the coming quarters.
No, see the point is that with the kind of inflation that we've seen, there is bound to be revenue growth more than volume growth. You know, in these times. Mute your line from your side, please.
Sorry sir, please go ahead.
Yeah, there is bound to be, you know, volume will give way for revenue and that's what we are seeing. However, the way to look at it in our business, because 60% of our business comes out of price packs which are INR 5 and INR 10, the way to look at it is to see what kind of transaction growth, how many consumers are interacting with our brands. The transaction growth has been 12%. We are pretty happy with our transaction growth of 12%, and volume will also come back slowly and steadily. I would say the delta between volume and revenue will remain at about 6%, 7%, 8% for the coming two or three quarters.
Understood, sir. Thank you for that. Second question is on the commodities. Sequentially, most commodity prices are seeing a downward trend, and there seems to be kind of a 7.5%, 8% pricing in the system. How should one think about the gross margins from here on? In Q1, we did not see much improvement on a sequential basis versus what you were expecting. Maybe there were some higher inventory in the system. Can one expect these gross margins to have bottomed out and to see an improvement if all the high price inventory has gotten exhausted?
No, it was not about high price inventory. In Q1, the inflation that we saw was still, you know, what we had seen in the previous quarter. We hadn't been able to mitigate that inflation through the required price increases. Now we've completed that, and you actually answered your own question. If you know the commodity prices are within a band, then obviously the margins can only be better.
Got it. I just wanted to get your confirmation on the same, and just a shout out to your innovations, especially on the chess and the Harry Potter ones , you know, they're just pretty awesome. That's all from my side a ll the wishing you all the very best. Thank you,
Thank you, Mihir.
Thank you. Next question is from the line of Avi Mehta from Macquarie Capital. The line for the participant dropped. Next question is from the line of Nitin from MK Global. Please go ahead.
Hi sir, thanks for the opportunity I just wanted to check on this SAR sort of impact of INR 52 crore. How exactly is the calculation, and how should we build this going forward in the coming quarters?
See, it's completely dependent on the stock price where the employees get this SAR, which then gets revalued basis the stock price. We do understand the fluctuation it causes. In the next year, not in this year, but in the next year, we'll try and see how we can even it out better.
Okay, sure. Thank you. My second question is around how are we investing behind brands? Because last year NP spendings have reduced 19%. Can you throw some light here? Also, if you can help me understand how is our digital spend.
We did rationalize our NP spends during this quarter. What we did was we focused on, we are IPL. IPL was a main platform where we, and it was also on digital. Digital has been a pretty important agenda for us. We just focused on IPL because this was the IPL quarter and that gave us the right kind of dividends. Obviously we knew that the inflation pressures are there. I think that strategy worked. We didn't go across all our brands. We just focused on our top four brands and advertised those brands. That's how we moved on. In this quarter we are back to our normal A&P spends.
Thank you, sir. Last question is around quick commerce. What is the salience of quick commerce given 4% is from e-commerce? We have exciting offerings like Foxnut, BU, Protein Bar and Crosshorn . How exactly is quick commerce doing first?
Overall, it is 4% on our overall business. Obviously, for certain categories it's larger. Actually, biscuits is the lowest and the other categories are all 8%+ . The fact is, between quick commerce and e-commerce, I think it's mainly quick commerce.
Yeah. So hi, this is Vipin Kataria. Out of our total digital commerce business, almost 75% now is coming from QCOM. The category also is pretty salient in QCOM. That is how the entire ratio is changing. Marketplace for us is not very big because the average order value for us is not very big. Therefore, the big tailwind is coming from QCOM. Now, coming to a lot of the innovations that we have launched, like Croissant, almost 35% of the sale is coming from e-commerce. Pure Magic Stars that we have recently launched, almost half of that sale is coming from QCOM, and similarly Brownie and a lot of other innovations. Therefore, a lot of the innovations we've been able to build through the entire digital commerce and that's the strategy going forward.
This is really helpful. We are basically aligning with the evolving consumer needs. Thank you, sir.
Thank you. Next question is from line of Latika Chopra from JP Morgan. Please go ahead.
Yeah. Hi Varun. Thank you for the opportunity. My first question was, you know, checking your confidence on demand recovery. You talked about a marginal uptick in urban and rural demand trends. You have delivered close to 10% revenue growth in this quarter. Much of the pricing is behind us y ou would assume that incrementally growth Is going to be transaction led. As you mentioned, do you anticipate further acceleration in overall revenue growth through rest of the year?
We're going through turbulent times really with Mr. Trump and all that's happening on the international front. It is very difficult to judge where the consumer sentiment is headed. Yes, we've seen very good growth this quarter and hopefully we'll be able to continue with that momentum as we go forward as well.
Okay. The second thing I wanted to touch upon in a little better detail was around your comments and market shares and regional competition. You just alluded that gross margins probably will improve sequentially. Did you see a need for higher competitive spends to deal with the regional competition, which is gaining? In that light, do you expect EBITDA margins for the full year to still hover around last year levels or improve from there, or do you see any significant risk on EBITDA margin? Thank you.
Latika, I think we've taken our price increases today. We are in a good place. We've also been able to create a war chest for ourselves to be able to spend if we need to, in specific territories, specific states against specific players. We are going to fight many battles in smaller territories and we are doing a specific analysis on each one of these competitors. I think we are in a very good place to be able to do so now with the inflation deflation cycle sort of behind us and having been able to mitigate inflation with all the measures including cost efficiency programs. I think we are in a good place to be able to take this forward in a stable and good way.
Do you think ability to sustain margins, a fair bit of confidence to sustain or improve on margins over the last year at operating level?
Yeah, yeah.
All right. The last bit for me was two checks. One was on if you could give us some color on how you are thinking about the other operating income number on a full year basis by FY 2026, and also if you could give us the number on CapEx for the year. Thank you.
Other operating income, it's good that you bring that up. In last year's results, the other operating income was higher because in Ranjangaon we had made the investments which were necessary to take us to an ultra mega project from a mega project, which gave us a windfall in the Q1 of 2025, and that's why the number there is higher than what it is this year. However, having said that, from here on it's going to be pretty linear, so that should not be a fluctuating number any longer.
Understood. Anything on CapEx, incrementally? CapEx.
CapEx, w e are just keeping it very tight this year, Latika. We just want to make sure we've got enough capacity. Wherever we need capacity, like for example Jim Jam, we need capacity. We put up some new plants recently. We put our plant in Tirthan Valley and in UP, and we're in non-stop capacity in Orissa. We've got good capacity right now. We've got decent headspace. I won't say that it's too much, but we've got decent headspace, so we want to keep the CapEx low. I would say, how much, Ram? INR 100 crore is what it would be this year, which is much lower than what we've seen in the past few years.
Thank you so much for the detailed answer.
Thank you. Next question is from the line of Percy Panthaki from IIFL Securities. Please go in.
Hi sir. Basically, I know this has been discussed, but again on the gross margin front, just wanted to understand as to when this palm oil cost reduction and duty reduction, which quarter is it going to hit us? Did it hit us partially this quarter, or it's going to be Q2 or Q3?
The reduction was given by the government somewhere in May and part of the benefit has already come in Q1, but largely it will come in Q2.
Okay. Because you would have some holding period also of inventory. That's why I'm asking.
Oh no, we don't have holding period. Whatever we buy, the duty which exists today is applied, so there's no stock which hits us adversely or favorably as far as duties are concerned .
How relevant or h ow big is this duty cut plus whatever cut has happened to the base price itself, I mean in terms of gross margin basis points? Is it like 50 basis points, 100 basis points? What does it translate to, assuming all other factors are constant?
It's a little bit difficult to say because with the tutor it also depends on the international prices, how they move, etc. Right. Just put a quantification, will be a little bit difficult on a number %.
Percy always asks very tough questions.
No problem, sir. Okay, another thing, follow up to this is since all commodities are cooling off, do you expect any kind of this benefit to be passed on to the consumers or more likely to maintain current price levels? Because anyways, margins were under pressure.
Yeah, I think more of the latter. If there's need to do anything, as you know we spoke earlier, if there's any need to be competitive in certain territories, we will make sure that we do that.
Okay, second question is, you have continuously sort of highlighted that in the Hindi belt states you have lower market shares and you are going to increase market share t here are as one of the company's overall growth drivers, is this the main thing, or do you think that, excluding this region, the company can still grow volumes at mid single digits over the next three to five years, or is it mainly going to be this region which is driving the growth?
No, no, it's not. We can't base our numbers on just one region. This is a focus area that we are working on, but a lot of the markets are so big for us, like the south is so large, if we're not able to sustain our momentum there. This is an important part, but not the only part of our strategy.
In south, per capita incomes are also a little bit higher than India. Penetration is full. Of course, there is a premiumization angle always. What really will drive market share in, let's say, south India where your market shares are high, where per capita consumption, and not in value terms but at least in volume terms, is pretty decent? Do you see that region or the industry overall for that region to be sort of a decent mid single digit growth industry or that's not the case anymore?
No, it is, it is. You know, if you're saying that if you're talking from a market share perspective, then the Hindi belt is going to be an important part of our equation. Right. If you're talking about growth perspective, then we've got to grow. Obviously, we have to grow through penetration in a lot of the states that we operate in currently. It's going to be important for us to grow each state and not just the Hindi states because that's not going to give us overall growth for the company.
To build on this, while we are talking about the aggregate market share, within that market share there are a lot of subcategories which have a big, big head space. Just to give you an example, way further than south we are underleveraged in terms of our market share and therefore there is a big opportunity in terms of gaining share in that market. Similarly, Croissant is a big opportunity and there are a lot of other premium products where we have a head space to grow market share. That should be built through the penetration which Varun was talking about. That should give us that entire opportunity to gain market share. Even in the mature markets, obviously the growths have to be more homogeneous. It cannot be only dependent on these four, five opportunity states.
The other angle is the channel angle which is becoming now more and more mature. Let's say the modern trade penetration, the quick commerce penetration is another dimension to build the growth as well as market share. How we look at market share as well as growth is basically a grid of channel and geographies. That interplay is very, very critical when we talk about market share and categories.
Got it, sir, Very helpful. Thank you. All the best.
Thank you. Next question is from the line of Tejas Shah from Avendus Partners. Please go ahead.
Hi. Thanks for the opportunity. Across industry we are seeing strong traction in health, nutrition, wellness-led launches, especially on D2C and big commerce. Interestingly, on the previous answer you also called out that big commerce and modern trade is an opportunity which is under-index. Do you see any portfolio gaps? there opportunities for us in this space, especially like let's say something like? Super, if you saw t hose brands a re getting immediate traction on wellness platform and quick commerce channels. I just wanted to understand your perspective on this.
Okay, I'll answer that. Siddharth here. The way we look at it is we keep a check on trends Which are developing, and you're right, health is one trend which is becoming salient e specially on quick commerce s imilarly, indulgence is again a similar trend that we are seeing to cater to these trends, if you recall, I mean even in the presentation, there was an innovation launch that we spoke of, which is NutriChoice 100% millets, which is actually catering to this trend of healthier offerings which the quick commerce consumer is seeking. Similarly, the Pure Magic Choco Frames that's lined up is again catering to the indulgence trend that the same quick commerce consumer is seeking. So we are keeping a tab on that and make the key smart make the key smart. Exactly a lso caters to the same, you know, I mean, the mothers looking for you know, healthier offerings for their kids.
Therefore, you are right, these trends t hey are becoming relevant. To cater to those, we already are launching new innovations and work is happening to kind of be ready with more such products which cater to the consumer trends.
The point is taken. Your point is right. There are certain startups which are making their presence felt by breaking into certain categories which are, you know, sort of not visible before they come into the market. I think those are trends that we have to watch out for and make sure that we have those in our arsenal as well.
Last quarter you had called out certain d istribution reforms to increase volume per output. I just wanted to know where are we and are we seeing intangible outcomes a lready on that?
We have the RTM project weapon.
Yeah. Thanks for the question. Basically, the project is about building the bespoke service level, which is, let's say you have ultra high potential outlet. You need to service it adequately so that we can build on our availability as well as range. The project has been on for the last four months. Now we are scaling it up. The intent is to make sure that 70% of our urban retail is covered through this model. We are already, you know, one third of the entire scale up has been done. This quarter and next quarter is when we are making sure that 100% of the project scope is covered. The initial results are good. We are getting good delta growth for our biscuit categories and even higher delta growth for Cake, Rusk, and Croissant. I think the project is shaping up well.
We are right now, you know, in the war room. We are making sure that, you know, as we scale up, we improvise. It's very important for us to also keep all stakeholders engaged because there's a large change and therefore change management is something which is very critical. We are also making sure that this is also beneficial to our channel partners, our distributors, because, you know, that's what will bring the stability. I think, you know, the first four, five months of the scale up are pretty good, and you know we have a very clear sight of scaling this up to that 70% level in the next four, five months.
This 1/3 rollout that we would have done would have given a much higher number than what we have logged at average level.
Yeah. The delta growth is high single. Right? We measure this basically as the pilot versus the overall universe. There the delta growth is coming to high single, and that's giving us the confidence that by servicing these high potential outlets at the right frequency, we'll build throughput and range.
Okay. If I must, please, last one. You mentioned very positive outlook on raw material prices. Just wanting to know, are there any specific markers which are giving you that confidence, or if it just comes as a sense of optimism?
No, I didn't understand the question.
In your remarks you mentioned that you believe that the worst of R is behind us. Are there any specific markers that we are tracking which gives us this c onfidence or is this just a sense o f optimism that we have as of now?
No, no. It's completely scientific. Manoj, what would you comment?
Basic supply demand construct of the commodities have been factored in, and that's why we feel that price outlook should be quite stable in terms of commodities.
Got it. That's all from my side, and all the best.
Thank you.
Thank you. Next question is from the line of Nihal Jham from HSBC. Please go ahead.
Your voice is muffled.
Can you speak for the handset, please?
Sorry for that i s that better?
Yes.
Two questions. First is on the regional competition y ou didn't mention at the start of your presentation. Generally, we've seen that t he competition comes up when there is a massive price reduction that happens on the RM side. Maybe at this point in time, there is a moderation but not as much i s it that the color of r egional competition has changed, where rather than just being price driven, even in terms of innovation or products, they are sort of matching up, and now this is not just becoming a RM-driven regional competition but more serious as we consider ahead.
If you look at what's happened to the biscuit industry, about 14 years back the margins in the industry were about 3%, 4%. Right. From that it's moved to teens now. Right. Whenever the Indian entrepreneur cites potential of making margins, they will be there to make sure that they enter the market. We've seen some entries happen like that and when people come in they do get some fruit for whatever they've done. It's always important to make sure that we understand where and what their strengths are and make sure that we nullify them in whatever way we can as we move forward. The reality is that the margins are going to be much higher than what they were in the past. The reality also is that there will be competitors who will enter this category and remain in this category. Obviously some of them will sustain themselves.
A lot of them will not be able to sustain themselves. It's up to us to read in their strategy and make sure that we act accordingly to be able to sustain our numbers in those territories. Right. That is where it is. It's impossible to, you know, have no competitors coming into this category. Right. Because it will happen. There will be smaller players coming in now. It's up to us to be able to counter them as we go forward.
Again, the second question was that on t he adjacencies, if you could just give more color on cakes and breads, I think that is something you've not highlighted much, and the overall adjacency growth, if that is possible.
Yeah, so bread has been doing really well for us. Bread, where we were obviously not accretive on margin, etc. The growths have been very good, and even the margin have been pretty good. Obviously, a little lower than what our company margins are, but they are pretty good. Bread business has been doing quite well. We've been able to spread ourselves. We used to be a north-centric business. We still are heavy in the north, but I think we've been able to get our business in Hyderabad and Bangalore and Chennai, Bombay. Obviously, we already were there. We've been able to spread our business across the country, which is good. We will make sure that we continue to do that and have a nationwide footprint. As far as bread is concerned, cake has not been a great story.
Cake growths are single digit, they're not double digit as I spoke about for the other categories. The reason for that is again, margins led. We had a margin issue on cake, and we tried to move price point from INR 10- INR 15, and we sustained certain volume and revenue losses when we did that. That was a strategic move from our side. Obviously, with UPI and digital payments, etc., we thought price points are not as critical today, but it seems that they are. We are reassessing that strategy. Obviously, we do want to get the margins up, but we are reassessing that strategy, and we will be in a good place as far as cake is concerned. We've had a very good response to our relaunch. Some of our categories within cake have been doing really well, like Brownie, etc., have been extremely well. Once we get this right, the margin and the volume and revenue growths, I think we'll be in a good place as far as cake is concerned as well.
Thanks so much.
Thank you. Next question is from Amit Sachdev from UBS Group. Please go ahead.
Hi. Thank you so much for taking my question. Small clarification on the SAR evaluation again, although it's good that the interests are aligned and you know, employees, you I assume that's linked with economic v alue created, and that reflects in the s tock being, you know, you saw being revalued c an I just get a broader sense? Say there's a 10% increase in, say, stock price in a given time frame s ay a quarter or two h ow one should think about you k now, P&L impact of that is I assume the structural c ompany and it grows earnings every year. How one should think about structurally taking into account without having to worry about each quarter's one-off impact of it, and how margins should be integrated, you know Although I see that it's a thing that will happen c an you give us some guidance how it is really calculated and with reference stock price?
No. It's very simple. See, in a normal market, you know, it goes up whenever the stock price goes up by. It's just been that overall the times have been very turbulent. The stock price had gone down and then it came up. In those turbulent times, you'll see these bumps in the road. I think as things become smoother, I think it'll be. See, if you look at the range in one year, as far as our stock price is concerned, it's a very wide range and that's what's created this number. With a smoother road, I think this kind of bump doesn't happen.
Got it, got it. That's very helpful. What I'm coming from is that I want to sort of always want to know how we a re at the EBITDA margin level, you k now, from a cycle input price cycle point of view t hat sort of come in w ay of getting that benchmark. Right. That's just the only thing.
Okay, understood.
All the best. Thank you so much for this response. I really appreciate it. Thank you.
Thank you. Next question is from the line of Jay Doshi from Kotak Securities. Please go ahead. Hi.
Thanks for the opportunity. I'll just have a small follow up on the previous question itself. If we assume that the stock remains at these levels for the next two or three quarters, then is this 52 Crore charge is all we'll see f or the full year, should we think of it that your underlying employee cost without SARS charge was about INR 190 crore this quarter? That will continue ballpark at that run rate for the next three quarters, and this 52 is basically something you see at a full year level, is that right u nderstanding?
Yes. If the stock price remains stable, there will be no charge as far as SAR is concerned.
If it moves up 10%, it w ill be.
Five more crores, right? It'll be, yeah, it'll be small.
Understood. Okay, that's very helpful. Second, could you please share on.
Your previous, a 10% of INR 50 crores may not be a right assumption because these are all basis the model that is used. Right. We use the Black-Scholes model t his is a predictive model of what the prices are going to be based On the past movements. Right. It's a predictive model. A simple extrapolation of 10% price increase will result into 10% extra charge m ay not be right.
Okay. You know the other question was c ould you share your t houghts on quick commerce channel from two or three different dimensions. One is, where is your current market share in the channel, how under-indexed are you if you are. Second is, how do you think about this channel from a competitive standpoint? Could it actually create a significant fragmentation in some of the categories that you operate in? Third is profitability of this channel vis-à-vis these other channels. Fourth is, what will be the share of overall advertising budget or A&P spend that this channel can entail.
Okay, so I think it's a long four-part question. First, like we said, Q-commerce in terms of salience is pretty good. 75% out of the 100% of e-commerce that we do. The salience is also building up in, let's say, metros. Today we supply close to 160 cities, 3,500 dark stores. How we see e-commerce or Q-commerce evolving is that this is one channel which will augment our omnichannel approach. Just to give you an example, the INR 5 and INR 10 price point which Varun was talking about, the salience coming from these salient price points is less than 5%. Therefore, the entire point is to build e-commerce in a way that it does not conflict with our larger distribution system, but it only augments our distribution. The second point is the range that we sell.
Let's say Pure Magic Stars or a Harry Potter or cheese or cheese potions. The salience that these innovations and new categories that we are getting through e-commerce is fairly significant now. Therefore, the investment that we are doing in e-commerce is commensurating with the salience. The third part is building the capability for e-commerce. Today we have got a complete end-to-end model right from social listening and then building on what the buy boxes and the reviews are saying, also using the entire full funnel approach in terms of what is happening, the visibility and the investment that we are doing, and using the entire demand side platform to build conversion. I think that's the track that we have taken in e-commerce and therefore the approach that we have is far more holistic.
As far as the operating margin is concerned, I think today we are in the investment phase and therefore we are investing so that our growths are pretty good. Coming to market share, we have close to 500 points higher market share in e-commerce, which is a very good thing. If you actually inquire about the market share a lot of FMCG companies are getting through e-commerce, you will realize that the market share in e-commerce is actually lower than their overall aggregate market share. I think that is one big plus that we have, that our market shares are fairly good. The other point that you talked about was on profitability.
The way to see profitability is that you need to sell a much better premium mix and therefore that is one KPI that we drive, that how do you drive higher gross margin innovations and new categories and products? Let's say if NutriChoice is more profitable, how do you make sure that you build salience in NutriChoice and therefore build gross margins and therefore the flow through is good without hampering any kind of investment. I think that's our approach from a profitability point of view. I hope I have addressed all four, maybe not in the same sequence.
Sure, thank you so much.
Thank you very much, ladies and gentlemen. We'll take that as the last question. I'll now hand the conference over to Mr. Ayush Agarwal for closing comments.
Thank you everyone for spending time with u s on the call today w e look forward to interacting with you a gain in the future. Thank you and have a good day.
Thank you.
Thank you very much on behalf of Britannia Industries Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.