Ladies and gentlemen, good day, and welcome to the Q2 FY23 Earnings Conference Call of Britannia Industries Limited. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Mundra from Britannia Industries. Thank you, and over to you, sir.
Thanks, Steven. 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 Q2 2022/2023. Joining us today on this earnings call is our Vice Chairman and Managing Director, Mr. Varun Berry. Executive Director and CEO, Mr. Rajneet Kohli. Executive Director and CFO, Mr. N. Venkataraman. Chief Sales Officer, Mr. Vipin Kataria. Chief Marketing Officer, Mr. Amit Doshi. Chief Procurement Officer, Mr. Manoj Balgi, and Chief Development and Quality Officer, Mr. Sudhir Nema. The analyst deck is uploaded on our website. Before I pass it on to Mr. Varun Berry, I would like to draw your attention to the safe harbor statement in the presentation. Over to Mr. Varun Berry with remarks on the performance.
Good morning, everyone. Let me just jump onto page three of the presentation. If you will look at this, you will see that we've had a very good quarter. We've got our revenues from operations, which have seen a year-over-year growth of 22% and a quarter-over-quarter growth of 19%. Our operating profits have grown 30% year-over-year and 47% on a quarter-over-quarter basis, which is sequential. Market share continues to be a very good story. It's the 38th quarter of market share gains for us, which is a very, very positive story.
This comes out of all the hard work that the team has put in, not just building and nurturing strong brands, but getting the distribution of all our products in more and more outlets, across the country, and I'll come to those details in a minute. If you move on to the next page, this shows you what's happened from an inflation standpoint. If you look at consumer food price inflation year-on-year, quarter one was 8% and quarter two is almost in the same vicinity. We know what's happened to the Indian rupee versus the U.S. dollar. It's now at about INR 82. While the wheat prices in the international markets have gone down a bit, and similarly on palm.
Palm is, you know, giving some upsides to us as well. Unfortunately, the wheat price decrease that we've seen in the international market has not happened in India. The reason for that is that we've had a lower crop, which is about 12% lower than last year. As a result of that, the wheat prices have held fairly firm this quarter. Moving on to the next slide, you will see what's happened in the last seven quarters. In this last seven quarters, we've seen inflation of 32%. If you were to index quarter three of 2021 as zero, from there we've moved to 100. From 100, we've moved to 132%. That's a huge inflation in seven quarters.
As you see that, it's not just year-on-year, but also quarter-on-quarter, it's been moving up. This, you know, if you were to look at the key components of this inflation, wheat flour is 25%, industrial fuel is almost 40%, and palm oil is, on a year-on-year basis, at 10%. So overall it's been. It's, you know, this is the first time that inflation has not just been in one country but across the globe. What we do expect is that Q3, you know, some respite on the back of palm oil. Milk prices continue to be on a boil, which has impacted our daily profitability. Wheat prices, we do expect these to be firm in Q3 as well.
That's the current situation and our outlook as far as commodities is concerned in a concise, short capsule. Moving on to the next page, if you were to look at on the cost and profitability front, the overall inflationary pressures have been this quarter as well. If you were to look at sequentially over the last quarter, we've seen an inflation of 3% in this quarter. We were the first ones to action price increases, and we took it much ahead of the market. You know, we've been able to accelerate our cost efficiency programs as well, which I'll take you through as we go through this deck. We've also plowed back into the business, you know, the monies that for the last two years we've not fully spent.
This year, we've normalized our advertising and sales promotion spends as well. Despite all of that, our operating margins have improved by 290 basis points on a quarter-over-quarter basis. Just in a capsule, 32% inflation in the last seven quarters, which has impacted our profits by approximately 23%. We've mitigated this through about 20.5% of price increases that we've taken, and we've got approximately 3% from cost efficiency programs. That is the story of inflation and what it's done to our bottom line in the last quarter. Moving on to the next slide, which is slide seven.
This you've seen in the past as well, so I'm not gonna dwell on it, but these remain our strategic plans for driving profitable growth. Moving on to the next slide, which is slide number eight. This is the slide on distribution and truly a great job done by our sales team. If you look at it, we built our rural distributors, which is the first bar chart on top, from approximately 8,000 distributors in March of 2016 to 28,000 distributors in September of 2022, which has helped us gain more share in rural. The share gains in rural are approximately one and a half times what they are in urban. That's helped us and a lot of companies have called out a slowdown in rural.
As a result of our programs, we've not seen that slowdown in our business. If you were to look at it, we've built our rural sales by almost 4 x in the last six and a half years, which has given us, you know, the rural momentum. As we said, earlier as well, rural has not been a stronger force for us. You know, we've always been slightly weaker in rural and that's what we are trying to fulfill. Now looking at the bar charts at the bottom of this slide, you will see that these are the outlets that we distribute directly to.
These have gone up to 26 lakh outlets, which is approximately 4 lakh outlets more than what we were doing till March of 2022. Moving on to the next slide, which is slide number nine. Marketing activities have been fairly regular and almost back to normal. Some of the big campaigns that we've done, Milk Bikis Atta, the croissant campaign, which some of you would have seen. A new launch in Biscafe, which is a very fine, very tasty coffee cracker. We've relaunched Bourbon. We've got 5050 Potazos on television. We've got 5050 Golmaal, which is again a new product that we've launched and is doing extremely well in the East. We've done the cheese campaign, which is around the properties of protein.
Besides that, we've been doing digital activities and engagement initiatives on quite a few of our brands, which we have enhanced. After Amit Doshi joining the team and bringing the experience of a digital company, we've started to look at this in a way that we look at how we can make our digital efforts accretive to our mainline media efforts. Moving on to the next slide, which is slide number 10, which shows some of the innovations that we've done and innovations that will fuel the next phase of growth for us. Biscafe was launched in Q1. It's almost three times, you know, revenue shift quarter on quarter.
We've also done, you know, Nutri Choice Seeds, Herbs and Proteins, which were launched again in the first quarter of 2023 and 2022, 2023. We've done approximately 2.5x the revenue from quarter one to quarter two. Similarly, 5050 Golmaal, I've spoken about that. It's an East-only launch for the time being and has done really well with 85% quarter-on-quarter increase in revenues. Treat croissants has been launched nationally after a prolonged market research and figuring out what to do with the product, what to do with the packaging, et cetera. I'm very happy to report that we've seen amazing results as far as croissant sales is concerned. We've seen a revenue growth of almost 70% quarter-on-quarter.
Wafers, again, I would say, a reasonable, you know, progress as far as wafer is concerned. We've got, you know, a new wafer which is a cheese wafer that we've launched in the South. We've got limited capacity. We seem to be hitting the top of our capacity, so we will have to look at, you know, more capacity into our newer plants. But I would say, a reasonable progress, but tremendous opportunity for even better performance as far as wafers is concerned. Cake and rusk are back. We on cake, we've done a lot of new products, including what you see on this slide, which is marble cake, with a 2x revenue shift, quarter-on-quarter.
Marble cake has actually given us very good revenue growth as well for the cake business, which has turned the corner and has started to do extremely well, not just from a top-line perspective, but even from a profitability perspective. Moving on to the next slide, which is slide number 11. Again, something that we've been talking about, bakery adjacencies. Objective being profitable growth. Journey continues with bread, which used to be a very unprofitable business and is turning out to be a hidden gem for us. Growth in rusk and cake are back. You know, from a Croissant perspective, I've spoken about it. Growth. We are growing at 250% versus last year. We've done an aggressive national scale-up supported by end-to-end marketing campaign.
I won't say that we've found, you know, a certain level that we would like to be at from a distribution and numeric distribution standpoint. There's a lot more to do. We are testing the waters as we go. We are looking at how far we should go in terms of the width of distribution. What we are seeing is that offtakes are very, very good. Repurchase rates are very good. We are very, very, you know, happy about the performance that we have on croissants. Internationally, we've just signed up for a joint venture with a controlling stake in Kenya. There used to be a brand called Britannia, which had a different spelling from our Britannia.
As a result of this deal, we will have control over that brand so that we will not have an infringer in Africa doing the same brand that we have on our shores. Middle East growth continues and so does the Americas. The Americas has shown us a very good growth in the last few years, and that continues especially in Canada. Dairy has been a tough story. Although we've done some fantastic work of putting up, you know, our collection centers, getting farmers to pour milk for us, setting up the factory, which is probably gonna be commercialized in the next month or so. We've already commercialized the SMP plant, but some of the other facilities there are gonna be commercialized starting next month.
The problem there is the inflation that we are seeing. Milk prices today are at INR 41 a liter in the west. Manoj, correct me if I'm wrong, it's INR 58 a liter in the north for buffalo milk.
Yes.
Mm-hmm. Yeah.
Yes, yes.
There has been from about INR 31, they've gone to INR 41. There's a very high inflation on dairy. While we are taking price increases, this is turning out to be a lot more than what we'd ever imagined. Profitability remains a challenge as far as dairy is concerned. That is the story of our adjacent businesses, but very happy about some of the progress that we've made in each one of these buckets. This was a little bit of a worry for us, but I think we are slowly coming into our own with all of these products and starting to do well, not just from a top line, but from a bottomline perspective as well. The next slide is about cost efficiency programs.
You will see that from 1x - 8x, from 2013- 2022, 2023. In the last one year from you know 5x - 8x, almost 1.5 x you know the cost efficiencies that we used to get last year. The things are the same that we've been talking about. Process automation, reduction of distance to market, optimal power sourcing, renewable energy. You know the sourcing strategy as far as our raw materials are concerned. Vendor development to ensure full efficiency accruing to us. Packaging initiatives, that's been a big area for us. We've developed not just you know packaging from a sustainability standpoint, but we've also been able to bring costs down.
Vendor cost optimization, we've looked at various ways of optimizing this, depending on our factories and what needs to be sent to our factories. Other areas have been market return, which has been this year the lowest that we've ever seen. We continue to optimize on that. That's giving us a very good, you know, feel of how high is high and how we can bring, you know, savings to the table. Commitment charges. Basically, you know, commitment charges are charges that we pay to our contract packers because we take capacity from them, and if we are not able to draw that material, then we have to pay them some kind of commitment charge.
We are reducing that too by making sure that we you know optimize our you know not just what we need from them but optimize the demand centers and sources for all of these demand centers. That's given us pretty good savings. Fiscal incentives and also on media effectiveness, we've done some major initiatives to make sure that we get more bang from the buck. The next slide is about ESG. This has been a fantastic story for us. While we've been focusing on you know a lot of these programs for quite a few years, the issue has been that we were not doing it in a structured way. We started to do it in a structured way about two years back.
Our Dow Jones Sustainability Index score in 2022-2023 has come out to be 52, which is the 91st percentile of companies in the sector. This has actually gone up from what was the score two years ago, Manoj? 11?
11-37 last year and 52 this year.
11, 37-52. It's been great progress, and we made progress on all of our pillars. On growth, on governance, on resource management, on sustainability, on packaging and making sure that we get it from sustainable sources. As well as on people, which is about diversity. On the shop floor, we have we've got great diversity. We still have to do some work, you know, in our in our management team, et cetera, to get diversity up. We've got, you know, great work on nutrition. Employee engagement, we are top quartile of FMCGs, as far as, you know, that that parameter is concerned. Finally, reduction of incidents from accident standpoint, we have been doing pretty well there as well.
As a result of all these programs, which are a part of the KPIs for the ExCom team, the progress has been remarkable as far as ESG is concerned. Moving to page number 15, which is the top line movement. As you'll see, our top line movement has been remarkable this quarter. We've grown by 22% versus Q2 of last year. On a 24-month growth basis also, we've grown at 29%. This quarter growth has been, you know, something that if you were to look at even the six months, Q1 and Q2 put together, we've seen 16% growth. Moving to the next slide, which is on operating profits.
You know, after what happened in the last seven quarters or so with inflation and making sure that we put all the right measures to beat this inflation, we've come back. You know, there were these three quarters in 2021 where we'd seen huge numbers as far as operating profits are concerned, but that was because we didn't have capacities, and we were able to sell whatever we produced due to COVID and the demand created due at that time. We were able to get great efficiency as a result of that because we were running our lines flat out with one product and getting great efficiencies.
Thereafter, our profit, operating profits have had in this business a lower number. This quarter again, we've come to 15.2%, which is better than what it was pre-COVID. Moving to the next slide, which is slide number seven. If you were to look at our algorithm, net sales have grown by 22%, operating profit by 30%, profit before tax at 26%, and profit after tax at 28%. Overall, good results. Quite happy with the progress and how we've been able to bounce back as far as our top line and bottom line growth are concerned. As a result of that, you will see the percentages. The percentages have moved up.
If you look at 2019, 2020, profit from operations was 14.5%. That was the pre-COVID year. Now we are at slightly better than what we were at in 2019, 2020. Happy with that progress and hoping that we'll be able to keep that trajectory. That is all from me. Very happy to answer all your questions. One more point. We have Rajneet for the first time on the call. Rajneet joined us on the 26th of September and was on induction to understand the company and its operations. He's just completed that and just a few more sessions to go, but pretty much on the ball now. Over to you for any questions that you have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks, and congrats on a very good set of numbers. If I see last five quarters, your sales has been stable at that INR 3,300 crore-INR 3,600 crore number. Quarter-on-quarter jump of 18%. I had question on that only. How much would be the pricing growth, quarter-on-quarter? Plus, because festive was earlier this time, how much is a one-off because of the inventory built-up because of the festive season related pipeline filling? When I refer to your slide number 10, your new products have seen very strong growth quarter-on-quarter, 70% to almost 2.9x quarter-on-quarter. Is there a inventory filling because of that? Because you are seeing good demand which could further accelerate. If you could explain any one-offs out here.
There are no one-offs, Abneesh. Abneesh, I must say that Abneesh from Nuvama sounds a little funny. We are too used to your edgy way, so I was a little taken aback. Okay, to answer your questions, first of all, no one-offs at all. It's all progress made from a zero base. We've seen very good demand. We've been able to do enough for our brands this quarter. We've, you know, taken a step back on that, but we've gone back on air. We are supporting our brands and as a result of that, and we've done a lot of innovation, as I've spoken through the deck. That's giving us momentum with our customers.
This is despite the fact that we had taken the price increase before some of our peers. That was your first question. What else did you ask?
How much would be the pricing growth, say, quarter-on-quarter and YoY, if you could give that number?
Total pricing that we've taken... Sorry about that. Total pricing that we've taken is approximately 22.5% . You know, this is in the face of a 32% inflation. As I told you, this quarter, we've taken, Venkat, what is the pricing that we've taken this quarter?
I'll tell you. I have-
Yeah.
Quarter one versus quarter two versus quarter one has been about 7%. Okay? Between-
We've seen an inflation of 3%, but we had some catch-up to do, so we've taken a 7% price increase this quarter.
Yeah.
Go ahead, Venkat.
Yeah. No, year-on-year is the question that Abneesh was asking. Year-on-year is about 18%, Abneesh. What Varun was referring to is over a period of longer six or seven quarters, is what he was referring. Year-on-year is 18%, quarter-on-quarter is about 7%.
Does it imply 4%-5% kind of volume growth, 18% YoY pricing?
Right. Correct.
Yes. Yes. Approximately, mid-single digit volume growth.
Sure. One related question, Varun, was on your direct reach expansion, which was extremely strong. I do note that in FY 2022, it came down also sharply versus FY 2021. Was it just a COVID-related impact? Now in the rural, when I compare the market share between you and Parle, could you give us some sense where is the indexation now versus say six years, seven years back when you had started the focus on Hindi states? Where is the gap now?
It's still a big gap, Abneesh. While we've made up, it's too small to really, you know, make a big difference. Just to give you an idea, we are probably now about 18% share, you know, in a market like UP, right? Large state of UP. I'm just giving you some rough numbers. We could be about 18% and, you know, seven, eight years back we were probably 11%, 12%. Still, yes, good progress, but still a long way to go.
Right. Varun, last question is on your overall group related and your long-term debt. I do see ICDs coming down versus six months back and quarter-on-quarter it is stable, which is okay, which is good. On the long-term debt, INR 1,000 crore, it has gone higher. I understand CapEx is happening. Plus also there are the investor concerns on the group entity of Bombay Dyeing- related SEBI issues. If you could address, is there a better way of financing this CapEx through the internal accrual rather than the long-term debt? On the group related, could you address some of the concerns? I know there is no direct impact, but if you could address what are the concerns.
Yes, I think this question was gonna come up, you know, in any case, let me address that. Bombay Dyeing, you know, they've already clarified while you know I'm not on the board of Bombay Dyeing, but whatever we know is that Bombay Dyeing has already clarified through the press release, you know, that it's fully compliant and will exercise its right to appeal against the SEBI order, right? I also understand, Venkat, correct me if I'm wrong. I understand that the company has since filed an appeal with the Securities Appellate Tribunal as well, right?
That's right.
Venkat?
Yeah.
Yeah.
No, that is right.
Yeah. The matter is sub judice, so I wouldn't want to. And, you know, I am also like you. I also heard, you know, more than what you heard. I've also heard the same. As the matter is sub judice, I don't think it's right to comment on that any further than this. But happy to clear if there's any more information that we get or, you know, we will be happy to clear any other doubts that you may have on a larger basis. Coming to the debt that you're talking about. We've taken debt, yes. We've taken debt for our Ranjangaon expansion, which was a lot of that in dairy.
The dairy plant is almost ready and should be commercialized soon. You know, dairy, then we've got a factory coming up in Tamil Nadu, a factory coming up in UP. To fund that and we've got the loan at a very low price. We've got a loan at, what, Venkat, 5.8%?
That's right. Correct.
Yeah. While our treasury yields, you know, 250-300 basis points more. We do understand what you're saying. I think we have fairly measured in what we are doing. Venkat, happy if you can comment on that as well.
No, you covered them all. I think the borrowing currently is at about 5.8%, and our treasury is yielding roughly 8.5%. The point being made by Abneesh is clear, Abneesh. And like you rightly said ICDs, group ICDs have been coming down from what was about INR 740 crores in March. It's currently at about INR 590 crores.
Yeah.
Sure, sir.
Thank you.
Thanks, sir. That's all from my side. Thank you.
Thank you.
Yeah.
In order to ensure that the management is able to address questions from all participants, we request the participant to please restrict their questions to two per participant. For any follow-up, may be requested to rejoin the queue. The next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah. Thanks for a great quarter, and thanks for the opportunity. My first question is on raw material. On raw material, what would be the broad breakup between wheat, edible oil, sugar, fuel and how much wheat inventory do you typically hold, and how does the wheat procurement work? Do you mostly acquire after the Rabi harvest?
Wheat, palm oil and sugar are the three largest components as far as we are concerned. Manoj, you want to comment?
Yeah. Wheat, palm oil and sugar roughly together would constitute about 65% of the value of procurement. Wheat is typically procured during the harvesting season. That is in April, May, June.
Okay. What's your initial view right now with regard to reserve levels? Do you think wheat prices will ease up or any initial view there?
Wheat prices are quite high, and I think government is taking actions to stabilize those.
Okay. My second question is on the management change. With Rajneet joining, what will be the role division between the CEO and MD Executive Vice Chairman? Should we expect any changes in the strategy?
No. I think it's gonna be a seamless management, you know, working. Rajneet will take full charge of day-to-day operations of the company. He will also use his digital e-commerce experience, you know, to build a pathway to bringing Britannia's digital quotient up and building a digital interface which can make this company into a data-driven organization. I think that will be a big part of his agenda as well. I will continue to have overall responsibility for the company as the managing director. I'll also focus on strategic priorities like building future categories, geographical expansion, strategic partnerships, JVs, M&A, driving the ESG agenda, you know, and obviously mentoring and guiding Rajneet through this process.
Okay. Understood. That's it from my side. Thank you.
Thank you.
Yeah.
The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Hi, Varun and team. My first question was on the commodity inflation. You mentioned that 32% number. Given where palm is currently and the rest of commodities are, how would you expect this to trend in 3Q, 4Q? In that context, do you then expect your gross margins to continue to sequentially improve from where it is at this quarter?
Kunal, yes, I do think that prices are gonna stabilize. Palm oil has already shown some signs of stabilizing. It actually went down quite a bit before surging a bit upwards thereafter. In wheat, because the countries produce less wheat, I think that's gonna remain a little, you know, firm till the time the next season comes through. As far as sugar is concerned, we are seeing a little bit of upside as far as sugar is concerned. I've already spoken about milk and milk products. That's on a complete boil. I don't think it's gonna cool down substantially. Yes, it's gonna be stable to slightly cooling down, I would say in Q3 and Q4.
Venkat, Manoj, if you wanna add something, please do so.
No, I mean, you covered it.
Yeah. That, that's how we see it. I don't think there's gonna be a complete cool down happening in the next two quarters because there are fundamental issues. Wheat has an issue of availability. Sugar is not an issue of availability. It's about, you know, the government is trying to keep the prices firm so that farmers, et cetera, can get the right amount of returns. Palm is out of our hands, but seems to be coming at the right level. Let's see. I think things will be equal to or slightly better.
Thanks. Thanks, Varun, for that clarity. The second and last question was on your volume growth. You've seen this sequential 7% price increase, and yet volume growth has actually probably slightly stepped up in a relatively weak macro environment. From what you've seen on the ground, are you reasonably confident that the price hike has been well absorbed and there will be no negative effect on volumes going ahead? Therefore, you know, this complete step up in the quarterly run rate, any concerns that, you know, that could kind of slow down as, you know, the pricing starts affecting volume?
No, Kunal, the point is that pricing has affected volume. We were seeing a lot more volume growth. Yes, we have come back reasonably well in this quarter. Still, I would say at the lower end of volume growth. The result of that really is, you know, the price increases that we've taken. Now, the question that you're asking is, why is it that we are obviously doing a little better than what other categories and other companies are doing? The answer to that is there are two. One is the execution, which is the distribution build, et cetera, that we are doing, which is keeping, you know, our share up. We are getting more share. Share is one part of it.
The second part is that even the category is growing. The reason for the category growth is that it is, you know, a category which is the cheapest form of food. When there is inflation which happens across different categories, obviously the impact on, you know, the higher categories, et cetera, will be a lot more. Because we are the cheapest form of food and we are wholesome and tasty as well, I think we've been slightly better than, you know, all the other categories, and we've probably benefited out of that. Those are the two reasons.
Okay. Thanks so much, Varun. That's it from my side.
Yeah.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Yeah. Hi, good morning. Hearty congratulations, Varun, for becoming Vice Chairman. I think two things. Just one observation on slide 10. You have seen so many new products, so I was more keen, at least the trade is very positive on Croissant. So maybe if you can help me, what is the number we look at this year and maybe next year specifically for Croissant?
We are looking at approximately a exit rate of about INR 150 crores, which is, I would say, a reasonable number for a product which has just been launched.
You normally used to give the NPD contribution. What was the NPD contribution in quarter two?
It's approximately 3.5% of the revenue. See, the thing is that our overall revenue has also been growing pretty fast. No, this is in our definition. If you were to look at the total NPD contribution, it'll probably be about 5%. Because we look at a shorter period, that's why it's 3.5%, but overall it'll be about 5%.
It's interesting to see that. I think last year we started with Potazos, and in this slide I am not seeing Potazos. Any comment? Is that product still on, or is it low focus for us now?
No, no. It's doing quite well for us. We've spoken about it, so we don't want to repeat what was done earlier. Otherwise it'll become a very long session with you guys.
Okay. My second question is on the growth path. You normally used to give three-year CAGR, so I'm more interested, what is the three-year CAGR volume growth?
Three-year CAGR volume growth will be quite substantial. I would hazard a guess, it'll probably be 8%. Venkat, would you have that number?
I'll give me a couple of minutes.
Okay. Meanwhile, let me ask the last question on the dairy part. You've mentioned that dairy has now gone up and I think somewhere last two quarters you've been indicating it's about INR 550 crore. Maybe if you can spell it out, what are the new categories product distribution and what number we should model in FY 2023 and 2024?
Our growths are reasonably good in dairy. We've been seeing reasonably good growth. We are working on some very strategic measures as far as dairy is concerned. Hold on, in the next 15 days or so, we will come back and chat with you on what we are looking at as far as dairy is concerned. The pressure on dairy is not top line at this time. The pressure is bottom line because of the milk prices going from INR 30 to INR 41. That is the big pressure as far as we are concerned.
Obviously, as we start to, you know, commercialize our dairy factory, you know, again, there will be a momentum, but we'll have to make sure that we do it all in a way that it all becomes, you know, the way we conceptualized, you know, making this business a very large part. As I promised, we'll come back. We'll be back, discussing with you in the next 15 days or so on how we are looking at making this, you know, a very solid business for us in the future.
Sure. All the best to you, Varun. Well, Rajneet, welcome to our interaction.
Thank you.
Thank you.
Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Percy Panthaki, your line is in talk mode. Kindly go ahead with your question, please. As there is no response from the current participant, we move to the next question from the line of Manoj Menon from ICICI Securities. Please go ahead.
Hi, team. You know, very impressive performance, must say, given the context. I got one clarification on the sales part of it and the other one on the marketing, you know, part of it. If time permits, I just also want to understand, you know, the 5.8% loan. It appears extremely good. Just was wondering if you could, you know, tell us where it is available, if it's a CP or something like that. Anyway, the first is on the sales side of it, Varun. Could you just help us understand, you know, the exact modalities which you are actually using to get these sort of outcomes? For example, you know, you talk about 28%.
Is it sub-stockists or is it actual distributors? Point number two, is it just a classic case of, you know, awareness higher than availability and you are just driving it?
These are distributors, but they are not as organized as our large distributors. They are appointed in a smaller area. They cover anywhere from 40-100 outlets in their area. These are all small areas which are rural, small towns, villages, et cetera, 10,000 kind of population kind of areas. Now, what we have with them, we do have handhelds, and we do get data that, you know, their sales, et cetera. We get all of that data. But obviously the quality of supervision, et cetera, tends to be, I would say, a notch below what we do with our larger distributors.
These are serviced through, you know, it's a hub-and-spoke model that we do because, you know, we have to break bulk, as far as these distributors are concerned. We create these C&FAs who then distribute to these smaller RPDs. It's a different model. It probably costs us 1% more, but it gives us a long-term sustainability in that area or in that village. The way it works is that after they become larger, so let's say they start with a INR 30 lakh a month kind of a business or INR 20 lakh a month kind of business, and then they get to a larger size.
As we see them graduate to a larger size, then we can start to service them directly. We cut out the C&FAs, we make them distributors, and so the evolution continues. I'm just trying to simplify things so that you understand what we do.
Understood, sir.
That is, that is how-
Sure. Sure, sir.
Yeah.
Seems to actually a very much repeatable, you know, sort of a model. Understood that. The one linked question on the sales side of it is that when I look at the direct touchpoints which you have, you know, comfortably more than 2 million currently, which also happens to be the best in class, let's say largely at par with the leader. The question automatically which comes is, you know, maybe there is another lever which you have, let's say, multi-line selling, you know, or let's say extracting more from the current set of outlets. Any color on that?
Yeah. That is a KPI as well. I'll actually let Vipin answer that. We have this KPI of how many lines that we sell to each one of the outlets. Actually the way we look at it is that in urban, the objective that we have is to get depth of distribution, and in rural it's about breadth of distribution. Because we want to start in rural, we want to get our products into those outlets. Or if the outlets do stock our products but they buy it through a wholesaler or something, then, you know, half the time they will not be available. Those products will not be available. The wholesaler is not as, you know, trustworthy as a direct distributor going to those outlets.
We try to make sure that we go there directly, we deal with the customer directly, and we put our, you know, products in there. That's how we look at it. Over to Vipin.
Yeah. Hi, Manoj. There are a few things that we do to increase our range. You know, Britannia, as you know, is a range-driven organization, right? We've got 25 odd brands. I think the first thing which Varun explained is, you know, using the entire technology, which is handled in various apps. These handlers and apps are basically predictive as well as prescriptive analytics, right, which basically tells that this needs to be, you know, cross-sell or upsell to the outlets, right? That's the first principle that we apply, that a lot of empirical data through the tech basically predicts that this is going to be the forecast for this retail or the wholesale outlet, and therefore that's the active selling that we do.
The second part is that, you know, our distributors, our super stockists, they have got, these stock norms which basically ensures that the entire range availability, is there at that point in time, right? Therefore that can be then, connected with the retail market, right? Therefore it is a fairly pull-driven system. The third is that in rural we have got a fairly large feet on street, team, which is taking these orders directly, right? Therefore we keep impacting the range. I think the fourth and the most important is that the range, selling is also part of the trade term or the margins that we give to our super stockists and RPDs. Therefore, you know, it is a self-motivating commission which basically, helps us sell this entire range.
These are the four principles basically we apply and therefore it is a scalable model for all the states. Thanks.
Loud and clear. Thank you so much, Vipin, Varun, for the exhaustive response. I had a question on marketing, but I'll come back in the queue. Just quickly, if I may request, Venkat, on the 5.8% loan, you know, some more color on it, given that it seems to be very low and very attractive.
The long-term loans essentially are including bonus debentures that we had issued the last year.
Okay.
It also has some borrowing that we had done in respect to the dairy project through a funding arrangement which is available with the animal husbandry. The third is the normal term loan. I think we managed to borrow it right in time.
Understood. With the blended rate. Okay, sure.
Yeah, yeah.
Thank you. Ladies and gentlemen, we take the last question for today from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, sir. I just wanted to ask on the margin side. Now, clearly we are seeing while input costs have risen, you have been able to kind of pass them on quite effectively. You are arguing that input costs remain quite stable and are likely to kind of moderate down. In that kind of context, would you say that a path forward to reach back to the 18%-19% EBITDA margin exists?
Listen, I think, you know, we also dream like you.
Yeah.
No, see, that. Those numbers were reached during COVID. Yes, obviously we would want to, you know, endeavor to get to higher numbers. I think it's important that we make this as gradual as possible and, you know, create funding opportunities for new products or new categories and, you know, we support these new products and get them to be of a certain size. See the problem is that. It's not a problem actually, it's actually a good thing, that the base business is so large that, you know, INR 150 crore-INR 200 crore kind of innovation just becomes a drop in the ocean. We have to create much larger pieces of innovation as we go forward, and that's what we'll endeavor to do as we move forward.
We'll try to see how we can make each one of these categories fairly large. You know, there are now three innovations which are over INR 100 crore. Milkshakes have become INR 100 crore plus last year. Croissants have become INR 100 crore plus this year. Wafers is headed towards INR 100 crore plus this year as well. There are three or four categories which are going there. Similarly, you know, products like Biscafe, products like Potazos are becoming very close to that number as well. As we start to create these kind of innovations and we take them to scale, I think that's the time when it'll all start to show on you know, the adjacent category growths. That's really what our you know, endeavor will be.
Yes, we will try and maximize our profit as we go forward, and we've shown you that, while managing to make sure that we gain our market share and we also grow our top line. But we also want to support all of our adjacent products.
Got you, sir. Sir, the second bit is I'm just trying to. We have seen another quarter of market share gains in this period. You know, congratulations on that. That I was trying to reconcile it with the fact that, you know, things are opening up. You highlighted biscuits being the cheapest, so price is an aspect, and you have taken sharper price increases. In that context, is it that the competition's still not back to normal and probably they've structurally impeded to a lower level? Is that the reason? I'm just trying to kind of reconcile, because what you said.
It's biscuits on the cheaper side and pricing would be the aspect, but due to higher pricing created.
No, you're right. See, the point is that what hits us hits other competitors more than us because we've got scale, right? All other competitors can do is take short-term advantage of you know, getting prices below us for four months, three months, six months, eight months, whatever it may be. That they've done already. You know, it's not really impacted us in any big way. Yes, in pockets it did impact us, and we took whatever action was necessary you know, to make sure that we get back to what our plan was. At some stage it all comes back to normal.
Now, I would say that 95%, at least the A players are at the same level as they were pre the inflation. Yes, the smaller players sometimes, you know, take their time and, you know, they'll continue to sell their product in a small territory at a much lower price, et cetera. It all normalizes finally, you know, impacts everyone. As I've said in the past as well, everyone's got used to profits. You know, biscuits was not a profitable category, so people were not really making big profits, and they were living with whatever conditions they were in. Now everyone's got used to a profitable existence. Why not? You know, it has to be a profitable company to be able to, you know, become more successful in the future.
Everyone's on that path now, which is a very, very good thing. Frankly, I'm very proud of the fact that we've been able to garner that in some way. We've been able to guide the entire industry to look at competition in a execution way rather than pricing advantage way. I think it'll all get back to normal. I don't think there will be any big issues on that front.
Got it, sir. Thanks a lot for this, sir, and wish you a lot of luck for the future.
Okay. All right. Thank you, guys. Thank you very much. Good night, all of you. Yeah, and we'll see you soon.
I now hand the conference over to Mr. Mayank Mundra for closing comments. Over to you.
Great. Thanks, everyone, for spending time with us on this call today. We look forward to interacting with you again.
Thank you. Ladies and gentlemen, on behalf of Britannia Industries Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.