Has Biscuit Manufacturer Britannia Industries Found a Fresh Recipe for Growth?

: India Knowledge@Wharton
(http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4341)

Has Biscuit Manufacturer Britannia Industries Found a Fresh Recipe for

Growth?
Published : January 09, 2009 in India Knowledge@Wharton

For more than a decade, biscuit manufacturer Britannia Industries has called
on consumers to "Eat Healthy, Think Better." Now, emerging from a period
of internal crisis and preparing to address a larger slice of India's growing
food space, the 90-year-old Bangalore-based company is taking on a new
slogan: Zindagi mein Life.
Translated literally from Hindi, the new slogan means "adding life to life" -- This is a single/personal use copy of India
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According to Bali, who has been at Britannia's helm since 2005, "Over the x407.

past few years, as we looked at what we stand for and what we could stand
for, we felt that if our promise to consumers [is to] make products that are not just enjoyable but also good
for them, then we need to make that promise come alive through our products."
This is perhaps best exemplified by Britannia's decision to remove 8,500 tons of trans fat from its biscuits
in the last year, making them completely trans fat-free. The company was under no regulatory compulsion
to do so; in fact, it is the only biscuit manufacturer in India to have taken such a step. Over the last few
years, Britannia has also fortified many of its products with vitamins and micronutrients such as iron.
Currently, 50% of its products are fortified.
Positioning the Britannia brand as both enjoyable and healthy is core to Bali's growth strategy. She
stresses that Britannia is not in the "health food" business, but rather "in the business of delight and
enjoyment," competing not only with other biscuits but also with savories, chocolates and other snacks.
By marketing itself as a healthier alternative, however, Britannia seeks to sharply differentiate itself from
other brands -- and that move has paid off. Last September, Microsoft founder and philanthropist Bill
Gates included Britannia's fortified snacks in a list of eight examples of 'creative capitalism' published in
Time magazine. The company was also recently recruited to participate in former U.S. President Bill
Clinton's campaign against childhood malnutrition through the high-profile Clinton Global Initiative.
Hungry for More
The new positioning is also intended to strengthen the mother brand itself. With the introduction of the
"Eat Healthy, Think Better" campaign in 1997, Britannia focused on building its individual brands, such
as Tiger glucose biscuits, Good Day cookies and Treat cream biscuits. That was fine, as biscuits
accounted for the bulk of the company's revenues. (For the year ended March 2008, biscuits brought in
about 90% of Britannia's net sales of $650 million.)
But now Britannia wants to broaden its menu. In addition to growing its core biscuit business, it wants to
significantly expand its small businesses including dairy, bread, cake and rusk (known as zwieback in the
U.S.). The dairy business, which Britannia entered in 1997 and spun off as a joint venture with New
Zealand's Fonterra Group in 2002, has revenues of barely $36 million and has yet to become profitable.
Britannia has dabbled with bread and cake for more than two decades and entered the rusk market a few
years ago. These three businesses together take in just $68 million.
More important, Britannia looks to explore other opportunities within the growing food space. According
to a November 2008 report by the Federation of Indian Chambers of Commerce and Industry and
management consulting firm Technopak Advisors, the Indian food industry is estimated to have been at

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Has Biscuit Manufacturer Britannia Industries Found a Fresh Recipe for Growth?: India Knowledge@Wharton
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$200 billion in 2006-07 and is expected to grow to $300 billion by 2015. The report considers the food
industry to include fruits and vegetables, dairy products, marine and fish, meat and poultry, breads
and bakery, confectionary and packaged foods, and alcoholic and non-alcoholic beverages.
"Our vision is to become a larger player in the food space, and as we get into newer products and newer
categories, their strength will be derived from the Britannia mother brand," says Durgesh Mehta, who
was Britannia's chief financial officer when he was interviewed for this article. He has since moved on to
become CFO of Bombay Dyeing, which, like Britannia, is a Wadia Group company.
What new areas might Britannia enter? Company officials aren't saying, though speculation includes
breakfast items and ready-to-cook and ready-to-eat products. Bali says that Britannia will not look at
staples such as rice, wheat flour and sugar. "We will pursue profitable growth opportunities where we can
create propositions that are relevant and differentiated from a consumer point of view," she notes.
Adds Neeraj Chandra, Britannia's vice president and chief operating officer: "We are looking at
categories that gel with our principles of enjoyable and healthy food. We want to participate in as many
consumption moments as possible in the food space through both leveraging our current products better
and through different kinds of products."
Industry players and analysts see Britannia's move as both smart and inevitable. "Britannia certainly has
the capability to be a larger player in food," says Harish Bijoor, chief executive officer of Harish Bijoor
Consults and a visiting professor at the Hyderabad-based Indian School of Business. "The brand equity of
Britannia can be as elastic or as inelastic as its vision is for the Indian market."
Nikhil Sen, who was with Britannia for more than 25 years, including a brief stint as chief operating
officer, adds: "Redefining its boundaries to become a larger player in food is a great strategy for Britannia,
and it certainly has the capability to do so." Sen is currently managing director of Unibic Biscuits India,
the Indian arm of the Australian biscuit company.
Both Sen and Bijoor add a note of caution. "Britannia has been very good at developing its current
business, but it has not come out with any innovations in recent years," Sen says. "There has not been a
single new product in the past few years which has been pioneering for the category. There has been no
new energy, no 'wow' factor. Britannia needs to innovate."
Adds Bijoor: "Dairy and biscuits is still a wide-open arena, and there is [a lot of growth] in this space
itself. Britannia is in an enviable position to leverage [these] opportunities, but it needs to be far more
aggressive." Bijoor is also not convinced about Britannia's positioning as health-cum-enjoyment:
According to his research, taste and health are mutually exclusive in the Indian context.
B. P. Agarwal, managing director of Surya Food & Agro, which makes the Priya Gold regional brand of
biscuits, says that while Britannia undoubtedly remains a market leader, much of its strength is derived
from past glory and its strong consumer equity. "The new products that Britannia has been introducing in
recent times have been more by way of tweaking the existing portfolio. It has been launching variants
with new packaging, but there is nothing dramatically new," Agarwal says. Recent launches including
Chutkule, a snack product, and Fruit Rollz -- both of which Britannia has discontinued -- failed to excite
consumers, he says.
A Period of Turmoil
Any lack of innovation -- and Britannia insists that it is constantly innovating -- can be traced to the
company's internal turmoil a few years ago. Sunil Alagh, who led Britannia as managing director and
chief executive officer for more than 10 years, was fired in 2003 amid allegations of financial
mismanagement. A number of senior executives also left. Sen was given the reins, and then in January
2005 Bali was brought in. She put an almost entirely new management team in place.
The last few years have also been marked by battles between Britannia's two major stakeholders, the
Wadia Group and French Group Danone, over issues including alleged infringement by Danone of
Britannia's Tiger brand. With Danone having sold its biscuits business to U.S.-based Kraft Foods last
year, it is expected to exit from Britannia.

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Even as Britannia was caught up in its internal crisis, the external landscape was fast changing. For a long
time, only Parle Products was a strong competitor to Britannia in the national biscuit market. Other
competitors were small regional players. While Parle focused primarily on the low-end glucose biscuit
segment -- its Parle G brand is one of the world's best-selling biscuits -- Britannia focused on the
premium segment. With nearly equal shares of a total greater than 80% of market value, they coexisted
peacefully.
In 2003, however, tobacco giant ITC entered their turf as part of its diversification strategy. Using its
financial muscle -- ITC's 2007-08 revenues were $5.5 billion -- and massive distribution network, it
quickly succeeded in emerging as a strong third player. While privately held Parle claims that it has a
40% market share, market research firm ACNielsen says Britannia and Parle both have around 33% of the
market, while ITC has close to 9%.
"Britannia's story is one of change of management and change of management styles," says Bijoor. "In the
bargain, what suffered was the back-end research and development and the potential for massive growth
at a time when India's economy was booming. Britannia was also completely unprepared internally for
the irrational competition from ITC." Bijoor adds that it is only now, with Bali at the helm for the last
four years, that a certain amount of stability has taken hold and that Britannia's momentum is building
again.
Praveen Kulkarni, general manager of marketing for Parle Products, agrees. "Britannia is definitely
getting more aggressive in the market and seems to be getting back into the game now."
Britannia's financials bear this out. In the last two years, Britannia has been among the three
fastest-growing fast-moving consumable goods (FMCG) companies in India. In the second quarter of this
fiscal year, Britannia topped the list with 27.3% growth.
Ingredients for Growth
So what are Bali's main ingredients for growth? Investments in people, brands and infrastructure,
improved efficiencies and cost reduction, and new choices for consumers.
For instance, the company has been investing significantly in higher and better quality of human
resources both at the front end and at the back end. It has sharply segmented its go-to-market strategy and,
unlike an earlier focus on simply increasing the number of outlets it covered, Britannia now has separate
teams for general sales, modern trade, institutions, and semi-urban and rural markets. It is building strong
capabilities in each of these segments.
Britannia has also been working with an international consulting agency for building capabilities in
shopper understanding as opposed to consumer understanding. Says Chandra: "These are some finer
distinctions we would not even have thought of three years ago."
In 2008, Britannia divided its product portfolio into two distinct categories: "health and wellness" and
"delight and lifestyle." Products such as Tiger glucose and NutriChoice biscuits fall under the former
category, while Good Day and Treat fall under the latter. Each category is headed by a senior executive
responsible for outlining distinct growth strategies.
Other initiatives include introducing personal consumption packs to attract youth and people on the move,
adding transit points such as bus stops and small roadside shops to its distribution network, and addressing
workers in the business process outsourcing industry as a potential new market.
Meanwhile, Britannia has doubled its ad spending in the last three years. It is also working to increase
trade marketing visibility and, for the first time ever, has signed on with a trade marketing agency.
According to Mehta, Britannia plans to increase advertising and marketing spending to 10% to 12% of
sales over the next few years from a current 7%.
On the infrastructure front, Britannia has added 200,000 tons of annual capacity, an increase of about
60%. It has also devised a long-term distributed manufacturing strategy, put in place a continuous
replenishment supply efficiency system, and strengthened its supply chain management significantly.
According to Rajesh Lal, vice president and chief technology officer: "The stocks at our distributors are

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Has Biscuit Manufacturer Britannia Industries Found a Fresh Recipe for Growth?: India Knowledge@Wharton
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now replenished within 24 hours, and in the past three years we have increased the availability of our
[stock-keeping units] from 60% to 90% across the country." Lal adds that cost reductions over the last
three years have saved the company $30 million.
Bali is looking to leverage all these new pieces for maximum competitive advantage. Sources inside
Britannia say revenue targets are $1.25 billion by 2010 and $3 billion by 2015. While Bali won't commit
to any numbers, her hunger clearly is to be the best. "There is a huge opportunity out there in the market
and it is up for grabs," she says. "What we make of it depends on our ability to commercialize the
opportunity. We want to be among the three fastest-growing FMCG companies in the country and to
grow profitably."

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