COMPANY PROFILE

Britannia Industries Limited

Type Public (BSE: 500825 NSE: BRITANNIA)

Industry Food processing
Founded 1892
Headquarters Bangalore
Number of locations 300 stores (2000)
Area served India
Products Bakery products, including biscuits, bread,
cakes and rusk, and dairy products, including
milk, butter, cheese, ghee and dahi
Revenue ₹78.58 billion(US$1.2 billion) (2014)
Profit ₹1.34 billion(US$20 million) (2011)
Owner Nusli Wadia
Parent Wadia Group
Website www.britannia.co.in

Britannia
The story of one of India's favorite brands reads almost like a fairy tale. Once upon a time, in
1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now
Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today.
The beginnings might have been humble-the dreams were anything but. By 1910, with the
advent of electricity, Britannia mechanized its operations, and in 1921, it became the first
company east of the Suez Canal to use imported gas ovens. Britannia's business was flourishing.
But, more importantly, Britannia was acquiring a reputation for quality and value. As a result,
during the tragic World War II, the Government reposed its trust in Britannia by contracting it to
supply large quantities of "service biscuits" to the armed forces. As time moved on, the biscuit
market continued to grow… and Britannia grew along with it. In 1975, the Britannia Biscuit
Company took over the distribution of biscuits from Parry's who till now distributed Britannia
biscuits in India. In the subsequent public issue of 1978, Indian shareholding crossed 60%,
firmly establishing the Indianness of the firm. The following year, Britannia Biscuit Company
was re-christened Britannia Industries Limited(BIL). Four years later in 1983, it crossed the Rs.
100 crores revenue mark.

Today, more than a century after those tentative first steps, Britannia's fairy tale is not only going
strong but blazing new standards, and that miniscule initial investment has grown by leaps and
bounds to crores of rupees in wealth for Britannia's shareholders. The company's offerings are
spread across the spectrum with products ranging from the healthy and economical Tiger biscuits
to the more lifestyle-oriented Milkman Cheese. Having succeeded in garnering the trust of
almost one-third of India's one billion population and a strong management at the helm means
Britannia will continue to dream big on its path of innovation and quality.

Value chain analysis of britania insustries ltd.

Primary activities:
INBOUND LOGISTICS

These activities of Britannia Biscuits are associated with receiving, storing and disseminating the
inputs of the products. It can include material handling, warehousing of physical products, as
well as architecture to receive and store customer information for digital media company.
Britannia Biscuits at present has outsourced most of its inbound logistics activities.

OPERATIONS

Activities that help the organization to transform raw material into finished products. For the
purpose of this article the definition is broad – it can mean using customer data to serve
advertisements based on usage behavior to clients, moulding plastic to make products etc.

OUTBOUND LOGISTICS

Britannia Biscuits under takes these activities to distribute the finished products to channel
partners and final buyers. Outbound logistics activities include – processing, warehousing,
scheduling, distribution network, and wholesalers and retailers order fulfillment.

MARKETING AND SALES

These activities are undertaken by Britannia Biscuits to create means through which the buyer
can buy a firm’s products. These activities include – marketing, advertising and promotion,
pricing, channel selection, sales force management etc.

SERVICES

Britannia Biscuits needs to provide after sales services and maintenance for successful usage of
the product. Service activities of Britannia Biscuits can include – training, installation services,
product forward and backend alignment of software, post sales maintenance, and part supply.
Supporting activities
FIRM INFRASTRUCTURE

Firm infrastructure support activities at Britannia Biscuits consists activities such as – general
management, quality management, legal services, finance and accounting and planning.
Firm infrastructure activities at Britannia Biscuits supports entire value chain though the scope
varies given that Britannia Biscuits is a diversified company even within the industry. For
example the finance and planning at Britannia Biscuits are managed at corporate level while
quality management, accounting and legal issues are managed at business unit level.

HUMAN RESOURCES MANAGEMENT

In an environment where each organization is striving to become a learning organization, Human

Resources Management is key to the success of any organization. HRM support activities
include – Recruiting, Hiring, Skill Assessment, Selection, People Planning, Training &
Development and Compensation at both business unit level and corporate level.
Human resource management affects competitive advantage in any firm, but in some industries it
is defining factor. For example in the consulting companies HR is the main source of competitive
advantage.

TECHNOLOGY DEVELOPMENT

Technology supports almost all activities in modern day organization. In the technology industry,
technology development has become a source of competitive advantage. Technology
development at Britannia Biscuits may include activities such as - feature design, field-testing,
process engineering, component design, and technology selection.

PROCUREMENT ACTIVITIES AT BRITANNIA BISCUITS

Procurement activities at Britannia Biscuits include activities that are undertaken to purchase
inputs that are used by Britannia Biscuits’s value chain. It doesn’t include purchase inputs
themselves. Purchased inputs may include - raw materials, supplies, machinery, laboratory
equipment, office equipment, and buildings.
PESTEL ANALYSIS
Political:
Exemption on Customs Duty on Sugar Raw Material Import: Due to the shortage in the
production of sugar the deadline for the exemption on customs duty on raw sugar imports has
been
extended. Exemption on customs duty will help in purchasing sugar at lower cost, which in turn
will
control the cost of production.

VAT on Biscuits: The VAT of 12.5% on Biscuits. Price of the biscuits might need to be
increased
due to the high VAT rates which may result in switch of brands due to the highly competitive
market.

Removal of Import Duty on Dairy Products: The whole-sale price based inflation indicates that
the
milk prices have moved up by 14.73% over the last year. The imports at cheaper rate would help
in
reduce the cost factor for dairy products.

Incentives to Build Cold Storage Facilities: Wastage of food items due to lack of cold storage
facilities lead to a loss of Rs. 500 billion every year. The government announces schemes and
incentives to attract investments in cold storage warehousing would help in preserving products
better and reduce the wastage cost.

Economical

Shortage of Milk: Even though the milk production has risen by 4.6% compound annual average
growth rate, it still cannot match up with the increasing demand. Price of milk increased by
12.6%
to 13.6% . This can cause an increase in the input cost for the dairy products and which in turn
can
lead to hike in price or lower profit margins.

Globalization: Globalization a universal phenomenon is affecting each and every industry. This
can
serve as an opportunity to expand the business to a global level but on the other hand there is a
threat of new entrants from international market.

Requirements for Logistics: Logistics in India suffer due to the poor infrastructure and other
limitations. Sophisticated third party logistics system will help in proper supply chain
management
and on time delivery of goods, which help in maintaining the shelf life of goods on meeting the
demand on time.
Social:

Need for Healthy Eating Habits: Studies say that Indians are more prone to Coronary Artery
Disease (CAD), which is the major independent risk factor causing Cardiovascular diseases, due
to
the smaller calibred arteries found in Indians. This suggests that Indians should move towards
more
healthy food and diet. This could be a new area to explore for Britannia with its new health
associated products like Nuti-Choice biscuits and Actimind flavoured milk.

Problems with Cloned Livestock: Cloned animals are supposed to be suffering from large-
offspring
syndrome. The mother cows face a problem in giving birth to the cloned animals as they are
larger
than normal. Also these cloned animals suffer from health which might make unsafe to consume
the
produce from them.

Technological:

Cloning of Livestock: India, a late entrant in cloning research, is now moving with a great pace
in
cloning technology. ‘Hand guided cloning technique’, a technique very different from the
conservative cloning practice has been a successful venture.

New Age Packaging: The new packaging systems help in protecting food from micro-organisms
by
creating shelter layer. It uses new technologies like oxygen scavenging function, atmosphere
control, biodegrability etc. and is low cost.

Environmental:

Change in the Climatic Conditions: Climate plays an important role in the agriculture process.
The
change in the rainfall pattern has been a matter of concern now in India. The agriculture sector in
areas which are monsoon dependent suffered badly due to the change in the rainfall pattern. The
sector suffered a huge loss in terms of total output. The loss in crop will affect the input supply
and
this might delay or cause problems in the production. So the industry might not be able to meet
the
demands resulting in the loss of customers.
Legal:

Raising the Norms for the Probiotic Food: There is a need for setting the standards for probiotic
food. Clinical tests should be conducted on the probiotic foods before they could reach the
market
for sale. The Indian Council of Medical and Research has submitted the proposal for the same to
the
government. Strict norms will help in raising the quality standards but on the other hand the cost
and time of production might subsequently increase.

SWOT Analysis
Strengths 1.Around 120 years in the industry
2.India’s most trusted brand with strong brand
recall
3. Wide range of bakery products like biscuits,
rusks, cakes and dairy products like milk, butter,
cheese, etc.
4. Strong distribution network ensuring proper
availability of the products even in the remotest
of areas
5.Major share in biscuits industry
6.Marketing and advertising efficiency
7. Innovative products for health conscious
people like oats and porridge, Nutri Choice
biscuits for diabetes patients, Vita Marie Gold,
etc.
8. Strong presence in rural markets

1.Lower market share in dairy segment

Weaknesses 2.Heavy expenditure on advertising and
marketing
3.Similar products produced by many companies
means high brand switching

Opportunities 1.Increase in purchasing power of people in India

2.Increase its share in the dairy industry
3.Product line extension
4.Expansion in other countries
Threats 1.Lower price offering competitors
2.Local dairies and bakeries
3.Inflation can cause fall in sales and revenue
4.Rise in cost of raw materials
Dominant economic traits of biscuit industry:

Market Capitalization
India Biscuits Industry is the largest among all the food industries and has a turnover of
around Rs.4350 crores.
Size of the industry
The production capacity of wafer biscuits is 60 MT and the cost is Rs.56, 78,400 with a
motive power of 25 K.W. Indian biscuit industry has occupied around 55-60 % of the
entire bakery production.

The Indian Biscuit industry for the organized sector produces around 60% of the total
production, the balance 40% being contributed by the unorganized bakeries. The
industry consists of two large scale manufacturers, around 50 medium scale brands and
small scale units ranging up to 2500 units in the country, as at 2000-01. The
unorganized sector is estimated to approximately have 30,000 small & tiny bakeries
across the country.
Total contribution to the economy/ sales
Biscuit industry contribute Rs 8,000 crore to the FMCG industry today, provides vast
opportunity for growth, as the per capita consumption of biscuits is less than 2.1 kg in
our country. India is classified under two sectors: organized and unorganized. Branded
/Organized to Unbranded/Un organized market share of biscuit has been 70% for
Organized sector and 30% for Unorganized sector. Apart from Big 3(Britannia, Parle,
ITC) there are around 150 medium to small biscuit factory in India.
Top leading Companies

 Parle
 Britannia
 Sunfeast
 Priya Gold
 Cremica
 Dukes
 Anmol
 Horlicks
 Biskfarm
 Rose
 Sobisco
 Nezone
Employment opportunities
The Biscuit industry employs almost 3.5 lakh people directly and 30 lakh people
indirectly. Brittania brand is now available in nearly 1.8 million outlets. Britannia claims
that it has a superior distribution clout with its presence which is nearly 3.3 million
outlets. Parle, the seasoned player itself, says it is available in 1.5 million outlets.
Sunfeast's next step was to step up its branding and promotion.
Latest developments

 Indian biscuit market is 1.1 million tonnes per annum at Rs 50 billion. About 90%
of Indians buy and eat biscuits.
 According to estimates the bakery industry in India is worth Rs 69 billion. Out of
which bread and biscuits hold about 82% of the share. The bread market has a
business volume of 1.5 million tonnes. The major factors for growth in this segment
are: Brand loyalty, volumes and strong distribution networks.
 Growth in the over 40-year-old Indian biscuit industry has remained slow. The
analyst's calculations will show that per capita consumption is less than Rs 3 per
month on biscuits or less than Rs 15 per household per month.
 Back in 2003, nobody thought Sunfeast would have consumers eating out of its
hands.
 According to the AC Nielsen retail sales audit in March 2006, both Britannia and
Parle have lost volumes. Britannia's shares have dropped from 35.8 % in 2004-05
to 30.5 % in May 2006 (volumes). Parle's shares have also dropped from 42.2 to
38.4 % in the same period.
 Even Priya Gold has seen a minor dip from 6.4 % to 5 %. ITC's Sunfeast has been
a big gainer with its share increasing from 2.7 to 6.7 %.
PORTER'S FIVE FORCES MODEL:
Competitor Rivalry:
BIL has a market share of 38% and has been growing at 27%, compared to the industry growth
rate of 20% Battle-scarred Britannia on expansion spree, Business Standard and has many
competitors based on the nature of product. Parle and ITC (Sunfeast) pose a great competition to
BIL. BIL earning major of its income from the biscuits, and Parle and ITC are the other major
players in biscuit market. BIL is also into the production of dairy products, where the two major
players in market are Amul and Nestle. Amul is the leader in the dairy industry. There is also a
high level of competition from the unorganized baking sector. Overall rivalry is high.

Threat of New Entrants:

The entry on a small scale dairy industry and in the unorganized baking sector is easy. But on the
other hand to enter the large scale dairy industry and organized baking sector a huge amount of
investment is required in terms acquiring assets and to establish supply and distribution chains.
Government regulations pertaining to food norms and others may also seem to be unattractive.
Looking at the latest trends, the bakery industry is expected to earn huge revenues which might
attract new entrants. So the threat of new entrants is moderate.

Threat of Substitutes:
Savoury snacks, crisps, cereals, fruits and other fast food can be substituted for biscuits. Dairy
products are dubious to be replacing with other products as they key ingredients of majority of
people’s diet. So the threat is a very moderate threat of substitutes.

Buyer’s Power:
The buyer’s of these products could be a retailer or the consumer. Both the dairy and bakery
industry are price sensitive, so a little increase in price might lead the consumer to shift other
brand or product. So the buyer’s power is calculated to be very strong.

Supplier’s Power:
The major supplies for a bakery industry include wheat, sugar and other agriculture products.
And the major supplies for dairy products are milk. It’s difficult to bargain with the suppliers of
the above mentioned inputs as the price of these inputs is majorly influenced by the production
of these inputs. The prices tend to be high as the demand for these products is rising at much
faster rate than supply. The secondary supplies include the packaging material. The secondary
supplies can be easily
substituted with the low-cost ones to save on cost. Overall the supplier’s power is assessed to be
moderate.

Conclusion of Five Forces Analysis:

There is an existence of major players in the market with a moderate level of threat of new
entrants and substitutes. The supplier’s power is moderate but the buyer’s power is measured to
be strong. So the rivalry is suggested to be high.
Factors driving biscuit industry change
1. Increase in disposable income
If disposable income increases, households have more money to either save or spend, which
naturally leads to a growth in consumption.
2. Availability of different pack sizes:
Availability of different pack sizes encourages the customers to buy the product because it
enables customer to buy biscuits of different quantity.
3. Growth in organized retail:
as Internet penetration increases in the country and more international retailers start
operating in India, the share of organised retail market would increase from about 12% in
2017 to about 22-25% by 2021, which would partly also be driven by the growth of e-
commerce market from $24 billion in 2017 to $84 billion in 2021.
4. Growth in processed food industry:
The Indian food industry is poised for huge growth, increasing its contribution to world food
trade every year. In India, the food sector has emerged as a high-growth and high-profit
sector due to its immense potential for value addition, particularly within the food processing
industry.

Challenges faced by biscuit industry:

1. Volatility in Raw Material Prices
The wholesale prices of the raw materials such as Wheat flour, sugar, butter, cocoa, etc.,
which are key ingredients in the manufacturing of biscuits, are highly volatile. For
instance: Sugar and milk prices in India has risen at a CAGR of over 4.5% & 5.5%,
respectively, during 2013-2017. Similarly, global cocoa prices witnessed a rise at a
CAGR of over 4% during 2013-2017. This in turn has led to increase in average selling
price of biscuits.
India being a highly price sensitive country, manufacturers face difficulties to increase
prices due to which value chain stakeholders are expected to witness shrinking profit
margins.
2. Lack of Exclusive Retail Distribution Channel
Biscuits, being a low-priced product, offers limited margins across value chain. Unlike
small bakeries across country like Frontier which have their exclusive retail outlets, key
players lack exclusive retail channel resulting in sharing their margins throughout the
value chain.
For a product like biscuit, managing a distribution network is a challenge. On one hand
an exclusive retail outlet could be a much expensive option for a rural area and on the
other, selling a product in traditional store is what the crowd is following blindly. With
more than ever developing modern retail format, increasing consumer awareness across
country, etc. making the product visible in the market should be the prime focus area.
Identifying key success factors

WHAT DO HOW DO FIRMS KEY SUCCESS

CUSTOMERS SURVIVE FACTORS
WANT? (Analysis of COMPETITION?
demand) (Analysis of
competition)

BISCUITS Low price, variety, Markets localized, Convenient locations,

quality, quantity, extension of product competitive price
flavours, availability at line, managing challenge, wide variety
convenient stores, supplier and of offerings, new
discounts, offers, distributors network product launch, quality
packaging, taste, for availability of parameters.
healthy, wheat products, launching
instead of refined promotional offers,
flour, health R&D in tastes and
conscious. flavours, introducing
more dietary and
healthy product
range.