Britannia is one of the best FMCG (Fast Moving Consumer Goods) and oldest food companies in India. Its manufactures Biscuits and Dairy Products. Britannia Industries is Own by the Wadia Group.
Britannia Industries History-
Britannia Industries is one of the best and oldest food companies in India. Britannia acquired a huge market share within a short span of time. But it’s all possible due to the good quality of its Biscuits and a Comparatively lower price.“Britannia Industries Limited” is India’s largest food products corporation. The Britannia Industries Limited was founded in 1892 in Kolkata, It started manufacturing biscuits in a small house in Central Kolkata. The company was established in 1897 by a group of British businessmen with a small investment of Rs. 295. Later in 1897, the Enterprise was acquired by the Gupta brothers, mainly Nalin Chandra Gupta, and operated under the name “V. S. Brother”. In 1918 one English businessman “CH Holmes” became a partner of Britannia. Then Britannia’s name was changed to “Britannia Biscuit company limited”.The Britannia industries became the subsidiary of the famous British company “Peek Frean” up to 2014. During the second world war, they started supplying cookies to British soldiers, at that time Britannia Biscuit was in high demand and Britannia opened a new factory in Mumbai in 1924. In 1978 Britannia launched their IPO to the public and 68% were Indian shareholders and 38% were UK Based Associated Biscuits (ABIL).
In 1978 Britannia changed its name to “Britannia Industries Ltd.” In 1981 Rajan Pillai came into the company and bought a 5% share of the UK Based Associated Biscuits (ABIL) in 44 million. He became a major shareholder in Britannia Industries Ltd. At that time the famous businessman Nusli Wadia was also interested in the biscuit industry, he wanted to be part of the biscuits industry Kerala-based famous businessman ‘Rajan Pillai’ and ‘Nusli Wadia’ both fought for ownership of Britannia Industries. But after the death of Rajan Pillai in the ‘Tihar Jail’ The whole control of Britannia industries came under the ‘Nusli Wadia’. Then Britannia gained massive growth in product selling under the Nusli Wadia leadership. The ownership of Britannia industries changed too many times and, Company suffered complicated legal issues. Though ownership of Britannia industries changed so many times any of the owners never let the popularity of the company diminish. Britannia Manufactures Biscuits, Bread, Cake, dairy products, and other food products. Their main competitor is ‘Parle’ in the Biscuits industry. Britannia has grown its businesses in more than 60 countries and it had a good impact all over the world.
Britannia Industries Products.
Britannia’s main products are Biscuits, Cake, Rusk, Dairy products, and Bread. Britannia’s 90% revenue is generated from the Biscuit products and the annual biscuit manufacturing capacity of the company’s factories is 433,000 Tonnes. The brand names of Britannia’s Biscuit industry include Vita Marie Gold, Good Day, Tiger, Treat, Nutrichoice, 50-50, Pure Magic, Milk Bikis, Bourbon, Nice Time, and Little Hearts among others. In 2006, the tiger brand biscuit’s market sales reached approximately 150 Million, including export to the U.S and Australia. Which is 20% of the whole revenue of Britannia Industries Ltd.
In Dairy products, Britannia has a good reach in the global market. Britannia’s dairy product’s revenue contribution is close to 10% of Britannia’s revenue. The Britannia company not only markets dairy products to the public but also trades dairy commodities business to business. Some names of Britannia dairy products are Dairy Whitener, Ghee, Cheese Cube, Butter, Cheese Slice, Creamy Cheese, Milk, Cheese Spread, and Daily Fresh Yogurt.
Its dairy portfolio grew to 47% in 2000-01 and 30% in 2001-02. The Britannia industry’s main competitors are Nestle India, National Dairy Development Board(NDDB), and Amul(GCMMF).On 27 October 2001, Britannia’s announced a joint venture with the ‘Fonterra co-operative group of New Zealand’, It’s owned by around 105000 farmers. The joint venture has handled all the aspects of the value chain from milk procurement to making value-added products, such as cheese, buttermilk, and yogurt. The Britannia Industries Ltd. and New Zealand dairy FCG ( Fonterra Co-Operative Group) each hold a 49% portfolio of the joint venture and the remaining 2% will be held by strategic investors. Britannia intends to source most of the Products from New Zealand and which they will market in India. The joint venture will allow the technology exchange with Britannia.
Britannia Industries Disputes and controversies-
Wadia and Rajan Pillai-
Kerala businessman Rajan Pillai took control of the group in the late 1980s, becoming known in India as the ‘Biscuit Raja’. In 1993, the Wadia group was also interested in the biscuit industry, then acquired stakes of Britannia from Associated biscuit International (ABIL) and became an equal shareholder partner with group Danone in Britannia’s Industries Ltd. In ‘Economics Times’ referred to as one of the most dramatic co-operate sagas, Pillai hand over to Wadia and Danone after a bitter boardroom struggle. Rajan Pillai went off to the Singapore base after the accusations of defrauding Britannia and died the same year in the ‘Tihar Jail’ in 1995.
Wadia and Danone –
The Wadia’s Investment Company Kalabakan Investments and group Danone had two equal joint venture companies, Wadia and the United Kingdom registered (ABIL) Ltd both together held a 51 per cent stake in Britannia. The ABIH tranche was acquired in 1992, while the controlling stake held by Wadia BNS was acquired in 1995. In case of a deadlock between the partners, Danone was obliged to buy the Wadia BNS stake at fair market value. ABIH had a separate agreement sign in 1992 and was subjected to British law. Wadia wants to be Danone’s as a partner in the food and dairy products business and their JV being existence for over 13 years in India. Wadia group was permitted Danone Group for moving independently into the distribution of imported water bottles and Yogurt JV with Yakult. Under the 1995 JV agreement changed, Danone is prohibited from launching the food brand in India without the concern of the Wadia. In addition, the partner agreed that in the event of another partner wishing to sell its stake or in the future Danone group has a requirement to work with Wadia Group in their businesses in India, and gave Wadia group the first right of refusal. June 2006, Wadia claimed Danone had used the tiger brand to launch biscuits in Bangalore.
In May 2007, Nusli Wadia told the Ministry of commerce and industry, Danone invested in a Bangalore-based bio-nutrition company, Avesthagen. October 2006 in violation of the government press note 1, 2005, which required a foreign company to obtain the content of its India JV partner before pursuing business in the same area including JV, based on technical collaboration. Danone refused that press note 1, did not have a formed technology transfer agreement with Avesthagen, and that its 25 per cent holding in Britannia’s was indirect. Wadia also filed a case in the Bombay high court for a breach of non – competition clause in that connection. The Wadia Group also, In September 2007, the foreign investment promotion brand of India rejected Danone’s claims, then Wadia enters into business in India alone. The long-running legal dispute between Wadia and Danone group, for control of Britannia industry Ltd., is drawing to a close with the two reaching settlement on the issue according to a notice issued by the Wadia group to the NSE. Danone agrees to sell its 25.48 per cent stake in Britannia’s to Leila Lands, which is a Wadi group entity based in maturity, and quit this business. The deal value was 175 million us dollars, with this buy out Wadia holds a major stake of 50.96 per cent.
Britannia Industries Investment highlights-
Britannia Industries Ltd. listed 30% of its Biscuit category shares. Britannia lists the biscuit categories with a market share of 30% in the country. It has a strong biscuit brand like Good day, Tiger, Vita Marie Gold, etc in a faster-growing market. The company is investing 8% of its sell in the advertisement to enhance the brand value and market share, lift towards the premiumization and cause rationalization to have improved the profit margin in the Indian business. It’s witnessing a major shift towards premiumization. Britannia is increasing the sale of a mix of non-biscuit products to improve profitability and diversifying the product portfolio. The company has been increasing its non-biscuits products like Bread, Cake, Dairy products, Poha, Upma, and oats to earn a higher margin.
Britannia Industries Performance and Profitability-
Between 1998 and 2001, Britannia’s sales grew at an annual rate of 16% compared to the market, and operating profit reached 18%. The Britannia has been growing at 27% a year compared to the Industries growth rate of 20 % in the present day. 90% of Britannia’s annual revenue comes from biscuits and the remaining 10% comes from dairy products, Bread, etc. Britannia has an estimated market share of 38 per cent.
Britannia Industries Risks Management –
The small MNC bakery giants entering the Indian biscuit market over the last few years, these unorganized local biscuit manufacturers enter the competition. Britannia’s fighting competition through its new launch is positioned with health and wellness, also it attempts to grow new dairy products, snack categories. The volatility in raw materials cost, wheat, sugar, and milk are the main raw material to the company and the prices have continued to remain volatile. Increasing diesel cost also impacts the distribution coast. The staggering increase in diesel costs during this focal will have a negative impact on the cost of distribution.
Britannia Industries Future Prospective-
The Britannia Future strategies or expansion plans based on ‘One New Market A Year’, are designed for new marketing strategies for every year. Britannia plans to expand through local operations in Africa and South Asia in the coming years. Britannia takes pride in having stayed connected to its tagline, “Eat Healthily, Think Better”.
- Net Sales at Rs 3,403.46 crore in June 2021 down 0.5% from Rs. 3,420.67 crore in June 2020. Quarterly Net Profit at Rs. 389.55 crore in June 2021 down 28.61% from Rs. 545.70 crore in June 2020.
Sharekhan is bullish on Britannia Industries has recommended a buy rating on the stock with a target price of Rs 4200.
The company has planned to invest Rs 94 crore to add two new manufacturing lines that will increase its capacity by 85 per cent from the current 35,000 metric tonnes to 65,000 metric tonnes per annum.
Britannia Industries: Higher cost focus, judicious price increase to support earnings.
Sharekhan is bullish on Britannia Industries has recommended a buy rating on the stock with a target price of Rs 4740 in its research report dated September 21, 2021.
Parent- Wadia Group