Britannia holds back product launches, expects demand revival in 9-12 months

Biscuit giant Britannia Industries has postponed product launches on account of a consumption slowdown in the country, which it said is expected to revive in the next 9-12 months.

“We had a fairly packed calendar. But when we started to see the slowdown, we decided to postpone these launches because we were seeing inefficiencies coming into the system,” managing director Varun Berry told analysts on a call after the company’s second-quarter earnings.

Britannia, which also makes dairy and bakery products, said second-quarter net sales rose 5.88% to Rs 3,022.91 crore during July-September from Rs 2,854.81 crore in the corresponding year-ago quarter.

“We know that rural is growing much slower than urban. There is pain in rural. And it’s important that gets sorted out for the overall growth to come back for every possible FMCG company,” Berry said.

The maker of Good Day and Tiger brand biscuits gets 75% of its revenue from biscuits.

“We are launching new packs but at a slower pace and getting more packs into outlets we’re already present in,” he said.

Rural growth dropped below urban levels for the first time in seven years and the FMCG sector grew 7.3% by value in July-September, down from 16.2% a year earlier, market research firm Nielsen said in a report last month. The quarterly report said while the FMCG market witnessed a resurgence in modern trade, the rural market grew only 5%, which is one-fourth of the 20% clocked in the same period last year.

“The biggest issue is the liquidity crunch in the trade, especially in wholesale channels. Disposable income is under stress, especially in rural markets, while modern trade and e-commerce are doing better,” said Marico managing director Saugata Gupta.

The maker of Parachute hair oil and Saffola edible oils said instead of introducing new products, Marico would focus on improving existing brand strengths.

“While immediate consumer sentiment continues to be weak, along with the liquidity crunch, we expect to stay invested in both innovation and go-to-market,” Gupta said.

Berry said growth was being driven by premium products as financial stress in rural markets continues.

“The mix is moving towards premium. Sales are showing that premium products are doing better than value products. Consumers seem to be cutting back but whenever they’re consuming our products or any other products in the market, they are leaning towards the premium products,” he said.

Britannia Defers Launches

Almost all consumer good companies are focusing on premium products through channels including e-commerce and modern trade to hedge against the rural slowdown, which accounts for about a third of the overall FMCG market. Hindustan Unilever, ITC and Reckitt Benckiser are among those that have rolled out premium products in the detergent, chocolate and car freshener categories, respectively.

The National Council of Applied Economic Research pegged India’s GDP growth at 4.9% for 2019-20, compared with 6.8% in 2018-19. It said India’s economy grew 5% in the first quarter of 2019-20, the slowest in over six years. “On account of the rural slowdown, we are introducing products that are affordable and accessible for rural consumers in the form of low unit price packs,” Dabur chief executive Mohit Malhotra said. The maker of Vatika shampoo and Real juices will continue to add premium products for modern trade and e-commerce, he said.

Hindustan Unilever’s chief financial officer Srinivas Phatak said on an investor call last month that the wholesale and smaller retail trade faced an acute liquidity crunch, on account of which rural markets grew far slower than the urban ones.

Source:- https://retail.economictimes.indiatimes.com/news/food-entertainment/personal-care-pet-supplies-liquor/britannia-holds-back-product-launches-expects-demand-revival-in-9-12-months/72135501