Britannia Industries Ltd., India’s biggest cookie manufacturer, will hike prices by 7% this year.
Amid the Ukraine crisis, the soaring prices are a sign of inflationary pressures that hurt below-par consumers.
The Russia-Ukraine war has led to severe shortages in food supply chains.
The Russian invasion has also caused turbulence in global consumer firms.
However, India’s biggest cookie manufacturer aims to expand across rural India by launching new products.
How far is India’s biggest cookie manufacturer going to expand?
India’s biggest cookie manufacturer Britannia’s next move is potential acquisitions.
With current sales at 70%, Britannia aims to lower cookie sales by 60%.
Furthermore, Britannia will launch new products like croissants and milkshakes while continuing its expansion into rural India.
In addition to contract-packing facilities in Uganda and Egypt, Britannia ambitiously moves towards Africa.
Berry said Africa’s most populous nation already boasts of “a lot of strong players” while looking to venture into Nigeria and Kenya.
While citing typical 30-40% import duties on the continent, Berry said, “Africa is becoming protectionist, so export business doesn’t work any longer.”
“We’re not putting up our own money into those markets yet, we’re looking at contract packing and then distribution – once we get a certain threshold, then we’ll start to look at putting up our own investment.”
What does Britannia’s price hike say about the Indian economy?
The list of products in Britannia’s price hike includes Tiger and Good Day biscuits and a sharp rise in sugar and wheat prices.
In an interview at the company’s HQ in Bengaluru, Managing Director Varun Berry said, “I’ve never seen two years which are as bad.”
“Our first assumption was a 3% inflation this year, which obviously went wrong by a very big margin because of Mr. Putin – unfortunately it’s turning out to be more like 8-9%.”
As per Jefferies research, Britannia is among a handful of exposed local firms.
In India, private consumption accounts for 60%, and a hike in prices will hinder demands.
Mumbai-based Vivek Maheshwari, including Jefferies analysts, stated in a report last week that aggressive price hikes won’t be able to prevent declining margins for companies.
They said, “the timing of input price inflation could not have been worse.”
India’s largest cookie manufacturer is 130 years old and posted a 19% dip in quarterly net income through December.
Berry said, “It’s a price shock for the consumer, while you dilute it to whatever extent by removing grammages from the pack.”
“But consumers are smart, they figure out that this packet is lighter than used to be.”
“So it will have some impact, we’re already seeing an impact with the price increases we got last year.”
As consumer prices ruptured the 6% upper tolerance limit, Bank of India Governor Shaktikanta Das addressed that the central bank revisits the inflation forecast in the April meeting.
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