“If spot prices continue at similar levels for the next 12 months, then an additional 10% year-on-year price hike would be needed for FY23,” he said. The maker of Good Day and Marie biscuits will follow a combination of price hikes, controlled discretionary spends and cost efficiency to tackle inflation.
“Wheat production has been less than expected due to heat and the Ukrainian crisis will impact global wheat supply as well,” he said.
While forward contracts helped it control costs to some extent, it is also looking at grammage cuts that might contribute to the price hike in the year, he said.
Britannia increased market share gap compared to its largest competitor (Parle), and it said it has gained market share from both largest competitors and small players. The company saw 4-5% year-on-year volume growth and about 13% over two years, driven by Tiger crunch, Milk Bikis and milk drinks, the company said during the call.
Berry said more premium products like Good Day and Marie have been introduced in rural markets and this would continue. The biscuit maker reported mid-single digit volume growth amid a rural slowdown and inflationary raw material costs. It already took up pricing by 9-10% during the January-March quarter.
“There are multiple challenges including near term pressure on margins, but we believe the company is well prepared for share gain, also fuelled by out-of-home consumption channels, which have rebounded,” Edelweiss Securities executive director Abneesh Roy said.
The Wadia group company reported 5% increase in consolidated net profit at ₹377.9 crore in the fourth quarter ended March 2022 and total revenue from operations at ₹3,550.5 crore, up 13% from last year.
Analysts added that the pressure on margins could lead to demand unpredictability for the entire FMCG sector.
“We expect Britannia to invest in new categories, however, pressure on core margins is likely. We believe the sector is likely to witness demand uncertainty during periods of high inflation, which is a tough challenge to navigate,” ICICI Securities wrote in a report.
Hindustan Unilever, Nestle, Godrej Consumer Products and Coca-Cola have also said they would have to take up pricing further in the year to maintain their margins and profitability, amid steep cost pressures.
“The Indian FMCG industry witnessed a consumption slowdown over the last few months. The sector continued to be hit hard by higher inflation levels, leading to successive price increases, and impacting volumes,” Parachute hair oil maker Marico said in its quarterly update for the fourth quarter of FY22.