britannia

Britannia Industries Ltd.

Company ProfilePublication Date: 13 Sep 2010

www.datamonitor.comEurope, Middle East & Africa 119 Farringdon Road London EC1R 3DA United Kingdom t: +44 20 7551 9000 f: +44 20 7551 9090 e: [email protected] Americas 245 5th Avenue 4th Floor New York, NY 10016 USA t: +1 212 686 7400 f: +1 212 686 2626 e: [email protected] Asia Pacific Level 46 2 Park Street Sydney, NSW 2000 Australia t: +61 2 8705 6900 f: +61 2 8088 7405 e: [email protected]

Britannia Industries Ltd.

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Britannia Industries Ltd. Datamonitor

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Britannia Industries Ltd.TABLE OF CONTENTS

TABLE OF CONTENTSCompany Overview..............................................................................................4 Key Facts...............................................................................................................4 Business Description...........................................................................................5 History...................................................................................................................7 Key Employees.....................................................................................................9 Key Employee Biographies................................................................................11 Major Products and Services............................................................................13 Revenue Analysis...............................................................................................14 SWOT Analysis...................................................................................................15 Top Competitors.................................................................................................21 Company View.....................................................................................................22 Locations and Subsidiaries...............................................................................26


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Britannia Industries Ltd.Company Overview

COMPANY OVERVIEWBritannia Industries Limited (Britannia) is engaged in the provision of bakery products, including biscuits, bread, rusk and cakes, and dairy products. The company primarily operates in India. The company's products include 50-50, Good Day, Little Hearts, Marie Gold, Milk Bikis, Nice Time, NutriChoice, Pure Magic, Tiger, and Treat. It is headquartered in Kolkata, India and employed about 1,982 people as on March 2009. The company recorded revenues of INR34,212.3 million (approximately $746.5 million) during fiscal year March 2009 (FY2009), an increase of 23.2% over FY2008. The operating profit of the company was INR1,782.4 million (approximately $38.9 million) during FY2009, a decrease of 15.4% compared with FY2008. The net profit was INR1,514.8 million (approximately $33.1 million) in FY2009, a decrease of 14.6% compared with FY2008.

KEY FACTSHead Office Britannia Industries Ltd. 5 1A Hungerford Street Kolkata 700 017 West Bengal IND 91 33 2287 2439 91 33 2287 2501 http://www.britannia.co.in

Phone Fax Web Address

Revenue / turnover 34,212.3 (INR Mn) Financial Year End Employees Bombay Stock Exchange Ticker March 1,982 500825


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Britannia Industries Ltd.Business Description

BUSINESS DESCRIPTIONBritannia, a wholly owned subsidiary of The Bombay Burmah Trading Corporation Limited, is a leading player in the Indian biscuits industry. The company is engaged in the manufacture and distribution of food products primarily comprising of bakery products like biscuits, bread, cakes and toast; and dairy products. The company operates in the Indian and overseas market through its subsidiaries, joint ventures and associates. The companys operations in the country is managed by International Bakery Products Limited, TC Balam, Tamil Nadu; J B Mangharam Foods Private Limited, Gwalior, Madhya Pradesh; Manna Foods Private Limited, Bangalore, Karnataka; Ganges Vally Foods Private Limited, Kolkata, West Bengal; and Sunrise Biscuit Company Private Limited, Guwahati, Assam.. The company markets its biscuit products in India under the brand names of Tiger, Good Day, 50 - 50, Marie Gold, Treat, Milk Bikis, Nutri Choice, Time Pass, Pure Magic, Little Hearts, Nice Time, Bourbon and Greetings. Bread products are sold under the Premium Bakes, white sandwich bread brand. Cake products are sold under the Premium Bakes, Cakes and Rusks brands. The company also offers 'Cup Cakes' in its cakes category. Britannia New Zealand Foods Private Limited (BNZF), the joint venture of Britannia with Fonterra Cooperative Group Limited of New Zealand, markets and sells dairy products comprising cheese, dairy whitener, curd, butter and clarified butter. These products are sold under the Britannia Milkman brand. Daily Bread Gourmet Foods Private Limited (Daily Bread), a wholly owned subsidiary of the company, is engaged in the business of premium bakery products under the brand name Daily Bread. The subsidiary manufactures and retails a range of breads including French bread, Italian breads, Italian white breads, Italian sandwiches, rolls, multi-grains, pastries, bagels and a range of ultra premium health breads. In addition to this, Daily Bread also offers doughnuts, cheesecakes, mousse cakes, fruit cakes, fruit tarts, pastries, brownies, cookies and Belgian pralines and truffles. Deluca, a division of Daily Bread, offers a wide range of gelato, sorbet, gelato cakes, sundaes, and desserts. Besides, the subsidiary operates Daily Brew espresso bars serving a variety of coffee, tea and light snacks. Strategic Food International Co. LLC (SFIC), a 70% subsidiary of Britannia, operates in the Middle East. The subsidiary offers a wide range of biscuits and wafers under the brand name Nutro. Al Sallan Food Industries Company (Al Sallan), a 64.5% subsidiary of the company, also operates in the Middle East. The subsidiary offers a range of cookies, rolls and chocolates under the brand name Bakers Pride. In addition to this, Britannia is also a kea player in the Sri Lankan biscuits market offering products like Milk Bikis, Milk Cream Smileys, Vita Marie Gold, Creams and Cookies.


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Britannia Industries Ltd.Business Description

Besides, the company exports its products to the US, Ghana, Seychelles, Singapore, Oman, Saudi Arabia, United Arab Emirates, Qatar, Bahrain and Kuwait.


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Britannia Industries Ltd.History

HISTORYBritannia was established in Kolkata, India in 1892. The operations of the company were mechanized with the advent of electricity in 1910. The company started using gas ovens in 1921 when imported machineries were introduced in the country. The company took over the biscuit distribution from Parry's in 1975. In 1978 the company became a publicly listed company. In the following year, it was renamed as Britannia Industries Limited. The company's executive office was relocated to Bangalore in 1989. In 1993, Wadia group acquired stake in Associated Biscuits International Holdings (ABIL), UK and became an equal partner with Groupe Danone in Britannia. Britannia introduced its new corporate identity 'Eat Healthy, Think Better'; and launched Tiger Cashew Badam and Cheeker brands of biscuits in 1997. During the same period, the company entered in the dairy market. In 1999, the company introduced Cheeselets product range. The company introduced biscuit brands GD Choco, Time Pass and Vita Marie Gold in 2000; and Rourbon Pocket Packs, Maska Chaska and Vita Marie Gold in 2001. In 2002, Britannia introduced Time Pass Classic Salted, Jim Jam Pocket Packs, Chai Biskoot, Tiger Cream, GD Ginger Nut and Pure Magic. The company established Britannia New Zealand Foods in a joint venture with Fonterra in the same year. The company launched, Treat Duet, a biscuit brand in 2003. In the following year, Britannia's Good Day biscuit added Choconut, a new variety to its range of biscuits. The re-launch of Tiger biscuit was seen in 2005, with the tag line 'Swasth Khao, Tiger Ban Jao'. In the same year Britannia launched Greetings range of premium assorted gift packs; and Britannia 50-50 Pepper Chakkar. In the same year, the company started its new plant in Uttaranchal. In 2006, Britannia acquired Cafe Coffee Day's 50% stake in Daily Bread, a Bangalore-based high-end food retailer. Britannia formed a joint venture with the Khimji Ramdas Group in 2007 and acquired a 70% stake in the Dubai-based Strategic Foods International Co. LLC and 65.4% in the Oman-based Al Sallan Food Industries Co. In the same year, Britannia NutriChoice SugarOut range introduced no added sugar variants. In 2008, Britannia launched NutriChoice 5 Grain, Tiger Banana, Good Day Classic Cookies, low fat curd and renovated its MarieGold brand.


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Britannia Industries Ltd.History

Groupe Danone and Wadia Group concluded their existing joint venture relationship in April 2009. As per the agreement, Danone sold 50% of its interest in ABI Holdings Limited (held through Britannia Brands Limited) to Wadia Group. In September 2009, Britannia launched two new milk variants including Britannia Milk (Toned) and Britannia Slimz Milk. These products are packed in convenient tetra packs which have a shelf life of four months. Also, in the same month, Britannia announced its plans to enter flavored milk mart through milk brand Actimind and also launched vegetarian cakes under the brand name Britannia Veg. In October 2009, Kolkata Port Trust (KoPT) sent a notice to Britannia to vacate the Taratala premises, which the confectioner has been occupying for the past 60-years, following a rent dispute. Further in November 2009, Calcutta High Court asked Britannia to pay INR26 million to KoPT and also ordered the company to issue a bank guarantee of INR40 million in favor of Port Trust in connection with Taratala rent dispute issue. Britannia announced its plans to launch new products in the salted biscuit space in April 2010. In May 2010, the company announced its plans to expand manufacturing capacities in bakery products by setting up two new plants in FY2010. The company added the Milk Bikis Almond Cookies line to its existing Milk Bikis category in June 2010.


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Britannia Industries Ltd.Key Employees

KEY EMPLOYEESNameVinita Bali Nusli Neville Wadia A. K. Hirjee Ajai Puri Avijit Deb Jeh Wadia Keki Dadiseth Nasser Munjee Ness Nusli Wadia Nimesh N. Kampani Pratap Khanna S. S. Kelkar Vijay L. Kelkar Neeraj Chandra Rajesh K. Lal P. Shyam Sunder Alagu Balaraman Atul Sinha Raju Thomas Gautam Banerjee Ashok Kumar Gupta R. K. Agrawal R. S. Subramaniam Anuradha Narasimhan Shalini Degan

Job TitleManaging Director Chairman Director Director Director Director Director Director Director Director Director Director Director

BoardExecutive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board

Compensation42094615 INR

Vice President and Chief Operating Senior Management Officer Vice President and Chief Technology Officer Vice President and Head, Quality Vice President, Human Resources and Process Architect Vice President, New Business Development Chief Financial Officer General Manager, Materials General Manager, Accounts and Planning Supply Chain Director, New Business Development General Manager, Manufacturing, Engineering and Projects Category Director, Health and Wellness Category Director, Delight and Lifestyle Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management


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Britannia Industries Ltd.Key Employees

NameBalaji Reddipalli R. Anand Jehangir Tankariwala Vinod Menon Shridhar Panshikar P. Govindan K. N. Shashikanth Valiveti V. Padmanabham

Job TitleHead Replenishment Business Operations Director General Manager, Human Resources

BoardSenior Management Senior Management Senior Management

Compensation

Head, Britannia New Zealand Foods Senior Management Private Limited National Sales Manager Company Secretary and Head, Legal Corporate Quality Assurance Manager Corporate Manager, Information Systems Senior Management Senior Management Senior Management Senior Management


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Britannia Industries Ltd.Key Employee Biographies

KEY EMPLOYEE BIOGRAPHIESVinita BaliBoard: Executive Board Job Title: Managing Director Since: 2006 Ms. Bali has been the Managing Director at Britannia since 2006. She joined the company as the Chief Executive Officer in 2005. Ms. Bali started her career with Voltas where she pioneered the launch of Rasna soft drink concentrate. In 1980, she joined Cadbury India with responsibilities for Cadburys India, UK, Nigeria and South Africa operations. Ms. Bali had also served on the boards of Cadbury Nigeria and Cadbury South Africa. The Coca Cola Company chose her as its worldwide Marketing Director in 1994 where she was responsible for the worldwide strategy for Coke. While working with Coca Cola; Ms. Bali took over as the Vice President, Marketing for Latin America in 1997 and in 1999 as the President, Andean Division. In 2001, she was appointed as the Vice President, Corporate Strategy. Ms. Bali joined Zyman Group in 2003 as a Managing Principal and Head, Business Strategy.

Neeraj ChandraBoard: Senior Management Job Title: Vice President and Chief Operating Officer Since: 2008 Mr. Chandra has been the Vice President and Chief Operating Officer at Britannia since 2008. He joined the company in 2005 as the Vice President, Marketing, Sales and Innovation. Mr. Chandra began his career with Hindustan Unilever and handled diverse assignments in sales and marketing in a career spanning two decades.

Rajesh K. LalBoard: Senior Management Job Title: Vice President and Chief Technology Officer Since: 2008 Mr. Lal has been the Vice President and Chief Technology Officer at Britannia since 2008. He joined the company as the Vice President and Head, Operations in 2005. Mr. Lal has spent most of his career at Hindustan Unilever in the technical function of setting up and running manufacturing units, managing the supply chain, and working with contract packers in India and Asia.

P. Shyam Sunder


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Britannia Industries Ltd.Key Employee Biographies

Board: Senior Management Job Title: Vice President and Head, Quality Mr. Sunder currently is the Vice President and Head, Quality at Britannia. He has been with the company for over 14 years during which he handled a variety of assignments. Mr. Sunder joined the company in 1991 to establish the Group Internal Audit function. In 1999, he took charge of the Information Systems and subsequently the Logistics functions. Mr. Sunder led several cross functional project teams including SAP implementation and Project Dhruv at the company.

Alagu BalaramanBoard: Senior Management Job Title: Vice President, Human Resources and Process Architect Since: 2008 Mr. Balaraman has been the Vice President, Human Resource and Process Architect at Britannia since 2008. As the founder and head of the IT Strategy practice in PwC India, he has had the opportunity to help leading companies redefine the way they work to deliver better performance. Mr. Balaraman is an alumnus of IIT-Madras and IIM-Calcutta and started his career in Larsen & Turbo. His last assignment was as Executive Vice President, IT and Corporate Development at Godfrey Philips India.

Atul SinhaBoard: Senior Management Job Title: Vice President, New Business Development Since: 2007 Mr. Sinha has been the Vice President, New Business Development at Britannia since 2007. Prior to this he was serving as the Vice President, Marketing and Sales at Agro Tech Foods Limited where he was associated with the successful launch of Sundrop Heart. Before that, as the Associate Director for Oral Care marketing with Colgate Palmolive, Mr. Sinha revived the growth of Colgate with the relaunch of Colgate Dental Cream and other new products. He had also served as the Head, Sales with Reckitt Benckiser.

Raju ThomasBoard: Senior Management Job Title: Chief Financial Officer Since: 2008 Mr. Thomas has been the Chief Financial Officer at Britannia since 2008. Previously, he served Hindustan Unilever in various several financial and commercial roles in the Home and Personal Care, Foods and Animal Feeds businesses.


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Britannia Industries Ltd.Major Products and Services

MAJOR PRODUCTS AND SERVICESBritannia is a producer and distributor of bakery and dairy products. It manufactures, distributes and sells a range of branded products including: List of products: Biscuits Bread Dahi Cakes Cheese Butter Milk Rusk List of selected brands: 50:50 Good Day Little Hearts Milk Bikis MarieGold Maska Chaska NutriChoice Pure Magic Treat Tiger Time Pass Greetings


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Britannia Industries Ltd.Revenue Analysis

REVENUE ANALYSISThe company recorded revenues of INR34,212.3 million (approximately $746.5 million) during fiscal year March 2009 (FY2009), an increase of 23.2% over FY2008. For the FY2009, India, the company's largest geographic market, accounted for a majority of the total revenues. Britannia generates revenues through one business segment: foodsprimarily bakery products and dairy products(100% of the total revenues during FY2009). Revenues by Division During FY2009, the foods segmentbakery products and dairy productsrecorded revenues of INR34,212.3 million (approximately $746.5 million) during fiscal year March 2009 (FY2009), an increase of 23.2% over FY2008. Revenues by Geography India, Britannias largest geographical market, accounted for a majority of the companys revenue in FY2009. The US, Ghana, Seychelles, Singapore, Oman, Saudi Arabia, United Arab Emirates, Qatar, Bahrain and Kuwait accounted for minority of the companys revenue in FY2009.


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Britannia Industries Ltd.SWOT Analysis

SWOT ANALYSISBritannia is one of the leading producer and distributor of bread, snacks and dairy products. The company has a portfolio of top selling food brands. Britannia produces and distributes premium brands such as 50:50, Good Day, Little Hearts, Milk Bikis, MarieGold, Maska Chaska, NutriChoice, Pure Magic, Treat, and Tiger. An extensive portfolio of global brands facilitates customer recall and enhances Britannia's market penetration capabilities. However, intense competition would lead to pricing pressures, thereby decreasing the profitability of the company. Strengths Robust brand portfolio Focus on innovation Strong emphasis on manufacturing operations Dominance in the higher margin non-glucose biscuit segment Opportunities Emerging dairy products market in India Increasing demand for healthy food products Launch of vegetarian line of products Positive outlook for the global biscuit market Weaknesses High dependence on Indian market Weak performance of subsidiaries affecting the companys profitability

Threats Intense competition Taratala rent dispute issue Volatility in raw material prices

Strengths

Robust brand portfolio Britannia has a strong portfolio of top selling food brands. The company's premium brands include 50:50, Good Day, Little Hearts, Milk Bikis, MarieGold, NutriChoice, Pure Magic, Treat, and Tiger. In addition, Britannia brand was rated as 'Top 10 Most Trusted Brands' for the 5th successive year according to a survey conducted by AC Nielsen and The Economic Times. Moreover, Britannia brand was also internationally recognized with its issue on Time Magazine in August 2008. With a wide portfolio of brands and choice of product category, the company is able to differentiate itself in the market, nurture customer loyalty, and reduce its business risk. A strong brand portfolio not only facilitates customer recall but also enhances Britannia's market penetration opportunities. Focus on innovation


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The company has a strong orientation towards product innovation. Through its ability to innovate and extend its brands and products, the company plans to strengthen and sharpen its brands. In FY2009, the company launched egg-less fruit cake under brand name Britannia Veg cake; Treat Chocoz, a new cream range; and new flavors and addition in its fruit cake range. Prior to that, in FY2008, the company introduced several new and renovated offerings in its existing line of Tiger, Good Day, Treat and MarieGold brands. It launched Tiger Banana, fortified Milk Bikis, renovated MarieGold and 5 grain biscuits under the umbrella brand NutriChoice in the same year. Earlier in FY2007, the company launched cream and coconut varieties as a part of its Tiger brand extension. Furthermore, the company expanded its Treat products brand by launching fruit filled soft rolls under Fruit Rollz brand name. Additionally, the company expanded its product line of NutriChoice brand by adding whole-wheat and fiber enhanced biscuits and cream biscuits under the brand names NutriChoice Digestive and NutriChoice SugarOut. The introduction of new brands and innovative product ranges has been one of the strengths of the company and has helped it in retaining its leadership position in the Indian confectionary market. Product innovation adds to strength of the companys power brands and enables it to stay ahead in the competitive market. Strong emphasis on manufacturing operations The company has a strong emphasis on its manufacturing operations to reduce the cost and improve the productivity. It has taken a number of initiatives to improve the productivity through effective application of technology and improved manufacturing processes by switching to lower cost energy alternatives. The emphasis on recycling energy helped the company in reducing the baking fuel consumption by approximately 13%. In addition, over the last four years, the company saved INR1800 million (approximately $39.2 million) by reducing and eliminating wastages through consolidation of its manufacturing operations. The strong emphasis on its manufacturing operations helps the company in reducing the unnecessary cost and thereby improves the productivity and efficiency of its value chain activities. Dominance in the higher margin non-glucose biscuit segment Indian organized biscuit industry has been largely dominated by Britannia and Parle; Britannia being the largest player commanding approximately 38.5% of the market share. The operational strategies of both the companies have however been different. Britannia till now has been a major player in the non-glucose segment while Parle primarily caters to the glucose segment. Britannia offers several premium products such as Good Day, Bourbon, and Treat in the higher margin non-glucose segment. Parle, except for its Hide and Seek brand of biscuits, majorly operates in the lower margin glucose and Marie segment. As per industry estimates, the premium biscuit segment generates a gross margin of 50-55% as compared to a gross margin of 28-30% in case of the glucose segment and 40-42% generated in the mid-priced segment. Britannia having its sales mix of 70% from non-glucose segment and 30% from glucose segment is well positioned to tap the higher margin segment.


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Furthermore, the company can leverage the profitability and cash flow generated from the premium segment to fuel the growth and offset the price-war in other segments. Besides, the changing demographics and improving disposable income coupled with the improving economic condition, increases the potential of growth in premium segment. Additionally, the premium biscuit segments volume growth prospects have improved as a result of heightened focus on smaller packs and innovative products. Britannia with favorable sales mix and brand equity can utilize the opportunity to further its market share.

Weaknesses

High dependence on Indian market In spite of making forays into other international markets, Britannia is still dependent on the Indian market for majority of its revenues. As compared to this, Kraft Foods, the US foods major, is contemplating entry in the Indian biscuits market. Kraft Foods manufacture and markets packaged foods in over 160 countries. Furthermore, the company generates $40,386 million turnover with approximately 47.9% of its revenues being generated from international operations. Britannia on the other hand derives its $746.5 million of revenues specifically from India. In a competitive environment, high dependence on Indian markets not only exposes Britannia to the vulnerability to the local market conditions but also limits the growth opportunities. Besides, the company is also deprived of the economy of scale and benefits which its competitors enjoy because of their global operations. Weak performance of subsidiaries affecting the companys profitability Britannias subsidiaries and joint ventures continue to make losses in FY2009. Among the five Indian subsidiaries engaged in manufacturing, three of them reported net loss in the present fiscal. JB Mangharam Foods Private Limited, Gwalior, Madhya Pradesh; Manna Foods Private Limited, Bangalore, Karnataka; and Sunrise Biscuit Company Private Limited, Guwahati, Assam reported a cumulative net loss of INR46.6 million ($0.1 million) in FY2009. Besides, Daily Bread Gourmet Foods (Daily Bread), a subsidiary of Britannia, has been struggling to break-even. Daily Bread registered a net loss of INR248 million ($5.4 million) in FY2009.The high infrastructure investments in Hyderabad and Delhi operating units were the prime reason for the loss which forced the company to discontinue its operations in these two locations and focus on Bangalore, where the brand has an established presence. Further, Britannia New Zealand Foods Private Limited (BNZF) also registered a net loss of INR35 million ($0.7 million) in 2009. Strategic Food International Co. LLC (SFIC) and Al Sallan Food Industries Company (Al Sallan), the middle east subsidiaries of Britannia, reported net loss of INR269 million ($5.8 million) and INR69 million ($1.5 million) respectively; primarily driven by inflationary rise in commodity prices. On an aggregate basis, the companys various subsidiaries and joint ventures posted a loss of INR438million ($9.5 million) in FY2009. The continued weak performance further could hamper the


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companys profitability and margins which in turn would affect the companys price flexibility ability in the competitive Indian biscuits industry.

Opportunities

Emerging dairy products market in India As per the Datamonitor estimates, Indian dairy market was valued at $4,354.8 million in 2008 and is expected to rise to $7102.5 million by 2014, an increase of 63.1% since 2008. Britannia, apart from biscuits and breads, also markets and sells dairy products comprising cheese, dairy whitener, curd, butter, and clarified butter under the Britannia Milkman brand. Besides, the company is also focusing on the flavored drinks market. With recent launch of TigerZor Choco Milk, a milk-based chocolate drink, the company further enhanced its ActiMind flavored drink portfolio. As per the Datamonitor estimates, flavored milk market is worth $20.1 million as of 2008 and is projected to grow to $36.4 million by 2014, an increase of 81.09% since 2008. The company plans to launch new varieties and products in these two growth segments. The new launches and strong brand equity of Britannia would enable it to target and penetrate the consumer group with ease. This would increase the revenue sources and growth opportunities for the company in the coming fiscals. Increasing demand for healthy food products Consumers worldwide have become more health conscious in recent years. Increasing number of consumers are opting for natural, fat-free and healthy food products. Food items containing trans-fat are losing market share as they are linked to cardiovascular diseases. The primary drivers for this trend are changing lifestyles, late marriages, increase in single-parent households, increase in number of homes with two working parents, and increased working hours. Britannia offers a range of low-fat and sugar free products such as NutriChoice Digestive and NutriChoice SugarOut'. NutriChoice SugarOut is the first biscuit without added sugar, in the Indian market. The company sells roughly 50% of its biscuits fortified with vitamins and micro-nutrients. Besides, the company decided to relinquish the use of trans-fats from its baked products range. With a strong emphasis on healthy foods, the company is likely to benefit from the increasing health food market. Launch of vegetarian line of products The company launched egg-less fruit cake in 2009 under brand name Britannia Veg. The company is planning to increase its vegetarian product portfolio by 15-20% considering the fact that one-third the population in India is vegetarian and hence the potential demand associated with it. In addition, the company established a separate factory in Delhi to manufacture the egg-less cake products with special emphasis on states like Punjab, Rajasthan, Uttar Pradesh and Gujarat that have higher proportion of vegetarian populations. The launch of similar products by the company, hence, will help in attracting consumers in the vegetarian market segment and in turn could enhance revenues of the company.


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Positive outlook for the global biscuit market The biscuit market is witnessing phenomenal growth globally. The global biscuits market grew by 3% in FY2008 to reach a value of $35.2 billion and by FY2013; global biscuits market is forecasted to have a value of $41 billion, an increase of 16.6% since FY2008. The company offers various biscuit brands including Tiger, Good Day, 50 - 50, Marie Gold, Treat, Milk Bikis, Nutri Choice, Time Pass, Pure Magic, Little Hearts, Nice Time, Vita Marie Gold and Greetings. The companys quality and brand value, besides the experience of doing business in the competitive Indian biscuit industry, could be leveraged to expand in other emerging economies. The international expansion would not only add to the revenue growth, but also will provide the much needed economy of scale to fight the cash strengths of competitors like ITC and Kraft Foods.

Threats

Intense competition The company faces intense competition with local and international companies in its primary food business segment. Parle Products, ITC, Surya Foods and other local players are challenging the companys leadership position in India. Besides, the entry of PepsiCo in the Indian biscuit market with the launch of Aliva brand, has intensified the competition. Furthermore, the acquisition of Cadbury by Kraft Foods in 2009 has opened up the avenues for the worlds largest food giant to enter the lucrative Indian biscuit market. Kraft is banking on the premium brand value of Cadbury and its distribution strength to launch its biscuits, chocolate and snacks brands in India. Kraft, with turnover of $40,386 million in FY2009, and Pepsico, with $43,232 turnover in 2009, enjoys competitive advantage in term of cash and financial strength over Britannia. These global companies along with having greater financial resources, also have substantially greater marketing and distribution resources. Aggressive marketing and other competitive action pursued by these large companies, besides innovative products and price wars by national players, would make it more difficult for Britannia to sustain its leadership position. Taratala rent dispute issue Kolkata Port Trust (KoPT) has issued a notice to Britannia in October 2009 to vacate its manufacturing plant in Taratala premise which was leased to the company for period of 60 years. The KoPT which owns the land also asked Britannia to pay leasing rent of INR13 crores which is due since 1997 owing to non-acceptance of rent revision as per the lease agreement. Later on, the company has moved the petition to Calcutta High Court which has ordered the company to pay INR2.6 crores to KoPT and also issue a bank guarantee of INR4 crores in favor of Port Trust to get the stay order. Britannia carries out its manufacturing, planning, logistics and sales operations for the eastern region in Taratala premise and it could have adverse affect on its manufacturing operations if it had to vacate the premises.


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Volatility in raw material prices The primary materials used by the company to produce and manufacture its products are wheat, sugar and vegetable oils. Wheat constitutes 46% of the companys raw material costs, sugar 23% and vegetable oils 20%. On a global and regional basis, these raw materials and components are susceptible to significant price fluctuations due to supply and demand trends, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, the economic climate, and other unforeseen circumstances. The higher wheat and sugar prices in 2009 affected the companys cost of raw materials which rose from INR1.5 million ($0.03 million) in FY2008 to INR1.9 million ($0.04 million) in FY2009, reflecting an increase of 26.7%. Since the wheat and sugar production depends upon monsoon, an unfavorable monsoon in FY2010 would affect the supply of these crops, thus pressurizing the already steep prices of the input prices. Moreover, India imports majority of its vegetable oils consumption, exposing the prices to the exchange rate fluctuations. Any adverse volatility in the raw material prices or exchange rates, could materially affect the company's profits.


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Britannia Industries Ltd.Top Competitors

TOP COMPETITORS

The following companies are the major competitors of Britannia Industries Ltd.

Nestle India Ltd Parle Products Pvt. Ltd. ITC Limited SURYA FOOD & AGRO LIMITED GlaxoSmithKline Consumer Healthcare Ltd


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Britannia Industries Ltd.Company View

COMPANY VIEWA statement by Nulsi N. Wadia, Chairman of Britannia on behalf of its Board of Directors is given below. The statement has been taken from the company's annual report for the year 2009. Overview of Company Performance In a year of economic & market uncertainty your Company added Rs. 5,281 MM to the net turnover and achieved a sales growth of 20.4%. Profit from operations increased 13.5%. Net Profit for the year at Rs. 1,804 MM, was achieved in the context of another year of high commodity inflation, especially wheat flour, sugar & laminates, taking the operating margin to 7.3% in 2008-09. Net Cash Flow from operating activities for the year was Rs. 2,468 MM compared with Rs. 631 MM in the previous year. Consistent with your Companys priority of investing for growth, Capex for the year was Rs. 678 MM compared with Rs. 666 MM in the previous year. Exceptional items for the year include Rs. 249 MM towards amortization of VRS costs, Rs. 390 MM towards provision for doubtful advances to a subsidiary, Rs. 205 MM towards write back of previous years liabilities no longer required and Rs. 228 MM towards capital receipt for settlement of litigation with Groupe Danone. Earnings per Share are Rs. 75.51 compared with Rs. 79.95 last year. The tables below show trends in performance across key parameters: In retrospect, 2008-09 was a mixed year, characterized by continual and high commodity inflation and a slow-down in GDP and disposable income growth in the 2nd half of the year. This impacted your Companys growth, reducing it to 17.2% as compared to 24% in the 1st half. Market and consumer sentiment were partly affected by the global economic crisis and partly by a reduction in market liquidity, especially with organized trade, making consumers more cautious & discerning. In this scenario, your company fortified its strategy of investing in its 6 Power Brands, added a 7th, and simultaneously restructured operations. Over the last 4 years, your Company has taken Rs. 1,800 MM of cost out of the system. This has been achieved by consolidating operations where relevant, optimizing manufacturing units, reducing complexity and eliminating wastages in the value chain. Additionally, your Company continued to sharpen its consumer & customer insight to identify new sources of growth and profitable revenue generation. This resulted in initiatives to energize power brands and open up new consumption occasions & opportunities. As an example, the on-the-go consumption opportunity has led to the successful launch of brands and packages, conveniently priced at Rs. 5/- for personal consumption. Once again, consumers voted brand Britannia among the Top 10 Most Trusted Brands across all categories for the 5th successive year in an independent survey conducted by AC Nielsen and The Economic Times. Britannia was rated as the 2nd Most Trusted Food Brand and the 7th Most Trusted Brand across all categories in 2008. The value of the Britannia brand was also recognized internationally with Time Magazine in its issue of 17 August 2008, quoting the collaborative


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partnerships that Britannia has created in the nutrition space, as one of 8 examples of creative capitalism from around the world. Your Company extended its international footprint with exports more than doubling to Rs. 555 MM. Further, operations in Sri Lanka commenced with a select range of Power Brands, which have had a positive response from both consumers & trade. Dividend The Board of Directors declared an interim dividend of 400% on the paid up equity share capital of the Company for the financial year 2008-09, which works out to Rs. 40 per share. The Directors further decided not to recommend a final dividend for the year. The total payout will amount to Rs.1,118 MM including dividend distribution tax of Rs. 162 MM Brands Your Company believes that its business is brands. Therefore, the right and adequate investment in brands is a key priority. This investment includes everything that the Company does to gain consumer insights and convert those into meaningful and differentiated propositions that delight & satisfy consumers and create value for all other stakeholders. During the year, investment in Advertisement & Sales Promotion increased by 17.5% and together with the renovation & innovation efforts across the portfolio, resulted in a healthy double digit growth of 20.1%. Your Company further streamlined and strengthened its marketing approach across the two portfolios of delight and lifestyle brands like Good Day, Treat, 50-50, Pure Magic, etc., and health and nutrition brands like Tiger, Milk Bikis & MarieGold. A 7th new Power Brand was added to the Companys portfolio with the launch of NutriChoice 5 Grain, which created a meaningful stake in the health and nutrition space. A large number of initiatives were taken to fortify the health and nutrition aspect of the Companys portfolio and in that respect, as stated last year, your Company made the responsible decision of removing transfat from its entire portfolio of biscuits, the only Company in India to have done this. Consequently, a total of 8,500 T of transfat was removed. To further strengthen the health & nutrition benefit, several key brands were fortified with essential micro-nutrients and today 50% of your Companys biscuit & bread portfolio is fortified. Several new and renovated offerings were introduced across Power Brands and these include Tiger Creams in a new recipe, packaging and a wider choice of flavours; Berry Cherry cake; specialty breads like cheese garlic bread, multi grain bread, etc. With a view to increasing the accessibility and affordability of its brands, a number of new packs and price points were introduced to target new consumption opportunities both in-home and outofhome.


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To extend the relevance and synergy of its bakery and dairy portfolio, your Company consolidated customer service in Modern Trade and other large key accounts. This enabled the sales team to focus on these channels, create a differentiated approach and improve service levels. Manufacturing Operations The emphasis in manufacturing continued to be on creating a responsive and cost effective supply chain. A large number of initiatives were rolled out to improve productivity through effective application of technology and improved manufacturing processes as well as switching to lower cost energy options. The emphasis on recycling energy resulted in reducing baking fuel consumption by approximately 13%. Technology improvement projects were replicated, following successful pilots, across locations to secure cost and quality advantages. Production at Uttarakhand factory crossed 5000 Tonnes / month and overall costs reduced due to efficiency and productivity improvements in manufacturing. Capacity was augmented across categories to meet market place demand. During the year, your Company also set up new manufacturing facilities for cake & toast, in line with the growing demand for these products. Quality Standards Your Company believes in continually striving for a higher and better level of quality not just in its products and packs, but also in its operations. A key plank of quality assurance is the ongoing quality training that is imparted across the system to employees, contract packers and vendors that your Company deals with on an ongoing basis. Corporate Social Responsibility Building on the success of the GAIN and Naandi Foundation partnerships, your Company collaborated with other NGOs like the Navjyoti Foundation to supply iron fortified Tiger biscuits for children in order to supplement their nutrition needs. It also continued to partner with the UNWFP (United Nations World Food Program) to supply customized biscuits to at risk populations across countries. Pension In respect of the notice received from the Commissioner of Income Tax (CIT), Kolkata in April 2007, to the Company's Covenanted Staff Pension Fund, asking it to show cause, why recognition granted to the Fund should not be withdrawn, for refunding in the year 2004, the excess contribution of Rs.121.199 MM received by it in earlier years, the Hon'ble Supreme Court of India has directed the Single Judge of the Hon'ble Calcutta High Court to hear the same. Acknowledgements


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The Directors would like to thank all stakeholders, namely, customers, shareholders, dealers, suppliers, bankers, employees and all other business associates for the continuous support given by them to the Company and its management.


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Britannia Industries Ltd.Locations and Subsidiaries

LOCATIONS AND SUBSIDIARIESHead OfficeBritannia Industries Ltd. 5 1A Hungerford Street Kolkata 700 017 West Bengal IND P:91 33 2287 2439 F:91 33 2287 2501 http://www.britannia.co.in

Other Locations and SubsidiariesBritannia Industries (Bangalore) Britannia Gardens Airport Road Vimanapura Bangalore 560 017 IND Britannia Industries (Mumbai) Neville House 1st Floor Currimbhoy Road Ballard Estate Mumbai 400 001 Maharashtra IND Britannia Industries (Chennai) Research and Development 191 MCH road Padi Chennai 600 050 Tamil Nadu IND Britannia Industries (Kolkata) 15 Taratola Road Kolkata 700 088 West Bengal IND


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