Britannia's 3-point strategy to tackle inflation

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Britannia's 3-point strategy to tackle inflation

Vinita Bali, managing director of the USD 1 billion baker, Britannia Limited has one passion - marketing healthy, but tasty, food to a large group of people.

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Vinita Bali, managing director of the USD 1 billion baker, Britannia Limited is Forbes India Business Woman of the year and one of India's most respected executives. However, in her own words, corporate India should consider themselves lucky that she chose Mumbai over Delhi to do her post graduation studies, because she may have become more of a communist otherwise!

Bali's passion is marketing healthy, but tasty, food to a large group of people. "We have got some wonderful products which are highly fortified and indulgent brands like Pure Magic. So everything is what is relevant for consumers," she said."

Below is an edited transcript of her interview to CNBC-TV18's Senthil Chengalvarayan. Also watch the accompanying videos.

Q: Can companies like Pepsi and the three companies that you have been associated with, Britannia, Coke and Cadbury before that, ever be profitable selling healthy stuff?

A: I think I am passionate about delighting consumers and I am passionate about delighting consumers with wide array of choices. I think we have to look at it from an ordinary perspective. All of us want to indulge at times, we want to eat healthy at other times, we want to binge at other times and I think companies like ours make that wide array of choices possible for consumers.

We have looked at adding what is good in our products and removing what is not good, for example transfat; removing that doesn't do anything to the taste. I think the idea came from going back to what was the slogan for Britannia - Swasth Khao Tan Man Jagao. The moment you start saying that it is a defining statement of who we are and what we do, then it stand to reason to remove what is not good and add what is good.

At the same time, we also believe that we are a food company and we would like to cater to a large diversity of food requirements and choices that people have. So we have got some wonderful products which are highly fortified and we have got indulgent brands like Pure Magic and so on. Everything is what is relevant for consumers.

Q: So you are saying that when you removed transfats, your biscuits got no less tasty?

A: Absolutely not. In fact, one of the things I pride ourselves on is that we know how to make food taste good, whether it's a biscuit, cheese, bread or cake. Our products development people had to work a lot to ensure this.

For example, when you add iron to a biscuit, it has a metallic taste. The big challenge for all of us was how to enrich a biscuit with iron and yet mask the taste of iron. Frankly that is one of the reasons why there is a greater consumption of biscuits fortified with iron than there is for an iron tablet.

Q: So how do you fortify and enrich a biscuit with iron, mask the taste and yet sell it at a price point which is attractive enough to attract customers in a very price inelastic market?

A: It's a challenge, it's a big challenge, but at the same time we must remember that the beauty of working in a country like India is that there are enough consumers at every price point, from the lowest to the highest. The important thing is that the base biscuit that anybody starts with has to be at a price point that people can afford. It has to be accessible and therefore available wherever people are. So that is in a way the entry point.

But there is another very interesting thing that is happening at that price point. Several years ago, if you wanted to consume a biscuit for Rs 5, the only thing that was available was a Glucose biscuit. Today, I can buy cream biscuit for Rs 5, I can buy cookies for Rs 5 and I can buy the plain Glucose biscuit for Rs 5. So I think as consumer tastes have diversified and the challenge for companies like ours has been to create competitiveness from a cost point of view that enables us to deliver that taste proposition at a very affordable price and to diversify our product impact portfolio which is what we have done with something like Nutri Choice.

Q: Is the fortified Tiger any more expensive than the normal Tiger Glucose biscuit?

A: No.

Q: But do you think the consumer will be willing to pay a little more for a product that's better for him?

A: Consumers in India are very smart when it comes to value. When I am buying that biscuit, my preference changes once I know it's fortified. But at Rs 2 price point, I think it's very critical for us to give today's consumers something that they can cherish, something that they can enjoy and something which is actually very good value for them.

When you look at a biscuit, the ingredients that go into making a biscuit are wheat flour, dairy products, sugar etc. So a biscuit gives you energy. In fact when you look at the penetration of biscuits as a category in urban as well as rural India, the penetration is almost 85% of all households in India. The reason for that is that it's great tasting, it's hygienic, it gives energy and if it is enriched with micronutrients, it doesn't get better than that.

Q: Since you mentioned the various ingredients that go with it, I just can't help but ask you, how badly has the increase in the price of ingredients affected you?

A: Very significantly. If you look at the profit pool of the industry, it has industry has actually declined. Take dairy and dairy products - milk this year alone has increased by 26%. I remember about six years ago when I joined this company, we used to buy wheat at a price of about Rs 7.80 per kilogram. That same wheat is in excess of Rs 16 now. Sugar which used to be about Rs 8-9 is about Rs 30. So as an industry we have had to absorb a significant inflation and yet continue to generate more and more delightful as well as healthy products and it hasn't been easy.

Q: But how you have done that because you haven't really increased prices two and threefold?

A: Prices have not gone up two and threefold and prices certainly have not gone up enough to cover the inflation. So from our point of view, there are really three things that we focused on. The first is how we manage our revenue, which is really a question of mix. This is why you see a lot more of a diverse set of products emanating from Britannia, which is sort of our innovation pipeline.

So it's about revenue management, about innovation that is capable of adding new consumption occasions and therefore new value, and the third is cost management. We don't have an option, we have got to do all three to be in business and to be in business profitably.

Q: You'll sold biscuits for a very, very long time and then diversified into dairy products. But it's taken you extremely long by industry standards to come out with snacks. What kept you out of the snack market for so long?

A: Actually I don't agree, and I will tell you why. We are the largest snacking company in India. You define a snack as anything I consume in between main meals, and biscuits are the most often consumed snack in the country. So we have been there and we have been very dominant in that segment.

Q: Let me say savoury snacks.

A: So what you are really talking about is savoury snacks. I think it's a very conventional way of looking at what people are buying and consuming. A biscuit is not a snack, but something savoury is a snack. In India, a samosa is a snack, bhel puri is a snack and pani puri is a snack. So we have got a large snacking basket.

But even within this, you have got sweet biscuits and you have got savoury biscuits. Yes, we have just come up with a whole range of products under the NutriChoice brand name, because it's important for us to deliver something which is differentiated, something which is not just a copycat of something that exists. Also, we want to do it in a manner where we have the competency to do it better than anybody else.

So it's not about chasing every product category, it is about finding the right category that fits in with our competence, with our ability to be able to differentiate and creating a business proposition out of that.