Input costs likely to rise by 5% this year: Britannia

Rural economy is going to change for the better with better monsoon playing, said Varun Berry, MD of Britannia Industries.  Talking on the company's performance, he said: "It has been four quarters of double digit volume growth, where the overall demand situation has not been the greatest." The company's net profit surged 14 percent to Rs 190 crore and sales grew 8 percent to Rs 2,190 crore in the fourth quarter ended March. In an interview to CNBC-TV18, Berry said the company has had tailwinds in its premium product segment growth in the quarter gone by. The demand in the same has picked up, he said. Further, Britannia Industries is looking at a 5 percent inflation in input costs this year, he added. Below is the verbatim transcript of Varun Berry’s interview with Rukmini Rao con CNBC-TV18.Q: Could you take us through your performance in this quarter?A: Robustness to me is the underlying growth is all about volume growth. So, I do think we have had a fairly robust volume growth. It has been four quarters of double digit volume growth. So from that stand point we are good. It has been in a quarter where the overall demand situation has not been the greatest. Frankly, right from the last I would say three years, the demand has been dropping quarter-on-quarter for most fast moving consumer goods (FMCG0 categories and especially for the food categories that we operate in.Unfortunately, the demand situation for the last quarter was lowest single digit. However, I do think it is temporary, I do think that with all the incentives that were declared by the government in the last Budget I do think that the rural economy is certainly going to change for the better. The agricultural economy I do think with the monsoons is going to be in a zone which is going to be a much better than what we have seen in the last two or three years. I am a born optimist, so I am hoping that things will change but considering the situation a robust double digit volume growth and a 28 percent operating profit growth is what we have achieved which is to my mind a pretty good result.Q: What are the challenges that you are foreseeing especially on the input cost side given the fact that we are seeing a price rise in wheat and sugar?A: Input cost commodity prices are going up certainly. We are seeing that happen as we speak. So, we will have to take corrective action. The only good thing is that it is going to be within a certain band. So, we are looking at about a 5 percent inflation may be 5.50 percent during this year. So, price corrections will have to be made to that affect as we move forward. However, I do think it is something which is a reality for every player in this category and not just our category but even other food categories, so it should be possible to make that pricing correction to the affect of 5 percentage. Challenge is not about that, the challenge really is about the demand situation changing. I do think that is the biggest challenge if that changes that could make a big difference to what the optimism in the economy is and how consumers feel about where the country is going etc and that is going to make the big change for us. Q: Also your mix is improving and your margins have largely been held up by your premium products. Want to understand what is your game plan with products mix and how do you look to play this out in FY17? A: We have had a positive tailwind on the premium products growth. We have seen, and not just for us. It is category phenomenon, so the value products have seen a sort of a deceleration while the premium products have seen uplift. That is very interesting because while you see an overall demand slowdown you see a demand pick up in the premium segment which I think is very interesting. So, the consumers today are saying that while we are value conscious we are looking for better products. So, we are looking for a more for less, we are not looking for less for less, don’t give us stripped-down products we are not looking for stripped-down products. We are looking for more but for less. So, it is a very interesting phenomena and I think if you were to look at other categories as well you will see a similar phenomena. If you look at cars you will see a lot more of the Audi’s and the Mercedes and the BMW’s selling those growths are pretty robust while the Nano is where it is. So, I do think that we will have to cater to the way the Indian consumer is thinking and which I think is a great place to be.