Britannia Industries Plans Price Hike To Offset Rising Input Costs And Protect Margins

"The price hikes will make the margins better, but as I said on the commodity side, the inflation is also a lot bigger than what we'd expected," Berry said

Varun Berry, Managing Director and Vice Chairman of Britannia Industries said, “We're seeing a tough demand scenario in the urban areas coupled with high inflation.” He highlighted this during the company's post-earnings conference call with investors. As a result, Britannia is considering a price increase across its entire product portfolio.

Berry further noted that while value growth in the FMCG sector is declining, input cost inflation continues to rise, creating a challenging operating environment. The company has already implemented a price hike of around 4-5 per cent across its product range to cope with this. However, additional price increases are expected to ensure margin protection, according to a Moneycontrol report.

Berry added that the price hikes will be gradual and will take effect over December and January.

"The price hikes will make the margins better, but as I said on the commodity side, the inflation is also a lot bigger than what we'd expected," he said.   

Talking about the competition, Berry added, "There is inflation in the market. So, in times like this, there will always be a few players who want to drive demand and don't want to take price increases. Then they realise that their entire profit has gone to hell. And hence, they will then take some knee-jerk reactions and go out of the market."

According to Britannia Industries, two key factors are contributing to the slowdown in urban consumption, impacting its earnings for the September quarter.

The first factor is the rise in housing costs, which account for 22 per cent of the Consumer Price Index (CPI) basket in urban areas. "That's creating stress for most consumers in large cities and metro," said Berry. The second factor is the slowdown in wage growth among the non-salaried workforce in urban areas, which has risen by just 3.4 per cent—a rate slower than inflation.

“So, there's stress in almost 51 per cent of the workforce sitting in urban areas. So, that is the double whammy, which is creating a demand shortfall as far as urban and especially metro is concerned,” Berry explained.

The FMCG company reported a consolidated net profit of Rs 531.5 crore for the September quarter, marking a 9.4 per cent decline from Rs 586.5 crore in the same period last year. Revenue from operations stood at Rs 4,667.6 crore, reflecting a 5 per cent increase compared to Rs 4,432.88 crore in the corresponding quarter of the previous financial year.