Britannia Industries Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Britannia navigated an extraordinarily challenging inflation environment in Q3 FY25 with 11% commodity inflation (RPO +43%, cocoa +103%). Despite this, volume growth remained strong at ~6.4%, almost matching revenue growth, as pricing actions were deliberately delayed due to uncertainty on whether inflation was transitory. Management has now committed to cumulative 6-6.5% price increases through Q1 FY26. A Rs 75 crore SAR write-back (due to stock price decline) flattered employee costs this quarter. Cost efficiency program at 2.5% of revenue is on track to beat targets. The company is taking a capex break after commissioning 3 new facilities.

Highlights

  • Revenue grew 6.5% YoY on 12-month basis; volume growth at par with revenue (~6.4%)

  • PAT grew 4.8% YoY; PAT margin at 13%

  • Severe inflation: RPO +43%, cocoa +103%, overall commodity basket ~11%

  • Cumulative 6-6.5% price increase planned across Q3 FY25 to Q1 FY26

  • Cost savings program targeting 2.5% of revenue; on track to beat targets

  • Forward buying saved 2-4% on commodity costs

  • SAR write-back of Rs 75 crores in employee costs (stock price dropped Rs 6,338 to Rs 4,762)

  • Pure Magic Choco Frames (Harry Potter) launched for e-com and modern trade

  • Capex guided at Rs 150-200 crores for FY26 - taking a capex break

Concerns

  • Extreme commodity inflation eroding margins

Key financials

2 periods

Headline

  • 12-month Revenue Growth
    6.5%
  • 24-month Revenue Growth
    8.8%
  • 12-month PAT Growth
    4.8%
  • PAT Margin
    13%
  • Operating Profit Growth
    3%
  • Volume Growth
    6.4%
  • Biscuit Volume Growth
    5.5%
  • Commodity Inflation
    11%
  • RPO Inflation YoY
    43%
  • Cocoa Inflation YoY
    103%
  • Price Increase Taken in Q3
    2%
  • SAR Write-back
    ₹75 Cr
  • Cost Savings Target
    2.5 % of revenue

9M

  • Other Operating Income
    ₹373 Cr

What they filed

Q1 FY27: revenue up 8.2%, net profit up 14.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,668 4,593 4,432 4,622 4,841 +4%4,970 +8%4,719 +6%5,000 +8%
EBITDA780 843 801 752 951 +22%977 +16%834 +4%838 +11%
Net profit532 582 559 520 655 +23%682 +17%680 +22%593 +14%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Pricing

  • Cumulative price increase Pricing · Q3 FY25 through Q1 FY26 · High confidence 6-6.5%
    In Q3 2%. In Q4, it's going to be another 2.5%. And then in Q1... another 1.5%. So cumulatively, it's going to be 6%, 6.5% price increase.

    — Varun Berry

Cost Savings

  • Cost savings as % of revenue Cost Savings · FY25 and FY26 · High confidence 2.5%
    We are again looking at 2.5% for next year, and hopefully even more than that.

    — Varun Berry

Capex

  • Capital expenditure Capex · FY26 · High confidence Rs 150-200 crores
    INR150 crores to INR200 crores is what we'll keep it at, unless there is a volume increase.

    — Varun Berry

Margins

  • Profit from operations margin Margins · FY26 · Medium confidence Current range
    We will stay in the current range, I would say.

    — Varun Berry

People Costs

  • Employee cost growth ratio People Costs · Ongoing · High confidence 0.75x of revenue growth
    If our top line growth is X, our fixed cost growth or our people cost growth should be 0.75X.

    — Varun Berry

Risks & concerns

  • Extreme commodity inflation eroding margins

    high

    RPO +43%, cocoa +103%, flour +4%, overall 11% inflation. Rs 4,000 crores total inflation over 5 years. Price increases only maintain absolute profit, not margins.

    Management taking 6-6.5% price increases + 2.5% cost savings; forward buying providing buffer

  • Inflation-deflation cycles causing pricing whiplash

    medium

    Year started with deflationary expectations; took price cuts then had to reverse. Industry delayed price increases hoping duties would be removed.

    Management now taking decisive action after initial hesitation

  • Market share flat despite volume growth

    medium

    Flattish market share year due to pricing volatility. Local players may have gained during the inflation-deflation cycle.

    Management exit trends positive; expects share recovery with stable pricing

  • Palm oil import duty unlikely to be removed

    medium

    Finance Minister confirmed duties will stay as part of indigenization strategy. Major structural cost increase for the industry.

    Management government wants to indigenize fats; duty permanent

  • SAR-driven employee cost volatility

    low

    Rs 25 Cr in Q1, Rs 50 Cr in Q2, Rs -75 Cr write-back in Q3. Annual impact Rs 50-60 crores but quarterly swings distort results.

    Analyst says it evens out; won't break out separately

Q&A highlights

5 direct
Pricing strategy and inflation management Direct
The 11% inflation in commodities equates itself to 6.5%... it requires 6.5% price increase [for absolute profit maintenance].

Critical distinction: 6.5% price increase maintains absolute profit, not margins. To maintain percentage margins would need 11% increase. Gap being bridged by cost efficiencies.

Asked by Abneesh Roy, Nuvama / Percy Panthaki, IIFL

New competition from Amul, Reliance Direct
We haven't seen any signs of worry at this point in time... brands have always stood their grounds.

Management dismissive of new entrant threat; brands seen as key moat

Asked by Abneesh Roy, Nuvama

E-commerce contribution to adjacencies Direct
For croissant, it's 17%; for cake, it's 9%; for dairy, it's 11%... biscuits is 4%.

First detailed e-com penetration by category; adjacencies significantly more e-com reliant than biscuits

Asked by Abneesh Roy, Nuvama

Focus states contribution and growth Direct
These states basically contributes about 15-odd percent to our overall revenue... growing at about 1.3 to 1.4x... almost 35% contribution to the overall rural category.

Focus states still only 15% of revenue despite years of effort; market share less than half of rest of India

Asked by Tejash Shah, Avendus Spark

Salty snacks strategy Direct
Till we are able to feel absolutely confident of being able to sustain our competitive edge with the large competitors... we will not launch it nationally.

Still in experimental/pilot stage; management cautious about entering against strong competitors

Asked by Latika Chopra, JPMorgan

1 min read 4 chapters

Detailed narrative

Navigating the Inflation Storm

Q3 FY25 saw 11% commodity inflation (RPO +43%, cocoa +103%, flour +4%, corrugated boxes +15%). Forward buying saved 2-4% but couldn't fully offset. Management admitted being late on pricing - started the year expecting deflation, then had to reverse course. Cumulative 6-6.5% price increase planned over 3 quarters (Q3 FY25: 2%, Q4: 2.5%, Q1 FY26: 1.5%). Critical insight: 6.5% price increase maintains absolute profit only; maintaining percentage margins would require 11% - gap to be bridged by 2.5% cost savings.

Volume Growth Resilient Despite Challenges

Volume growth at ~6.4% was almost at par with revenue growth, indicating no real pricing in Q3 (pricing only started during the quarter). Biscuit volume growth at 5.5%, with adjacencies providing the delta. Focus states (Hindi belt) at 15% of revenue, growing 1.3-1.4x rest of India, contributing 35% to rural category. Market share was flat for the year due to pricing volatility.

Innovation and Adjacency Momentum

Multiple launches: Pure Magic Choco Frames (Harry Potter, e-com/MT exclusive), Rs 5 Rusk pack (first ever), triple chocolate Croissant, Winkin' Cow Grow (Rs 20 fortified milk). Full relaunches planned for cake and cheese portfolios. E-com penetration by category: croissant 17%, dairy 11%, cake 9%, biscuits 4%. Salty snacks still in experimental pilot; management won't launch nationally until confident of sustaining competitive edge.

Route-to-Market Transformation

Two-pronged RTM overhaul: (1) E-com capability with data-driven personalized content, (2) Urban retail revamp with 5 elements - leveraging high-potential outlets, upskilling salesmen, upgrading technology, right-sizing service frequency, and increasing feet on street. Currently in pilot with positive results; scaling in Q4 FY25. Urban retail is 1.3x company profitability - the most profitable channel. Also planning rural RTM refresh.

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