Earnings Call Transcript - XNSE:BRITANNIA 2026-11-06

Operator

Ladies and gentlemen, good day and welcome to Britannia Industries Limited Q2 and FI27 earning conference call. As a reminder, all participant line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I hand the conference over to Ayush Agarwal, Investor Relations. Thank you and over to you, Ayush.

Aayush Agarwal, Head of Investor Relations

Good morning, everyone. This is Ayush from the Investor Relations team. I welcome you all to the Britannia Earnings Call to discuss the financial results of quarter 2 for financial year 2026-27. Joining us today on this earnings call is our Managing Director and CEO, Mr. Akshay Sargavet, Deputy Managing Director, Mr. N. Venkatraman, Chief Financial Officer, Mr. Ramamurthy Jairaman, Chief Commercial Officer, Sales and Replenishment, Mr. Vipin Katariya, and Chief Manufacturing and Procurement Officer, Mr. Manoj Palli. The analyst deck is uploaded on our website. Before I pass it on to Mr. Rakshas Hargaveh, I would like to draw your attention to the safe harbor statement in the presentation. Over to Mr. Hargaveh with remarks on the performance.

Rakshir Hargave, CEO

So good morning, everybody. And the team at Britannia here is happy to present the quarter two. And the tech is uploaded for all of you. I will go through the tech and post that we can engage in the Q&A. Agenda will be broken into three parts. We will first do the business overview, followed by the strategic priorities, and then we will look at the cost of financial. If we go to the first slide, which is our performance scorecard for Q2 26-27, you will see that we've had a decent quarter. The revenue from operations, the 5542 pros, on a 12-month basis, it grew by 16.6%, and over Q1 27, sequentially, grew by 11.6%, and PAT for Q2 27, It was at 13% of revenue. On a 12-month growth, it was plus 10.2, and versus Q1, it was at 21.9%. We are reasonably healthy now. And if we break that and look at the On a YTT September basis, so here you will see that the revenue from operations for the first time crossed 10,000 crores in the first half, so we were at 10,506 crores, the 12-month growth approximating to 13.1%, and at a PAT level, the H1 was at 12.5% of revenue, while on a 12-month growth period, it was a revenue. We continue to update and share the same strategic priorities, which we had defined earlier this year. So the first pillar being how do we keep building efficiency in sales. The second was on elevating brand experiences with investment. So, I will delve into that. To begin with, if you see how we grew across all channels, which is critical, you will see that the green line is general trade, and the amber line or the orange line is all other channels put together. So, you will see that from Q226, Going ahead, the line is moving upwards to the right. You will see that our GT growth in Q227 is 2.6 that of the full year FY25-26. So, obviously, there is some acceleration in GT, which is welcome because GT is the largest part of our business. And if you see, for example, And we are very happy to say that e-commerce is now trending at close to 7% of our overall content. And the other channels is, you can see that the gap with GT, which is very obvious, because other channels is a mix of modern trade, we have alternate channels, and then we have e-commerce, is trending at a rate which is significantly above GT. Also, we talked about our key states. So, our key states are our so-called heavyweight states, which contribute in terms of larger revenues and larger properties. And here, we see that our key states are also pulling up much better than the earlier year, while the other states, where maybe the agility for opportunity to grow is more, continue. to be faster than our key states. And the good part is both of them are again trending We are sharing something interesting, which we did across the quarter. So, you know, you will see that our NutriChoice portfolio, you know, we've invested a lot in bringing forth the whole range in front of the consumer. So, while NutriChoice is the leader in the healthy biscuits segment, and is also the leader, obviously, in digested, the spread of offering that we have was something that we talked about. And then, obviously, you know, Interesting marketing with our Maki brand, Middle Hearts, where you can see the Korean heart emojis, just sharing this Korean information. And also, something interesting is cheese, where we introduced a good range of flavoured slices, Korean chilli, cheese, herbs, which I will really encourage all of you to taste, because it's a good product and it's doing very well across the shelf. Our adjacency business also grew much faster. So you can see that the adjacency vagary business overall grew at more than 20%. And this obviously imputes brownie, it imputes our coza, it imputes what we call a group of higher growth products. And if you take a look at our dairy business also, Satwan Ghee is drinking very well. And also our milk drink. Our international business also, you know, after the challenges which we had in the last quarter, because of the war happening in the region, because the Middle East is a large part of our business, they covered, and both, you know, the sum total of our Middle East Africa business and the rest of the international, grew in good double digits. Although the cost of operations across the Middle East still remains high, largely driven by costs and freight, where you are having to pay a large premium for transporting goods from the region. Some interesting campaigns. So all of you who are based in Mumbai would have seen the Ganesh Chaturki promotion with Bourbon. And also in Kerala, where cheese dipped as a category is very large, including some of our competition, you know, how do you activate the brand along the way? On ESG, we are consistent. We continue to build a profitable business, but with responsibility. So, the number of women in the factory is at 45%. The Nutrition Foundation, the Britannia Nutrition Foundation, which does very dedicated work across numerous locations, reached close to 5.73 lakh beneficiaries in the first half of the year. And, The renew will likely share in our own plants at 48%, although you would know that there is a capping applied by the government. In terms of, you know, how much renewable electricity you can use, so at 48% I think we are trying to optimize to the best of what we need. Financials lie. You will see that in terms of input costs, it's not been an easy quarter. It's not been an easy quarter for the whole industry. So wheat flour sequentially versus Q1 had a spike at plus 9%. Although if you compare against the previous year in the same period, it's marginally down. But refined palm oil over Q1 was up by 11% sequentially, and over last year was up by 17%. And refined palm oil is affected both by food prices, but also by, you know, the, some shortage of rainfall which is there across the producing markets, also because of some Motel Nino conditions. Sugar, sugar is up versus Q1 by 4%, and over last year by 6%. And you also know that sugar went through a very stormy period during the course of the quarter. And although it has kind of corrected, but obviously it has still remained at a very elevated level. One of the other commodities, you know, which is high and high by a significant margin is milk. So over last year, milk is up by 16% and over the previous quarter up by 2%. We usually see milk prices. We will ease out during the winter period in India, but we don't see that happening as of till now, and as you know, across industry, most of the large dairy companies are also taking price increases to offset. So, it's a challenging period for milk. Laminate is actually one of the most challenging areas for the industry, and also for us, because laminate prices have shorter. So, over the previous quarter, it is up by 7%. We have to watch that very carefully, because it's dominated. And on fuels, and for us it means a mix of gases and LNGs, because all that fuel fires are ovens. So there has been some relief also because of the geopolitical situation where it has come down compared to the... Again, in the same period last year, it is still up by 45%. So you can imagine that the input cost trending is a challenge of sleepings to be managed. If you see the next graph, you know, which we call the Manhattan graph, you will see that the quarter which has just got over at 5542 is distinctively standing apart as the tallest star. And you will see that on a 12-month growth basis, like I said, it's close to 17%. On a 24-month basis, it's 21-10. Also, On a quarter-by-quarter basis, you will see that we have moved upwards, so from 4964. And that's something that we are quite, we believe is commendable. At the same time, if we see the key financial line, which has any way been shared in detail with you when it was uploaded last year, you will see, and here I repeat again, that net sales from hubs grew at 16.6%, operating profit grew at 8.5%. PBT was at 10.6% and PAT was at 10.2%. And if you see the trend that we have posted for Q1, Q2 in the last five years, you will see the profit from operations has done reasonably well. So at 17%, we are better than the previous quarter. Also at a PBT level, we are better than the previous quarter and very much comparable with 4 or 5 of the previous year. Thank you. So, at a P80, better than the previous quarter, and fairly comparable with the years which are there in the... If you look at the first half and see how we fare, you will see that net sales for the year of ITD is at 13.1%. Operating profit at 10.3%, DBT at 12%, and profit after tax at 11.7%. And similarly, if we see the trend line, so profit from operations, the first half at 16.2%. PBT at 16.9 and P80 at 12.5. Again, fairly comparable in the past four years. So that was the small presentation in terms of what we wanted to share with you. And we will be happy to take.

N. Mekka Trumman

Thank you so much.

Operator

Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may please press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

N. Mekka Trumman

First question comes from the line of Mihir Shah with Mamura. Please go ahead.

Mihir Shah, Analyst — Nomura

Sir, good morning. Thank you for taking my question. So first question is actually on the raw metal fund. I just wanted to understand how everyone think about the gross margins in this kind of a scenario, given, you know, most key raw markets are inflationary. Are there any price increases apart from the one that we see in the results of 3.5%? Have you taken any further price increases on that? So, that's what, on the price increases front, and how should one think about the gross margin scenario in the near-coming quarters?

Rakshir Hargave, CEO

Okay. So, morning, Mahit. So, well, if you see the raw material prices, and, you know, we are in the middle of the season, so you have attended other calls also, so you know that the commodity inflation across... Most of the agri-commodities is at an elevated level, and that's a fact. So, like I showed, palm oil is up, and from packaging, you see packaging is up. Flower is also up sequentially against the previous quarter. So, yes, it is a scenario where you are seeing a high level of inflation, and inflation is there to stay. From a pricing point of view, Obviously, you can see that we implemented 3.5% in the quarter which has gone by, and just let me dwell for a minute on the way we do pricing. So a large part of our business, like I've told before, works at Rs.5 and Rs.10, and hence our price increase is slightly different because it takes a bit of time, because a lot of the price increase is what you call a shrinklation, and hence the physical operation. The process of implementing that takes about one and a half to two months. Unlike many other companies, you're able to take the price increase at a much faster rate, because you can change the pricing online and you can do that. So, to your question, yes, three and a half percent came secure. There is more price increase activation, which is in the works, and it will hit you. The course of time that it takes to hit the market, so it is going to come and which is something that we have to do.

Mihir Shah, Analyst — Nomura

Got it, got it. This 3.5% would cover what percentage of cost inflation, or maybe what kind of cost inflation are you seeing? Anything on that, if you can just highlight?

Rakshir Hargave, CEO

So, obviously, the cost inflation is more than what, and this has only covered part of it. And our attempt with the subsequent increases is to close that gap.

Mihir Shah, Analyst — Nomura

Understood. Second question, sir, is on the volume growth trajectory. Optically, if one looks at the volume growth, 13% looks like a way decent set, but it's on a base of minus 3. So on a two-year season, it looks like 5. How should one think about volume growth trajectory from here on, especially with the extinction effect? Will it have a further effect on lowering the volume growth trajectory?

Rakshir Hargave, CEO

So, Mihir, so obviously volume growth at 13% is healthy, and yes, there was a base which was very low. But I think, despite that, I think from a volume point of view, we have done well, because, you know, people have consumed 13% more grammage of biscuits across. Yes, there is going to be some reduction in grammage which is going to happen, so which might have some impact of volume going ahead, but we still are I'm quite confident that our volume growth story is moving well and which is very important in a food business.

Vipin Katariya, Other

May I just to add one more dimension on the transaction. So our transactions are moving in a very healthy trajectory. So basically, it's a good combination of value, volume, and transactions. So more number of packets and more number of biscuits are going to the consumers.

Ramamurthy Jairaman, CFO

Okay.

Mihir Shah, Analyst — Nomura

Thank you. That's encouraging. Wishing you all the best. Thank you.

Operator

Thank you so much. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participants, we request you to kindly limit your question to two questions only per participant. If you have a follow-up question, please rejoin the queue. Our next question comes from the line of Avneesh Roy with Nuama Wealth Management. Please go ahead.

Avneesh Roy, Analyst — Nomura Wealth Management Limited

Congrats. Very good set of numbers. My first question is on competition and market share. And I'm talking about real market share, not the industry market share. If I see, Malkist is very aggressive. So KBC, very high advertising, and that is very expensive advertising. And generally, good presence of Malkist on the mainline media. Yeah. Second, Reliance, of course, very baby steps currently in Biscuit. Cola, they have really disrupted the market. Do you think there is an opportunity for Reliance to do somewhat similar? I know Cola is a very different ballgame altogether. Any comment on Reliance, longer-term impact on Biscuit? Related question. Q3, Q4, and possibly Q1, you did suffer impact of odd pricing from competition. So if you could tell us, are we now back to pre-odd pricing scenario in terms of general presence, general market share? So that is my first question.

Rakshir Hargave, CEO

Okay. So, thanks, Amish. So, basically, you have asked two questions. Let me answer them one by one. So, the first, which relates to competition. So yes, Malkist, you know, has been the inventor of the category where you have the cheese or any other delicacy enclosure between two crackers, and they built the market, and they have been doing well. We responded with our product called Cheese Dipped, which was launched earlier this year, or maybe towards December or January, and Cheese Dipped has also done well. Obviously, we are competing with Malkist in this segment. And this is a small segment of the larger ecosystem of crackers. But yes, competition is fierce. And we also have been able to dent them. And they've also had to come back with a change strategy and have had to increase their investment. So it's a nice game which is going out in the market. But both Britannia and Malkist are there to fight it out. And that always happens in the market. As far as Reliance is concerned, you know, we have to study what they have done. So, they have come with a range of products, basically very similar to all the classical products in the market, and they are starting with Tamil Nadu. Tamil Nadu is a large state for this case, also for us, as you would know. Now... Obviously, the biscuit market is a bit different from the cola market, and our early evaluation is that, obviously, we are being very watchful. We have, obviously, already seen their products and analyzed them. Their disruption of price, which happened in the cola market, as you would know, in the biscuit market, a large part of the market operates at Rs. 5 and Rs. 10. So... The ability to disrupt those two price points in the biscuit market is much more difficult than you can do in a cola market by discounting by rupees 5 or rupees 10. But that said, obviously, Reliance is a very respectable competition, and we will watch carefully, but we also have very, very strong votes and very strong plans to go ahead, and we will see what it happens and how it transpires. On your second question, which was, On the fractional pricing, which was in play in the market last year towards the end of Q2 and to a large extent in Q4, well, that 4.5 rupee price point has, you know, got buried. I think the whole industry, including competition, has migrated to the 5 rupee price point and the 10 rupee price point. And like I said, that migration happened somewhere towards May and June this year. So that is not there in the market. So the four and a half rupee is now only in the base of last year. So going ahead, we don't see anything of that sort happening in the current year.

Avneesh Roy, Analyst — Nomura Wealth Management Limited

Sir, my question is slightly different. No, my question is slightly different. I understand odd pricing was out of the market three months back. My question was, are you able to come back to the same shelf market share? Because in FMCG, once you seek some share, getting back also doesn't start from day one. So that was the question.

Rakshir Hargave, CEO

No, no, no. Obviously, we have regained our shelf space. We have regained and, you know, done better on the shelf.

Avneesh Roy, Analyst — Nomura Wealth Management Limited

So, my second and last question, thank you. Second and last question, quick one. So, in cola, if we see almost 80% to 90% of the portfolio, at least for the listed company, has become zero sugar, no sugar. In biscuit, what can be the opportunity here? Because clearly healthy snacking, people are very, very cognizant whether sugar hai ki no sugar hai. So, if you can tell us what is the current number, what is the difficulty here? Because that will help you to diversify the RM also.

Rakshir Hargave, CEO

So, Amnish, so obviously, if you see… So, we have zero, you have... Nuti Choice Zero, which we have, is growing in very, very strong double digits, upwards of, you know, very strong double digits. So, obviously, as a company, we have a plan to address this opportunity. I think the key is, you know, from a taste level, when you give no added sugar, how do you make the taste much more acceptable and palatable? And I think there, Britannia has done a lot of work. So, in the near future, you will see more variants coming to be able to address that health platform.

Avneesh Roy, Analyst — Nomura Wealth Management Limited

Sure. Thank you. That's all. Thank you.

Operator

Thank you. Our next question comes from the line of Kunal Vora with BNP Paribas. Please go ahead.

Kunal Vora, Analyst — BNP Paribas

Yeah, thanks for the opportunity. Last quarter, you talked about future platforms for healthy stacking and healthy biscuits and including likely protein products. Can you share the timelines and how you're thinking about it? Also, what would it include? Would you stick to your existing categories or would you look at a wider place beyond what you're doing?

Rakshir Hargave, CEO

So Kunal, yes, as you would see in the strategic pillars that we shared earlier this year, one is the future platform, and the future platform includes the health-based products, protein-based products, and you will see them in due course of time. You know, we are obviously in the process of developing that. In the interest of competition, we would not like to give the exact time when we will be able to launch them, but definitely, it is going to come, and we will come in a good way.

Kunal Vora, Analyst — BNP Paribas

Second and last, last one. How is the dairy business doing? And there are new dairies which are coming up. They are focusing mostly on valued products. Are you looking at having a stronger play in those areas? And what are the ingredients that will be required to succeed in that space?

Rakshir Hargave, CEO

Yes, so you know, if you take a look at the dairy business, obviously one of the newer companies has done remarkably well. And I think also from an entrepreneurship point of view, what they have been able to do and put the portfolio is very impressive for all of us to see. And maybe all of us also have to learn something from it. So yes, on our dairy portfolio, the way we look at it is one is our cheese business and the other is the non-cheese business. So, the cheese business is doing better. And, you know, I also showed you some colorful slices, etc. We are also working specifically with some large customers on the cheese business. You will also see more variations on cheese and different formats of cheese consumption that we will come out in due course of time. Also, on the non-cheese dairy business, I think we have two strong verticals which are doing well. One is the drinks business where we have our winking cow sub-brand and we also have our ghee, satvam ghee. Both of them have good traction. But obviously, we are looking at how to expand our non-cheese dairy business into other platforms. And there is a strategy which is being worked out along with execution, which will come in due course of time, because we want to become a more bigger player in dairy with a better value-added portfolio. So, like you rightly said.

Kunal Vora, Analyst — BNP Paribas

That's it for me. Thank you.

Operator

Thank you. Our next question comes from the line of Aditya Soman with CLSA. Please do it.

Aditya Soman, Analyst — CLSA

Yeah, hi. Good morning. So just one question. We are seeing this pickup in general trade. So the question was, is this largely just base effect where obviously last quarter or the base quarter last year we had an impact because of GST, and we are seeing that reversal? Or is there something more sustainable that you're seeing in this GT recovery? Thanks.

Rakshir Hargave, CEO

So, no, I think on the GT recovery, and maybe you're also referring to other organizations who have had a reasonably, you know, the whole season has come with better numbers. So, I will want to make three or four points with this regard. The first part is that on the base effect, yes, September last year was a transition month, and hence, Many of the companies had a bit of a challenge because, you know, you were transitioning from a GST point of view and so did Britannia. But the impact of that on the quarter result at a cumulative quarter level would not be more than at best one and a half to two percent. Okay. So that's a small factor. Secondly, I think the consumption in GT has shown remarkable resilience. And you've been reading it across the other results also. And our observation also is that GT and especially semi-urban GT and rural GT has shown strong consumption. And we say that we see that happening. We even see that happening in the wholesale segment where, you know, the 5 rupee price point has done actually well. So I think it's commendable that. With all what is so-called happening in the external world, the Indian consumer, who majority of that, you know, has GT as the source where they pick up their products, has actually done well. On top of that, I think our own GT execution, which is a combination of sales and our strategy of winning in many Indias and the focus. that we have put on the teams in the states, he is also delivering more results. So it's a combination of these three things which has done well, and maybe I'll request Vipin to add his point onto this because he leads the overall sales system.

Vipin Katariya, Other

Thanks, Raksha. So I think the general trade growth buoyancy is fairly uniform, so basically from opportunity These states. To the mature states, what we see is fairly uniform growth on volume transactions as well as value. Despite the change which is happening in e-com, what we've also seen is that metros and the top 15 cities are also doing decent. I think rural is a very, very strong story for us, and rural, we are a very large business. So the rural consumer... The aspiration is going up, and what we also see is a kind of premiumization happening in semi-urban and rural, which is basically giving us the tailwind. So I think this is pretty much sustainable, and this should give us good results.

Ramamurthy Jairaman, CFO

Thanks for that, and I wish you all a happy dawali.

Operator

Thank you. Our next question comes from the line of Anshu Dayani with Macquarie Capital.

Anshu Dayani, Analyst — Macquarie Capital

Hi, good morning. Congratulations for a great set of numbers, especially on top line. So, just wanted to ask you, one of your peers had highlighted on food inflation from a forward outlook point of view. So, how would you see this in terms of, you know, the recent expansion, particularly in GT, and like you highlighted, that you've seen this come through rural. So, given inflation outlook and commentary from peers, what would your outlook on this be?

Rakshir Hargave, CEO

So, you see, the inflation is there what it is. And from an outlook point of view, you know, we would not want to make a prediction for the future. But like I'm saying that we have to be careful. The Indian consumer is relevant. Biscuit also operates a lot at price points. So, protecting those 5 and 10 rupee price points insulates the biscuit business in some way, as compared to other businesses where actual price points might go down. So, consumers might get a bit less, and you know, last year with GST, they got a bit more. So, I think our kind of business is slightly more secure from a food inflation point of view, from that point, obviously. We have to manage that inflation internally for our P&L much better. But I think from a consumer point of view, that becomes a bit of an advantage. But yes, like we said, food inflation is high. You know, we showed the milk prices. We have never seen a trend where, you know, by October, milk prices will start coming down, but they keep going. So we have to watch. Thank you very much. On top of that, you see, Britannia, if you have been following us in the last many years, we have been… We are very strong in our cost optimization programs and the level of focus and targets that the internal teams take in terms of finding out and discovering new opportunities to cut down costs so that what we pass on to the consumer is the bare minimum is something which obviously continues this year and will continue. So hopefully we will have that edge against competition.

Ramamurthy Jairaman, CFO

With respect to the discipline that the team has put through in the last several years.

N. Mekka Trumman

Thanks, Herrschild. Thank you.

Ramamurthy Jairaman, CFO

Thank you.

Operator

Thank you. Our next question comes from the line of Nihal Mahesh-Sham with HSBC Securities. Please go ahead.