FMCG major Britannia Industries has sounded an alarm regarding evident signs of an economic slowdown in rural areas. The company posted a 19% year-on-year (YoY) growth in consolidated net profit for the quarter ending in September, reaching Rs 588 crore, surpassing expectations set by ET Now, which had predicted Rs 533 crore.
Britannia’s product portfolio is now more urban-focused, with urban sales outpacing rural sales by about 1.3 times, as indicated in the earnings conference call.
Despite the reported rural slowdown, the company continued to expand its distribution in rural areas. Varun Berry, Vice Chairman & Managing Director of Britannia Industries, commented, “We delivered a good performance in a challenging environment on the back of two years of high inflation. Our potential in rural areas continues to remain high, and, hence, expansion in rural distribution continues.”
Britannia has also implemented price cuts on some of its key brands and stock-keeping units (SKUs), which led to some recovery in market share. However, due to ongoing conflicts in the Middle East and Russia, global commodity prices remain volatile. The company plans to adjust prices once commodity prices stabilize.
“We are closely monitoring the situation and its impact on our business. Our strategy will remain focused on increasing market share while maintaining profitability,” Berry affirmed.
Britannia’s revenue from operations increased by 1.2% to reach Rs 4,433 crore ($532.6 million). However, this figure fell short of analysts’ estimates of Rs 4,543 crore. The FMCG major’s operating margin also increased by 343 basis points to 19.68%.
Managing Director Varun Berry noted that as commodity prices began to soften in the quarter, the competition-initiated pricing activities in certain product categories. In response, Britannia reduced prices on select key brands to enhance its market share.
While there was a slower recovery in rural demand for packaged foods during the quarter due to high food prices, analysts anticipate an uptick in demand in the current quarter, thanks to the delayed festive season.