Pre-MBA/MSc Management Programme

University of Bath

RESEARCH PROJECT D:

CASE STUDY ANALYSIS OF

BRITANNIA INDUSTRIES LTD.

By

Boyu Sun (Sunny) 139167241

Daoqin Gao (Dora)

Hezi Zhang (Hezi) 139271799

Worawee Khernamnuai (Wee) 129419279

0

Ya-Chuan Yang (Iris) 139158205

Tutor: Mr. Neil Hicks

Word count: 1,941

1

Abstract

Britannia was the largest bakery manufacture in India. Due to a successful initiative

the company intended to scale up the manufacture, distribution of social products and

sustain the business. Thus, the CEO started to make a policy to develop and expand

the social products. Based upon the movement, we found out the shortcomings

including profit decreased, limited marketing strategy, and potential competitors.

Therefore, the given recommendations were saving costs, cooperation with

government or outsourcing, brand management and improving the quality of products.

2

Table of Contents

Introduction 3

Background 3

Methodology 4

Findings

Internal Environment 5

External Environment 7

Conclusion 9

Limitation and future research 10

Recommendations

Internal Environment 10

External Environment 11

References 13

3

Introduction

Britannia was a bakery manufacture in India. In 2009, the company had started to

supply specially fortified biscuits to small groups of school-going children. The

movement offered the company an awareness of the widespread national problem of

malnutrition and ambition to extend the brand.

However, Vinita Bali, chief executive officer, faced two challenges- how to scale up

the manufacture and distribution of social products, and how to develop the social

product into a sustainable business. In order to overcome the difficulties, Bali made

several important policies. The report analyses those main plans in finance,

marketing, competition and external environment factors.

Background

Established in 1892, Britannia was the largest manufacture of bakery products in

India, with 28-per-cent share of the$3- billion Indian biscuits and bread market. The

company was known for launching variation of existing and new products to cater to

customers. Thus, product innovation leads Britannia stand out among the competitors.

In 2010, the Indian government operated the Middle Meal Scheme, providing cooked

nutrient meal to primary school children, which aimed at combating malnutrition- the

most important problem in Indian even across global. Britannia joined the policy,

offering specially fortified biscuits to children and revealed the importance of social

products. Therefore, the company attempted to scale up the manufacture and

distribution of social products and even develop them into a sustain business.

4

Methodology

Both qualitative and quantitative data were applied to analyse the problems that

Britannia is facing and provide recommendations

The qualitative data including:

Case study from the University of Bath

Online journals

Basic SWOT analysis of Britannia Industries Ltd.

The quantitative data involves:

Financial exhibit and graphs of Britannia

External problems:High requirement;Fierce competition

Internal problems:Financial strategy;Marketing strategy

Britannia

External recommendation:Cooperate with stakeholders;

Outsource;Improve quality;

Keep balance of products;Gain public supports

Internal recommendations:Decrease producing cost;

Brand management

5

Findings

Internal environment

Financial issue

The financial report of Britannia Industries Ltd. between 2007 and 2011 showed that

although the income rate was increasing every year, net profit remained between 3%-

5% (See figure 1). The main reason behind this scheme is high expenses. In 2007, the

total expense is 21,733 million Rupees. Then double in 2011 to 44,829 million Rupees

which is 68% of total expense. Note that the highest expense is raw materials such as

sugar, flour and oil (See figure 2). Not only the cost of material, but cost of labours

and distribution also increased every year because Britannia plans to invest labours in

urban areas which costs high salary rate and expand a large number of new stores

which costs high distribution cost.

Even through Britannia faces the financial problem, they still want to extend the brand

and expand the supply chain. However, Britannia production capacity decreased every

year from 163,500 in 2007 to 152,100 in 2011 which is inconsistence with their

expansion state. According to Freidenfelds (1980), failing to consider production

capacity while expanding the business might lead to operation management issue

which can pull the company to financial crisis. It could be claim that if company

wants to expand the business, it should aware of the financial background and

calculate the financial ability before starting new projects.

6

2007 2008 2009 2010 2011 0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

0

250

500

750

1,000

1,250

1,500

1,750

2,000

22,951

28,096

34,599 38,311

46,700

21,733 25,990

32,817 36,917

44,829

1,551

1,774

1,514

1,030

1,342

Britannia Industries Performance

Income Expense Net profit

Figure 1: Britannia industries performance between 2007 and 2011 (Units: Indian rupees millions)

(Source: Company annual report)

67%7%

7%

6%5%

4%3%

Britannia industries expenses

Cost of materials Advertising and sales promotion

Carriage, freight and distribution Conversion charges

Other operating expense Employee costs

Depreciation and interest

Figure 2: Britannia industries expense in 2011

(Source: Company annual report)

Unit: Indian Rupees Millions

7

Marketing strategies

The trend of Asia-Pacific biscuits market increases every year. The market grew by

3.9% in 2011 and reaches a volume of 1,934.5 million kg (See figure 3). That is a

challenge for Britannia to build a sustainable business in India biscuit market.

However, Indian has a large number of malnutrition. As Gillespie (2003) points out

that India has many manufactures of food and beverage but pregnant woman and

children still suffer from malnutrition. This might be viewed as either a problem or an

opportunity for Britannia’s marketing strategy which did not consider enough to

educate fortified products biscuit and did not offer enough product varieties to Indian

customers.

Year Million kg.

2007 1,659.3

2008 1,724.8

2009 1,791.8

2010 1,861.7

2011 1,934.5

Figure 3: Asia-pacific biscuits market volume between 2007 and 2011

(Source: Marketline)

External environment

Cannot meet the need at the national level

According to the case, in India, there are several limitations for the development and

expansion of social products. The most important reason is the speed of its

implementation cannot meet the need at the national level. There are four aspects

about this problem:

8

Firstly is lack consciousness of malnutrition. Since malnutrition is not infective and

cannot be transmitted, people in India do not have general conscience and

consciousness of malnutrition. Moreover, malnutrition is not only associated with

poverty, but also related to gender, age and other factors.

Secondly is small share in food market. According to the case, the India food and

beverages market was valued at almost $300 billion in 2009, while the health and

wellness food products only accounted for about $725 million. Therefore, there is still

a large demand in the health food market.

The third issue is capacity limitation. Although cooperate with various stakeholders,

such as government agency, the corporate sector and community can improve

productivity and reduce costs, the company needs more upfront investments and

larger business scale.

The last issue is innovator of the health food market. As being the first India biscuits

company, Britannia’s first step in the society food industry has significant influences

on the market and followers, especially the potential risks, for example, how to attract

customers and how to make a strategic marketing plan successfully.

Intense competition

Competition in bakery products was fierce in India, not only coming from local

companies, such as Parle Products, ITC, and Surya foods, but also international

companies, such as GlaxoSmithKline, Kraft Foods as well as Pepsico. These global

companies along with having greater financial resources also have substantially

9

greater marketing and distribution resources. Aggressive marketing and other

competitive action pursued by these large companies, besides innovative products and

price wars by national players, would make it more difficult for Britannia to sustain

its leadership position.

Volatility in raw material prices

The primary materials used by Britannia to produce and manufacture its products are

wheat, sugar, fats and oils. On a global and regional basis, these raw materials are

susceptible to significant price fluctuations due to supply and demand trends,

transportation costs, government regulations and tariffs, changes in currency exchange

rates, price controls, the economic climate, and other unpredictable circumstances.

Conclusion

There is no doubt that fortified biscuits are the solution for the nation-wide

malnutrition even though most people lack the recognition on the importance of this

food. However, if the company cooperate with the government and educate the

customers to know fortified biscuits, it would be a bright future for Britannia to sell

this product while competing with other counterparts. It is possible that Britannia

scale up its business from India to the world and nutritious products could be a

sustainable business based on the large scaled selling.

Limitations and Future Research

Although this report has prepared carefully and achieved most of its aims, there are

10

still some inevitable limitations. First, since most data of this report is based on this

case, the completeness and accuracy of the findings is unavoidably limited. Second,

due to the limited time, this report focus on the qualitative analyses of Britannia’s

marketing strategy and financial issues mostly. In order to provide appropriate

recommendations, a strategic plan about how to scale up Britannia’s social products

successful and how to sustain its business with product development and expansion

should be devised. Additionally, findings and recommendations need more

quantitative and qualitative analyses to provide the reasoned evidences.

Recommendation

Internal environment

To begin with the recommendation for the internal problems, the solution for

problems of this company is also significant for its development in the future.

First of all, saving cost would be a fast way to deal with the financial issues. Britannia

industry could cooperate with the sugar supplier and flour companies to lower the

price of these materials. In addition, to cut the payment on employees, the biscuits

manufacturer may recruit the workers from rural location settings where the salary is

much lower than in the urban area. Moreover, choosing an appropriate location of the

biscuit factory also has an impact on the fee of distribution. More precisely, if the

factory is closed to the school where the students are the targeting market, the time

and the cost on transportation will reduce obviously. As a result, all the cost decrease,

the profit will increase.

11

Having addressed the financial issues, next internal recommendation is about the

solution for the marketing issues. The core of the marketing strategy is the skills on

brand management. As known from the research, the flavour of this kind of fortified

biscuits is limited even though it is really healthy and nutritious. As a consequence,

the department of food producing should explore and experiment new flavour for

meeting the demand of consumers. Except the repeat customers, it is still a large

potential market in the group of who has no recognition of the importance of fortified

biscuits. Therefore, this company should educate the public to know the malnutrition

and to trust the fact that this product is the solution of malnutrition. This educating is

a hard work for only a company due to the large scale and the long term. However, it

would be a social campaign if both the government and the company participate in

this educating. Then, there would be a number of consumers to purchase these

biscuits in a national-wide level.

External environment

As has been indicated in the finds, there are four main problems faced with the

Britannia Industry. It seems to be essential for the company to solve the problems in

order to scale up the business and build the sustainable development. The

recommendation, therefore, is to solve the external and internal problems face with

Britannia Industry.

Initially, the company is likely to benefit greatly from the good relationship with the

stakeholders according to the theory of the stakeholder. The existing cooperation with

12

the government like Integrated Child Development Service and Midday Meal Scheme

are aimed to provide nutritious food for young children and lactating mothers. The

company can also strengthen the relationship with community-oriented organizations.

Furthermore, outsourcing may enlarge their producing capacity immediately as well

as decrease the operational cost. These two methods might be efficient to enable the

implementation to meet the need of the national level.

Then, it is vital for Britannia to gain competitive advantages. There are three ways to

win over the competitors. Firstly, improving quality of the products is an effective

way appeal to more consumers. For example, the company can improve the taste of

the biscuits or add more minerals into the healthy food. Secondly, keep a balance of

the low-price and high-price products. It is shown in the figure 4 that the gross margin

of high-price products is 20 times larger than that of the low-price, therefore, the

company may gain more profits by exploring high-price products. Meanwhile,

appropriate amount of the low-price products and satisfy the low-income consumers,

which might also make Britannia more competitive. Another way to beat the

competitors is to gain more support from the government by conducting projects. It

may enhance the reputation as well.

13

Low-price Brands Mid-price Brands High-price Brands0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

0.08

0.36

1.6

Gross Margin

Figure 4: Britannia industries margins of biscuits and cookies (Units: $ per kg)

(Source: Company files)

14