After moderate performance for a decade (FY03-13), we find the recent changes implemented by new management constructive. The new managements focus on the core business, improving distribution efficiency and cost savings have raised market share (up 130 bps y-o-y to 28% as of February 2014) and margins (OPM up by 284 bps in FY14) with hope of more to come. We believe limited innovation, lack of offering in high growth segments like mid-priced cookies and creams, entry into unrelated categories and international forays were some of the strategic mistakes that slowed down Britannia.
Better targeting of retail outlets, appropriating existing portfolio (price hikes in strong brands) and focus on R&D (likely to launch new products). Expanding depth in the urban region to improve availability and widening its reach in high-growth rural areas should increase market share. Savings across the supply chain have lowered other expense-to-sales 33 bps y-o-y to 10.8% in FY14. Management sees enough opportunity to save costs.