Britannia Industries Ltd Management Discussions

(A) INDUSTRY STRUCTURE AND DEVELOPMENT

The food industry was significantly impacted by high commodity prices, rising interest rates and the continuing impact of Russia-Ukraine war during the year. Further, the long-term effects of these factors continue to be felt extensively, giving rise to fears of an impending recession in major economies.

Although commodity prices were volatile and inflation was at unprecedented levels, the post-covid normalisation of economic activities supported growth throughout the year. India was one of the fastest growing economies in the world with robust domestic demand backed by significant investments in infrastructure. During the year, the major challenge confronting the food industry was managing inflation in the cost of key commodities like wheat, milk, sugar, palm oil and crude oil, all of which were trading at multi-year high prices.

Your Company was able to successfully navigate these challenging circumstances and deliver strong performance through focused efforts, robust cost efficiency programs, brand marketing and timely price increases. Prudent procurement decisions also helped your Company to ensure availability and overcome volatility in prices of essential commodities like wheat, sugar and palm oil.

Global warming is also having a significant impact on food availability and the environment in general. In this context, your Company?s decision to place sustainability at the core of its business practices is timely and was based on the conviction that growth is meaningful only if it contributes positively to the environment and society. The sustainability initiatives of your Company have begun to yield positive results and your Company has achieved 100% plastic neutrality and other sustainability goals as detailed in the Business Responsibility and Sustainability Report.

BAKERY BUSINESS

Biscuit

The biscuit category, like many others came under unprecedented inflationary pressure this year. Despite taking category-leading price increases, your Company has managed to stay ahead of the curve by continuing to invest in its brands and ensuring strong execution in a difficult year.

Cake

Growth in the Cake category has revived post-covid after a lull on account of decline in out-of-home consumption. Innovation continues to be driven by value based offerings at affordable price points. Penetration and per capita consumption remain low and this offers your Company a significant opportunity to strengthen its leadership in this category.

Rusk

Growth in the Rusk category, which had peaked during covid, was subdued during the year. There has been significant impact of inflation on this category, which has been managed well by your Company. In addition to expansion of product portfolio, your Company also revamped its base rusk offering.

Bread

Your Company is focused on growing its Bread portfolio as it is perceived as a food staple in many parts of India. With increasing consumer preference for healthy and value added products, this category provides significant opportunities for established players and new entrants.

DAIRY BUSINESS

India continues to lead the world in milk production accounting for -22% of the global production. Within the Indian Dairy Industry, the organized segment, which constitutes about 33 to 34% (by value), has seen faster growth compared to the unorganized segment. The organized dairy industry is likely to witness good revenue growth over the next 5 years, aided by demand for value-added products, steady liquid milk sales and a hike in the retail price. While packaged liquid milk continues to be a key driver of industry growth, a healthy demand and growth is expected in cheese, yogurt and other value added dairy products as well.

ADJACENT BUSINESS Cream Wafers

Wafers is a highly unorganized & fragmented category with a market size of -900 Crores and healthy annual growth. As one of the pioneering brands to enter the space, your Company is well placed to grow rapidly and lead this category on the strength of its brands, innovation and national presence.

Centre - Filled Croissants

Croissant is beginning to witness increased consumer interest and market activity. Consumption patterns are changing owing to lifestyle changes as people are getting exposed to global foods and seeking more convenient packaged food options. Croissant, being a convenient on the go bakery product, has enormous potential for acceptance in the domestic market. This presents an opportunity for your Company to pioneer and actively drive growth in this category making it accessible to the consumers.

Salted Snacks

Savoury snacking is integral to Indian food habits and is therefore, a category of significant interest to your Company. Delightful sensorial experience involving flavour, texture, shapes/formats, colour and mouthfeel drives consumption in this large category. The presence of multiple players, national as well as regional makes it a highly competitive category. Restricted out-of-home movement during covid has impacted the category growth in last few years.

Changing consumer preferences, from unorganised or local to branded products provides a significant opportunity for growth in this category for national players like your Company. Further, it is anticipated that snacks with health & wellness promise will grow faster in the post-covid environment.

International Business

International Business for your Company is primarily focused on Middle East, Americas, Africa, Asia Pacific and SAARC. The presence of large local and international players in these geographies makes the business environment very competitive. There has been an accelerated growth of E-commerce channels especially in GCC, Americas and emerging markets.

(B) BUSINESS STRATEGY

BAKERY BUSINESS

Biscuit

Continue to drive penetration for large, powerful brands: In an attempt to drive frequency of consumption, your Company?s largest biscuit brand Britannia Good Day launched a new campaign aimed at driving relevance for the brand across different consumer cohorts and at different moments in the day. Milk Bikis also launched a new campaign that illustrated the omnipresence of the brand in the state of Tamil Nadu across dayparts and audience segments. Marie Gold continued its growth march with a differential strategy to win in different market clusters while inspiring women across the country to ‘do more and be more? through its annual ‘My Start Up? property.

Launch and scale-up new, unconventional experiences: In its continuous endeavor to provide new experiences to the Indian consumer, your Company launched Biscafe, a thin cracker which is designed as a great accompaniment to coffee. 50 50 Potazos is another experience that?s unconventional and provides the joy of snacking in a potato cracker. NutriChoice launched 3 new products - NutriChoice Seeds, Herbs and Protein Cookies to address the emerging health needs of the post-pandemic Indian consumers.

Marketing transformation in the digital era: Right from consumer listening & trendspotting to engineering end-to-end digital consumer experiences, your Company has made large strides, digitally. Britannia Bourbon and Good Day Chocochip launched 360-degree digital experiences for the Gen-Z audience through connected packaging. The health-seeking Indians were offered expert diet planning advice at their fingertips through an easily accessible chatbot created by NutriChoice in collaboration with Ryan Fernando, the expert celebrity nutritionist. Also, Marie Gold created a digital means for women entrepreneurs to receive crowd funding for their business ventures from consumers of Tamil Nadu.

Cake

Your Company continues to expand its portfolio to ensure competitive play across all relevant categories. While adding premium innovations and evaluating new-to-India formats, your Company will continue to strengthen its core portfolio of slice cake.

Rusk

Your Company has renovated its product recipe and also upgraded its manufacturing capability to continue offering superior taste and quality products at competitive prices to consumers. This will help your Company to further strengthen its consumer base and gain share in this category.

Bread

Your Company has increased its share in the healthier bread portfolio this year and has added many innovative products to the portfolio like Olive Sub and Panini. Your Company will continue to enhance its manufacturing capabilities to make these products available across relevant markets.

Your Company continues to invest in improving its distribution infrastructure and maintains strong position in emerging distribution channels like E-commerce.

DAIRY BUSINESS

Product & Innovation: Your Company?s strategy is to continue its focus on the core brands as well as build a portfolio to cater to various palates and taste preferences. As part of this strategy, your Company entered into a Joint Venture arrangement with Bel SA, renowned French cheese maker, to undertake the development, manufacturing, marketing, distribution, trading and selling etc., of cheese products in India and certain other countries. Your Company also launched premium range of products under Winkin? Cow Brand and invested in aseptic PET drinks technology.

Your Company has incubated the ‘fresh business? through the launch of multiple products viz., Probiotic Dahi, Paneer & Fresh Lassi.

Your Company entered into the ‘non-dairy beverages? business with the launch of ComeAlive Refresh 100% Coconut Water.

Dairy Backend Capabilities: Your Company has started operating its state-of-the-art manufacturing facility at Ranjangaon, which is fully compliant with global standards. It has the infrastructure to function as a multi category dairy plant with capabilities of manufacturing yogurt, ghee, cheddar/processed cheese, skimmed milk powder etc. Milk collection has also been scaled-up to 70,000 litres per day from 3,000 farmers.

Growth through Channel Mix: Scaling up availability is key to meeting the business goals and your Company has improved distribution of Cheese and Winkin? Cow products across traditional channels, while developing E-commerce as a pivotal part of its distribution strategy. Your Company has also leveraged Premium Milkshakes portfolio to further build salience in Modern Trade, E-commerce and Premium Channels.

ADJACENT BUSINESS Cream Wafers

Creme Wafers is one of the fastest growing categories and presents your Company an opportunity to grow substantially in the near future. The consumer acceptance of Treat Creme Wafers accompanied by the launch of Treat Stix has motivated your Company to expand its product range and launch a series of innovations in the market. While your Company continues to focus on front end excellence, robust in- house manufacturing capabilities are also being built up.

Centre - Filled Croissants

Your Company launched Centre-filled Croissants under the brand ‘Treat? in select geographies & trade channels and saw momentum building in the business. Your Company?s strategy is to build awareness of this category among consumers through brand building and take it to national scale. The business also has an exciting portfolio of products lined up for the coming year to give consumers, a further round of choices of their favourite Croissants.

Salted Snacks

This is one of the important categories providing an opportunity of growth for your Company. It intends to leverage the brand ‘Time Pass? and achieve a significant position in this category by innovating and providing differentiated products at competitive prices. At the same time, your Company is exploring possible value added products in emerging premium segments.

INTERNATIONAL BUSINESS

Your Company?s strategy to achieve growth and market share in International Business is to:

a. Strengthen brand equity and affinity for its products among the Indian diaspora to retain its competitive edge over other international players;

b. Offer new product experiences to existing consumers and ethnicity inspired offerings to recruit other nationalities;

c. Establish and grow local operations in fast growing emerging markets through evaluation of available opportunities like contract manufacturing, acquisitions, joint ventures etc;

d. Customize its distribution strategy in Middle East North Africa (MENA) markets to address the dynamic business requirements;

e. Build on the favorable consumer response and growth potential in the export markets in Americas, Asia and Africa that were developed in the past years by intensifying presence in mainstream & E-commerce channels and opening white space markets.

The International Business witnessed good double-digit value growth in GCC and Americas mainly through change in distribution strategy, addition of new markets and innovations. The distribution initiative taken in UAE last year showed a significant improvement in product availability in the market this year. Further, Americas and Asiapac regions delivered consistent performance.

As part of its strategy to expand International Business, your Company commenced its local manufacturing operations in Kenya with the aim to cater Eastern Africa region. Egypt saw an upsurge in revenues through local contract manufacturing operations and your Company further aims to scale up the volumes.

(C) SEGMENT INFORMATION

The primary business segment of your Company is Foods.

(D) OUTLOOK

Despite apprehensions about global recession, businesses in India are still optimistic on demand conditions. The trajectory of inflation during the coming year would depend on a host of domestic and global factors. The outlook for the food prices and rural growth would depend significantly on climatic factors and adequacy of monsoon rainfall.

Milk prices are expected to remain high on account of high input costs and good demand. Prices of other essential inputs like wheat, sugar, edible oil and fuel continue to be subject to high uncertainty. Elowever, it is expected that a good crop would help keep prices in check and strengthen rural demand. The government?s thrust on capital expenditure and private sector manufacturing and service activity should also support income generation and bolster economic activities.

Despite the challenges of inflation, commodity volatility and intense competition, your Company expects to continue its good performance on the strength of its resourceful and hardworking employees, strong brands, innovative products, cost efficiency programs and large distribution network. These factors would continue to fuel further growth and expansion during these turbulent times.

Your Company?s International Business managed to weather the difficult inflationary environment and expand to new geographies during the year. The efforts at building the Brands through localized consumer connect programs, premiumization and differentiation are yielding positive outcomes in International markets. With more initiatives aimed at capitalizing your Company?s differentiated portfolios to grow in existing and emerging markets, the outlook for the International Business remains bright in the coming years.

(E) OPPORTUNITIES AND THREATS

BAKERY BUSINESS

Biscuit

Due to high levels of household penetration in biscuit category, the potential for growth in this category is immense. The per capita consumption of biscuits in India continues to lag behind the levels seen in developed countries. The possibilities for increasing consumption through innovative, healthy and superior offerings in this category are numerous, which augurs well for your Company in view of the established brands and capabilities.

The immediate threat in this category is from the sustained inflation in commodity prices and increasing competition.

Cake

This category is still not as well penetrated as biscuit category and there exists a significant opportunity to expand market share through innovative value added products. High commodity inflation and concentration of innovation at entry level price points remains a primary challenge for the category.

Rusk

This category holds enormous promise and offers opportunities for growth to companies with national presence, due to its fragmented and unorganized nature. The consumer base can be further expanded by offering differentiated products of superior quality at attractive prices.

The possibility of reduced consumption and consumer preference for local players in an inflationary environment is a major threat to this category.

Bread

There are significant opportunities to grow in this category by offering healthy and value added products and expanding in newer geographies. There has been significant consolidation within the category over the last couple of years.

However, increasing competition and continued inflation in key commodities pose challenges to the Company?s business.

DAIRY BUSINESS

This category is expanding with the addition of value added products to meet changing consumer needs and experiences. There is immense potential to leverage technology scale and reach to achieve rapid growth in this industry. The dairy business also has a significant role in furthering your Company?s long term quest to develop sustainable businesses.

The dependencies in milk procurement and manufacturing through co-packers continues to be the major challenge for your Company in this category. To address this, your Company has been leveraging technology through an app to monitor procurement, secure quality and productivity while curbing dependency on co-packers by commissioning a state-of-the-art Dairy Manufacturing facility in Ranjangaon, Maharashtra.

The continuous increase in milk prices as well as the increasing trend in input prices such as labour and raw material also pose major challenges to this business.

ADJACENT BUSINESS Cream Wafers

There is tremendous opportunity for growth in this category due to its fragmented nature, low category penetration and few large competitors. However, competition is also intense with launch of many differentiated and premium products at competitive price points by new entrants from National and International markets. These developments could affect your Company?s efforts at category expansion.

Centre - Filled Croissants

The opportunity in this segment would be to play the leadership role by pioneering an entirely new category within the domestic market by scaling up the business nationally. The new category creation challenge is of spreading awareness & persuading consumers to try the new product. Making Croissant an everyday choice continues to pose hurdles for your Company?s growth in this segment.

Salted Snacks

The mass salted snacks segment witnesses intense competition among leading national and regional players. The established players invest disproportionately in trade incentives, consumer promotions/discounts and advertising to gain market share thereby posing a significant challenge to growth. However, these measures tend to facilitate category expansion in packaged/branded snacks. The Company perceives significant opportunities for growth by leveraging its established brands like Time Pass and innovation in the emerging premium segments.

INTERNATIONAL BUSINESS

International business is fraught with challenges such as middle east oil price shocks, geo-political conflicts, exodus of expatriates, localisation of work force, changes in tariff barriers, exchange rate fluctuations etc. There is an increased emphasis on locally manufactured products in emerging economies.

(F) RISKS AND CONCERNS

The global economy is becoming uncertain due to turmoil in financial markets, geo-political tensions, persistently high inflation and recessionary trends. These factors along with tight global financial conditions, protectionist trade policies and climatic changes due to global warming pose significant risks to growth.

While the Indian economy has exhibited remarkable resilience and growth so far, it may not be immune to a protracted global slowdown or recession in advanced economies.

Interest rate increase and tight money market conditions are expected to moderate the rate of growth in India. Any shortfall in monsoons due to onset of ‘El Nino? conditions as forecasted, would also have a higher impact on rural consumption and the Indian economy as a whole. Availability and prices of input materials like wheat, sugar, milk and edible oil could be affected, thereby posing severe risks to the business growth.

Your Company?s continued performance and growth would depend largely on the effective management of commodity inflation and volume growth while managing price increases in a subdued demand environment.

Consumer sensitivity to price increases in packaged food products, migration to low cost products, intense competition, lower purchasing power and changing consumer preferences could pose challenges to your Company?s future growth prospects.

(G) FINANCIAL AND OPERATIONAL PERFORMANCE The key highlights of the standalone financials are:

(Rs in Crores)

Particulars	2022-23	2021-22
Revenue from Operations	15,618.42	13,371.62
Profit after Tax	2,139.30	1,603.19

(H) SIGNIFICANT FINANCIAL RATIOS

The significant financial ratios are given below:

Particulars		2022-23	2021-22
Net Profit Margin	%	13.5	11.7
Operating Profit	%	16.3	14.4
Margin Debtors Turnover	Times	56.8	57.6
Ratio Stock Turnover Ratio	Times	40.4	43.7
Debt Equity Ratio	%	83.7	90.7
Current Ratio	Times	1.1	0.9
Interest Service	Times	17.9	17.1
Coverage Ratio Return on Net Worth*	%	76.6	56.0

*The change in Return on Net Worth compared to the previous financial year is 37%, basis change in profit and shareholders? funds.

(I) INTERNAL CONTROL SYSTEMS AND ADEQUACY

Your Company?s Internal Control Systems are commensurate with the nature, size and complexity of its business.

The Directors have laid down internal financial controls to be followed by your Company and such policies and procedures have been adopted for ensuring the orderly and efficient conduct of business, adherence to Company?s policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information.

An independent firm carries out the internal audit of your Company and reports its findings to the Audit Committee on a regular basis. Internal Audit provides assurance on functioning and quality of internal controls along with the adequacy and effectiveness through periodic reporting. Internal Risk and Control function also evaluates organizational risk along with the controls required for mitigating those risks.

Your Company has a Code of Business Conduct for all employees and a clearly articulated and internalized delegation of financial authority. These authority levels are periodically reviewed by Management and modifications, if any, are submitted to the Audit Committee and the Board for approval. Your Company also takes prompt action on any violations of the Code of Business Conduct by its employees.

During the year under review, the Internal Financial Control (IFC) Audit was carried out by the Statutory Auditors, the Report of which is forming part of the Annual Report.

0) HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Your Company is committed to create an enabling corporate environment that fosters belongingness, innovation and ownership through its EVP pillars of InviTING, IgniTING, CreaTING and RespecTING. Your Company also received several awards which highlights its dedication to put employees at the forefront and create a culture that encourages and nurtures their growth.

Kincentric Best Employer 2022

Your Company has been awarded the ‘Best Employer 2022? (consecutive 4^th year in a row) as per the Kincentric Best Employer Study, India (2022) thereby recognizing your Company as one of the top 15 best employers in the country. The study was a combination of the engagement sentiment of colleagues in the organization as well as an audit of policies and best practices.

Kincentric Best Employer?s Club 2023

Your Company is one of the top 10 companies in India to be featured in the Kincentric Best Employer?s Club 2023 for its consistent performance as the employer of choice.

The Economic Times Best Organisations for Women Conclave

Your Company has won the The Economic Times Best Organisations for Women Conclave?, powered by FEMINA. This award spotlights and honour businesses that have shown a commitment to advancing diversity and inclusion in corporate India. It celebrates organizations that fosters the best workplace culture for women, empower female employees and are committed to create a gender-equal workplace.

Great Manager Awards, 2022

Your Company has been trying to build an eco-space where the best managerial practices are nurtured and recognized on internal and external platforms. Two Managers from your Company were selected as Great Managers among the top 100 Managers in the country by the Great Managers Awards 2022 (organised in partnership with ET and People Business).

Your Company was also recognized among the Top 50 Companies With Great Managers. Out of 175 participating Companies, your Organization featured in the Top 50, which is a proud moment and prestigious recognition for Britannia.

ffolistic Well-Being

Your Company continuously strive towards enhancing the well-being of its employees through initiatives focused on increasing awareness across the 4 pillars of physical, mental, financial & social well-being. Your Company champions ‘Britannia for Britannians? philosophy through its various initiatives. ^•

• Physical well-being - Sessions focused on recognizing the need for physical activity, preventive medical care through sessions by doctors on various health related topics, medical

concierge desk and several fitness related competitions & sports events.

• Mental well-being - Mindful Monday focused on expert talks/24/7 psychologist on call and employee assistance program to help employees prioritize mental wellness.

• Financial well-being - Awareness sessions on inheritance, investments, tax planning and filing of returns.

• Social well-being - Building relationships not just with the employees but also their family members through parenting tips, career guidance programs and summer and winter camps for the children of colleagues, fondly known as ‘Little B Junior and Senior?.

As on 31 March 2023, your Company had 4,570 permanent employees.

(K) CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Company?s objectives, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to your Company?s operations include raw material availability and prices, cyclical demand and pricing in the Company?s principal markets, competitive actions, disruptions caused by pandemic and natural calamities, changes in government regulations, tax regimes, economic developments in India and in countries in which the Company conduct its business and other incidental factors.