Britannia Industries

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Britannia Industries Limited

Type

Public (BSE: 500825) (NSE: BRITANNIA)

Industry

Food

Founded

1892

Headquarters

Kolkata, India

Number of locations

300 stores (2000)

Area served

India

Key people

Nusli Wadia, Chairman Ms. Vinita Bali, Managing Director

Products

Biscuits Tiger, Britannia, milk

Revenue

Rs 3,401.4 crores [$ 746.8 million] (2009-10)

Net income

Rs 116.5 crores [$ 25.58 million] (2009-10)

Owner(s)

Danone, Kalabakan Investments

Parent

Wadia Group, Associated Biscuits Intl. Holdings

Website

www.britannia.co.in

Britannia Industries Limited is an Indian company based in Kolkata that is famous for its Britannia and Tiger brands of biscuit, which are popular throughout the country. Britannia has an estimated 38% market share.[1] The Company's principal activity is the manufacture and sale of biscuits, bread, rusk, cakes and dairy products.
Contents
[hide]

1 History 2 Growth and profitability 3 Business 3.1 Dairy products

3.1.1 Joint venture with New Zealand Dairy 3.2 Biscuits

4 Ownership and relationship between major shareholders 5 See also 6 References 7 External links

[edit]History
The company was established in 1892, with an investment of Rs. 295.[2] Initially, biscuits were manufactured in a small house in central Kolkata. Later, the enterprise was acquired by the Gupta brothers and operated under the name of "V.S. Brothers." In 1918, C.H. Holmes, an English businessman in Kolkata, was taken on as a partner and The Britannia Biscuit Company Limited (BBCo) was launched. The Mumbai factory was set up in 1924 and Peek Freans UK, acquired a controlling interest in BBCo. Biscuits were in big demand during World War II, which gave a boost to the companys sales. The company name finally was changed to the current "Britannia Industries Limited" in 1979. In 1982 Nabisco Brands Inc., USA became a major foreign shareholder.

Kerala businessman K. Rajan Pillai secured control of the group in the late 1980s, becoming known in India as the 'Biscuit King'. In 1993, theWadia Group acquired a stake in ABIL UK, and became an equal partner with Groupe Danone in Britannia Industries Limited. In what The Economic Times referred to as one of [India's] most dramatic corporate sagas,[3] Pillai ceded control to Wadia and Danone after a bitter boardroom struggle,[4] then fled his Singapore base to India in 1995 after accusations of defrauding Britannia, and died the same year in Tihar Jail.[5] With all these inspiring history, Britannia has reached every households of India reaching the top 100 Most Trusted brands listed in The Brand Trust Report by Trust Research Advisory.

[edit]Growth

and profitability

The company is growing at a steady rate, and is currently profitable. Between 1998 and 2001, the company's sales grew at a compound annual rate of 16% against the market, and operating profits reached 18%. More recently, the company has been growing at 27% a year, compared to the industry's growth rate of 20%. At present, 90% of Britannias annual revenue of Rs2,200 crore comes from biscuits.

[edit]Business [edit]Dairy

products

Dairy products contribute close to 10 per cent to Britannia's revenue.[6] Britannia trades and markets dairy products, and its dairy portfolio grew to 47% in 2000-01 and by 30% in 2001-02. Britannia holds an equity stake in Dynamix Dairy and outsources the bulk of its dairy products from its associate. Its main competitors are Nestl India, the National Dairy Development Board (NDDB),and Amul GCMMF)
[7]

[edit]Joint venture with New Zealand Dairy

On 27 October 2001, Britannia announced a joint venture with Fonterra Co-operative Group of New Zealand, an integrated dairy company from procurement of milk to making value-added products such as cheese and buttermilk.[7] Britannia planned to source most of the products from New Zealand, which they would market in India.[6] The joint venture will allow technology transfer to Britannia.[7] Britannia and New Zealand Dairy each holding 49% of the JV, and the remaining 2 per cent held by a strategic investor. Britannia has also tentatively announced that its dairy business would be transferred and run by the joint venture.[7] The authorities' approval to the joint venture obliged the company to start manufacturing facilities of its own. It would not be allowed to trade, except at the wholesale level, thus pitching it in competition with Danone, which had recently established its own dairy business.[7]

[edit]Biscuits
The company's factories have an annual capacity of 433,000 tonnes.[1] The brand names of biscuits include VitaMarieGold, Tiger, Nutrichoice Junior,Good day, 50 50, Treat, Pure Magic,Milk Bikis, Good Morning, Bourbon, Thin Arrowroot, Nice, Little Hearts and many more. Tiger, the mass market brand, realised $150.75 million in sales including exports to countries including the U.S. and Australia, or 20% of Britannia revenues in 2006. The company alleged that Danone has violated its intellectual property rights in the Tiger brand by registering and using Tiger in several countries in 2006 without the consent of the Britannia Board. Managing Director Vinita Bali claims the company found out in 2004 Danone launched the Tiger brand in Indonesia in 1998, and later in Malaysia, Singapore, Pakistan and Egypt when it attempted to register the Tiger trademark in some of these countries.[8] Whilst it was initially reported in December 2006 that agreement had been reached,[9] it was reported in September 2007 that a solution remained elusive.[8] In the meantime since Danone's biscuit business has been taken over by Kraft, the Tiger brand of biscuits in Malaysia has been renamed Kraft TiGER Biscuits beginning September 2008. Britannia initiated legal action against Danone in Singapore in September 2007.[10] The dispute was resolved with Danone paying Rs 220 million to utilise the brand, and Britanniasecuring legitimate right to use the Tiger brand worldwide.[11]

[edit]Ownership

and relationship between major shareholders

The Wadias' Kalabakan Investments and Groupe Danone have two equal joint venture companies, Wadia BSN and UK registered Associated Biscuits International Holdings Ltd., which together hold 51 per cent stake in Britannia.[12] The ABIH tranche was acquired in 1992, while the controlling stake held by Wadia BSN was acquired in 1995. It was agreed that, in case of a deadlock between the partners, Danone is obliged to buy the Wadia BSN stake at a "fair market value". ABIH which has a separate agreement signed in 1992 and is subject to the British law.[12] [13] Wadia was to be Danone's partner in the food and dairy business, and product launches from Groupe Danones were expected but never materialised despite the JV being in existence for over 11 years in India.[12] Under the 1995 joint venture agreement, Danone is prohibited from launching food brands within India without the consent of the Wadias.[14] In addition, the partners agreed there would be the right of first refusal to buy out the remaining partner in the event of the other wishing to sell its holding.
[15]

In May 2007, Nusli Wadia told the Ministry of Commerce and Industry that Danone invested in a Bangalore-based bio nutrition company, Avesthagen, in October 2006 in violation of the government's Press Note 1, 2005, which requires a foreign company to obtain the consent of its Indian joint venture

partner before pursuing an independent business in a similar area, including joint ventures based purely on technical collaboration. Danone argued that Press Note 1 did not apply to it as it did not have a formal technology transfer or trademark agreement with Avesthagen, and that its 25 pct holding in Britannia was indirect.[16] Wadia also filed a case in the Bombay High Court for a breach of a noncompete clause in that connection. The court ordered Danone not to alienate, encumber or sell shares of Avestagen.[17] In September 2007, the Foreign Investment Promotion Board of India rejected Danone's claims that it does not need a non-compete waiver from the Wadias to enter into business in India alone.[18] In June 2006, Wadia claimed Danone had used the Tiger brand to launch biscuits in Bangalore.[15] After a prolonged legal battle, Danone agreed to sell its stake in Britannia and get out of this line of business. Danone will sell its 25.48% stake to Leila Lands, which is a Wadia group entity based in Mauritius. The deal is valued to be at $175200 m. With this buy-out, Wadia's will hold a majority stake of 50.96%.[