Britannia braces for higher costs with price increases, grammage reduction strategy

Britannia Industries is preparing to raise prices selectively and shrink pack sizes as rising fuel, packaging and freight costs linked to the West Asia crisis begin to weigh on the company’s margins.

The biscuit maker said geopolitical disruptions, including the closure of the Strait of Hormuz, have sharply increased costs across parts of its supply chain, even as exports and international business came under pressure during the March quarter.

“To manage the crisis at West Asia, we have moved our manufacturing to Mundra,” managing director and chief executive officer Rakshit Hargave said during the company’s analyst call on Friday.

The maker of brands such as Good Day, Marie Gold, Milk Bikis and Tiger said it is facing nearly 20% inflation in fuel and packaging costs due to geopolitical disruptions and global supply chain challenges.

“Yes, selectively we will have to take price increases. And this includes both grammage adjustment and some of the packs which are above ₹10, some kind of a price increase,” Hargave said.

The company indicated that price hikes will be implemented through a combination of smaller pack sizes at existing price points and direct increases in prices of larger packs.

While wheat, one of Britannia’s key raw materials, has remained “a bit deflationary”, other inputs have become sharply more expensive. Hargave said fuel costs have turned “highly inflationary”, while laminates used for packaging have also become costlier because of disruptions arising from the conflict involving Iran.

“Palm oil is also higher, although we are covered, but we know that palm oil has a connection with fuel prices. Sugar is more or less normal,” he said.

Fuel inflation has emerged as another major concern for the company’s manufacturing operations. “We use LPG, we use PNG, and the inflation of that is openly available in the market, which is also what we are having to pay,” Hargave added.

Britannia also reported an impact on exports during the quarter because of the Strait of Hormuz disruption. According to the company’s investor presentation, its international business revenues and profitability were affected in the March quarter due to vessel unavailability and slowing demand. The company also faced a significant increase in fuel costs and ocean freight rates.

To counter the impact, Britannia said it is initiating calibrated price increases from the first quarter of FY27 and optimising sourcing between India and international manufacturing facilities for key markets. The company expects these sourcing adjustments to be fully operational by mid-May.

At the same time, Britannia said there had been no material disruption to production operations at its India manufacturing facilities due to industrial fuel supply constraints. It is also accelerating cost optimisation and efficiency initiatives across the business.

Despite the near-term pressures, Hargave expressed confidence about recovery in the current quarter. “So, we are quite confident that we will do better this quarter,” he said.