Inflation is here to stay, says Britannia CEO; more price hikes in the works as 3.5% increase falls short

Britannia Industries is preparing for another round of price increases as rising commodity and packaging costs put pressure on margins, with the biscuit maker acknowledging that its latest 3.5% price hike has only partially offset inflation.

Rakshit Hargave, chief executive officer and managing director of Britannia Industries, said the company was working on further price increases to bridge the gap between input cost inflation and consumer pricing, even as it navigates higher costs of wheat flour, palm oil, sugar, milk and packaging.

"Inflation is there to stay," Hargave said during the company's Q2 FY27 earnings call, flagging an increasingly challenging cost environment for the packaged foods industry.

Britannia implemented a 3.5% price increase during the September quarter. However, Hargave said this was insufficient to fully absorb the rise in input costs. "Obviously, the cost inflation is more than that and this only covered part of it. And our attempt with the subsequent increases is to close that gap," he said.

The company is now working on additional pricing actions, which will be rolled out over the coming months.

The challenge of passing on inflation

For Britannia, however, passing on higher costs is not as straightforward as changing prices on a product listing. A significant portion of its biscuit portfolio operates at the ₹5 and ₹10 price points, making price increases particularly sensitive in a price-conscious market.

Hargave said the company relies substantially on shrinkflation, or reducing pack grammage while retaining the existing price point, to implement price increases. This process typically takes one-and-a-half to two months to reach the market.

"Unlike many other companies, actually, where you are able to take the price increase at a much faster rate because you can change the pricing online," he said, explaining why Britannia's pricing actions take longer to reflect in the market.

The pressure is visible across several key raw materials. Wheat flour prices rose 9% sequentially in Q2, although they were marginally lower compared with the year-ago period. Refined palm oil was up 11% quarter-on-quarter and 17% year-on-year, while sugar prices increased 4% sequentially and 6% annually.

Milk emerged as another significant cost pressure, with prices rising 16% year-on-year and 2% over the previous quarter. Hargave said the company had traditionally expected milk prices to ease during India's winter months, but that correction had not materialised so far.

Packaging costs have also become a concern. Laminate prices, which affect the packaging of Britannia's products, increased 7% sequentially and 18% annually. Fuel costs, comprising gas and energy used to operate its ovens, were down compared with the previous quarter but remained 45% higher than a year earlier.

The cost pressures come even as Britannia reported a 16.6% year-on-year increase in revenue from operations to ₹5,542 crore in Q2 FY27. Operating profit grew 8.5%, while profit before tax and profit after tax increased 10.6% and 10.2%, respectively.

The divergence between revenue and operating profit growth underscores the pressure on profitability from rising input costs.

For the first half of FY27, revenue from operations crossed the ₹10,000-crore mark for the first time, reaching ₹10,506 crore, up 13.1% year-on-year. Operating profit grew 10.3%, while profit after tax rose 11.7%.

Despite the cost pressures, Britannia is seeing traction across its businesses. Its adjacency bakery portfolio, including brownies and croissants, grew more than 20%, while its international business returned to double-digit growth following disruptions in the Middle East.

The company is also seeing strong growth in its health-focused portfolio, with NutriChoice Zero recording strong double-digit growth.

For now, the immediate priority remains managing the inflationary environment without compromising its ability to compete at key consumer price points. With further pricing actions in the pipeline, the coming quarters will test how much of the cost burden Britannia can pass on to consumers and how quickly those increases translate into improved margins.