Biscuit major Britannia Industries's rural business growing at an astonishing 3 times the rate of urban business this fiscal leading managing director Varun Berry to conclude that 2020 will be the year of rural markets. While Britannia's rural revenue shot up 38-39 per cent in Q1FY21, urban business is growing at a rather modest 12 per cent. As a result, the company registered a 26.7 per cent growth in the first quarter of this fiscal.

"Increased MNREGA spends, reverse migration and with the monsoons headed in the right direction, there has been in a surge in rural consumption," says Berry. The COVID lockdown has resulted in a dramatic rural bounce back not only for Britannia, but for the entire FMCG industry after two-three years of low growth rates. Rural India is also less impacted by the pandemic compared to urban, which has also contributed to higher consumption numbers.

Having built distribution in rural areas over the past 7 years, Berry has helped Britannia ride the wave of uptick in rural demand. "Building distribution in rural India was a priority and that's what we have been doing in the last 7-8 years. That has significantly helped us." When most FMCG companies were struggling with low growth rates through Q1FY20 due to the disruptions created by the lockdown, Britannia has emerged an outlier with a revenue, EBITDA and PAT growth of 26.7 per cent, 81.7 per cent and 105.4 per cent, respectively. Its volumes jumped by 21.5 per cent YoY. Berry says that he enjoys managing crisis situations and when crisis hit, he and his team took to it just as fish takes to water. "It was an amazing experience from the word go, how we went about taking permissions from authorities to operate our factories, the way we dealt with distribution...we realised if things are done well even challenging situations such as these can turn out to be big opportunities."

Meanwhile, Britannia's distributed manufacturing and multiple plants gave it an edge over peers during the lockdown. "Between us and our contract manufacturers, we have got almost 40 plants, so, we were closer to our consumers. Moreover, if one plant shut down, it was just five per cent of our production. Our risks were more spread out and we were able to do much more locally than the rest of the industry," Berry said.

The company also prioritised its product portfolio. It opted for the 80:20 formula, and chose to manufacture only 20 per cent of its SKUs which garnered 80 per cent of the company's revenue. So, it only manufactured popular brands such as Britannia Marie, Nutrichoice, Milk Bikis and Good Day. Even within Good Day, it chose to manufacture only Good Day Butter and Good Day Cashew. It de-prioritised variants such as Choco-Chip, Choco-Nut and Chunkies. It ran its factories for longer hours so that it could increase its efficiency.

"We sided with efficiency over variety which was a prudent call. It also gave us good result from a manufacturing tonnage standpoint," Berry explains. To improve efficiency, the company chose to prioritise Marie over 50:50, as Marie could be produced on the same manufacturing line and it is a more popular brand. "We would take long runs, we would run with the same SKUs for four-five days and that gave us much better efficiency and cost savings. We were able to supply products, may be not variety but we were able to supply the staples across the country."

In fact, biscuit consumption through the lockdown has witnessed a huge spike. With out of home food consumption coming to a halt biscuits as a snacking option has become a huge favourite, and that too healthy biscuits. A recent report by global market intelligence agency, Mintel, says that 63 per cent of Indians during the lockdown have consumed healthy biscuits. While most FMCG companies have complained of consumers down-trading, Berry says that the hasn't seen any form of down-trading in biscuits. "Within food there is definitely down-trading happening. People were eating in fancy restaurants, going to QSRs, all of that has gone away. Biscuits are the most value for money, cheapest snack available. Even if you take our most expensive biscuits, they are much cheaper than any other snack. We are still selling our premium brands, but we are catching our consumers from other categories they were consuming, such as eating out, street food and all of that. I look at down-trading in a slightly broader frame."

With out of home consumption coming to a complete halt, Britannia has also seen a spike in sale of products such as cheese by 60-70 per cent. Categories such as bread and rusk have seen a 100 per cent jump in sales. "When we are not going to restaurants and having idlis and vadas, its good to a make a cheese sandwich and have it at home. Also the ability of our team to get the products reach faster to stores has made this growth possible," says Berry.

Britannia's Q1FY21 growth numbers have surpassed industry expectations. However, does Berry see this growth sustaining in the long term? "Growth might not continue at the same pace, there will be tapering of growth rates as we move towards normal life." He says that till the pandemic eases out, the company will remain cautious and not indulge in any form of innovation or expansion. However, when life returns to normal, Britannia is all set to foray into the African continent. "We are looking at contract packaging in Uganda and Egypt. Both these countries have got alignment with lot of countries around them, so they can export without any duties. We will manufacture in these countries and export to a wider campus."