Britannia's Milkman turns into a cash cow again

Britannia's Milkman turns into a cash cow again

Author | Source: The Economic Times | Tuesday, Apr 18,2006 7:02 AM

Britannia's Milkman turns into a cash cow again

The Milkman is opening the profit books finally. A major revamp lasting nearly two years has brought Britannia's dairy joint venture with Fonterra of New Zealand into the cash positive zone, and pushing for 20%-plus annualised growth.

The restructuring - on account of a crisis-ridden liquid milk operations - led to Britannia exiting the same to stay focused on milk derivative portfolio such as cheese, butter, ghee and dairy whitener under the Milkman brand. The pruning exercise also saw the equal JV limiting its operations to 230 cities and towns, down from 400-odd, and almost halving the employee strength to 115, which include 60 outsourced staff.

The result: In '05-06, the free fall in topline revenue on account of the restructuring was reversed as it clawed back to approximately Rs 120-125 crore from Rs 100-105 crore in the previous financial year. The JV had reported a turnover in excess of Rs 250 crore before the crisis-driven restructuring forced drastic scaling down of operations.

“We ended '05-06 on a firmly cash positive note. We turned it around in the previous fiscal ('04-05) on the back of restructuring, and consolidated on that last year,” Anupam Dutta, head of Britannia New Zealand Foods, the JV, told ET. But the JV needs to wait for the net profit as it requires to do away with accumulated losses, since inception in '02.

The company's main markets like Kolkata, Chennai and Bangalore have seen monthly business volume jump by 1.7 to two times without hurting its premium pricing and margins. “It will be disappointing if we fail to report 20% topline growth in the ongoing year,” said Mr Dutta. “We want to be a mid-tier company in the near future,” he added.

With growth and returns in sight the JV is on a consumer activation strategy, revolving around the core milk derivative portfolio and introduction of nourishment products for the future. Last year, it test-marketed Anlene, a calcium-enriched malt drink in Kolkata and Chennai. The product, which returned satisfactory performance, is still 'under watch' before taking it national. The mandate from the Nusli Wadia-headed board is clear: Take 'sure steps'.

The new strategic play, which will pan out into top 45 cities this year, include beating the competition in ensuring freshness of products through a 15-day factory-to-market initiative, building visible presence in modern retail and relying on distributors, who bring in critical business volume.

The Wadia-managed Britannia Industries and Fonterra hold 49% stake each in the company with the remaining 2% in hands of a strategic ally. “The crisis in liquid milk operations pushed us back by a couple of years,” said Mr Dutta, and the JV has decided to not re-visit the particular market citing lack of sourcing competencies.

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