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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to Britannia Industries Limited Q3 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Yash Vardhan Bagri. Thank you, and over to you, sir.
Thanks, Nirav. Hello, everyone. This is Yash, filling in for my colleague, Mayank, today. I welcome you all to the Britannia earnings call to discuss the financial results of quarter 3 '22, '23. Joining us today on the earnings call are our Vice Chairman and Managing Director, Mr. Varun Berry; Executive Director and CEO, Mr. Rajneet Kohli; Executive Director and CFO, Mr. N. Venkataraman; Chief Sales Officer, Mr. Vipin Kataria; Chief Marketing Officer, Mr. Amit Doshi; Chief Procurement Officer, Mr. Manoj Balgi; and Chief Development and Quality Officer, Mr. Sudhir Nema. The analyst deck is uploaded in our website.
Before I pass it on to Mr. Varun Berry, I would like to draw your attention to the safe harbor statement in the presentation. Over to you, Mr. Varun Berry, with remarks on the performance.
Good afternoon, everyone. Very happy to be here with you. So without much ado, let me get to the presentation. If we get to Page #3, that will give you the 3 parameters of our business. Our year-on-year growth is 16% on revenues. Operating profit, we've grown 55%, and we continue to gain market share through this quarter as well.
Moving to the next slide, which gives a look at what's happening to the environment as far as inflation is concerned. The food inflation in India, it continues, albeit at a slightly lower level. Wheat is 1 commodity which remains on a boil. So if you were to look at the first quadrant on the left, that shows what's happening to the Indian overall consumer food price inflation, which is showing at approximately 6% year-on-year in Q3 of '23. U.S. dollar, obviously, strengthening versus the Indian rupee.
You go to the third quadrant on the left, that shows Wheat. So if you were to look at the red line, the red line shows the Chicago Board of Trade and how the wheat prices have fared in the CBOT. Now very clearly, international prices have been dropping. After Q1, we've seen a drop in the wheat prices. However, in India, which is a fairly insulated market, the prices have been only going up. And while we are very close to the season, we will know soon enough in the next 2 months how the crop is and how the commodity prices rule at that time. But right now, it's at a high as far as wheat is concerned. The RPO prices have softened, both for the Bursa Malaysian Derivatives exchange as well as the Indian market prices are almost parallel to each other, and that's helped us control inflation on our commodities to an extent.
Going to the next slide, that shows the inflation versus Q3 of 2021. Basically, what happened is that in the last 2 years, we have seen a very high inflation. And even on a year-to-date basis, we've seen inflation of approximately 12%. In this quarter, because of IPO softening as well as us consuming cheaper wheat covers, which we had bought in the beginning of the year during the season, it's softened a bit internally for our consumption -- from our consumption standpoint, but it still remains reasonably high, the inflation for all commodity baskets.
Going to the next slide, which is on our cost and profitability front. If you look at it, we have taken necessary pricing actions, and these actions to cover for all of the inflation in the first half of the year. We've stepped up our cost efficiency program and we are looking extremely, extremely good, and I will cover that in a few more slides.
We've made -- there have been some corrections in RPO and we've been consuming wheat which was at the right price, and hence, Q3 results have shown improved operating margin. However, as a result of that, we've seen operating margin improvement of 330 basis points quarter-on-quarter.
However, there are -- as market leaders, we always need to lead the price increases, and we have done that. And despite leading that, we've been able to gain share. However, there are pockets where we've seen competitive reaction, so there will be some modifications that we'll have to make from where we are at today, and we will do so in the coming quarter. We obviously want to make sure that in every possible segment, we serve forward and we gained share to all of the strategies that we deploy, which I'll come to you in a bit.
So next slide, which is the strategic pillars which we have been talking about for quite a few quarters now, which drive our profitable growth. Distribution, which is very, very key to our strategy, and marketing of our key brands, heightened innovation. We've been -- after COVID, we've been going pretty heavy around innovation launches. Adjacent businesses, and I'll come to that in a bit, have been doing reasonably well, I would say. Cost efficiency programs, I already spoke about, and I'll speak about them in a little more detail as we go through the presentation. And finally, sustainability. So let me go through these one by one.
So the first 1 is on driving efficiency in distribution. As you will see from this slide, we have now 28,000 rural distributors versus 26,000 in March of '22, and we have gained 1.5x the share that we've gained on All India basis in Rural. So that strategy of going heavy on Rural has been working for us. And as a result of that, while some companies have been announcing some kind of slowdown, we have not seen any slowdown in our rural revenues and our growths -- volume growth in the rural areas.
The second part of that slide is on direct reach. We have also been focusing on getting this after the COVID relapse, so to say. We've been focusing on getting wider direct reach, and we've added 1.5 lakh outlets during this year. So from 24.9 lakh outlets, we've gone to 26.4 lakh outlets with our direct reach program.
Moving to the next slide, which is about the marketing activities during the quarter. So there are multiple marketing activities, and some of you must have seen them on air. So we have some new creatives that we've got this quarter, 50-50 was one of them. Some of the others listed on this slide also are some of the campaigns that we've done during this quarter. We've also won some industry awards, which are also there on this slide.
Amit, would you like to comment on this?
Yes. So yes, I think as Varun said, we've continued to make investments in our core brands to drive -- to ensure that we continue to drive penetration for these brands, and each of them is top of mind in their respective categories.
Now -- I mean, as Varun said, it's also heartening to get the industry recognition because we believe that we want to do work that wins in the market, and it's always good to get peer recognition. For both the -- so there's Campaign India there and there's Storyboard 18 there. And 3 of our pieces, the first 1 being for Good Day, then 50-50 and the NutriChoice were among the top 50 ads in the country and top 25 ads in the country, respectively. For Milk Bikis Classic, we won awards for Best Regional Marketing in Tamil Nadu at the Effie Awards, we're the best when it comes to effectiveness. And 1 of our NutriChoice digital thesis was actually voted as the Viewers Choice Ad of 2022 by the Outlook magazine.
So while -- sorry, I just want to go back to the previous slide, not shift to it. But while advertising wins awards, there are no awards for sales. But I would be remiss in not mentioning Vipin Kataria and the sales team, making some superlative efforts in getting the results that I was talking about on the previous slide. Okay. Moving on to the next slide, which is about innovation. So we've had some very good launches. Biscafe, which is a very unique product, has moved almost 5x in terms of revenue since we launched it. Similarly, NutriChoice Seeds, Herbs & Protein, which was launched in Q1, again, has moved 4x since launch. We also had focused scale-up drives on 50-50 Golmaal, which is a very interesting product. It wasn't national until some time ago, it was only East. And even today, it remains predominantly East and we have -- while we are trying to spread it across the country. Great product, it's moved 2x its revenues during this year.
Milk Bikis Classic, a very nostalgic and a great product, doing very well in its core territory of Tamil Nadu and Kerala. In the adjacent category, we launched the Festive Plum Cake in East and South, which is doing quite well. Just before the festive season. We've also launched a new product in our Snacking, which is called Tic Tac Toe. Snacking again has been -- it's in West market. But in these West markets, we launched this product, and it's doing quite well. It's actually yet to go into the West market, but it's currently only in the South market and it's doing quite well.
We've also got a Fresh portfolio. Again we are experimenting with Fresh Paneer through our Fresh distribution channel. I won't say it's a blockbuster, but this is giving us great readings on what we should be doing with our Fresh channel as we go forward.
And on adjacent categories, we also we had some focused scale-up drives. Croissant, which was launched across the country in Q2, is growing very, very handsomely and doing quite well. And the Marble Cake, which we also launch in Q2, has been scaled up and is doing very well. Both of these products are at about 150%, which is 2.5x what they were during launch and 130%, which is 2.3x what they were at launch. So a good progress on innovation as well as adjacency products.
Now moving on to the next slide, which is about our joint venture with Bel of France on cheese. So just to give you an update, you know that we have signed this strategic partnership to disrupt this very nascent but fast-growing Cheese category in India. Obviously, we bring brands with trust and the distribution strength, and Bel brings the product know-how as well as the technical expertise.
We are looking at a differentiated portfolio of very, very innovative Cheese products, and these will be produced in our new state-of-the-art facility at Ranjangaon. You guys are welcome to visit us and have a look at the facility whenever you happen to be in that part of the country. And you know that we hold majority stake at 51% and Bel holds a 49% stake.
Now to give you an update on where we stand on this. So Cheese line, cheddar cheese line will be commercialized in Q1 of '23, '24. So cheddar cheese has to be produced for that to be used to produce the various formats of processed cheese. So the processed cheese line will take a little more time. They will be ready in the second half of '23, '24. And on these processed cheese lines, we will produce slices, cubes, blocks and spreads, so that will be ready in the second half of the next financial year.
In the meantime, what are we doing? In the meantime, we are working on the joint branding, how the products and the packaging designs are going to look. We are working on the organization structure, we are training the personnel, we are finalizing our portfolio not just for immediate launch. But the portfolio as it will look in the next 2 years, 3 years, 5 years. There will be some products which will be imported to start with, namely the INR 10 sachet of cheese, which Bel currently sells, which is imported from Bel, Vietnam. That will continue to be imported but will be put through our distribution system, and hence, will be accessible to a lot more consumers as we put it into a lot more outlets across the country.
The second product which will be imported will be the portions. These are the triangular portions, great products which will continue to be imported from Vietnam. As you all know, there is a treaty that Vietnam and India has. So there are no import duties on products which are imported from Vietnam, so we will take advantage of that. What we've done for ourselves is we have set clear benchmarks on where these products have to reach in terms of revenues before we trigger a line in Ranjangaon. So we are planning a line of the sachets as well as the portions in Ranjangaon. But the timing of that will be in the next year to the next 2 years, depending on how we scale up these products in the market. So that is an update for you on our joint venture. I hope that is detailed enough for you.
Going to the next slide, which is the Ranjangaon factory commercialization as far as the other dairy products are concerned. Now just to give you the products that we are looking at, one is, of course, Aseptic PET, which are the Drinks we are going to produce in PET bottles. Currently, we are selling our drinks in tetra, and we will be moving a part of the portfolio to PET.
Second is Fresh Dairy, which is Dahi and other fresh innovative products which can be produced. So this Fresh Dairy line can produce wheat yogurts. It can produce drinking yogurts in a Fresh format with a limited shelf life of 21 days, so we will be looking at that as we start to commercialize the line.
We have a line for Powders, which can do Dairy Whitener for retail and also for captive consumption within our bakery, which is SMP, skimmed milk powder, SCM, sweetened condensed milk and Whey powder. So as we speak, I'll come to where we are at on all of these lines. And the last is fat, which is Ghee. So these are the other lines that we'll have in our Dairy facility.
Just to give you an update on where we stand. So as far as milk collection is concerned for producing all of these products, we are currently collecting 70,000 liters per day of milk from 2,850 farmers. Our objective is to take it up to 150,000 liters per day from 4,000-plus farms, right? Currently, we have 65 bulk milk collection centers, which are run by our partners in the global areas around Ranjangaon. We are looking at scaling these BMCs, as we call them, to 125 at the year-end. We are providing extension services to all of our farmer partners which are being strengthened to make sure that we genuinely add value to all of our farmer partners.
As far as the commercialization of the line is concerned, the SMP, which is the skimmed milk powder, and Dairy Whitener lines are already being -- have been commercialized. We are already producing products, and this product is being used internally by our Bakery division to produce biscuits and other products, right? We've also started to produce sweetened condensed milk, which is also being used by our Bakery division, right?
We also commercialized our PET line, and we launched milkshakes in PET only in the South currently. They have gone into the market only in the month of January, so you wouldn't have seen them, but they are great products, looking really good, tasting awesome, right? Fresh Dairy is also to be commissioned in the next couple of months before the end of this financial quarter, so that's where we are at. We are doing extensive training of our operators in the dairy facility. The quality parameters are being very clearly set to very high standards, and we are setting up all the systems to make sure that we run this facility to the highest standard possible.
Moving on to the next slide. We've made reasonable shifts in our adjacency business, and these will definitely fuel the next phase of profitable growth for Brittania as we go through time. So on Bakery Adjacency, this Cake, we've had quite a few occasions as well as our baked cakes are doing well, and we've registered healthy growths in this category. We've also improved profitability across Cake, Rusk as well as Bread, as far as this year is concerned.
New businesses. Croissant continues to gain traction. I've already spoken about the kind of growth that we have seen post the national launch. Yes, there are pockets where we are doing better than the others. There is focus required in certain markets, and we are making sure that we provide that as we go through the months with this new launch. Wafers. We've launched low-density wafers, cheese flavor, et cetera. And Wafers overall continue to gain market share. I wouldn't say blockbuster, but the making of a blockbuster for sure. As far as International is concerned, we've seen healthy profitable growth across key geographies. Nepal continues to do extremely well. If you remember, we invested INR 55 crores in Nepal, and that's given us a very, very good return. Commercialization of our own operations in Kenya is happening as we speak, and we will be scaling that business up as we go through the next financial year.
Moving on to the next slide, which is our cost efficiency programs. We've been driving ecosystem of efficiencies, right? Now if you were to look at it, the themes are the same. From a supply chain standpoint, it's all about process automations, distance to market, optimal power resources, renewable energy. From a material standpoint, it's again, the themes are exactly the same. Sourcing strategy, vendor development, making sure that we get the right people into the right category, packaging initiatives, vendors, cost optimization, et cetera, et cetera.
And on the other, we've got market returns, which we made very, very good progress on. Commitment charges that we pay to our manufacturing partners. Fiscal incentives, and there, I would like to just talk about that in a bit. I'll come back to that. And media effectiveness, there's some very good work which is happening on media effectiveness as well.
So on fiscal incentives, we made a lot of investments in production line, in the R&D center, innovation lines, dairy, et cetera. Now we have -- these lines have all been secured with the incentives, which have been provided by the state and the central governments, and this has been giving us good payback for all of the money that we've been putting in manufacturing. So at 1 hand, we are getting all the efficiencies, on the other hand, we are getting the incentive. So it's working out quite well on our overall investments.
Moving to the last slide from the business standpoint. So we are clearly on track as far as we have ESG is concerned. We are on track for all the targets that we've committed to, be it energy efficiency, plastic reduction, sustainable packaging. Working with communities around our plants, including the lives of farmers around Ranjangaon, et cetera. So we are making great progress there.
I will hand over to Manoj. Manoj is the architect of this, and between Manoj and Vipin, they've been driving this. So over to Manoj to take you through some of the details here. Manoj?
Yes. So we are working on 4 pillars as far as the ESG agenda goes: People, resources, growth and governance. And we have taken targets which are good for the community and good for the business.
And if we were to go through the People quadrant where our focus is on targeting farmers, so Varun talked about 2,800-odd farmers that we collect milk directly from. We do a lot of CSR work in and around our factories, partnering with the Wadia Foundation, and we have reached out 14,500-odd beneficiaries. The work is more on sanitation and water management and hygiene around those communities. And again, on the Nutrition side, we have reached more than 2 lakh beneficiaries in December 2022.
In terms of Resources, we have increased our share of renewable electricity source for our operations from 33% to 38%. The share of renewable energy is about 18% from 14% last year. 3% reduction in emission, an additional 61,000 kilos of plastic has been discarded in this period till December. We are on track for our EPR program. We have been plastic neutral last year, and we will be plastic neutral this year. And 72% of our laminates multilayer packaging that we source are now recyclable. Water consumption has been reduced by 33% through recycling and reuse. In terms of the commitment towards reducing the fat, sodium and the sugar content, we are on track. About 2.5% of reduction in sugar versus 2018, '19 when we started the program and about 13% reduction in sodium. And in terms of Governance, we are extending our Sustainability program to 100 of our key suppliers. Assessment is on, and we'll co-opt them into our ESG program. Thank you.
Okay. Thanks, Manoj. Now moving to the financials. So actually, there's nothing much to say here, results speaks for themselves. So full year '22, '23, we've grown 16%. Q3 is also incidentally 16% for the year. And if you look at the 24-month growth, we've had 32%. So our growth, very healthy. Good growth that we registered from a top line revenue perspective.
Next slide is about operating profits. Again, operating profits have grown this year 15.5%. This quarter, it's at 55%. 24-month growth is at 35% because last year Q3, there was a decline of 13%, but a very healthy 35% even on a 24-month basis, with margins being at 18.5% of revenue.
Now getting to the next slide, which is the key financial ratios. So net sales up 16%, operating profit up 55%. Profit before tax is up 127%, but this includes INR 376 crores of exceptional gain, which is on account of the 49% stake sale pursuant to the joint venture with Bel on our Cheese business. So this is an exceptional number, and a result of that, profit after tax is at 151%, standing at INR 932 crores. Now even the numbers below, the only 1 to really look at is profit from operations, which has gone up to ever high at 18.5%. The profit before tax, obviously, at 28% and profit after tax at 23% includes the exceptional items, so I'm not going to belabor those numbers.
So those are the results. Over to you for questions, please.
[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama.
Congrats on good numbers. My first question is on the Dairy business. So in Cheese when I see currently, there is obviously 1 or 2 mass and pricing from AMUL and Mother Dairy kind of players, and also there are some regional brands. And Indian consumption also, if you see, it's mostly of [ mass and cheese at low prices. So when you say that you want to disrupt the market and have already discussed sharp scale up in the next 3, 5 years, that's coming because of the LUP strategy of INR 10 and the innovations like triangular, or is it coming because you want to make India consume the other variants which for the developed countries consume? The issue there is most Indians do not be knowing those. We'll have to have huge education for those. So which is the one you are getting from a 3-year, 5-year strategy in terms of LUP and aggressive pricing because of sourcing of milk, or because of new variants coming in India?
So there are both needs. See, one, we want to scale up the formats that we already exist in. Coming together of Brittania and Laughing Cow, I think the magic of brand will really play up. Both very strong brands, that magic will definitely play up. And obviously, the technical know-how of Bel on how to create differentiated offering which are much better than the market, which are obviously catered to the Indian taste. Albeit at a premium to what the cooperatives are providing, I think that's going to be 1 strategy. And the second is the LUP at INR 10 is a big one, if you think about it. It's a habit-creating initiative. Whenever a category has to go to a lot more consumers, we've got to have a carrier SKU, which gets to consumers across the country. I mean if you think about it, the fastfood, the QSRs have helped us create cheese in the tip of the iceberg as far as the Indian population is concerned. How do you create that same kind of a habit across the board and get to the bottom of the pyramid. And that is really the strategy, which is the second strategy that we are getting in. So -- and obviously, all these products and a lot more products, which can be -- which we can sort of create as habit-forming will be produced in the long run in India, in the country. So that really is the strategy, as far as the team is doing so.
Sure. That's useful. I had a follow-up on Dairy business. In Paneer, the new launch looks interesting. Can I see the prices, your pricing is at INR 110 versus INR 80 to INR 85 for Mother Dairy and AMUL. Your pricing is much more closer to Punjab Sind and IV Foods, for example. So here -- once your sourcing is in place, once the factory is fully in place, your pricing then, will it converge more to the value players, or here, you would want to be in the Punjab Sind and IV Foods kind of a, premium paneer kind of a player?
No, we are not looking at becoming the value players in any category. If we have a right to succeed, these are all experiments, Abneesh. We are looking at what we can do, how can we add value, et cetera. If you can create a premium offering which gives us revenue as well as profit, we are in it. We don't have a line for Paneer, for instance. It's all third party. Even in our Ranjangaon facility, we haven't invested for a Paneer line. So these are experiments which are without real investment. If they work out when we have the mix, we have the factory, we have everything else, we can always put up a line and move forward with it. If it doesn't work and it's still the bottom of the pyramid pricing which is working, then we will move forward and walk away from initiating it.
Sure. My second and last question is on your biscuits market share. So we are seeing very sharp...
That is first question. This is third. Okay. Go ahead.
In biscuits your market share, improvement has been quite good. Sir, in inflationary times, the market either #1 player, the premium player always gains market share in most FMCG. Now we are obviously coming into deflation gradually, palm oil first, packaging second. And wheat, obviously, India will see 112 million tonnes production this year. Government forecast last year, it did not go right. But if that happens and so milk also deflects to next year, how are you going to tackle the competition from regional players, and maybe the second player against from to gain market share? Would you be worried on that front in a gradual manner? I know currently, it is not relevant. I'm asking for the next 2 to 4 quarters perspective.
Well, Abneesh, you will see us in deflationary times as well. So we've been through quite a few years of deflation, and we managed that quite well. So we will deploy the same strategy as we go forward, and I'm hoping that we get to deflationary times. It doesn't seem so right now, but I'm hoping that you are right.
[Operator Instructions] Next question is from the line of Avi Mehta from Macquarie Group.
This is Avi here from Macquarie. Sir, I just wanted to understand the competitive intensity a little better. So over the last 2 quarters, not just 2 quarters actually. Even before that, we've been able to drive very strong market share gains despite taking. And in the last few calls, you've been saying we have taken the industry-leading price hikes. What should we read from a competitive intensity as of now? Is there a moderation or is there a change in behavior, if you could help us understand that, please?
See, we have been working very clearly on our agenda, right? Our agenda has been driving distribution. We know where our strengths are. We know where our weaknesses are. We have been working towards fulfilling our weaknesses. We've been heightening our strength.
So I think that's been working really well for us. We've been nourishing our brands. We know again where our strengths are, where our weaknesses are within the brands. We've been heightening our strengths, and we've been making sure that we fulfill focus some of the weaknesses, we know we have weaknesses increasing, right? The value portfolio is 1 weakness which we'll not try to pursue. Within the premium portfolio, there are certain weaknesses we are trying to fulfill them.
I think there is a lot to do within our system to make sure that we strengthen our geographical footprint, we strengthen our brand portfolio, we strengthened our innovation footprint to make sure that we continue to gain a march over competition. It's not about -- I'm going to cut prices, or I'm going to give discounts. So I -- this guy is better than me in this segment, and hence, how I can look at being -- from a pricing standpoint or from a promotion standpoint, hurt them or anything like that. I mean it's very internal to us, this strategy, and it's working very well for us. And I think that's what we'll continue to do.
Yes, we watch others, it's not that we are not watching what others are doing. We are learning from them. There are certain players within the biscuit competition we've been doing quite well, and we've learned from them. For example, Patanjali is doing very well in milk. And our Milk Bikis is, predominantly a Tamil Nadu brand. So we've now expanded Milk Bikis across the country, we come up with very innovative positioning of "Doodh Roti ki Shakti" using only Atta to produce our product. Especially others, we move forward in certain -- kind of certain geographies, et cetera, and that's what we will continue to do as we move forward.
Okay, sir. So I mean would it be fair in my -- if I understood it correctly, it's not got to do -- I mean, while the competition may not have probably put in the same investments we have done, it probably has not got to do with differential in growth rates between this value versus the base or sort of mid or the premium end? There's no other reason which is more specific from a category perspective that we should read. It is more about us doing the right things that probably the competition has not necessarily or may not have invested in those specific quantities. That's the right way to look at it, right, sir?
Yes. Yes, that's the right way to look at it. So it's about making sure that you stick with your strategy, you develop the right strategy within segments and we move forward.
Okay, sir. Sir, the second of it was more of a bookkeeping and the buildup to that. Would you be able to give us some sense on what are the one-off gains from these forward contracts which may not continue going forward? And also a sense of where the ad spend intensity is versus the normalized or pre-COVID levels? Just to get a sense on where margins can probably read.
No. So clearly, this -- let's start with the advertising part. We have normalized our advertising spend this year, so we have gone back to the pre-COVID levels. From one-off gains, I've spoken about the one-off gain from the joint venture. But besides that, we've been consuming covers of wheat, which have been at a much lower price. So that is certainly going to go away, right, as we move to the next quarter because we never cover wheat till the next seasons. All these covers will now end, and hence, we will start to consume these which will come from the market from the season. So that will be 1 change. There were -- there always are some changes that come through during the season. And I think 1 of the 2 changes, frankly, there are no other exceptional items, despite these.
So I was trying to just understand the quantification roughly, how much would it have benefited margins, because that would help us understand. So this quarter, we have almost done all, 18.5, 19.5 of kind of margin. As we go into the next year, what -- how much should we kind of remove out the business? Is it 100 basis points, and that's the level that we look at as the steady state? That's broadly where I was trying to head to.
Yes. No. So I had mentioned that as well. So we as market leaders, we have to take price increases before everyone else does and we did so. Now the inflation not being at the level that it was a few quarters ago, there have been certain categories where competition is -- has played a little bit hard ball. It's not a widespread phenomenon. But there will be a few segments, a few SKUs, a few brands where we will have to address pricing back to a lower level. So that will be a small number. It might not be a very large number, but that would be the only thing. Besides that, I think we are pretty much in the place.
Sir, any guidance or any range you can help us understand? Because we went to '19 in COVID, you said that was not the level we should assume correctly so. But now we are getting back to '19. So I'm just trying to appreciate what would you be comfortable? The second -- the last 2 quarters is a better range to look at because there are covers, but clearly, those covers would continue. If there is anything you can say?
I don't think so. I don't think so. Q2 -- between Q2 and Q3 will be the right range to look at.
[Operator Instructions] Next question is from the line of Jaykumar Doshi from Kotak.
About a year ago, you had indicated the potential for Dairy business is about INR 2,000 crores. Do you still believe in that number, or do you think it can be higher based on the developments for the past few quarters?
I didn't get that. Your voice is not very clear. Can you just repeat that question quickly?
Sure. I'll repeat. I believe about a year ago, you had indicated the potential for Dairy business is about INR 2,000 crores in the medium term, you have not given any indicator sort of in terms of time lines. Do you still believe that number is doable, or do you think you can do better than INR 2,000 crores? And is it possible at this point of time to give us some color in terms of how that portfolio can shape up in terms of revenues over the next 3 years?
I would still stick with that number. We -- in the process of launching our new products, cheese is still not even in the market. So let's watch this space for a bit, and we will come back to you with -- that's what we said for ourselves, so we'll stick with that.
Understood. And current scale is about INR 500 crores, INR 600 crores. Is that understanding correct?
Just over that.
Yes. And one more follow-up around the same thing. I think prior to pandemic, industry was growing at a very low single-digit levels in terms of volume, and you were able to grow faster based on new product launches and market share gains. And a couple of times, you had called out industry growth versus your -- the gap between the growth driven by new products. Could you give us an indication in terms of what do you think that gap is and how -- whether that gap is widening, given that you've seen good success in new product launches and now Dairy will scale up?
No, sorry. As you can see from the market share, we've been continuously gaining share. So the gap remains pretty much the same, but I must admit that around COVID times and beyond, we've seen the market growth to be much faster than what we've seen from 2013 to, let's say, 2018, '19. So the market growth have certainly picked up, and this is a great trend from our industry standpoint.
The next question is from the line of Latika Chopra from JPMorgan Chase.
Thank you, Varun, for your detailed comments on the adjacencies, but what I'm looking for now is a little bit quantitative flavor. So it would be helpful if you could share what is the salience of Non-Biscuit portfolio in your business today? And if you could share a little flavor on what is the kind of annualized revenues today that you're seeing for key segments like Cake, Rusk, maybe Croissants and Wafers? And if one looks at the growth algorithm over the next 5 years or 3 years for Brittania, what that salience or revenue size of these adjacencies could be in your view?
So currently, the Biscuit and the Non-Biscuit portfolio are approximately 77-23, which has gone up from what it used to be. And if you think about it, it used to be almost 85% was our Biscuits to about 7, 8 years ago. And so it's been continuously, obviously, the Non-Biscuit portfolio has been growing faster. You also got to remember that Biscuits is so large that for the other categories to become a substantial part and to contribute substantially to it, it requires a little bit of time. And it's taken time, but I think we are moving in the right direction.
In one of the interviews, you said that probably this 23% probably becomes 35% over the next 5 years. Is that what we -- how we should read?
Yes, yes.
And within this 23% today, could you tell us how much would be Cakes and Breads and Rusk, which are the more multi parts of this portfolio?
So Cake and Rusk would be almost 50% of this, and the rest would be approximately 50% of the 23%.
All right. That's helpful. And the second bit I had was on Biscuits itself. You've talked about market share gains. Could you help us with the volume growth and the value growth for the Biscuits overall categories, and some flavor on how the different subsegments are looking at? And within your growth rate that was posted for the last 2 quarters now, what is the kind of mix contribution to this precise volumes?
So see, there was not always a complete matchup between our numbers and the recent numbers in the overall total market. But we've recently seen very good growth, and you've seen our growth. Our transaction growth are almost at 16%, 17%, which means that the number of packets that we sell is growing almost 17% in this quarter. And if you were to look at our year-to-date number also, it's almost at about 14%. So it's -- the transaction growths are very good, and that's what matters to us.
Volumes obviously had been low. Volumes are very low single digits, and the reason for that is the kind of price increases that we've taken during the last 2 years. So that's what it is. But from a revenue growth standpoint, it clearly is indicated that even the entire industry is growing at double-digit revenues.
Sure. And I believe you are fair...
Sorry to interrupt you, may I request you to come back to the question queue. [Operator Instructions]. Next question is from the line of Percy Panthaki from India Infoline.
On Dairy, can you give some idea on what is the CapEx that you will do over the next 2 to 3 years? And secondly, do you fear any risk of EBITDA margin dilution if Dairy has become a large part of your business? And the EBITDA margins there might be lower than the Biscuits margins. Correct me if I'm wrong in that assumption, first of all.
So first, your question on investments. Investments are about INR 600 crores, for starters, in all of the lines that I spoke about during my presentation. There will be no investment, yes, probably for innovation, but that will be very clearly once we've read our results of the imported products that I was talking about. Only after that, we'll put in more investments as far as cheese is concerned. And even on the other areas, we will put in investments after we've proven that some of the products that we are launching are doing well. The other question -- what was the other question that you had?
EBITDA margin, whether it will be diluted?
No. So EBITDA margin, we'll have to see as we go, Percy. See for Cheese, we've always had a very solid EBITDA margin. Now with our own factory and with the joint venture, hopefully, that should move in the right direction. Yes, for a period of time, there will be depreciation with that we'll have to take, which is fine. But I think over a period of time, we should be fine on that.
And the other thing is that even at INR 2,000 crores, even if Dairy has to move to INR 2,000 crores in the next few years, by that time, our overall business would have moved much beyond where it is today. So it will not be more than 8%, 9%, 10% of our total business, so the impact of this is not as high as you are imagining today.
Okay. And just checking on data point which you just said. Did you say that number of packs sold grew at about 16%, 17% this quarter?
Yes.
Okay. And finally, can you give some guidance on the overall CapEx at a consolidated level for FY '23, '24, '25?
So just to highlight what are the investments that we are making, we've got 3 lines -- 2 new lines. We've got a new factory in UP. We've got a new factory in Tirunelveli, in Tamil Nadu, and 1 new factory in Bihar, which is going to come up. There are some lines which are coming up in Ranjangaon plus the Dairy facility. And in Orissa, we are putting up an additional line, right? So basically, all put together, the current year is going to be approximately INR 750 crores. And thereafter, I think for the next 2 or 3 years, it's not going to be very large. Let's say, the next 2 or 3 years, our total investment will be INR 250 crores odd. Yes.
Next question is from the line of Sheela Rathi from Morgan Stanley.
So 2 questions from my side. First is a clarification. This is to do with the sustainability slide, where you have mentioned 12.84% reduction in sodium versus '18, '19. But if I remember correctly from the annual report, we had mentioned that we aspire to have a 6% reduction in sodium by '24. So just wanted to get that clarification here.
Yes. So that's 1 area where we've had more reduction than what we've stated for ourselves. So that's been working well. Manoj, Sudhir, do you want to comment on that?
Yes. So you are right, Varun. We had a target of 6% for the sodium on per selling basis, but we did basically roll out the sodium plan in various products to get to this number.
All right. Yes, that's very clear. And my second question, regarding, was on the distribution strategy. I think that's worked out very well for us. So just wanted to get an idea from you as to what is the aspiration on the distribution front, both on rural side as well as direct distribution, where we have reached a certain level now? Where we could be in the next 2 years?
So, yes. So that's a very important question, and people continue to feel that how long will this last? I think this is ever lasting. While we made great progress, there are still territories and states and areas which we still continue to be very poorly distributed. Rural still lags often by almost 11 distribution points. So we have a long way to go, and we will continue to work on this because it's such an important strategy for us.
A very important part of our strategy has been our distribution gains, and that is the one which has kept us away from really getting into fisticuffs with competition. We've been driving our own distribution and been gaining the traction and share in all of these states. So a long way to go. Short answer is a long way to go, and we'll continue to drive that.
And assumption of 15% increase every year could be a fair assessment, right?
Yes, absolutely.
Next question is from the line of Vivek Maheshwari from Jefferies India.
Varun and team. My first question is on the market share again, Varun. So the market shares that you have presented on the slide are value market share, I'm guessing. Would volume market share also give a similar story?
Yes. Yes, it will.
Interesting.
So we've also benefited from the pack that premium products and premium offerings have been gaining over the value offerings, so it will be very similar.
Interesting. Okay. The other question is you mentioned 16% growth in packs, low single-digit volume growth and 16% revenue growth. So does that mean that there has been a shift from larger packs to smaller packs?
It could be momentary. It could be momentary. It's not reflective of a long-term trend. But yes, this quarter, we have seen a 17% transaction growth with a 16% revenue growth, but it's not like we've been seeing that forever. But in times like this, you've got to remember that there is some amount of downgrading, which goes off as things become better. So it could be for a quarter or 2, and then it goes back to the old mix.
Got it. And lastly, Varun, how much will be the price cuts that you will need to take at the portfolio level in the coming quarter?
It's not substantial. We haven't really looked at what number we workout to do, and we are not really taking a price cut. What we are looking at is projecting them as promotion so that it doesn't look like we are permanently down to a certain price. It will be as a promotion so that we can take out the distance and move back to our price whenever needed.
Okay. And at the time of taking up prices, you have had a reasonable amount of that via volume. So conversely, will also be true as the input prices are going down, right?
Yes. We are looking forward to that because while in inflationary times like this, it's okay to have a very small volume growth. And the good thing is that we've had great transaction, and that's what matters for us. How many packets, how many consumers are enjoying our products, et cetera. But volume growth are also important, and we would like to get back onto our volume growth to get to.
Next question is from the line of Kunal Vora from BNP Paribas Mutual Fund.
So continuing on the previous question. So how should we look at volume and pricing contribution in FY '24? You had double-digit price hikes in FY '22, another double-digit price hike in FY '23. So growth has been mostly pricing-led. How do we look at that mix changing in FY '24?
So from what we just discussed, I don't think we are going to see the kind of inflation that we've seen in the last 2 years for some time to come. I don't want these to be the famous last words, but I'm hoping that I'm right. So with that, I don't think there's going to be a substantial price increase. It will only be opportunistic when it's a necessary for a certain year scale. But we are not looking at -- the inflation number for next year is looking like about 2.5% to 3% for us, so that's the kind of price increase probably that we'll be looking at.
So with that, would the revenue growth moderate, or you think the current growth rate or anywhere close to that is maintainable?
That's one area which I haven't understood ever. When does growth rate pick up, when does growth rate -- I've never been able to understand. What I understood is how to take share from the market by driving strategies. What happens to the markets, I think, God only knows. But I'm hoping that the growth rate in the industry continues.
Okay. Second, last question is, is there a correlation between the milk collection and your revenue as the milk collection doubles, which you indicated, should we expect revenue also to double? And when do you get to the 150 KLPD, which you mentioned, in terms of milk collection?
Well, 150 would be towards the end, but no, it's not only for the products that we'll sell in the market. We will run the lines that we use for our Bakery division as well. So this will help us, obviously first, there are some overheads to the extension services that we provide. So we'll be able to max out and leverage the overhead on those extension services. We will be able to get better quality product which will be produced, whether it's SMP or sweetened condensed milk or whey powder, et cetera, all of that produced in our own factory for our Bakery division. So there's no real correlation between that and the Dairy revenues because this is an internal transfer from Dairy to our Bakery division.
Will take that as the last question. I now hand the conference over to Mr. Yash Vardhan Bagri for closing comments.
Thanks, everyone, for spending time with us on this call. We look forward to interacting with you again.
Thank you very much. On behalf of Brittania Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.