Nov 6 (Reuters) – Indian billionaire Mukesh Ambani’s Reliance Industries (RELI.NS), will find it harder to disrupt India’s biscuit category than soft drinks, as many existing products are already sold at 5 rupees to 10 rupees (5-10 US cents), Britannia Industries’ (BRIT.NS),CEO said on Friday.
Reliance on Monday expanded the biscuit range under its Independence brand in Tamil Nadu, with packs starting at 5 rupees, days after it established the segment as the “focus category” of its consumer business.
The push comes after the company relaunched the Campa soft drinks brand three years ago, triggering a price war with global rivals Coca-Cola (KO.N) and PepsiCo (PEP.O),through cut-throat pricing, similar to its strategy in the telecom sector.
Britannia CEO and Managing Director Rakshit Hargave cautioned that this approach would be challenging to repeat in biscuits.
“A large part of the market operates at 5 rupees and 10 rupees, so the ability to disrupt those two price points … is much more difficult than you can do in a cola market by discounting by 5 rupees or 10 rupees,” Hargave said on a post-earnings call.
However, he said that the Good Day maker was “watchful” of competition from Reliance, whose biscuits mirror existing products in the market.
“At 5 rupees and 10 rupees, there is very limited room for aggressive price reductions without compromising profitability,” said A. Manikandan, founder of Tiger Consulting, who shared Hargave’s view.
On its own pricing strategy, Britannia said it plans to further raise prices and cut pack sizes to ease pressure from rising costs due to the Middle East war.
The company, which has been grappling with higher wheat flour, palm oil and sugar costs, raised prices by 3.5% in the second quarter and shrank pack sizes in the first.
($1 = 94.1550 Indian rupees)
Reporting by Praveen Paramasivam in Chennai; Editing by Sonia Cheema
