Mrs Bectors Food Specialities Ltd Q4 FY2023 Concall Summary

Key Takeaways

• High-teens growth, margin stability delivered: FY23 closed with strong double-digit revenue growth across biscuits and bakery, while gross margins stabilized and EBITDA touched ~14% in H2, meeting the company's near-term target.
• Volume-led domestic biscuit surge: Domestic biscuit growth was largely volume-driven, with pricing contributing only 9–10%, as the company gained material market share in North India, particularly in Delhi where share jumped from 2.9% to 4.7%.
• Capacity build-out unlocks a ~\$2,500 Cr revenue headroom: Two biscuit lines in Rajpura and a new bakery plant in NCR are imminent, with larger plants in MP and Maharashtra to follow, creating a path to INR 2,400–2,500 Cr in revenue.
• Distribution is the core growth engine: The company aims to double its direct biscuit reach to 3,20,000 outlets by March 2024, while entering new cities and expanding modern trade coverage to 80% of doors, a bet that will require sustained fleet and people investment.
• What to watch next quarter: Commissioning of the Rajpura biscuit lines, the pace of outlet additions in South and West India, and any pricing action in response to competitive moves or wheat cost shifts.

Revenue Growth & Composition

• Biscuit segment: Grew at a high double-digit rate in Q4 FY23, with exports and domestic both contributing. For the full year, approximately 12% of biscuit growth came from pricing and the balance from volumes, with export pricing marginally higher than domestic.
• Domestic biscuit engine: Growth was concentrated in Northern India, where overall share moved from 3.8% to 4.6%. Newer markets like Mumbai, Pune and Bangalore contributed little as the company was just beginning to place products there. Around 9–10% of domestic growth came from price, the rest from volumes.
• Bakery segment: Both retail and institutional bakery grew at high double digits in Q4. Outstation bread distribution outside Delhi NCR showed good results, with the premium bread category growing faster than mass.
• Bakery vs biscuit mix: Biscuit grew faster than bakery in FY23, so bakery's contribution to the overall mix remained stable year-on-year.
• QSR channel: Management sees any current slowdown as very short term, citing customers' bullish store-addition plans for the next three to four years.

Talwar: "the intent remains the same to stabilize around 14%, continue investing in the business and growing the business well, in the high teens. So, that's the target and we are confident of achieving the same."

Margin & Cost Structure

• Gross margin: Stabilized in Q4 and was slightly better than the prior year, helped by settling commodity prices. No further price increases were taken in Q4, nor in April and May to date.
• EBITDA trajectory: The company delivered close to 14% EBITDA in the last two quarters of FY23. The stated objective is to stabilize consistent delivery around 13–14% before beginning a journey toward 15% and beyond.
• Margin drivers: Premiumization of the product mix is a key contributor, but revenue scale, revenue growth, and cost efficiency are the other two big levers management is pulling.
• Ad spend: Held around 3% of revenue for now, with flexibility to increase depending on market conditions and investment capacity as the year progresses.
• Wheat cost outlook: Early 2023 brought announcements of record production, but unseasonal rains in February and March created some uncertainty. Management declined to offer an expert view, noting only that things seem stable now. [16-17]

Talwar: "The whole objective should be to bring that stability of consistent delivery of around 14%. That's why we say, 13% to 14% EBITDA."

Distribution & Market Expansion

• Direct reach target: The company aims to double its retail touch points for biscuits to 3,20,000 direct reach outlets by March 2024, adding fleet on the street as distribution expands.
• South and West push: Plans to almost double outlet presence in South and West India in FY24 by growing within existing cities and entering new ones. These regions are expected to start contributing meaningfully to domestic biscuit sales in two to three years.
• Bakery geography: Mumbai and Bangalore are targeted for 30%-plus growth, with Bombay expected to become the second-largest market outside Delhi NCR in the foreseeable future. Punjab market entry for bakery is imminent, with recruitment already started.
• Modern trade: Signed national duties with a couple of companies and aims to sign national duties across the board. The target for next year is to be present in roughly double the current 2,300 modern trade outlets, covering about 80% of total doors.
• Data gap: Management declined to provide the current number of retail outlets in South and West geographies, stating the data point was not readily available.

Capacity Expansion

• Rajpura, Punjab: Two new biscuit lines estimated for completion by Q1 FY24, with commissioning expected in the next two months.
• NCR bakery plant: A new bakery plant estimated for completion by Q2 FY24.
• Khopoli, Maharashtra: A state-of-the-art bakery plant with fully automatic lines producing 4,000 to 6,000 breads per hour, designed for minimal manpower and untouched-by-hand production. Capacity will be added only toward the later part of FY24. [12-13]
• Dhar, Madhya Pradesh: A biscuit facility starting with two lines of approximately 2,000 tons per month, with room to add more lines as demand grows.
• Revenue headroom: Taken together, the capacity being built in FY24 and FY25 creates a headroom of up to INR 2,400–2,500 Cr in revenue. New lines carry a payback period of approximately seven years based on current sales forecasts.

Bector: "We are looking at a very state of the art infrastructure. We are looking at the kind of lines, which are very-very efficient, very large production lines... these lines are going to be fully automatic, very-very less manpower, untouched by hands."

Exports & New Initiatives

• BCC region (Biscuits): The initiative to set up own distribution is progressing well, with a team on the ground, an office in Dubai, and a now 100%-owned subsidiary. Management is confident the region will contribute well over the next two to three years.
• Frozen products: Still at a very basic stage. The largest customer is for frozen steak, and the company has started supplying frozen pizza dough balls to one other customer. Management sees a bright future for the industry as QSR acceptance of frozen products improves.
• Dessert portfolio: Expanding the dessert category is helping increase presence with some institutional partners.
• Bakewalk Cafe: Incorporated as Mrs. Bectors English Oven Limited with a INR 1 Cr investment. Four company-owned, company-operated cafes are now open in NCR, using roughly 80% of bakery products captively. The franchise model will be explored at a later stage after the brand is built further. [14-15]
• Margin opacity: Management declined to share the margin profile or revenue share of frozen products, consistent with its policy of not disclosing individual business margins.

Competitive & Pricing Dynamics

• Pricing stability: Prices stabilized in Q4 with no increases taken, and no pricing action through April and May to date. The company watches market leaders for cues on both upward and downward price corrections.
• Market share gains: In North India, share moved from 3.8% to 4.6%, with steeper gains in lower North markets like Delhi (2.9% to 4.7%) where the base was low. Punjab, a stronger legacy market, moved from 13.6% to 14.5%.

Talwar: "biscuit is a very, very competitive market as all of us know, right? And we normally follow and watch our market leaders in the market, whether any kind of price correction, both upward and downward, which has to be taken."

Guidance & Commitments

Key Metrics