Over the past one year, when most mid-sized FMCG companies have outperformed the Sensex, the Rs 3,000-crore Britannia Industries has registered a subdued performance, with the stock rising 52% against the 90% run-up seen in the Sensex during the same period.

The company’s financial performance has been equally subdued when compared to that of similar-sized peers such as Dabur and Marico. Britannia has reported near-flat revenues (on a four-trailing quarter basis) since the past three quarters. It’s a similar story when it comes to its operating profit margin, which has hovered at around 7% during the same period.

While savings on raw material costs this year have positively impacted the bottomline of most FMCG companies, the spiralling cost of wheat and sugar which are key ingredients for the company have adversely impacted its bottomline. As a result, while most FMCG companies have witnessed margin expansion, it has just managed to maintain them.

The foods company, which operates in the bakery and dairy products category, earns 80% of its revenues from biscuits. It has been facing stiff competition from other national players such as Parle and ITC besides a host of regional warriors such as Surya Foods in north India and Bhagwati in the East.

The company has carried out several new launches like Britannia top, Nutrichoice nature spice cracker, UHT milk, and revamped brands such as MarieGold in recent quarters. It has also launched personal consumption packs in biscuits with smaller SKUs.

While the company continues to gear up for competition in the biscuits category, it’s quite bullish on its dairy business. Its non-biscuit portfolio comprising breads, cakes and dairy products has seen a faster growth in the past four years.

Britannia’s dairy business with products such as cheese, butter and milk (in tetra-packs) are sold under the Britannia Milkman brand. In October this year, the company made a foray into a new category of milk-based health drink. However, the company’s dairy business also competes with products of companies like Amul, Nestle and Mother Dairy.

Rising commodity prices, given the weak monsoon and inflationary conditions, are likely to be a major hurdle for the company to deliver growth in earnings. It will be some time before the company’s sales mix becomes more profitable and it strikes a good balance between dairy and biscuit businesses. For investors, a relatively high dividend yield of 2.4% seems to be the only solace, for now.