Ladies and gentlemen, good day, and welcome to Q3 and nine months FY 2024 earnings conference call of Zydus Wellness Limited, hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhuwania from ICICI Securities. Thank you, and over to you.
Thank you. Good evening, everyone, and welcome again to the Q3 FY 2024 results conference call of Zydus Wellness, Wellness. From the management, we have Dr. Sharvil Patel, Chairman; Mr. Tarun Arora, CEO; Mr. Ganesh Nayak, Director; and Mr. Umesh Parikh, CFO. I will now hand over the call to Mr. Tarun Arora for his opening remarks so he can welcome to the presentation. Thank you. Over to you, sir.
Good afternoon, and welcome to the post-results teleconference of Zydus Wellness Limited for quarter three, financial year 2023-2024. Like Karan said, we have with us Dr. Sharvil Patel, Chairman; Mr. Ganesh Nayak, Director; and Mr. Umesh Parikh, CFO. It is always a pleasure to interact with all of you. Wishing everyone a great 2024. During the quarter gone by, the FMCG sector continued to witness demand pressure on a sequential basis, similar to last quarter as expected, buoyancy in rural demand continues to lag. The same was further accentuated by macroeconomic factors like low agricultural yields impacting rural demand, delayed winters, and late festive season. However, some of the consumption segments continued to beat the trend. The personal care segment witnessed yet another double-digit growth for the quarter, with Everyuth portfolio continued to gain good traction, which is further aided by Nycil.
The Food and Nutrition Segment continued to face some brand-specific headwinds, plus demand pressure impacting overall portfolio growth. Similar to last quarter, Nutralite brand continued to witness good volume demand, but had negative value growth due to market-driven prices. The Sweeteners Portfolio Growth was also impacted due to very low sales of Sugarl ite as the Honorable Supreme Court allowed to clear the existing inventory towards the end of the quarter three and let the litigation continue at the trial court. The company registered consolidated net sales degrowth of 3.1% year-on-year basis. The consolidated gross margin on net sales is on upward trajectory, showing an improvement of 279 basis points on a sequential basis and 418 basis points on a year-on-year basis.
Let me take you through some other highlights of the consolidated financial performance of quarter three, financial year 2023-2024. Our net sales degrew by 3.1% to INR 4,001 million. The company reinvested some of the gross margin gain into brand building. As a result, advertisement expenses grew by 11.8% year-over-year. Other expenses grew by 17% year-over-year. Cost of strategy consultant and expense increase in minimum wages at Ahmedabad and Aligarh facility drove up the other expenses. EBITDA degrew by 51.1% year-over-year to INR 127 million. The company reported profit after tax of INR 3 million, which includes INR 34 million of deferred tax liability, a non-cash item.
With that, let me share some of the highlights of operations for the quarter, which will also cover category growth and market share numbers as per the MAT December 2023 report of Nielsen and IQVIA. Zydus Wellness portfolio brands were available in 2.9 million outlets, as per the revised reporting of Nielsen for MAT December 2023. Therefore, we are readjusting our plan for availability to 3.5 million outlets over the next three years. We continued our trust and marketing initiatives to grow the categories and increase our market share of our brands during the quarter. On Glucon-D front, the glucose powder category has grown by 4.4% at MAT level. Glucon-D brand has grown faster than the category and registered strong growth for the quarter. The brand has maintained its number one position with a market share of 60.0%.
On the Complan front, the brand has registered ahead of category volume offtake growth. With continuous efforts and interventions for demand generation, Complan has witnessed 16% growth in penetration at MAT level. The health food drink category has registered a growth of 5.8% at MAT level. Complan market share stood at 4.3%. On the sweeteners front, we continue to push consumption of Sugar Free Green with our media campaign with celebrity Katrina Kaif, which was further amplified with digital campaign during the 2023 Cricket World Cup. The brand maintained its market leadership with market share of 96%. On the personal care front, Everyuth brand registered yet another quarter of strong growth. The Face scrub category has registered a growth of 7.6% at MAT level.
Everyuth scrub continued to maintain its leadership position with market share of 44.4%, which is an increase of 263 basis points over the same period last year. The peel-off category has registered a growth of 4% at MAT level. Everyuth's peel-off has maintained its number one position with a market share of 79.5%, which is an increase of 113 basis points over the same period last year. The prickly heat powder category has grown by 2% in 2023, MAT December. Nycil brand has grown faster than the category and maintained its number one position with a market share of 35.1%.
As we speak, we have finished our season's preparedness and have started replenishment of fresh inventory across trade channels. Our demand generation and brand building efforts will continue, which will drive the growth of the company. The company's journey towards innovation will propel the growth further. Thank you, and we will now start the Q&A session. Over to the coordinator for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Sanket from Ambit. Please go ahead. Mr. Sanket? Since there is no response, we'll move on to the next question from the line of Kinjal Mota from Banyan Tree Advisors. Please go ahead.
Hi.
Can you use your handset mode, please? You're not very clear.
Hello.
Sorry, you're not audible.
Hello? Yes, I'm audible.
Yes, please go ahead.
Yeah, so, my question was related to deferred tax adjustment, which was mentioned during this quarter. Could you please give some details on what it is? And second thing is, why is the nine-month FY 2024 tax rate negative? These are the two questions, if you could help around.
So this is, you know, because on conservative basis, we created a deferred tax asset in the earlier quarters, and because there are in the standalone entity of ZWL, there are profits, and we had to reverse this as a deferred tax liability, and therefore, you see it, see it as a line item in the PNL.
It's a non-cash item.
Oh, okay.
Kinjal, we are unable to hear you.
Okay, yeah, got it. The second question is, what is the MAT credit entitlement? So the amount is adjusted for INR 188 million, which was mentioned in the note?
Yeah. So MAT entitlement was mentioned even in the last year's balance sheet as well. So, you know, because we are in the zone, in the scheme, where we have a, you know, this availability.
Okay. Okay, fair enough. And what is the tax rate that we could expect for this FY 2024?
FY 2024 and FY 2025 will be the nil, in the nil tax rate, and thereafter we'll be paying the normal tax.
Okay. Okay, perfect. Thank you.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. The next question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead.
Thank you for the opportunity, sir. Sir, I wanted to understand, when I look even on a Y on Y basis, our sales have declined, but we have gained share in a lot of our products where we are already market leader, we have gained additional share. So if you could just help me understand, why is that the FMCG market is growing, but it's not moving into our sales growth?
So I think, if you look at FMCG market, o verall, there has been a challenge while for the last quarter, Nielsen has reported a 6%, but most of the categories are struggling to get growth. For us, also, if you deaverage the whole business, the personal care is showing a fairly good growth, and which is what we've also reported. It's the food and nutrition which has not grown. So I think the impact is category by category.
Overall, there is a pressure on demand, and the categories are a bit of stressed. Fortunately, because of our actions, we are in a good competitive situation. Our market shares are going up despite the market pressures or category pressures. We believe as we move forward, as the demand improves, I think the category growth will be back, and we should expect improvement in overall growth and specific to those categories where we have the pressures.
Sir, when can we see... So you said that demand, but is there a timeline in your mind as well as some kind of, quantity or like, number, if you can say that we, we can grow up for FY 2025 as well as in future?
So, if you look at it, I think we've, we had even in the last call also mentioned that-
I'm sorry.
Quarter four onwards, we should see the growth.
Mr. Rathi, can you please mute your line? There's some disturbance coming from your line.
Yes. Yeah.
Sorry, sir, please go ahead.
We had. Yes, sure. So even in the last call, we had said that we expect growth to be coming back from quarter four, and that's what I think, it's looking like. That demand is improving though early days, and it's only green shoots. But we expect growth to be coming back to normal starting quarter four, and our wish list is, or our expectation is that FY20 25 should be back to normal double-digit growth that we worked with.
Okay, so sir we are, so there is some kind of growth that we see in Glucon-D for this Q4 as well as Q1, or, earlier year, which was not very well for us.
The earlier year, as you said, was subdued, but we still have to wait until March and April to understand how the season is going, but the start is good.
Okay. Thank you, sir, and all the best.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. The next question is from the line of Karan Bhuwania from ICICI Securities. Please go ahead.
Hi. Hi, team. Thank you for taking my question. So firstly, on Sugar Free, if we also that despite the headwinds, there has been good, good offtake in terms of volumes, right? And, so if you could elaborate more on that as to how has the demand been of the Sugar Free products, especially the?
So let me give you an overall sweetness portfolio and how our business has been. I think we've had two things that have affected overall Sugar Free business. One has been the Sugarl ite not being there for a major part of the business, and Aspartame has had a muted run post WHO. And most of the growths are being driven, and we've seen now several 11, 12 quarters of consistent growth of Sugar Free Green, which is a Stevia-based product, which is covering up for it.
Okay.
We are seeing good offtake momentum coming from Nielsen, and which we hope will help us recruit more consumers as we move forward. A lot of concerns over, you know, what affected seem to be reducing, and we hope to, you know, able to convert into a better improved penetration over the next coming quarters.
Thank you, sir. Thank you. Sir, if you could just highlight what was the contribution of Sugarl ite, which was not there in this quarter, so that will be helpful to understand the growth better.
Sugarl ite, at an overall level, annual level, has about a 1.5%-2%. Of course, in the smaller quarters, it gets more accentuated.
Got it. Got it. Secondly, sir, on Complan, are you seeing any increased competitive intensity versus previous few quarters? Or has there any change in terms of competitive intensity, in terms of pricing or say, distribution, that you are seeing right now?
No, not really. It's the usual. It is a very competitive category, and it continues to remain so. So, the good part is that we've been able to take some price increases, and with the milk getting stabilizing, we expect it to be in a better shape going forward.
Got it, sir. Thank you. Thank you. I'll come back in the future. Thank you.
Thank you. We have our next question from the line of Priyank Chheda from Vallum Capital. Please go ahead.
Yeah, sir, my question is on what was the volume growth for Q3?
It's volume growth for the quarter is in line with the total volume growth. It's almost the same parity, -3.
Okay. Okay. My next question is on how do we look into the growth of -5% for food and nutrition segment? It comprises a portfolio which is very different and very unique to each other. If you can help us... Sorry, I might have missed some of the category growth numbers that you spoke, but if you can also help us dissect -5% growth, say, in Complan or Nutralite or Sugar Free or Glucon-D. How has been the growth in each of the brands would give us a light which are the brands which have been doing well and where the action is required?
So, like I explained in my, you know, initial conversation, I think one part of it is Nutralite, where there is, because pricing has to be adjusted basis of the input prices, and therefore, we've had a reverse mix, where the, pricing have to be brought down, the volume growth is higher than the value growth. There have been also impact on the value for sweeteners, like I just explained in the last thing. Otherwise, overall, these are two major factors if I were to look at, and a bit of, impact on, Sugar Free, less aspartame.
So that's Nutralite and Sugar Free. What would have been the growth for Complan in the current quarter?
Sorry?
So Complan remains one of the largest brands within food and nutrition, right? What would have been the growth for that, if not?
Complan is not the largest brand. Glucon-D is the largest brand annually. We don't give quarter-to-quarter breakup of numbers, but annually, Glucon-D is the largest brand.
Okay, so what have been, what, what would have been the growth for Glucon-D? Would have been in line with the segment decline?
So YTD, Glucon-D, like I explained, has been on, due to seasonality, has been under pressure, though last quarter, of course, on a month-on-month basis, it has been more positive. But YTD, it has been under pressure because the season got impacted, and we had explained in quarter one, how due to season it got impacted.
So I think for the quarter, if you look at it, obviously Glucon-D doesn't have the large part of the realization and Complan is. Complan is, I think we still need some time to see how Complan moves forward in its growth trajectory, but we are seeing some improvement. So we are hoping that in this coming year, with measured investments and not over-the-top investments, we see better performance on Complan. But other than Complan, I think our strategy for 2024 is quite aligned.
I'm sure if you can help me, so as our portfolio is kind of seasonal as well as wide, it would be, it would be great if you can focus more on the each of the brand and their categories where, wherein if you can stress up more, what are the kind of strategic pillars and the, and the steps that we are taking to revise the Complan, that would be great.
So I think for Complan, I think, I don't think we, in terms of our overall 2024 plan, Complan, we will still require to continue to build on the current strength that it has, which is better protein, superior protein, and the aspects of how it helps in growth and height and other benefits. So I think that proposition will continue with the improvement in gross margins and others, we will see that trickle down in terms of better profitability on Complan. So Complan, I think currently it is to manage with the current base of business that we have and grow it in that line with measured investments. The growth for the overall business will be driven by, obviously, the other brands and the skincare brands which are doing extremely well.
How should we look into the gross margin for the full year, while on the YTD basis, we are up by 100 basis points. Would we end our FY 2024 in a similar way? Or, should there be impact of a June quarter, sorry, impact of the March quarter, where base was, base is very low, so there can be a further expansion into the gross margin for the full year?
So on the full year basis, we are expecting further improvement in the gross margin and good improvement in the gross margin. With the commodity prices and mix prices stabilizing, so we are yet to see further change in the-
Quarter four, we will see higher gross margin than quarter three.
Okay. On the distribution front, if you can help us, what are our plans to accelerate the distribution into the categories which have a very low penetration? Plus, we were tracking a data on the household gains for our Complan brand. If you can help us update on that.
First of all, on distribution, Nielsen has revised numbers for availability across our brand portfolio. They have now stated, restated our availability at 29 lakhs, 2.9 million for 2023, which was earlier stated at 25 lakhs. Over the next three years, we are looking at how do we reach 3.5 million outlets from a GT point of view. We continue to drive our gains in both modern trade and e-commerce, and clearly our distribution focus is to make our products more widely available, not just in quantity numbers, but also a wider range across the outlets that we cover.
Over the next three quarters, we are looking at adding at least 50,000-1 lakh more outlets in a direct distribution drive that is planned end of the season, which is post the summer season. Third part on the Complan expansion of our households, I think we continue to see double digits. In fact, in my initial speech also, I mentioned we've seen a 16% increase in household penetration for Complan. So largely, Complan is growing on the basis of volume and increased penetration, which is aided by our packed price architecture, which is making it more accessible price points without compromising on margins.
Sorry, if I can squeeze in further one question. So if there is a 16% expansion into the households, penetration for Complan, would it be very surprised to say that even the brand would have grown at, say, at least 10%, for the YTD number?
Not really. Not really. But we've seen some improvement in volume market shares, like we mentioned, but not really. I think some of these data come from different sources. They look from a trend point of view in the right direction, but they don't exactly match.
If you need more-
The second point is that it will also add on to our future growth for the brand, which is what this feeds into. So it's more of an early measure, early indicator of what we could build Complan with.
So, how should we look into the, if there is a household expansion that is happening while-
I have a small suggestion. I have a small suggestion. If you have more questions, please reach out to our Investor Relations. We'll, we'll be happy to do a more detailed call to help you with this, because-
Sure. All right.
Sure.
Thank you.
Thank you. We have our next question from the line of Tejas Shah from Avendus Spark. Please go ahead.
Yeah, hi, team. Thanks for the opportunity. So how would you explain the divergent trend that we have seen in food and nutrition versus personal care?
So, like I explained earlier also, I think the personal care shows that both the brands are in good shape, and they are driving, and there has been a consistency. Food and nutrition is a diverse portfolio, where we have had a mixed bag. Clearly, brands like Nutralite, like I mentioned, continue to be on a volume track and delivering growth and profitability. There have been some challenges in sweetness and nutrition portfolio, which is sizable, and therefore they have impacted. But we believe clearly sweetness portfolio, we should be able to address as with our actions in very short term. Nutrition portfolio should turn around, but may take a longer to get to a full momentum as we speak. So it's a quarter which is got impacted from our overall view.
Sure. Sir, second question, for many quarters you have been calling out that, Sugar Free has, Sugar Free Green has been doing very well almost since last nine quarters, as you have mentioned. And where other variants had very, undesired headwinds also, as per, as you called out. Despite that, Sugar Free has just reached overall business 7% contribution. So just wanted to know, so that growth is also not materially higher than the overall portfolio growth, is it?
So, Sugar Free Green is 7% of the Sugar Free portfolio.
Yes, yes.
That's what you pointed out. It has actually moved substantially from almost 2% about three, four years back. We believe it is growing at a pace where it will disproportionately impact the overall growth of Sugar Free. So I think it's moving in the right direction, and we do believe it will help us keep driving the penetration of Sugar Free, which got impacted over last two, three quarters after the WHO. Earlier also, there have been ups and downs with Sugar Free, but this should help us overcome this substantially.
But I think, to your point, one thing is important to understand, that Sugar Free Green is at a higher price point, than the other SKUs. So I think, as I said, it's a, it's a strategy that combines, the, all the three brands, and we cannot just only build on only Sugar Free Green. But in the long term, three-five years, Sugar Free Green will see significant traction in terms of higher market share in the overall Sugar Free space. But both the other two brands also, in both in the culinary and, and in the user, in tea and table top, also have to have the right, mix. So I think that's what the, the team is working on, to make sure that the healthy mix remains.
Obviously, strongly aided by the growth of Sugar Free Green, but with equal opportunity on Sugar Free Natura also, and maintaining the base with Sugar Free Gold, with the headwinds that we have faced. We have tweaked some things that we, for the brand, and in the coming quarters, we would see a positive impact on that.
Very clear, sir. Last one, sir, when you look at CY 2024, FY 2025, what are the top three things or initiatives you are excited about, and what are the top two, three things that you are actually keeping your fingers crossed for?
So I think,
Fingers crossed for is very similar is clear, is Complan and Sugar Free. We need to see how it trends forward. We hope for a good summer.
Season.
And a good summer, even a normal summer will be better than the summer last year, so that should have a positive momentum. And beyond that, I think Tarun can talk about these major initiatives.
So, so we have at least three-four, reasonably large launches that we have planned in this year, which is not just for this year, but over the next two-three years that we launch. Plus, within these two brands, we have some couple of initiatives which should help us drive. Like I also mentioned, there is a distribution expansion, right? So we've got our hands full in terms of how we are looking at it. We're putting some pilots in place to extend ourselves into some new market spaces also. So our activity calendar is, reasonably full, and we still remain, bullish on what we can do, despite the challenges we face, especially in last couple of quarters.
Got it. That's also my side, sir, and all the best for coming quarters.
Thank you. We have our next question from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead.
Yeah. Good evening, sir. Thanks for giving me the opportunity. Just wanted to understand on your initial comment of seeing a good improvement in quarter four. So is it because that there will be a lot of you know uptake prior to the summer season? Is it because of that, or overall, you are seeing some material changes in the demand environment?
Very good improvement in?
Good improvement in performance in Q4.
So, I think there are two parts to it. Certain seasonal buildup, which happens across our entire portfolio, where the wholesalers and distributors start building up in January, February, or February-March, because the season is coming, which is part of the portfolio and which will happen, which anyway looks good. But we are also seeing some green shoots of demand, and we are expecting all our so-far initiatives playing out, which we have put in place. So put together, we believe that quarter four should start, you know, help us take it to the next level from where we have seen quarter two, quarter three demand from our side.
So I think as Tarun said, it's a summer skewed portfolio for at least, and quarter four is loading, so it happens every year. So, assuming that this is a normal summer, we will see better traction.
Right. And Q1 should also be good, considering the fact that last year Q1 was affected by unseen waves and all. So I think even Q1 should also be good for us.
If we have-
Considering the base.
For Q1, if we have a better summer, Q1 will be the main growth driver for this quarter, at 525.
Okay. Okay, thanks.
Thank you. We have our next question from the line of Ajay Thakur from Anand Rathi. Please go ahead.
Hi, hello, sir. Thanks for taking my question. So, wanted to check on two, three things. One was on the Sugar Free. So, you know, I just read about the Sugar Free D'lite, can it be kind of, you know, just a one quarter kind of a phenomenon or, or we can expect that Sugar Free D'lite will be kind of, you know, hitting the markets sometime soon? And how do, how are we looking at, you know, filling that gap in terms of Sugar Free D'lite?
That is in place, but we'll discuss once we launch.
Yeah. So, I think we have, we've started at it. I think from March starting, we should be back with a normal momentum on this Sugarl ite or equivalent space. And we will in the next quarter be sharing a more detailed strategy where we believe because of this innovation and our capability, we should be back to normal business in the following quarters.
Okay. And sir, wanted to get more sense on the international business. So, you know, what would be our run rate right now for nine months in terms of the international business, as a percentage of overall sales? And, you know, what are the, you know, the growth drivers that we are looking forward to for the next year in terms of growing it faster?
In the nine months gone by, we've had a double-digit growth. However, it's been impacted by specifically Africa market, where we've had some challenges, specifically our largest market, Nigeria, where there were macroeconomic challenges. But most of our other markets, like Bangladesh initiative or Middle East, are firing as per plan and good to, you know, build up right. But at an overall level, it's still be closer to 3%-3.5% because of the challenges we face. So that's really where we are.
Understand. And for the drivers, you know, going forward, how are we looking in terms of, you know, growing the international business, say, for the next year?
So, like I explained, there are these three markets we've identified: Nigeria, Bangladesh, and Middle East. Nigeria, while we look for solving for the macroeconomic issues, in terms of our Bangladesh initiative, where we're investing, we've created a subsidiary and we are pushing stuff. We expect a good traction. We've already seen some fairly good traction on that. Plus, we are launching new products, some of which are available in our investor deck. We're starting with Middle East, and we'll extend it to other markets as well, on Sugar Free D'lite.
Understand. And sir, lastly, in terms of the price increase, so I believe we have taken some bit of a price increase. So but then given the fact that, you know, in the current quarter, if I were to look at it, it is kind of a flattish price increase that we are seeing. Can you just give some bit of a indication of how this is likely to trend in quarter four and onwards in terms of the price increases? Is there something that, you know, we can expect in terms of price increases going forward as well?
So, I think it's a mixed bag because, like I explained, it's like we had to, because the oil prices come down, so we have to pass on, where the net margins are good. So we'll take calibrated price increases on some of the brands, but some others will not be. So there's no overarching complete price increases, but we do expect to continue to inch up our margins, gross margins, and that's really the focus to get back to our FY 2021 numbers.
Understand. Thanks, sir. Thanks for that.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. The next question is from the line of Devansh Shah, an individual investor. Please go ahead.
Yeah, hi. Thank you for taking up my question. Actually, sir, if it's okay, then I can speak in Hindi also. The mix of that would be much more appreciated. Sir-
Okay.
Heinz India purchased... We have purchased Heinz India by INR 4,500+ crore company in 2019. So I can see in balance sheet, the operating profit margin before that was 20%+. In five years, we are nowhere near to this. So is it a good, good purchase or it's like, what has been happened and happened and we are now trying to survive only for all these things?
Because the markets, what we are seeing in the market, what we are seeing in the brands, where are we standing? So it's, really, I'm an individual investor, sir. I'm a retail investor, so I have my own perception for that. But, sir, in Hindi, five years we are at nowhere near to some 18%, 10%, 20%. Dividend payout is also worst. It's going on worst part. Complan India, Heinz India was a good company before that, or after buying that, we have disrupted the company?
I'll give you a short answer, and if you need more details, you can connect with our IR, and we can explain a little bit more.
Yeah, yes, sir.
I think there are two parts to this. Oh, can I?
Yeah, yeah. Yeah, yeah, yes, sir, yes.
So there are two, two parts to this. I think, at an overall level, there has been two or three fundamental changes from 2019 to now. One is a substantial GST budgetary support, which is sitting, which you've stated on records, which is almost INR 30 crore to the EBITDA, which is missing in the base number, which is not there. Second is 2021, on FY 2021 after that, there's been a substantial inflation which has impacted gross margins for all FMCG companies, including us, largely impacted by milk, oil, and other factors, and DMH, et cetera, which has impacted us. While we managed that with a lot of our cost cutting, but like many other FMCG companies and much smaller, than some other companies, our EBITDA margins have got impacted.
Having said that, we do believe that over the next two years, our EBITDA margins can go back to 17%-18%, that we want to do, and with our actions in place. Talking on the top line, I think, from what we acquired, three brands that we acquired, Nycil was at 31% market share when we acquired, it's already at 35%. We believe on margins as well as all our actions into place, we have increased the margins, we've increased the market share, and the presence of Nycil, which has been more successful with us. In Glucon-D, which has had a, should I say, a little bit of more volatile run, thanks to, COVID and last year's, summer season getting impacted. Our market shares have got consolidated from 58% to 60%+ .
The category has gone through a pressure because we defined the category and there was a penetration hit in 2020. But post that, our penetration and more consumers have come on board. We believe this will continue to build forward. We have a job in expanding the category to the next level, which is what we are working on. So both these have demonstrated a substantial consumer acquisition, margin improvement, and better execution. Third brand, which is more talked about and was already under stress under Heinz when we acquired, had already dropped from a double-digit market share to mid-singles. I think it, it was a known challenge which we took on. We believe we will be able to do it better. Of course, there are challenges.
We are still at a very similar level of market share that we acquired it at, closer to 5%. We have probably lost 0.2% , 0.3% over that, because the market has not expanded, and to make it worse, the milk prices have impacted the margins. The good thing is that while the leaders dropped the prices, we have held ourself enough. We didn't drop the prices, we played with the price point and held us as well. We believe with more actions in place, like we have discussed, we are good to build this brand forward as the prices are getting better from the input prices, and the competition is also realizing that low prices is not the way to build brands.
I think, our margins will improve, and we are on track to recover our shares, but that's a little bit longer haul than we estimated at that point in time. But at an overall level, despite all the macro and other things, I think the Zydus wellness team has done an exemplary job of integration, making it one team and, taking some of these brands forward. I think, from where we acquired Heinz brands or so-called iconic brands that they were, they are in better hands, and they will become only larger from where we are. So that's my view. More details, of course, we can share in a separate conversation.
Yeah, yeah, that's a normal, I understood that. Otherwise, though, there should be some part on the, like, on the annual report also regarding this, and five years, where are we standing? So we can understand, like, if FMCG or some sector is going through some of the hurdles or some of the. They are not in the correct flavor of the market. FMCG is not the flavor of the market from last two years or three years. But, sir, retail, sir, I have never seen in my life that milk price, inflation-inflationary points were. I have never seen this unless 20 years. Like, 20 years would be a very small to justify something like this. But, sir, my genuine question was regarding that case.
Before that, company was having only two, three brands, which were the market leaders, operating profit margin, etcetera. Now you are telling that in two years you are going to come back over there. That's a good part. That's all. That's only, that was the major question from my side or from the retail side.
Thank you. Thank you. Thank you.
Thank you very much.
Take care.
Thank you. We have our next question from the line of Mayur Parkeria from Wealth Managers India. Please go ahead.
Good evening, sir, and thank you for taking my questions. Am I audible? Just confirm.
Your volume is very low.
Is it better now?
Are you on your hands, sir?
We can hear you. We can hear you.
Okay, please go ahead then.
Actually, somebody just took away the thought, and it was also similar. I also had a similar question, maybe a little more diplomatically and nicely put, regarding the same Heinz portfolio. You have summarized your actions and what we have done over the last five years well, and you've also tried to give us some understanding of how we look at over the next two years, so that will help us. If you can clarify that also, and from a shareholders' return perspective, now, I understand that management can execute their strategy, markets will do their own things, right? We know that.
But over very long periods of time, and 5, 6 years are long period times, obviously there was COVID, there were other aspects, we understand that. But having said that, it's five, six years, and other companies have done relatively better, if not, you know, something very phenomenally great, but they are still continue to do better than.
From that perspective, from a shareholder wealth perspective, do you believe, I'm not, I'm not asking, one quarter, two quarter, one year, the kind of outlook on stock prices or something, but in general, for, you know, promoters and owners are the largest shareholders here, and do you believe that now this quarter marks the bottom as far as many of the aspects which were concerned with respect to demand, with respect to costs, with respect to initiatives, with respect to market share and brands and, you know, some of the changes which had to be done? Do you believe everything is now largely behind us, and we are on a trajectory where long-term investors and shareholder returns are can see an uptick for from here on?
From a cost point of view, I think this is the... I mean, this is the lowest we've seen, so cost-wise, we should be only getting better, hopefully, if no crazy situations happen. Demand is clearly a situation which is dynamic in nature. Right now, we are seeing a positive moment, and we do expect things to only get better from here. Just from a market share point of view, we touched our peak of last five years across most of our portfolio, and we remain positive about building on these market shares. So competitively, we are in good shape. We are looking at hopefully demand only getting stronger. Cost-wise, we remain again positive that we will improve our gross margins, and we'll be able to take it to our bottom line.
17%-18% kind of margins in two years will be largely led by gross margin improvement?
That will be the biggest driver and operating leverage if demand plays out the way we are expecting at least. That's the largest two factors.
Sir, we have, we have also reduced the debt over these years substantially and now practically debt-free kind of status. We are coming back to normalcy as far as the balance sheet strength is concerned. Why can't we increase our direct reach or the rates which is... Just a theoretical question, but your, just to understand your strategy, why can't we reach 3.5 million outlets, in, you know, one and a half years instead of three years? Just a question, just a period, because you mentioned. Means what, what stops us to grow our distribution now we have the strength? Is it spending which is the curtail, or is it just the market dynamics or our conservative approach in which we want to build this?
We're not conservative. Actually, when we acquired, we were 2.4 lakh outlets. Now, we directly cover more than 6 lakh-6.5 lakh outlets. 2.9 million outlets is where our products are available, but our direct coverage is only 6 lakh-6.5 lakh. Overall, we've seen GT, the general trade being under pressure over last couple of years, where a lot of consumers have shifted demand to e-commerce and modern trade. That accounts for almost 21% of our business. So while we are driving our general trade reach, we are also conscious of our cost to serve. So it's a balancing of expansion as well as cost parameters. We are reasonably bullish and capable, but we'll do it in a calibrated way so that our costs are managed, and not just driving it for the sake of it. So it's a balancing the two sides.
So last question from my side on Everyuth. With, apart from the scrub and the peel- off, is there any product which you see as potential to grow and which has, you know, over the next two years, obviously long term maybe it is possible, but over the next two years, which can, which has a, which is positioned in a manner, compared to peers or, you know, category, which has, which can give us, you know, enhance this growth rate in the category for the overall, brand itself?
Simplistically put, I think scrub and peel- off can give us all the growth that we need, but we've had at least two or three more initiatives. We launched body lotion. We are working on channel-led, specific initiatives on face wash. We have couple of benefit-led segments like De-tan portfolio, which will add to this growth. But our core will continue to drive, based on increasing their penetration and reach, is how we feel. This, there is enough scope within skincare to grow that.
Thank you, sir, and wish you all the best.
Thank you. We have our next question from the line of Malhar Sanghavi from Vama Financial Services. Please go ahead.
Hello, good evening. Am I audible?
Yes, please go ahead.
Yeah. I had a question on ImmunoVolt. Has the demand for that picked up as you had expected? And if not, then what's hindering the growth there?
So it's still small part of our portfolio. It's still very small, and we are working on driving it further.
One more question, just to follow up on the Stevia-based Sugar Free. So that's supposed to be a more healthier-based Sugar Free, if I'm not wrong. If, and if that's the case, why is it not showing as much growth as it should? Like, why has it not picked up the way you had expected it a couple of quarters or a couple of last year?
Free Green, as we call it, our stevia-based Sugar Free, it is driving, it has been growing for 11, 12 quarters in high double digits, and that's what we've talked about. So it is actually driving the major part of the sweetness portfolio.
Lastly, the bottom Sugarl ite is doubling each year, right?
It was doubling each year. In last few quarters, as we mentioned, there was a trademark litigation, and that has impacted our business and impacted our sweetness and overall business portfolio.
Right. So just want an update on that, like, how is the distribution being affected?
We should be back and selling it, and post that we will share in the next quarter our plans and strategy on that.
Sure. Thank you. All the best.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.
Thank you everyone for your questions. We hope to have a good run in 2024, and wish you all a very nice healthy 2024. We'll see you in the next quarter this time. Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.