Ladies and gentlemen, good day, and welcome to the Q2 FY 2023 earnings conference call of Zydus Wellness hosted by ICICI Securities. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. If you have questions 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. Manoj Menon from ICICI Securities. Thank you, and over to you, sir.
Hi, everyone, representing ISEC, it's our absolute pleasure to host the senior management of Zydus Wellness for the second quarter fiscal 2023 results conference call. At ISEC, we have been covering Zydus Wellness for a long period of time, and the research view stays constructive. For this call, the company is represented today by Dr. Sharvil Patel, Chairman, Mr. Tarun Arora, CEO, Mr. Ganesh Nayak, Director, and Mr. Umesh Parikh, CFO. I now hand over to the management for the opening remarks, after which we'll open the floor for Q&A. Over to you, sir.
Hi, good afternoon. This is Tarun Arora, and welcome to the post-results conference of Zydus Wellness Limited for quarter two financial year 2022-2023. Like Manoj mentioned, we have with us Dr. Sharvil Patel, Chairman, Mr. Ganesh Nayak, Director, and Mr. Umesh Parikh, CFO. Consumer sentiments have gradually started to improve in urban areas, and however, high input costs have continued to impact the industry. Moreover, pickup in rural demand has been slower than urban areas, which has resulted in down trading. Consequently, you would say that our rural demand, which contributes 25% of the total, net sales, has been a little subdued.
During the quarter, the company continued the growth momentum and registered a net sales growth of 12.3% on a consolidated basis, which is aided by a robust volume growth of 5% in the environment. On a three-year CAGR basis, the company sustained double-digit growth in net sales. Further, when you get into some other aspects of the business, softening of key commodity prices have provided some respite and would aid the business on an overall medium-term basis. However, we've seen some level of volatility, and the increase in milk prices remains, you know, unabated and has hurt the gross margin of dairy-related products, which is what is reflected in our numbers as well.
Moreover, some key imports continue to remain high and have worsened the impact due to weakening INR and negatively impacted gross margins. The company is very conscious of this and is practically implementing price hikes at a portfolio level to mitigate these pressures on gross margins, and it should be recovering over the coming quarters as we move forward. As we continue to scale up on our direct distribution, the company has witnessed higher growth in distribution compared to the FMCG industry growth for the second quarter as reported by Nielsen. We have also strengthened our competitive position across all the categories that we lead by gaining market share in each one of them over 2019, despite the disruptions in interim.
That's the one very important thing that I thought could be very relevant for all investors because, besides our leadership, we are strengthening our, you know, market shares across the portfolio and wherever we are in the leading situation. Let me take you through the highlights of the consolidated financial performance of quarter two financial year 2022-2023. During the second quarter of financial year 2022-2023, our net sales grew by 12.3% to INR 4,268 million. Our total income from operations grew by 11.9% to INR 4,295 million.
Our other expenses grew by 15.1%, which is largely driven by increase in the cost of few items like coal and husk and also the statutory revision in wage rate in northeastern belt, where some of our manufacturing facilities are located. This came in a very short situation, didn't get us much time to react, but we should be able to address this as we move forward. EBITDA de grew by 46.8% year-on-year to INR 163 million. PBT before the exceptional items de grew by 60.9% year-on-year to INR 82 million. Reported net profit was down by 60% year-on-year to INR 85 million. With that, let me share some of the highlights of the operation for the quarter gone by.
We continued our thrust on marketing initiatives to grow the categories and increase our market share of our brands during the quarter. Actually, before I get into it, I must also highlight. We continued our investments on advertising and marketing because we believe that's the only way to build our business on a sustainable growth basis. That's something we will see as we move forward. On the Glucon-D front, we continue to drive the growth of the brand post a good summer season through media activations, TV campaigns during the quarter to leverage the second summer's opportunity across our key markets. As a result, the brand has registered a strong double-digit sales growth.
Glucon-D has maintained its number one position with a value market share of 60.0% in the glucose powder category at a MAT September level, which is an increase of 157 basis points over the same period last year as per MAT September 2022 reported by Nielsen. On the Complan front, the health food drinks category continued with the slowdown and similar trend was reflected for our Complan as well. The category has been showing de-growth for the last three quarters at an overall level as reported by Nielsen.
However, with our interventions in terms of sachets and pouches launched in key markets, and some in the pipeline, which will help us participate in a larger pie of HFD market, we see green shoots are already visible, in terms of increasing market share of Complan, specifically in some channels like modern trade e-commerce, as we work with them. Brand market share stood at 4.6% in HFD category as per MAT September 2022 report of Nielsen. On the sweeteners front, Sugar Free brand continued to face headwinds of higher base and re-registered a flattish growth during the second quarter. We continue to focus on building and driving growth of Sugar Free Green, as a result of which its direct distribution has doubled during the quarter on a sequential basis.
Our new initiatives over last three years on Sugar Free Green and Sugar Lite contribute to now 14% of the sweeteners business, thus making us more future-ready. The Sugar Free brand continues to maintain its leadership with a market share of 24% as per MAT September 2022 report of IQVIA. On the Personal Care front, Everyuth brand registered yet another quarter with a strong double-digit growth. The brand was supported by TV and digital campaigns across its sub-subsegments like face wash, scrub, and peel-offs. Everyuth scrub continues to maintain its leadership position with market share of 41.8% in the facial scrub category, which is an increase of 269 basis points over the same period last year as per MAT September 2022 report of Nielsen.
Everyuth Peel Off has maintained its number one position with a market share of 75.7% in the peel-off category as per MAT September 2022 report of Nielsen. Everyuth brand is at a number five position with a market share of 6.5% in overall facial cleansing segment as per MAT September 2022 report of Nielsen. This covers face wash, face scrub, and peel-off, all the facial cleansing segments. While taking the benefit of prolonged monsoon in some parts of the country, Nycil brand registered a strong double-digit sales growth supported by TV campaigns.
Nycil has maintained its number one position with a market share of 25% in prickly heat category, which is an increase of 47 basis points over the same period last year as per MAT September 2022 report of Nielsen. On the dairy and spreads category front, Nutralite continued to build momentum in overall business and delivered a strong double-digit growth in quarter gone by. Nutralite DoodhShakti dairy portfolio, which includes butter, spreads, and ghee, has delivered a strong performance backed by increased distribution drive, festival-specific digital activations and online recipe videos endorsed by celebrity Sanjeev Kapoor. We expect revival in consumer demand on completion of normal monsoon and increased farm expenditure. We also expect good demand led by festive season in the coming quarters.
The company expects to improve margin on a sequential basis, the impact of which will be partially seen in the coming quarter, with full impact being captured in the quarter four of the financial year. Thank you, we will now start the Q&A session. Over to the coordinator for the Q&A.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their desktop or telephone. If you wish to remove yourself from the question queue, you may press star and zero. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait a moment while the question queue assembles. The first question is from the line of Manoj Menon from ICICI Securities. Please go ahead.
No, sir, I've got a few questions. I'll take one or two now and then I'll come back in the queue. One, you know, while we could hear very clearly about the comments about urban, rural, and how some of your brands have performed in your opening remarks. You know, the context of asking this question about demand is that, you know, some of the categories or many of the categories which you have can be classified as discretionary between staples. In general, we have seen, you know, discretionary top-end consumption, you know, even between consumer staples or FMCG, has relatively performed well.
This is a statement for making based on what I hear from other companies, so feel free to, you know, correct me if those understandings are incorrect for us. The question here is, you know, could you give us some more color in terms of, let's say, the SKU mix, channel mix, you know, which may be giving an indication of confirming that, let's say the top end of the consumer pyramid whichever geography is performing well. The problem is largely with the mass market, poor consumers, it's an impact on inflation slowing down. Any further color whichever cut, you know, on, at an overall level, portfolio level or, maybe, if you can at a brand level which will be super helpful.
I think what we've seen is the top end of the market, both in direct distribution, even the organized trade, which typically ends up selling larger packs, have done better than sub-stockist, super stockist business, which caters to largely the lower pops, beta and rural. That I think really confirms with the fact that there has been a muted mood, you know, takes across the board, and which is what you are also seeing. From a larger perspective, we do see a better response from more affluent parts of the market. We're just hopeful that things will change because the monsoon has been good. Overall government spending has been there, and we should see some revival coming back.
Some of our categories, you know, where we've invested also because Glucon-D was coming back after two hard years. We've also invested back in trying to get back, you know, growth post, you know, the peak summer of Jan-June. We've invested there. We've also seen good, you know, pick up from both our primaries and secondaries. We will see when the full offtake reports are there. We are seeing good absorption from the market in some of these categories also. Even Nycil saw some good uptake. Even the brands which come under otherwise pressure, for example, Sugar Free. We've seen Sugar Free Green doing well, which is a little bit more premium sort of based product, responding better and that does well in also organized trade. Clearly we see a better, you know, offtake from the more affluent, more upper segments.
If I can also add, this is Sharvil Patel here. I think if you look at the business as a whole. First and foremost, I think it's important to note that we have had very good volume as well as value growth in this quarter in spite of the challenges that have been there in terms of overall growth. The brands are very strong leaders, and they continue to demonstrate that with investments they are able to find better growth. Obviously it could have been better had the rural and other areas been better, but it's still good to see that they have reacted to it and shown better growth.
The second also is the market shares, and we have seen other than Complan, where we are still to solve for some of the things, and there have been good market share gains across the categories. I think the investments in terms of both distribution, direct distribution reach as well as some tactical investments on advertisement is all helping. Obviously, we have to be still judicious in terms of how we spend the money. I think all of those so far looks like it's positive sign for the brands that once we see some buoyancy because of the season now, we will see some better uptake in the market.
Understood. Now one statement I found in the presentation about industry. It is very heartening to note this was a slight performance that is bubbling up post, you know, every time series since launch. Does that apply to the current quarter also?
Not really for the current quarter, because that's largely what has happened in the full year of every full year, but not the current quarter. But I can say that Sugar Free Green and Sugar Lite now have become together a sizable portion of our business, and that's why we shared in my comments in my initial summary as well, that they now contribute together about 14% of our sweetener portfolio. These more stevia-based products, which help us get more future ready and open room for growth, are contributing more meaningfully in the sweeteners.
Right. Understood.
Momentum is for full years.
Sure. One follow-up on the marketing side of the business, and I have one question for you, and then I'll come back in the queue. Given that, you know, many of the categories, or rather I would say most of the categories, you are the dominant player and you have the primary task of growing the market. You know, the context is, which also would mean that you have to be the innovation leader here. Any qualitative color. I respect the fact that there is a competitive angle comes in. There's only so much you'll be able to disclose in a public forum. Any qualitative color, which you could give in terms of the innovation pipeline that you have?
For us, the way of growth, you're right, is through innovation and renovation. As much as we are focusing on getting new products in, some of which are at a stage of the three-year, five-year window that we really evaluate each of these products. One example is a body lotion which got launched upfront last year and see the light of the day. Each of the existing products also goes through its own improvement and enhancement.
Some of the existing products are already we worked and rolled out as we speak. Like last year, we also had Complan being relaunched as a, you know, a better tasting stronger taste product. Each of these products go through that. For the future pipeline, we have some interesting innovations which should come through and should help us consolidate. They will be largely around the brands we already have existing within the same category or adjacent categories.
Is it correct me if it isn't, what you just said, is it fair to then for me to understand that the renovation or innovation which you have done in the last, let's say 12-18 months, the ramp up of that over the next, let's say 12-36 months is a likely higher growth driver than, let's say completely new things? Rather than completely new things?
Yes. There is a bigger, more important to grow what we already have, and each one of them is large. Whether I take a DoodhShakti butter, I take a Sugarlite, I take a body lotion, they have enough room for growth, and we will obviously be planning that. New ones take. There is always a two to three-year window which any new product needs. New products, I mean, I can't say there are one or two which have a good potential, but I will not carry my growth dependence on them. If they grow faster, sure. Largely our growth thesis is based on what we already have in the market.
Understood, sir. Again, going back to the presentation, you know, it is very heartening to see the target of 1 million outlets that is from 600,000 which you have over the next three years. Which is 75%-odd, you know, increase which you are attempting. Now two questions there. One, if you could talk a little bit about, you know, the execution plans which you have. You know, because this is a significant jump, at least in my career, I've seen many companies even attempted of this sort of magnitude in percentage terms. Just some color in terms of execution, anything different in terms of structures you are doing, you know, et cetera.
Point number two, how do I think about this, let's say, you know, from a modeling point of view for revenue growth, where, you know, like if likely right, if I have 100 index processes, how much of extra growth, you know, which you could likely get, assuming that you hit these 34 million outlets in the next three years?
Yeah. I love these questions because it comes often, and it's a very interesting thing. If you look at, and I'll use a bit of Nielsen and our own experience on this. Earlier there was a very direct correlation between outlets and the sales. Over the last few years, that correlation has reduced, and factors, if you look at FMCG industry, the rate of growth of any brand, any category has been much lower in general trade than the number of outlets growth. That's why we are conscious of the fact that it will not have a very direct linear correlation with that. To my mind, first of all, let me just point out, we were talking about INR 5.4-5.5 lakh outlets just about six months back.
We've already implemented about half a lakh outlets as we speak over last few months. We are working towards completing a one lakh outlet enhancement for this financial year itself, which we'll do. There is, you know, a steady plan of keeping it up. There is also one new innovation or model which we want to test. It's too early to talk about it. In next year and a half, which will help us expand our coverage without taking a relevant increase in cost to serve. The other issue is because the number of outlets in general trade, traditional trade is going up, but the throughput per outlet is coming down. Therefore, there is a need to get more and more efficient. The need for us will be.
I don't want to prolong this conversation. I'll just touch the highlights because I don't want to take away time to ask other business-related questions. We will need to get more efficient about it. The key role with new outlets will be, one will be the growth, the other will be also driving growth of entities which otherwise do not go through the indirect channel. Those will be the key drivers for me to build our momentum around these.
Loud and clear, sir. Thank you so much. All the best. We shall come back and with you.
Thank you. The next question is from the line of Kapil Jagasia from Edelweiss Broking. Please go ahead.
Thank you, sir. Sir, my first question is on Complan, regarding the market share loss. Like, you know, we have been seeing that, you know, we have been introducing sachets and pouches and also entering into NutriGro. Just wanted to understand, you know, like how these initiatives have shaped up, you know, so far for us. And also, like, you know, if, you know, you would have internally decided on the timelines and, you know, probably, you know, you would be entering into the adult categories also or the elderly population also. I guess, you know, these segments are, you know, really large, you know, which you would be planning to enter probably, you know, what, even three years or less. Any timelines regarding this? Two questions attached into one?
First of all, I think our market shares otherwise have been stable. The category has gone through a large restructuring or reframing with a large focus on lower price packs. The sachets, which used to be about 20%-15%, now occupy 27% of the whole category. We've been, I would say, behind the category in driving the sachet growth up. That's one factor which is impacting our market share. Really speaking in the part we play, which is basically the kid segment, the bulk of the category with the large packs, I think our market shares are reasonably intact. We did face some pressures because of the pouch packs, which were competitively introduced. We have caught up with them. I don't see a market share challenge on that.
The restructuring of the market, reframing of the market, which is happening due to these sachets, that will take us two more months or maybe a couple of quarters to start catching up. My belief is we should be able to catch up on those and get back to our normal market share journey that we had. That's one piece if I were to say. As far as the other segments are concerned, they are a long gestation projects. We already have a Complan NutriGro, which is in the toddler segment. We've seen some good progress on that, but it's still small for us to start talking about a significant shift there. I think adult is some distance away, and we need to first consolidate the current numbers we've got right, and then we look at more expansion beyond that.
Like where these sachets would be like, you know, it could be more in rural areas or it's more in urban houses?
It was largely a rural and more southeast phenomena about 3-4 years back. Today, it has also gone to north. It is also there in mass markets in urban areas as well. The proliferation of sachets becoming 26.7% of the category really makes it much wider reach. Given the pricing of this category being reasonably high and inflationary times, I think they've just been a space that we see it's infiltrating across the board.
Right, sir. My next question is on the Nutralite portfolio. Over here, like what would be the proportion of the dairy portion of the overall treat, like the one which you have mentioned Sugar Free cream as part of Sugar Free portfolio. The dairy would be how much of this Nutralite portfolio?
I mean, this will be a very detailed discussion. We'll not be able to share that at this level, but we have seen good progress on the dairy side as well as the core, the traditional core of Nutralite also. Overall, the brand has done well across the portfolio.
Okay.
Yeah.
I understand that, you know, you are not able to give the data. Like, going forward the next three to five years, you know, how much, like the internal targets, like, can it be a standard tier category in the next three to five years? Any targets decided internally?
Nutralite will be among the top four, five brands and will be sizable enough as a portfolio.
Okay. Sir, just one last question from my side. In your presentation it shows the currency impact. Like, which of the raw materials are usually imported here?
Directly, indirectly, a large portfolio has a currency impact. It could be the sweeteners, it has oils, it has got, I mean, quite a few things, flavors, fragrances. There's a wide range of products which get impacted at overall level. Sweeteners in particular is very
Okay. Great, sir. Thank you for answering our questions.
Thank you. The next question is from the line of Shrenik Bachhawat from LIC Mutual Fund . Please go ahead.
Hi, thank you for the opportunity. Sir, can you please explain how much is your rural mix compared to total sales mix? Because as we all know that rural demand is impacting us, so we can really understand how much is the rural mix. My second question is, could you throw some light on the gross margin contraction, sharp contraction? I believe milk inflation would be the main reason for the sharp contraction. How will the milk inflation be impacting us in the third quarter? Have you taken the required price hikes or which are the factors? Next question.
First question is on the rural presence. We have 25% of our annual sales comes from rural.
Okay.
The second question that you have is?
The gross margin.
Gross margin, how will you cover that?
We have already initiated price hikes, like I mentioned in my summary. We already initiated more than 2% price increase across portfolio as we speak. We do see by various actions we will work towards, we should see a progressive improvement on the margins as we move forward.
It's largely driven by milk mix.
Milk is the single largest impact that we've had. To my mind, it is more of volatility and therefore may not be a sustained issue from a medium-term perspective.
Milk is majorly used in the Complan and Nutralite DoodhShakti, right?
That's correct.
Okay, you have taken the price hikes for offsetting the inflation.
Yes. At portfolio level.
Our milk inflation is not fully covered yet.
There's a lag, right? You don't get an overnight cover because of inventory as well as converting milk into SMP and then using it. If by whatever we have tried to adjust, we will. Our effort is to get back to our current original margin.
Are we able to take price hikes, like, as we don't have any big market share?
We can do it through a mix of actions. There is action on Complan, and there is action on the portfolio level, because at the end of it, we have to deliver as a portfolio. There's action within the milk portfolio and other products which we support. That's the power of a brand of the company at a portfolio level.
Okay, sir. Thanks so much.
Thank you. The next question is from the line of Alok Shah from Ambit Capital. Please go ahead.
Yeah, hi. Thank you for this opportunity. The first question is, again, on the gross margin. While the previous participant did, you know, ask part of it, what I wanted to check was that, say for example, Aspartame , you know, was at 1Q, is up in 3Q. In some of the portfolio we have a very strong leadership position. So are we, you know, recognizing the macro headwinds? Are we sort of delaying the price hike or you think that the required price hikes have already been taken? Because sequentially it is a seismic, you know, I don't see a lot of price hike being there. Just wanted to get your views on the same?
Alok, I think we are taking price hikes, but there is always a lag. It's not that we're not able to or we're delaying. We're just acting as and when they come. We don't want to be leading the price hikes, which will impact the demand or you know, because the consumer is also, at this point in time, quite stressed. We don't want to lose our volume business as well. We are balancing and going step by step. Being leaders across the portfolio, our ability to take price hike is simple. It's just that when a newer thing come up, it's a volatile situation. We cannot anticipate everything. Some of those things, that's why we're responding.
I think, Alok, this is looking at this way. We have lot of elasticity in price, though it's not always finite, but in terms of other brands. Complan is the only brand where we are obviously not the leader, and we have to play the role by which we can do appropriately in terms of competitive space. That's where we will always have been more guarded in terms of what we do, and we don't always will have enough scope when it comes to Complan. Because we produce our own SMP, ghee and others, I think we have a lot of arbitrage to improve the overall portfolio to utilize that. I mean, to absorb the price increases that happen on milk. All those do have a lag. Plus, I think this volatility of sharp increase was not ever expected.
That has obviously taken all of us by surprise that we've seen milk going all the way to INR 53+. I think that's been the challenge. By and large, brands have the capability to absorb any increases because of input prices.
Just to add a small thing, but the comment channels also have a lead time in, you know, giving their price conditions on. It's a mixed bag, but we are at it.
Got it. Got it. Second was on the Sugar Free portfolio. While, you know, we recognize the base impact, but going ahead, anything, you know, apart from, you know, the advertisement in Sugar Free and any replacement of Sugar Lite, especially for the category development, because, your comments, you also mentioned that it has a potential to become the third brand. What are your steps to, you know, become the third brand? I think potential is very high, but, you know, the size somehow, seems to be quite small. What are those, key things that you're taking, you know, to ensure that, you know, the growth in Sugar Free sort of comes in?
Sugar Free, I think, needs to look at, and this is in last six to seven years that we're looking at it has a kind of a yo-yo that we deal with. We've had good growth years, and there have been years where we've not. On a medium term, if I look at it, any gap of four to five years, I see a good single-digit growth that we are able to achieve. The unfortunate thing is we're not able to push it up on a consistent basis to a double-digit. Good year is followed by a not so good year. That's why, to my mind, while we are able to do a good 8%-9% on a three to five- year basis, we need to push that further.
There are two or three elements that we are looking at. One is to recruit new consumers, and that's where we believe Sugar Free Green and Sugar Lite are some of the best ways to do that. The second is by continuing to address the concerns. There are a couple of other ideas on the table which we started exploring, which we'll share over a period of time. Suffice to say that, I mean, high singles are clearly something we will have. Beyond that, we are still work in progress.
Got it.
At least from a..
Got it. And lastly, in terms of innovations, while you know, I think that has been touched upon, but you know, somewhere I think you had mentioned that, you know, we'll be looking at about two to three innovations a year. Just want to check where are we on that journey? Any changes to that plan that you had shared earlier?
We are on track with those. The key thing is that right now we have some very exciting in the marketplace stuff like body lotion, stuff like DoodhShakti butter and Sugar Lite. They have enough room for growth and we are putting investments. We also have to balance our investments and what we put on the table. We are on track on that.
Got it.
We are investing in R&D capability to have a strong pipeline.
Okay. Sure. Thank you very much. That's it.
Thank you. The next question is from Ajay Thakur from Anand Rathi Securities . Please go ahead.
Hi, sir. Thanks for taking my question. Sir, I have two, three questions. First was on the gross margin side, you had mentioned about the product mix in, which resulted into the gross margin, kind of a compression. Can you just elaborate more on the product mix part of it, that's driving that? Was it supply chain, you know, channel mix is impacting us in that context?
Some part of the dairy by-product portfolio at a gross margin level is slightly lower. May not impact at a total level, but those things become a little bit larger. Things like SMP and some part of the liquid portfolio.
Okay. Got it.
That's a mix, impact.
Okay.
The peak impact is the direct cost of milk, which impacts us.
Okay, understanding. Second, sir, can you just, you know, indicate what would be the milk as a percentage of raw material cost for us right now, as in on an annual basis, maybe if that can be shared. Also palm oil, what percentage it would be as a percentage of the current cost?
I will not be able to share the percentage of mix, but I can tell you the milk is the largest, and palm oil will be about a third of that.
Okay. Lastly, we have seen consistent erosion in terms of the Complan market share. We already have launched the low price point SKUs, while it is, I guess, 5% attempt to do this price point. When do you see that, you know, kind of, something arrested in terms of market share losses? Can we expect some kind of a market share gains also going through because of the same?
There are two parts to it. First of all, I think we've started rolling out in the last five, six months. Not all markets, all sachets are being rolled out. We do it as up to Q3, when the whole rollout will be complete. In last four months, we've already seen recovery of market shares, because we share rolling MAT data. You may see it with a lag, but we already seeing improvement in shares. I specifically mentioned all the channels also are responding better.
Understood. Thanks, sir. Thanks for taking my call.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking . Please go ahead.
Yeah. Hi, Tarun. Sharvil. Good afternoon. Thanks for the opportunity. I've got three questions. Starting with Complan as a category, if you have the number, what is the ex-September category decline in terms of volume for HFD?
I don't remember the volume, but if I remember, it is -3% for January to September, -3% category.
Nine months, you're saying?
January to September.
That -3% is value or volume?
Value.
I'm sure because most of the market leaders also cutting down the prices and some give freely. This is value. If it is declined, volume would have definitely taken a hit. Against that, what is the average industry would have taken up, price increase in HFD? Maybe about 11%, if my number is right?
No. Actually, the price has dropped because of 2 accounts. Some of the large players moved in a large pack, 500-gram packs. In the first 3 weeks took almost 20% drop. Then they improved some price. Now, their effective price over the last 2-3 years would be 500 grams would have dropped by 15%-16% is my guess. Then the sachets have taken over. They pushed sachets very hard, INR 5 sachets. Their market over the last 2-3 years have grown from 13%-15% to 26% or 27%. Average realization per gram on this market is actually declining.
Okay. Got it. Second, on the Everyuth, again, if you could share or help me, even personal care has definitely if we see most of the companies who represent the personal care. In terms of EBIT, again, the Everyuth category which is largely into the skincare, have you also seen the decline?
I mean, we are at a stage where we are in a more double-digit growth. I have seen of late, face wash, which has declined, which was very low growth, has revived a little bit. The fact is that our dependence is very large on scrubs and peel-off, and we have seen good, positive double-digit growth around that. Face wash has also grown well for us. Overall, we are growing faster than the category at a good double digits.
Yeah, that's exactly which I was trying, because, if I remember the exit June number, which I have seen, the face wash category has declined almost 6%. I just wanted to know on the sequential basis, has it declined further or it has improved?
No, it has improved. Last I remember, I just have a look at it. I think it has improved. We saw some improvement in face wash. Personally, I was not very, you know, keen on those numbers earlier, but I have seen an improvement there. What I-
Okay. There is a possibility. What I gather, you are saying that face wash is maybe may not have grown that faster, but peel-off and scrub has grown faster, and that's why our growth for the entire personal care is higher of double digit. Is that understanding?
Yeah. We've got a good high double-digit growth across the category on Everyuth.
Okay. The other question I was wanting to ask, you said you have taken some price increases, but what is the quantum of price increase planned in quarter two?
At the beginning of the year, we had talked about 7.5%-8% price increase. We have taken up further price increase implemented now about 2%+, which is gonna get implemented, I mean, which is already implemented, and we'll take more further calls as we go forward.
Okay. Just last question on slide seven, slide five, you have given most of the raw material price index. Now, in the price index, if you have the number, what is the sequential inflation we have seen as a basket? Is it gone up substantially about 6%-7% or it's just marginally we've gone up?
Gone up YoY basis, keeping the COGS same at the same volume level, it is about 8%.
I think sequential.
Sequential.
That is YoY, sir. Umesh Parikh , can you give me sequential?
Seriously, on a sequential basis, it is about 3.5%.
Okay. You mean to say that 3.5% is the inflation and half of that we have taken through price increase. Maybe it explains that about 200 basis points has happened because of COGS.
Yeah.
Okay. Yeah.
It also will depend on the future product mix, how we manage the right product mix.
Sure. Thank you, Sharvil. All the best to you, Tarun, and team.
Thank you.
Thank you. The next question is from the line of Tejash Shah from Spark Capital . Please go ahead.
Hi. Thanks for the opportunity. Just an extension of a question from the previous participant. Should we assume the fact that the private investment that we have made? In the second quarter was good enough for us to revert back to earlier margin mix by fourth quarter or can it happen earlier also? Several variables actually aren't prominent at this time today?
By fourth quarter, I think we should certainly be able to fully catch up. We are hopeful. We are going, I mean, we're managing it month-to-month, but by quarter four we should be back to normal.
Okay. Just wanted to ask,
It is also we have to see in the context of how the consumer business is, right? The fourth and first quarter are where close to 84% of our profits are, and the last two quarters are very small. While we have had a very big headwind in terms of price increases, in terms of the overall company, these two quarters are the smallest quarters when it comes to our profit, which obviously over the period time we need to improve to see that we are strategically there.
I think while we have had the de-growth, the de-growth is not as severe because these are very, very small quarters and a small INR 3-4 crore, INR 8-5 crore change in anything could make a big difference. Meaningfully over the year, the Because of the strong brands, I think we are still in a good place as long as we're able to make the right product mix and the right changes that we have made.
Fair. Thank you. Thanks. Sharvil, just wanted to check, apart from pricing intervention at consumer end, have you cut down any, customer promotion or trade promotion to the margins?
No, not really. I think nothing. We've actually focused on investing for growth. There may be a little bit here and there, but largely we've focused assets on growth and therefore no aggressive cuts. We had to do it in the COVID years when the business had dropped substantially. This year we have a single mindset of driving for growth and managing the inflation. That's the approach we are following.
Great. Thank you so much. Thanks a lot.
Thank you. A reminder to the participants, anyone who wishes to ask a question, you press star and one at this time. As there are no further questions, I now hand the conference over to the management for their closing comments. Over to you, sir.
Thank you everyone for participating in the earnings conference call. We'll see you next year with quarter three calls. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited. [crosstalk] t his conference. Thank you for joining us, and you may now disconnect your lines.