Ladies and gentlemen, good day and welcome to Marico Limited Q1 FY 2026 earnings conference call. We have with us the senior management of Marico represented by Mr. Saugata Gupta, MD & CEO, and Mr. Pawan Agrawal, Group CFO & CEO International Business. 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 touch-tone phone. Please note that this conference is being recorded. Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts. Therefore, if there is anybody else who is not an institutional investor or analyst who would like to ask questions, please directly reach out to Marico's investor relations team.
I now hand the conference over to Mr. Saugata Gupta for his opening comments. Thank you, and over to you, sir.
Yeah. Hi everyone. Good evening to all those who have joined the call. I would like to start with a narrative on the operating environment during the quarter gone by, after which I will touch upon our performance and strategic objectives going forward. During the quarter, we witnessed stability, improving demand trends in India across urban and rural. Premium categories continue to outperform the mass segment, while alternate channels like modern trade, e-commerce, and especially quick commerce continue to lead growth. While modern trade also moved into growth after some quarters as a result of focused initiatives, improved execution, and the ongoing progress of project safeties. Looking ahead, we are optimistic about a gradual and broad-based recovery in consumption sentiment supported by easing retail and food inflation, a favorable monsoon, increased government spending, and higher MSC.
Moving on to the quarterly performance, we have continued to deliver a sequential uptick in underlying volume growth in India, which is nearing double digits, backed by improving traction in the core aided by GT improvement and sustained momentum in our new business. Optics trends have been encouraging, with nearly the entire business either sustaining or gaining market share and over 80% of the business sustaining on improving penetration. Revenue growth in the India business reached multi-year highs, and the strengthening volume trajectory was supplemented by pricing actions in core portfolios taken in response to the sharp inflation in key commodities like copra nut oil over the last 12 months. Delving further into India with this, I will now share some perspective on the performance of our key categories. Parachute has continued to demonstrate resilience amidst the hyperinflationary conditions in copra prices.
In such hyperinflation, while consumption typeface is typical, Parachute has exhibited minimal volume impact and consolidated its market share, underscoring its inherent strength in terms of price inelasticity and deep consumer trust. Despite multiple rounds of price increases and MLH reductions amounting to an effective price increase of 60% plus after normalizing for MLH, the brand remained in growth territory during the quarter. We have delivered this growth despite consciously rationing certain low margin volumes to protect brand profitability. During the quarter, the brand continued to gain share in modern trade, e-com.
While pricing transitions are in fact quicker and the new prices have already hit the shelves, we understand that the unprecedented levels of inflation in this particular cycle have been due to the supply-demand graph created by a combination of crop yield due to uneven weather patterns in the first half of 2024 and speculative activities and some unseasonal rains in April and May and the temperature fluctuations this year, which further extended this cycle and led to a sharp spike in the April period when normally conversion starts. This year, because of rains, the conversions got delayed. Principally, it is the inelasticity of certain sources of demand that accentuates the demand-supply gap during such times, as you know copra can't be imported.
While the length and severity of this inflationary cycle pose short-term challenges, we have been able to hold on our ground and deliver stable outcomes on the back of pricing and enduring equity of Parachute. The brand has successfully navigated multiple hyperinflationary cycles, whether it's in 2014-2015 or over an 18 months- 24 month cycle in 2017 and 2019, where we had also taken around 35% price increases and still delivered 5.5% growth over a period of 2017-2019 and a 6.5% growth in 2014-2015. The scale of operations, coupled with resilient back-end capabilities and prudent inventory management, continues to reinforce a competitive edge. That being said, we believe the current market conditions are unsustainable and the copra market should settle down over the course of this fiscal, given a forecast of monsoons and a decent progress so far.
In fact, prices have just come down around 12% from the highs in the last two weeks. As consumer pricing gradually normalizes, we expect Parachute to chart meaningful recovery in volume growth. Given our competitive advantage under such conditions where the smaller players are out of the market, Saffola Oil bounced back to deliver mid-single-digit volume growth, which is in line with our medium-term aspiration. We expect the brand to be steady on a full-year basis. During the quarter, we launched Saffola Cold Press Oil range on e-commerce and quick commerce platforms. This is in line with our purpose of the brand to reinforce healthy cooking choices in Indian households and premiumize its play value. Value-added hair oils had a strong step up in its recovery, led by sustained momentum in the mid and premium segments. The franchise gained 140 bps in value market share this quarter.
On a MAT basis we are confident of maintaining a double digit growth momentum in the franchise throughout the year on the back of sharper brand activation supported by a strategic pivot from trade-led investments toward brand building and therefore increasing SOV especially in the mid and premium segments along with enhanced direct reach through Project SETU which invariably benefits while. The foods portfolio scaled in line with expectations. The core Saffola franchise grew in double digits while True Elements and Plix's plant-based nutrition range sustained accelerated growth momentum. We remain on track to deliver over 25% growth this year and over the medium term while steadily improving profitability. During the quarter, w e also expanded our muesli range with two variants. We will continue the innovation momentum and expand the TAM of Saffola through extension into relevant adjacencies.
We have a clear path for each of the three food brands and see tremendous TAM expansion opportunities across the board and some of it we have shared in the presentation for ClickCentral. The premium personal care segment continued with strong growth momentum during the quarter led by the digital-first portfolio. The digital-first portfolio comprising Beardo, Just Herbs, and a personal care portfolio of Plix exited the quarter with an ARR of over INR 850 crore, scaling up well ahead of our earlier targets. Given this trajectory we are on track to reach 2.5x of FY 2024 ARR by FY 2027. We continue to operate with a keen eye on the profitability and are striving to deliver double digit EBITDA margins in this portfolio by FY 2027. Moving to international business, we recorded high teen constant currency growth maintaining a stellar momentum.
Bangladesh delivered a robust performance underpinned by broad-based growth across core and new franchises while Vietnam had a muted quarter. Strategic interventions are underway. We expect a gradual recovery in this business in the quarters ahead. In MENA, the accelerated scale up in the Gulf region and Egypt continued, supported by healthy traction in new franchises and sustained market share gains in our core and in the NPD. South Africa was flattish this quarter but we aim to achieve our full year growth aspirations. To sum up, we have started the year on a strong footing with both India volume growth, overseas business constant currency growth, and the consolidated revenue growth trending positively and reaching multi-year highs. We firmly believe that we are in a virtuous cycle by virtuous growth slightly. I'd like to share a perspective on why we see it that way.
Over the past few years, the CPG landscape has undergone significant change shaped by macro events and evolving consumer behavior. During the COVID period, while categories like food, health, and hygiene benefited from natural tailwinds, we believe it also brought a degree of complacency among CPG players since the share of wallet was artificially shifting in their favor. Given that the lockdown created a situation where other expenses, whether it's out of home, whether things like travel, entertainment was not being done, subsequently due to the inflationary environment following the Ukraine war, the sector delivered pricing-led top line growth and ANP and other cost-led margin expansion, and some of them got rewarded in emerging markets. However, we believe the core mantra for consumer companies must remain centered on driving volume-led growth, which is a far more sustainable and enduring lever for growth.
We draw a lot of confidence from 99% of the business gaining or sustaining market share in India, which has happened after a while. We are consciously staying away from the trap of optimizing margins at the cost of long-term brand investments. We've also registered steroid-based selling in organized trade and investing in below-the-line of price-led selling. We believe our resource allocation strategy over the past few quarters is paying off. We have also done significant SKU rationalization so that we believe in fewer, bigger, better. We are also seeing the positive impact of Project SETU-led initiatives in rural and on mid and premium segments of WAHO. As we scale this up further in urban, we expect it to capitalize growth in food and PPC categories like serum and male grooming.
In addition to inflationary cycles being conducive to GT ROIs, our prior investments towards reinvigorating the GT distribution system have already begun to yield early wins with the revival of growth in the channel after a long hiatus. In addition, this high top line growth is helping in improvements of the ROI of our GDS distribution partners after a long time. Next, the scale up of our digital brands has opened new frontiers for diversification, innovation, offering avenues for accelerated revenue and profit growth in the medium term. A brand earning recognition with three of our digital brands featuring in the latest edition of the Insurgent Brands list published by one of the top VCs and one of the big C MBB management consulting firms. In addition to that, we have started the process of cost synergies amongst the digital brands as well as data synergies.
Coming to our strategic objectives for this year, with high single digit volume growth in India as our base case, we will strive to deliver double digit volume growth in some quarters supported by pricing growth. We will target around 25% revenue growth this year. While the pricing led denominator effect may suppress optical margins this year, we are not alarmed by the optical drop in operating margin and firmly believe this is a temporary hike and not any structural concern. We would think of this inflationary cycle like a 1x upheaval which could in some categories potentially upend business models. Although we are delivering sector leading growth and moderate profits in spite of this high inflation which is unprecedented and I believe exceptional, while delivering double digit EBITDA growth this year may be somewhat of a challenge, we expect better visibility by the second half.
That said, consistent with historical trends, moderate profit delivery during inflationary years has been invariably followed by considerable profit accelerations in deflationary periods and thus we are fairly confident of delivering double digit profit CAGR over the next two years. We have seen cycles like this before and each time we have come out stronger. We believe that what continues to anchor us through these cycles is a resilient and experienced senior leadership team with collective experience of over 140 years in Marico and average leadership tenure of eight to 10 years that reflect deep institutional memory and understanding of various business cycles. Ashish, who handles the, he's the CEO India, has been working with us. Together we have been working for 20 years and Pawan also has been with us for 21 years.
So between the combined three of us who are handling the business, we have around 63 years of combined experience in Marico. Over the last few years, we made significant investment effort towards strengthening our leadership depth and we now have a solid GenNext leadership in place. Looking at the medium term, while the journey from INR 5,000 crore - INR 10,000 crore took longer and we were not happy about it, there's a very fair chance that we could touch INR 15,000 crore over the next two years. Therefore, we also believe that a INR 10,000 crore to INR 20,000 crore leap can be achieved within the next five years if we continue to maintain this momentum. Last but not the least, sustainability remains central to our strategy. A Sustainability 2.0 framework is delivering strong progress across all key focus areas and moving up towards our 2030 goals.
We are confident that our commitment to creating shared value will drive long-term sustainable and differentiated growth. With that, I conclude my remarks and thank you and we are happy to take your questions.
Thank you very much, sir. We will now begin with the question and answer session. Anyone who wishes to ask questions may press star and one on their touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama Wealth Management Limited. Please go ahead.
Yeah, congrats on very good volume growth, revenue growth. My first question is on the India hair oil business. Three subparts to that. First is copra. How is the supply side now looking, and what kind of correction do you see in the next two or three quarters? That is my first sub question. Second is WAHO has seen a smart recovery after a few years of challenging times. The entire category faced challenging times. Now, with the urban recovery being talked about by most FMCG companies and rural continuing to remain reasonably robust, would you expect WAHO volume growth to accelerate from here? That is the first question.
Let me first address your question on coconut oil. As far as copra is concerned, as I said that the correction has started. We also need to understand that we being a significant buyer of copra, we have to also manage the entire supply chain assurance as well as pricing. We are now in a state where we believe we have much more control of the situation because as you know that copra and the overall coconut demand titration happens in these kinds of inflation. The normal S& D imbalance adjusted itself because every consumption point gets titrated. Given our supply chain advantages and other things, our position building and other rest, I think we are in a far more better control. We believe that much better and therefore I don't see any further inflation at this point in time.
We will be able to give a much better kind of a feel in the second half. As I said that in spite of taking such price increases, we have actually in transaction terms still delivered a slight growth of 1% and given the outlook on Parachute we should be under control. Coming to value-added hair oil, we took a conscious call over the last two three quarters because we faced unreasonable competition where a lot of, you know, spends went from ATL to BTL in the bottom of pyramid, especially in amla segment that we wanted to defocus convert a lot. What happens normally if competitive spend falls? You can maintain the same SOV at, you know, at half the spends or we said that it was a suicidal strategy, you know, it was, you know, it doesn't make sense.
We had re-pivoted towards investing behind medium and premium brands which makes certain margins that is working. In addition to that, the first benefits of SETU we are getting especially rural because whenever you do direct distribution, the second and the third brand distribution increases and therefore we are extremely confident of maintaining this double-digit value growth in terms of the value-added hair oils business. If you take X Amla, actually the volume growth is double digits and this is the high margin part of the business. You can understand this. Plus, you know, the food margin improvement as the digital margin. We have been able to hold on to margin in spite of this kind of unprecedented input cost inflation.
Thanks. One quick follow-up question here on the coconut hair oil business. Whenever we see such sharp inflation in FMCG and specifically in hair oil, we see local players kind of lower their intensity and presence in market, and obviously copra has seen absolutely insane kind of valuation. If you could talk about some of the local players in the core market and similarly on the consumption side because customer in India is extremely value focused.
Have you seen any kind of a consumer change at the coconut hair oil?
Level that some part is going to WAHO? I do notice your very resilient volumes, but that could be a function of market share gain because the very big retailer which had an annual call recently, they did say that in coconut oil they saw a very sharp decline versus your almost flattish volume. You have done quite well. Have you seen some section of
Customers shift to other hair oil.
You have gained market share, so it's kind of getting hidden.
I think as you know that our entire growth model is based on unbranded to branded and letting market share from other smaller players in the coconut oil market. I alluded to two pieces of statistics. In 2015, over 2014, we had taken a 35% price increase and we delivered a 6.5% volume growth and yes, market share gain over 2019- 2017 because it was over an 18 month- 20 month period. The average price increase was again 35% and we had delivered a two year CAGR of Parachute of 5%. I believe that we should be able to hold on to the volume. There could be titrations but all I can tell you is that we are taking certain steps, whatever in terms of our strategy, which will ensure that the volumes are not impacted.
Yes, the smaller players and other smaller branded players will be far more impacted.
Sure. Last question on the international business, if you could comment, three sub questions there. In terms of the Gulf and Egypt, what is happening, 42% CAGR, is there some base effect, is this sustainable? On South Africa, what is happening there, why have you not changed the full year guidance in spite of each flattish number? And Bangladesh, are you getting volume growth? My sense is the pricing growth in the coconut hair oil business there also.
Will be quite sharp.
Of course, lower than India given you do have import option there. How is the volume growth in Bangladesh?
Okay, so let me address one by one. As far as the Middle East, which is the MENA is concerned, the growth is being fueled by two things. One is growth in the core in terms of market share gain in our core businesses. As you know, we never participated in WAHO in Egypt. We launched WAHO in Egypt two, three years ago and then we have launched full portfolio of WAHO in Egypt, which is Herbs India. We have got Fiancee and we have got Amla. Similarly, we have got an aggressive distribution investment in, and also we have launched shampoo in Egypt and Middle East. We have launched shower gel and body lotion. The NPD contribution has been significant and all the NPDs are doing well, as well as we are getting share in our core. Last year also we grew 30% +.
This continues and we are expecting we're able to have this accelerated growth in the Middle East because it's a very strong focus and investment market for us, because in terms of the opportunity or the headroom for both top line growth, and we have also done this with a significant improvement in operating margin so that we continue to reduce our dependence on Bangladesh for both top line and bottom line. I think your second question was on South Africa. Sometimes in quarters we do certain area adjustment of strategy and all that. We are pretty confident that we start getting back quarter two and we have a visibility of July that we'll get it back on growth and over the full year we should be able to hit double digit growth, which has been our consistent this one.
Having said that, again, as you know, over the last four, five years we have outperformed the sector by a mile in South Africa and significantly improved profitability. We have been able to prove that yes, we haven't made so much investments in South Africa or Africa, but with a very, very frugal and a very efficient capital allocation we have been able to give sector beating growth consistently in South Africa over the last few years. Now coming to Bangladesh, Bangladesh has two components. As a volume growth in the core, there's significant NPD performance. As you know, we have done very well, doing recently well in shampoo, we are doing well in baby, and there is some part of inflation in. Price increase in Bangladesh has been far lower because international copra has not got impacted so much as the Indian copra.
Sure, thanks. That's all from my side. Thank you.
Thank you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Team, good to see results. First is on, you know, Saugata on ATL versus BTL, what you mentioned. At a consolidated level I see your advertising spends have gone up quite a bit, about 25%. India business is actually down 20%. The absolute number is like lowest in the last five years or let's say 20 quarters, the percentage number. I know the denominator shifts quite a bit in your case, but we have seen inflationary cycles in the past at about 3.5%. This is also the lowest number that at least I recall or we have ever seen. Can you just elaborate more on this?
Look, you're right Vivek, it's incorrect to look at ASP percentage to sales because of denominator effect. Having said that, yes, of course there has been some cut in the India input. Let me just tell you two, three broad contours for that.
Number one, we have not cut in the focus categories of premium, Bahoo Foods, and PPC. These categories we have invested adequately and also touched upon this fact that we've ensured that our share of voice is higher than our share of market in focus categories. Secondly, in BoP and WAHO, we have definitely cut down due to competitive activity at the trade and therefore we have rationalized ATL spends towards consumer beneficial pricing in that segment. Additionally, in this quarter we have cut down a lot of non-media spend. We have rationalized the frequency of Nielsen subscription data, we have deferred some of the new film shoots which was discretionary and hence reduction in utilization of celebrity time cost. Additionally, we also extracted a lot of inefficiency out of media and non-media spends and hence getting more bang for the buck for the same dollar spent.
These are some of the reasons because of which you see the NP spends little going down but going ahead. We believe that NP will trend upwards in India business. At a consolidated level we continue to invest behind all the focus categories and new parts of the business.
I see. Okay, so basically.
In terms of media.
Spend, there's been no reduction.
No. Why do you say that? Sorry, because the number is just about INR 85 crore.
Because all the cuts have been done on non, I mean non-media and production and other activities. What we have ensured is that the media.
Spends have not gotten.
the focus categories. In fact, has increased for other part, as I explained, largely because of non-media cut in some of the elements, and plus some of the non-focused categories, of course, we have cut down.
Got it, got it.
To, you know, on the.
When I subtract, you know, standalone from console, the advertising spend or there is up 60%. I'm guessing that bulk of this will be on India business only and international movement will be relatively lower. Right. Is that fair?
Yeah, you're right.
It is largely on the newer businesses, and also international business has gone up, but not to that extent.
Got it, got it. The second thing is, your comment in the press release, the way in which or the information update about the MNDs. What you mentioned in the existing geographies or even a new geography, I'm guessing that is more in the context of international business that you're talking about. You have done, I would say, exceptionally well on the acquisitions that you have done in the digital-first D2C space in India. Are there still white spaces that you are looking at in India, or you think the platforms are ready, the brand platforms, and it is just more? You have also given in your release the categories that you can expand into with the existing platforms. How do you think about India acquisitions from here on?
I think there are one or two spaces which are, I think, available still. We are clearly going into not only market attractiveness but a right to win which are adjacencies. We believe that there are one or two spaces which are available, whether it's in food or personal care. In addition to that, as you know, food is an interest for us. Therefore, we will continue to be still looking into these acquisitions. Our track record for acquisition has been big. We now have a good playbook, and we also believe that we see ourselves as a strategic investor of choice because, given that we are when we have multiple brands, the kind of synergies and the kind of cost and the kind of knowledge you can give and help a founder grow his or her business is, I think, significant.
Got it, got it. Thank you. Wishing you all the very best. Thank you.
Thank you.
Thank you.
The next question is from the line of Arushi Lunia from Macquarie. Please go ahead.
Hi. Hi team. Am I audible? This is Avi here.
Yeah, hi Avi.
I just had one question on copra. Just wanted to understand a bit. How is current copra versus the, you know, sector average? If you could kind of give us a sense and based on that, would it be fair to say—sorry, if you could kind of help first clarify that part. You didn't get the question. Versus the sector versus 1Q average. Sorry, sector as in quarter average. I'm really sorry. 1Q average as in, is it ahead of that? Is it below that? How would it be?
Yes, it's 12 down in the last few. That 106% was for the quarter. If you take a point today, it's 12 down in the last.
From the peaks.
From the peaks.
Yeah, from the peak. From the sector average it could still be down. That's the correct understanding. From the one, two average it would be down. That would be the right understanding.
Ice levels in quarter one, it went up further in July, and now we are seeing about 10% - 12% correction from the peaks that we had seen in July. Again, sort of linked it back to the point which Saugata had mentioned earlier. We do not see any further pricing action, at least given the recent trends that we have seen in the copra prices.
Got it. Just a clarification, it would be fair to say that whatever was the 1Q EBITDA growth, the growth logically should kind of improve as we go forward. Given that value-add is improving, given that we are seeing, is that a fair expectation?
Is it difficult to give quarter on quarter guidance? In fact, Saugata touched upon his opening commentary that while we had given a double-digit profit growth guidance earlier, in the current scenario it looks a little challenging, but we'll still strive for high single-digit growth in this year. Typically what we have seen is that inflationary years get followed by a deflationary year, and we have been able to make up for more than what we could not do in the previous year. Therefore, from a two-year perspective, we are fairly confident that we should be able to deliver double-digit profit growth.
The only thing I alluded to is just wait and watch in the second half. Right now, as I said, yes, double digit looks challenging as of now, but you never know. Three months ago I never could have predicted copra prices.
No, I understood. Except copra, there's nothing that I.
You know, as you know, we never give up like the Indian cricket team till the last ball, so we will not give up. We will be like the Indian cricket team.
Perfect. That's all from my side. I just wanted to clarify that point only. Thank you very much. Thank you.
Thank you.
The next question is from the line of Mihir Shah from Nomura. Please go ahead.
Hi team. Thank you for taking my question. Firstly, on Parachute, just one small clarification in the press update. You highlighted that there is a consumer pricing of about 60% in the press note and that translates to closer to about 30%, 31% for the quarter. I wanted to know after this 31% what is the incremental pricing that you have taken that has yet to come through in the numbers. We have taken additional 30% price increase in quarter one. We don't intend to take any further price increase.
I'm sorry to interrupt you, sir.
Mr. Shah, could you please mind muting your webcast line? There is a follow up.
The full effect of this price increase will be visible in quarter two, where the value growth probably could be even higher on the Parachute franchise. From quarter two onwards or later in the quarter, we also start advertising in the base. In H2, your pricing growth will progressively come down from the peaks of quarter tw o.
Understood, Pawan, thank you for clarifying that. After such sharp price increases, historically I don't think I recall much price declines in Parachute, maybe in 2017, 2018 and thereabouts. How confident are you on the volume growth front? You've sustained it this quarter. Does this kind of price increase put significant pressure on titrating for consumers? Can one expect a sharper decline on volumes on Parachute or not?
Really no. I think there are two things. One is obviously we will take steps. Now I can't get into details of what are the steps we will take to ensure that protecting some of the packs which are much more sensitive to pricing, we are taking steps. Secondly, as I told you, during such times the small players are really stretched in terms of their presence. Also, some of our branded large competitors who have been doing what I call unreasonable kind of pricing, which was last year, I think will not do that. I think there will be market share gain. A combination of that, we will be able to hold broadly the volumes. I don't see any reason to be stressed out.
I think the other thing is that what I believe is going to happen is that the peak has been reached and therefore as we go towards the second half, I think there will be a little bit of stability as far as pricing and other things go.
Thanks Abneesh for that. Secondly, on WAHO, it's a great set of numbers after such a long period of time. Is there any element of channel filling or is it largely project SETU that is driving this? You know, what is the core driver for this and sustainability of this? I know you mentioned that you were trying to do double digits, but just wanted to check on that one.
I think you are very, very. We have a very high confidence level on sustaining double digit growth in WAHO, and two things. One is that as you have seen, you are seeing also a significant increase in market share. See, what happens is that normally wholesalers take high velocity items. To give you an example, a Parachute or a Shanti Amla will be a natural thing of choice which will go through the wholesale system or the indirect sale system. Now that we are, over a three year period, adding half a million set of outlets, invariably it is the second or third brand that goes into the range selling, and that is the advantage we are getting. Therefore, we are not only taking share from the organized players, we also are taking share with some of the smaller players.
The second thing which we are doing is that because we have said that I am not going to get into the BTL fight at the bottom of pyramid but invest behind equity building. We are significantly investing behind equity building, which also means that our share of voice is increasing and investing behind because it is my job as a category leader to drive category growth. We are fulfilling the job which we had abdicated because of, you know, we were trying to fight at the bottom of pyramid. It's a combination of that, and as I said, the biggest, see in WAHO, obviously we haven't taken price increase majorly.
The biggest thing, which is illustration of the fact that if you take out Shanti Amla from the equation, because we are not getting into this, you know, PT wise BTL or whatever you call it, case wise BTL fight, which is, I think, very inane. You know, the volume growth of the other brands, which is brands like Hair and Care, Jasmine, Aloe, Ayurvedic, they are actually double digit for the first time after a lot of quarters, and we expect this kind of a trend to be maintained.
Fantastic. That's wonderful. Heartening to hear. Lastly, if I can just push in one more on margins, I wanted to understand how should one think about margins in the near term with this kind of inflation. WAHO is margin accretive category. If that goes by double digits, while the kind of pressure that you're seeing from copra, when will this converge and when can we start seeing, you know, margins starting to expand? Can it be like in two to three quarters? Is that a fair understanding?
See, from a margin percentage standpoint, very honestly, it is very difficult to sort of gauge because there's multiple moving parts in terms of the commodity inflation, price increase that we have taken, etc.
But as I mentioned earlier, in this kind of inflationary scenario, what is important is look at the profit growth because margins will definitely look compressed because of the significant denominator effect. As you would have heard, Saugata said that we're expecting even higher revenue growth going ahead. Therefore, margin percentage guidance is difficult. Yes, we hold on to what I just said a while ago in terms of the profit growth.
I said again, reinforcing, let us wait a quarter because situation is volatile. We have far more control on volume growth, revenue growth. I think on the margin it will come, and as I said, we strongly believe in emerging market volume growth is important. If we can deliver in some of the quarters going for a double digit volume growth, automatically margins will come next year. In terms of a two year basis, it will be a healthy margin growth. There is no reason to be concerned at all. One or two quarters is fine, but I don't think any power plant globally has taken these kind of price increases and actually, you know, hold and health volume.
W e've seen in the past that any compression in margin in a particular year has been supplemented by a significant expansion in the subsequent year. That will play out as we move along to FY 2027. Fair point.
Thank you very much, gents. Wishing you all the very best and congrats on the great set of numbers.
Thank you.
Thank you.
The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead.
Hi everyone, my question is on the Parachute segment. You mentioned that now there is like a 60% price increase on Parachute. We have seen inflationary cycles in the past, but I don't think we have ever taken a 60% year-over-year pricing in Parachute. In light of this, I know you said you will take measures to protect volume, but in light of this do you think it is possible that with a 60% pricing volume might touch a negative double-digit kind of a number, or you think that that's out of the question? It can't get so bad.
First of all, I think the 60 is a point-to-point, and as Pawan alluded to, as we move towards the second half, this number will go down drastically. It will go to anything between 46% - 35% if there is no pricing action. I think I gave you some piece of statistics that twice in the past we have taken 35%. That time, India might have been the 11th largest economy. Today, we are far bigger, and the aspiration and this one. Number two is this 60 is a one-quarter phenomenon. It's not a two- or three-quarter phenomenon. As I said, there has been stabilization that is happening on the copra prices from the peak. That's this kind of a demand, the supply-demand. This one was also something which was a function of some speculative function. It is not a structural major issue. It will get sorted out.
Obviously, you will only see a proof of this one after the quarter happens, the second quarter. We don't see, we are not unduly perturbed by this one. There could be volume pressure here and there. I mean that double-digit, this one is not a, it's a doomsday scenario is unlikely to happen. I don't think anything like that will happen.
No, let me just add, I think confident nothing of that sort will happen. In fact, in this quarter also, if you adjust for MLH, it is 1% positive growth. This is despite taking certain calls of rationalizing the supply on certain channel SKU combination because that was very low margin. We took a very conscious call in terms of not supplying to protect margins. Therefore, we are absolutely confident that there won't be a scenario where we will have any major decline. In all probability, we should be able to deliver growth adjusted for MLH.
Got it. Secondly, just wanted to understand the drivers behind the copra price. What is the reason that the inflation is so high and even taking a slight moderation from here, it would still for the full year remain much higher than what our original estimates were. What led to this, basically.
I think I talked about it in my opening commentary. What happened was there was a slight drop of productivity in the coconut. This was about around 9%. What happened was that some of the demand, as I talked about, that coconut which is used for consumption, coconut which is used for religious purposes, those initially are inelastic. The copra thing is the end of that entire supply chain. That led to, also, what happened is there were some unseasonal rains in April, which led to copra. Copra needs dry weather for conversion. That conversion cycle got delayed. Since all the other demands were met with a certain pricing, the availability for copra, availability, that was further shrunk because when you had a 9% overall productivity drop, if the other things have done at a certain level, copra, the availability was. That led to some speculative activity.
I think now what has happened is, given all the pricing, automatically demand rationing happened. As a result, what we are seeing is that as demand rationing starts happening, we are seeing the first signs, and we are still in season. The season continues till September. We don't have a problem in terms of supply. Our first job was to also ensure that we have supply assurance. We believe that we have far better control of the situation as of now. Going forward, yes, I think the overall full-year copra will still be high. At the same time, sequentially, copra price is expected to now go down unless there is again some other black swan event or something. Directionally, what happens is that if you see inflationary cycles, invariably followed by a deflationary cycle because what happens is demand titration happens. Also, the rains this time are good.
Our first idea about the crop is also decent. We believe that it will be followed by a deflationary cycle.
When you're saying productivity is 9%.
Down, does it mean that the crop itself is sort of 9% down? What exactly does it mean?
Broadly, yeah, yeah, yeah.
Okay, okay.
This is because of some seasonal.
Vagaries that the 9% has got affected.
What is the underlying reason for that?
Temperature and temperature, unseasonal rain or as a function of that.
Understood, understood. Basically, you are focusing more on the mid and premium because you think that the lower end doesn't really make profit. What we have seen across many.
We have, I think it makes profit, but it doesn't make as much profit.
Correct, correct. We have seen across many segments that consumption is under a huge amount of pressure. In this kind of a scenario, basically the consumer is willing to go for cheaper alternatives. You have seen that in multiple categories in the consumption space. While your strategy is sort of good of focusing on the more profitable part, do you think this is the right time to do that?
I don't know why I have not noticed. First of all, the index session of RPI is not that massive, you know. What we have said is even in Wahoo also what we are not doing is in the brand like Amla category, not focusing on BTL. That doesn't mean I'm not going to invest behind Shanti Amla mid and large packs. It is about that x20 price point BTL driven strategy. Once we have now got WAHO the rest of the things, I might invest in Amla also and grow the category. What we are saying is we don't believe that by converting ATL to BTL, that doesn't necessarily lead to consumption. The question is if I gave 10%, 20% BTL, am I getting increased offtake? My hypothesis is that increase in BTL doesn't give you offtake, long term offtake.
Right, got it.
Price increases. All I'm saying is I'm not buying volumes by doing.
That's all. Thank you very much.
You will stop buying because Marico has stopped giving BTL to the wholesaler.
Got it. Understood. Understood.
Thank you.
The next question is from the line of Aditya Soman from CLSA. Please go ahead.
Hi, good evening, and thanks for your time.
Two questions.
Firstly, on WAHO, what would be the volume growth? I mean, you indicated that it's sort of double digit. Excluding Shanti Amla, including Shanti Amla, would it be the close single digit?
No, it will be slightly more.
Yeah, mid single digits.
That effectively means that volumes for the non, the bottom, the remaining 30% of your portfolio other than Parachute, Saffola, and WAHO would be sort of north of 25%. Would that be the right rate to get you to the 9% overall?
We don't want to get into this one. All I can say is that we have indicated that mid single digits, you would not get into individual category wise growth. Yes, the premium part of the business or diversification of business would be higher growth.
No, that's very clear. Just lastly on this WAHO bit again. One of your competitors, on their call, mentioned that they've gained probably the most market share in their oil category and obviously they compete in Amla. Would that be the right inference that they are gaining market share because of BTL or whatever?
I can't comment on this one. We have gained 150%. 150 bps value share. We focus on value share.
Very clear. No, that's it for me. Thank you.
Thank you.
Thank you.
The next question is from the line of Nihal Mahesh Jham from HSBC Securities. Please go ahead.
Yes, good evening and congratulations. Focusing on the foods business, there has been a slight moderation from the 40% growth you saw in Q4 to 20%. Any specific parts you want to highlight on that?
I think there's a quarterly basis happen because last year there were some launches which happened. I think we are fairly confident about 25% plus growth in the food business. Sometimes this fluctuates because as you know it's not still a INR 900 crore + business. Sometimes fluctuations happen. There is nothing to be worried about. Two things we look at. One thing we look at is that the core of the foods, which is the Saffola oats, masala oats, and honey and all, are they growing by double digit? Yes, they are going by double digit. Sometimes, you know, because there is some part of True Elements, some part of Plix, it fluctuates. I don't think there's any cause for concern. Maybe 40% would have been a slightly higher number because we have always been talking about a 25% kind of a growth. 25% plus growth.
Is on the profitability of the food business itself. In case of personal care, you've given this outlook of double-digit EBITDA. Now in case of food, you mentioned that you expect to see a gradual improvement in the gross margin from where you've already reached. If I had to speak in terms of the EBITDA profitability, what will be the aspirations, say, similar by FY 2027 for this part of the business?
I think two things. One is as far as the oats plus masala oats, the core of the business which is a concern, which is a significant this one, we are almost, you know, touching the company EBITDA. What we have realized is that as long as you concentrate on value-added part and this one at a, we break even say any category at INR 150-INR 200 and we hit INR 300, INR 400. Our objective will be to get some of these categories into that. Having said that, quite separately, I think over the last two years we've improved gross margin by 1,000 basis points. It's still a work in progress. We need to continue to do that. I believe that what we actually look at is the blended gross margin of our NPD versus your current portfolio.
The blended gross margin of our NPD is higher right now than our current portfolio and this will progressively move up.
Also, just to add, foods is also a low ANP model. Low gross margin, low NP model, and therefore at a net contribution level it won't be very, very different. Once it reaches a particular scale, then to reach to a company EBITDA is not much of an effort because it's a low ANP model.
are also continuing on that. We are using the Saffola master brand and getting the amortization of the spend. You have to look at it from a Saffola master brand, Saffola total. This one is net contribution terms.
Just quickly, one last question. The INR 20,000 crore number you've given by FY 2027, just more clarity in terms of, you know, the different segment contribution. You mentioned foods and D2C 2025 by 2027. Just more clarity on the statement you made in the annual report.
I think we can't get it in data to give a, you know.
Exact breakup of that INR 20,000 crores. The idea is that on all the core categories we've given some guidance. For example, let's say we're talking about foods, 25%+ growth, digital plus business, 25%+ growth. We are expecting to deliver double-digit growth, a combination of all of these, plus of course international business. We also expect mid-teens kind of a number. With a combination of all this, this INR 20,000 crores can be achieved.
Got that?
Thank you so much. Wish you all the best.
Thanks.
Thank you. Thank you, sir.
The next question is from the line of Harit Kapoor from InvesTech. Please go ahead.
Yeah, hi, good evening. I just had three questions. One was on SETU. It's almost a year and a half in your three year journey. I just wanted to get a sense of how much of the INR 500,000 direct would we have broadly covered and any target for this year.
I think while, to be honest, we kicked off SETU sometime around one and a half years ago, the impact started because we were prototyping the SETU thing. I would say that we are seeing the first signs of growth of SETU and you will see perhaps better impact of SETU as we go into the second half of the year. There are two parts of it. One is the rural direct switch where we are not only doing direct distribution but also converting some of our indirect to direct using far more technology and getting a control of it, better ranges. The second part of the SETU will be also in urban where we will increase our presence in food, specialty stores, cosmetic as well as chemist, which we will unfold as we go. You will start seeing this. This will lead to two things.
One is we will certainly see a GT improvement in GT growth as we move from quarter to quarter in this process. While we said it's three years, I would knock off the first six months because we were trying to get the model right. I would say one year, there are two more years to go. We are pretty confident that what we have achieved in this is two things. One, we believe that the long-term sustainable competitive advantage for incumbents or large players in the FMCG sector is strength in GT. GT is not going to vanish overnight. Therefore, while we get short-term sales in by investing in OT, we have said that it is in our interest to ensure that our distribution system in terms of ROI stability stays continuously and controlled.
We are the first to call about this issue of GT and that's why we started this SETU. The second thing it will start doing is we'll be able to do range selling and tomorrow some of the digital brands, once they hit a certain critical mass, create a specialized DT channel for, say, the top 10,000-15,000 food outlets or the top 10,000-105,000 beauty stores or the top 10,000 chemists. That's the other thing which we have not even leveraged yet. That will be phase II-B of SETU.
Got it, got it. The second question was on WAHO, you know, given that the non Amla brands have grown double digit and clearly share has come from those brands. Just wanted to get a sense of, you know, who, you know, who are the players that or, you know, which are the type of players that we've been successful in gaining share from. The question essentially is, you know, if you look at it a few years back, you'd also had certain, you know, D2C led players in the premium space who came in and took up some space there, created certain brands there. Is some of it coming from there as well that as you are expanding your reach, customers coming back to the umbrella brands a little bit more, more color on that, that's all.
I think mere distribution of placing a product doesn't lead to market share. I'm alluding to some D2C brands, okay. I don't think Nielsen captures them at all. Whatever share we have got would be share from large organized players. I don't think there is any this one on D2C players. As I said, I think the biggest gain has come because of our SETU, which is involved in direct distribution, availability weighted distribution. Secondly, because of the fact that we are now investing behind some of the brands, it is leading to overall brand preference.
Lastly, in your presentation, you had a slide where you spoke about the INR 900 crore -INR 2,000 crore journey for the four brands in the digital space. Is this pertaining to digital-first brands overall, or is it pertaining to these four brands in the journey? You see these four brands going over the next three years. I just want to know if there is an acquisition element to that INR 900 crore- INR 2,000 crore also.
No, I think as of now it is the four brands. We’ll be happy to acquire some and ensure that this number is definitely achievable, crossed. What we wish you all the best is just to add that we alluded to in this chart is the potential TAM expansion for each of these four brands.
Yeah, I got that. Great, thanks. Wish you all the best. Thank you.
Thank you.
Thanks.
Thank you. The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Hi. Congratulations on a great quarter. My first question was again on the digital brand. You've given this enhanced aspiration of 2.5x and also margins going up sharply. Your chart shows a significant jump from where you are today to 27%. What we have seen in other digital companies sometimes is both the things don't happen together. If you try to pull the margin up, it does affect the growth rate at least to some extent. What's giving you the confidence that you can do both, which is scale up the top line but take up the percentage margins in some of these businesses.
Okay, I think I covered this last time. There are two cohorts in terms of Beardo and Plix. They have broken even. In fact, Beardo is close to double digit EBITDA. Plix has broken even. They are now on an accelerated growth path and obviously they will have, you know, because of cost synergies and scale synergies, they'll continue. In order to make them grow at an accelerated rate, I don't need to do burn. Actually, my EBITDA will also increase. As far as Just Herbs and True Elements is concerned, we are okay with moderate growth and get a path to breakeven within the next 18 months. The biggest one which I think we have a unique opportunity is that all these brands have access to the entire Marico cost structure, whether it's procurement, whether it's supply chain.
Now, look at another example of digital media buying because we are going to buy one Marico digital buying and digital media buying. All these are structural cost savings which a standalone digital brand will never have access to, and those are the things we are tapping. For example, I'll give you an example, Beardo. When we insource one or two of the hero SKUs into our own manufacturing system, we straight away got a 500 bps, 600 bps improvement in gross margin. We're starting that process now.
Just to add, there are two broad levers. One is, of course, these backend synergies which Saugata spoke about, and second is also with the scale, operating leverage will kick in. Now these businesses are becoming sizable, and therefore, let's say overheads, etc., will have an operating leverage. This is giving us the confidence that even operating margin % will improve. Again, we have a job to do in just a central elements, which you're expecting that we should soon move to breakeven, and therefore, the overall digital cohort, the upliftment of margin will happen.
Just one follow up on this. What we've seen again in some of the other digital brands is that this advertising spend, which tends to be a really large cost in these businesses, almost becomes like a variable cost because it's performance marketing, which is almost variable.
Are you saying that in your case, the way the P&L of these brands look, there is actually going to be decent operating leverage on advertising, which I assume would be a really large % of sales at the early stage when the brand is scaling?
Let me give you a construct. As far as advertising is concerned, good digital marketing leads to lower ROAS. Number two is if you look at, say, D2C part of the business, as long as the AOVs are high and your digital marketing spends are better, you actually get better profitability. The second thing that happens is that we also believe that it's just not about performance marketing but also off-platform spends that need to also drive, and as I alluded to, given it is a one Marico buy, your off-platform spend efficiencies are far better than standalone brands. Unlike some of the standalone brands, we are also getting economies of scale as far as A2S is concerned.
As you look at it, it's not that we make super obscene gross margin beyond the fact that at anything between INR 250 crore -INR 300 crore level, I can make double-digit EBITDA. It proves that our cost structure can be manageable. As you know, I think it was mentioned in my opening remarks. Recently, there's a study done by VC and in partnership with an MBB consulting firm on insurgent brands. You will notice that not only are our brands high growth, they are also extremely capital efficient.
Got it. My last question is actually on the copra that you know where copra is today, how much do they have to drop before you have to start taking price drops? What I mean is, till where have you priced copra on a broad-based basis? Do you expect second half there may be need to take price hike? Given how much the cycle has gone up, even if it comes off, let's say 10%, 15% from here, you may not need to take price corrections.
It all depends on the situation. What we will do is we will always balance volume and margin, I think, and we now have a broad pricing model which has been developed with around 15 years of data. We will not be greedy about margins. At the same time, we believe that usually in a deflationary cycle we have been able to increase our margins.
I just want to call out one thing, Arnab, that our vulnerability towards copra price fluctuations has come down over the years as we pulled multiple levers of margin expansion that we've discussed over the call in the last one or two quarters. For example, food gross margin or digital business margins. In fact, driving WAHO growth through mid and premium segment is also helping us drive up margins with a better mix. In fact, rapid scale up of premium portfolio, international business, scaling up of smaller business units in international business, all these are additional profit levers, and therefore our dependence on copra as a lever of profitability has come down and will keep going down over the next few years. Just to share a number, the dependence on Parachute and Saffola for profits has gone down by approximately 1,000 basis points over the last few years.
Therefore, we are not that much vulnerable now to copra and edible oil prices as we used to be, let's say, a few years ago.
If you really get it, that as if value-added hair oils keeps on growing double digit, your digital businesses grow and all that, this number will progressively even this year get less impactful. It's fine. I mean yes, it's something which is, you know, has been something unprecedented, but it's not giving us sleepless nights.
Understood. Thanks so much. That's it from my side. All the best.
Thank you.
Thank you, ladies and gentlemen. We will take the last question for today, which is from the line of Nitin from MK Global. Please go ahead.
Thanks a lot for the opportunity. My questions are on the copra prices. There is a drop of around 12%. Based on the previous answer, it seems like we are not going to take any price cut right now and we will look for balance. The other two questions are around, there was a Solvent Extractors test release which talks about pest attack hurting yield of sort of copra. Is there any such concern for this year? Second is, is it like import of copra is banned in the country? Can we import finished good from Bangladesh?
No, no, we cannot import either copra or oil. We can only import to the extent what we can export. The representation POMC is an independent industry body. We do not have such information of that pest, etc., damaging the crop in a wide scale manner.
There could be some limited impact, but again, it's an industry body which does represent the industry as a whole.
Just to add that as I said, the drop has been not major at 8%- 9%. It happens in any crop, and whatever little visibility we have is there's no additional concern as we go into next year.
Now this is reassuring.
Second, in terms of the long term path we have discussed in the.
Annual report around doubling revenue by 2030. This implies around mid 10% sort of a growth ahead. Would you be able to highlight how much of the business we are expecting from organic business and inorganic?
I think when we talk about a five year number it's an aspiration. We now put the building blocks in place to do it. It's very difficult to say inorganic, organic. I have never believed inorganic to be a substitute for, you know, organic growth. Inorganic is always an accelerator and therefore for us we will always make, in today's uncertain world, there has to be a plan B and a plan C. I don't see any inorganic component in that kind of a plan. The way we said is that I think given that we have started the year on a good note and the building blocks in place of diversification, getting WAHO back into double digit value growth, international business getting into teens, I think our ability to deliver a kind of a 14%, 15% growth which takes us to that is possible.
I think this year we have talked about around 25% which accelerates and that's why I told in the opening commentary that in order to secure that aspiration we will try and attempt to hit the first five. I mean to move to INR 15,000 in two years.
Thank you, sir. Thanks for the opportunity. All the way. Best.
Thank you.
Thank you.
As that was the last question for today, I would now like to hand the conference over to the management for closing comments. Thank you. Over to you, sir.
To conclude, we've had an encouraging start of the new fiscal, having delivered robust growth and margins in both India and international business. Despite facing unprecedented levels of input cost pressure. In India, there are clear signs of gradual pickup in the core portfolios while the new businesses play their part of accelerating growth. The international business has been a consistent growth driver, and we intend to further solidify its double-digit growth trajectory over the medium term. We are fairly confident of maintaining the strong volume and revenue momentum in the quarters ahead while tapping multiple levers at our disposal to effectively navigate transient inflationary pressures. In the immediate term, we will continue to prioritize driving a sustainable and profitable growth construct for the medium and long term. That is it from our side.
If you have any further queries, please feel free to reach out to our IR team and they'll be happy to address. Thank you and have a great evening.
Thank you, members of the management. Ladies and gentlemen, on behalf of Marico Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.