Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhuwania. Thank you, and over to you, sir.
Thank you. Good afternoon, and welcome everyone to the call. It's our pleasure at ICICI to host Q3 FY24 results conference call of Bajaj Consumer Care. From the management, we have Mr. Jaideep Nandi, Managing Director, Mr. Dilip Kumar Maloo, Chief Financial Officer, and Mr. Richard D'Souza, AVP Finance. I will now hand over the call to Mr. Jaideep sir for his opening remarks, after which we can open for Q&A. Thank you.
Thank you, Karan. Thank you, Karan. Good afternoon, everyone, and, thanks everyone for participating in this Q3 earnings call. Let me take you through the performance of the company for the quarter and nine-month ended 31 December 2023, before we open the floor for the questions. During the quarter, the demand conditions were mixed, with urban markets seeing mid-single-digit growth, while rural markets remained subdued due to consumer food price index remaining consistently high over the past few months. The company delivered a consolidated quarterly sales of INR 236.4 crore, with a 4.3% value growth and a high single-digit volume growth. The volume growth was higher than value growth due to higher growth of the non-ADHO portfolio.
For the nine months ended December 2023, consolidated sales stood at INR 733.7 crores, resulting in a 4.4% value growth, along with again, a high single digit volume growth. On a standalone basis, the gross margins grew by 30 basis points at 53.3% in Q3, FY 2024. Gross margins for nine months, FY 2024, stood at 54.2%, an expansion of 110 basis points due to lower cost of key raw materials. On a standalone basis, the EBITDA for the quarter stood at INR 38.4 crores, which is 13% growth over the same period last year. EBITDA margins saw an expansion of 140 basis points to 16.5% for the current quarter.
For 9 months, FY 2024, the EBITDA stood at INR 125.3 crores, which is 22% growth over the last year, while margins stood at 17.4%, an increase of 260 basis points over the same period last year. PAT for the quarter was 37.6 crores INR, translating to an increase of 12% over the same period last year. For 9 months, FY 2024, PAT was at INR 121.5 crores, registering a growth of 23% over the same period last year. General trade was flat on the secondary basis in Q3 , on account of inventory corrections that we have taken up in the supporting distributor working capital. In spite of credit crunch in the market, the company has maintained a strict discipline of ensuring zero credit to our distributors in GT.
This should bode well for us as the markets improve and our credit discipline remains at where it is. In GT, while rural markets remain subdued, urban markets continue to perform better, driven by specific channel programs and initiatives in specific states, as well as strong performance of the key products. Modern Trade continues to scale up well, registering a growth of 24% in Q3 2024, and 26% in the nine months FY 2024 over the same period last year. ADHO continues to gain market share in the key Modern Trade channels. Promoter-led activations for Almond Drops Serum, Shampoo Plus Conditioner, and Body Lotion, along with visibility strengths and collaboration in Bajaj 100% Pure Henna, has resulted in strong uptakes of these brands. The distribution for Bajaj 100% Pure Coconut Oil continues to expand successfully, resulting in double-digit growth.
E-commerce once again registered a strong performance with a growth of 24%-25% for Q3 2024, and 27% for nine months ended 2023, December 2023. E-commerce B2C demonstrated substantial growth of 38% for the quarter. E-commerce has grown over 2x over the past 8 quarters. Strong uptakes were recorded on these platforms during this quarter due to the flexible demand. Our focus and usage of the AI-powered bid optimization tool helped us to win the Best AI-Powered Marketing Strategy at the DNA Asia Awards 2023. The canteen businesses also did well, registered at 16% and 22% for the quarter and nine months ended, respectively. The growth was driven by robust performance in both CPC as well as CSD channels.
International business continues to deliver strong performances, registering a growth of 59% in the quarter FY 2024, and 31% for nine months ended December 2023. Middle East and Africa region achieved a 22% growth in Q3, led by revival across both the traditional trade as well as the modern trade channels. Saudi continues to do well with presence expanded in key modern trade accounts. In other regions, Nepal witnessed a strong recovery with good growth in general trade. Local operations in Bangladesh, as you are aware, was started about a year back, and now in, even in Q3, we have started developing our own team, and this has started to yield promising results on behalf of consumer demand generation through a mix of digital and on-ground activities.
Two new products have also been added in Bangladesh, the 100% Pure Glycerine as well as the 100% Pure Olive Oil. These were launched in Q3 and have seen encouraging initial demand. At the brand level, ADHO remained flat for the nine months ended December 2023. Large packs over nine months have performed better with a mid-single-digit growth. ADHO was additionally supported with print media during the festival of Abhyanga Snan in Maharashtra. This ad featured in multiple inserts in local newspapers, reaching over 31 lakh individuals. Digital marketing reach was then intensified with focus on influencer marketing, targeted at new-age customers for building the equity of the Almond Drops franchise. We deployed around 400 influencers in Q3, reaching out to 1.4 crore consumers as a part of our influencer marketing initiative.
Driving social conversations via topical content led to a reach of 2.7 crore+ target audience with trending content. Diwali digital activation campaigns achieved a reach of 55 lakhs and garnered 15,000+ instances of user-generated content. We continue to support the brand with strong media across TV, digital, print, and increased investments in visibility across various channels. AD extension portfolio, Almond Drops extension portfolio continues to see promising offtakes. The Bajaj Almond Drops shampoo plus conditioner and body lotions were successfully listed on key e-commerce platforms and modern trade channels. These brands are supported with sampling, display, and digital media to aid generate product trials and sales. Digital campaigns reached over 1 crore targeted audience, resulting in 6.5 lakhs traffic generated towards e-commerce sites. Bajaj 100% Pure Coconut Oil also has sustained its growth momentum.
TV and digital support continued in Q3 in select states. Exclusive consumer offers have been extended to consumers accompanied by on-ground rural activation in specific districts. Efforts such as enhancing visibility and sampling interventions in leading modern trade channels were met with positive responses. During the quarter, we launched Bajaj Gulab Jal in general trade and modern trade as a part of our strategy to expand our ethnic range. This new offering features natural rose extract and hyaluronic acid, providing effective moisturization and hydration for the skin. The product is suitable for all skin types and free from parabens and silicone. We have had good, good initial response from the product. The ad spend for the quarter amounted to INR 39.2 crores, which is 16.8% of sales.
Our commitment to investing in ADHO and new brands remain firm, with an increased emphasis on digital media to align with the evolving preferences of customers. LLP prices in Q3 remained flat as compared to the same period previous year. RMO prices saw a correction in Q3 compared to the same quarter previous year, due to balance of global demand supply of edible oils. We continued making progress on multiple initiatives in raw materials, as well as packing materials through cost optimization and alternate vendor development for driving structural reduction in cost of goods sold. In line with our revamped ESG policy, we continue to implement measures aimed at minimizing water and energy consumption, as well as reducing waste at our manufacturing facilities.
Our efforts in energy optimization and efficiency improvement within manufacturing operations are resulting in reduction of both consumption, energy and water. We continue to make significant progress on our strategic pillars of growth, which sets up well as we expect market conditions to improve in the coming quarters. Specific pack-level actions, coupled with increased distribution footprint as a part of our retail initiative, along with specific state-level action plans, is expected to drive offline growth for ADHO. New launches under the Almond Drops extension portfolio and Bajaj ethnic range, along with broad-basing of our Hero, continue to remain our growth drivers in the domestic market as a part of our expansion of the non-ADHO portfolio.
The increased saliency of our non-ADHO portfolio is trending well as planned, increasing our footprint in international markets, which has been taken up since the last few quarters, have already started bearing fruit, and our high growth for the past few quarters are a testament to that. We expect the saliency of international business to continue to rapidly scale up in the near term. As we look into the near, next few quarters, we are quite optimistic that due to the government's focus on rural housing and sectors such as agriculture and overall infrastructure, the macroeconomic factors will improve in our favor. The rural demand will also improve as a result. This will have a positive effect on consumption across middle and, low-income households. This growth in rural and household consumption should benefit us in the long term.
This, along with our strategic initiatives, which have already started showing results, should put us in a good, strong position in the coming few quarters. With this, I end the opening remarks and open the session for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets when asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks. My first question is on the portfolio mix. So you have really diversified your business quite well this year. So nine months of core ADHO is flat in terms of value, while non-ADHO has seen very strong growth of 35%. So here my question is, in this year, obviously non-ADHO has done well because of two reasons. One is whenever deflation happens, smaller players do well and gain market share. So in coconut, you would have done quite well. You have done a lot of promotional offers also there. Now, with copra expected to see inflation next year, that's what the market leader has expected and given the statements also. Plus, anyway, this year a lot of deflation has happened. Second is, you did a lot of new launches in FY 2024.
So when these two drivers are playing out already in FY 2023 in terms of new launches and share gains because of deflation, and that kind of changes in FY 2025, how do you see growth happening in non-ADHO in FY 2025? Do you expect 20%, 25% kind of growth continuing in FY 2025?
So, firstly, Abneesh, let's start with the first point that you said whether smaller players gets get an advantage. While in terms of size, obviously, we are a smaller player, I would not like to really go by the tagline of a small player in case of any any product which is distributed through our distribution system. We are, as you are aware, have a very very strong distribution as far as hair oils are concerned, but basically entire personal care. And in that, if you look at copra as a raw material, I don't think there is any specific...
We have done, as I've been talking about in the last two years, we have done a lot of work as far as copra is concerned, back end of copra in terms of manufacturing as well as entire sourcing of copra, so that there is not too much of a difference from the market in terms of our sourcing capability. So as far as sourcing capability, we are pretty, pretty strong as far as copra is concerned. So really speaking, if the copra prices were either to go down or to go up, as the market adjusts, we would also be able to adjust. So I do not see that as being a hindering factor as far as growth is concerned.
Our growth is coming not so much just because of the price, but because of our ability to have distributed across a large part of the country where we have been able to get traction as far as the coconut product is concerned. But just taking coconut itself will actually be doing injustice to the kind of work that the team has been doing in expansion of the portfolio. Coconut is just about one product in this entire world that is happening as far as expansion of the portfolio is concerned. So you look at the entire planned strategic work that has happened in terms of the Bajaj Almond extensions. We went very, very methodical.
We have said that our expansion will happen over a 2-3-year period and not in one shot, and exactly that is the path we are following as far as our expansion is concerned. We just launched our sixth product with the lotion, shampoo, and conditioner. And these are, these are not yet really come into our bases. I mean, this is the quarter these products got launched. We are already seeing good offtakes that is happening, and I would think that these products will give much higher returns next year than this year, because that is the first full year they will see as far as the products are concerned. And this is where we are more investing in this product rather than getting the results out of it.
So I think that Almond Drops extensions itself is going to be a good leg for that, as well as I think the ethnic range, which is just starting to give us some good.... Again, the premise that we had built the ethnic range was that Bajaj is synonymous with the Indian-ness, will have an immediate attraction towards anything that we put as an Indian product. And we would go into areas where gross margins are typically higher than ADHO, and that's where we are going, and we are seeming to get some good responses, and that encourages us to launch further products in the ethnic range. We'll obviously stagger it out so that we will be able to invest a bit as far as digitally concerned in the initial stages.
So, the launches will get staggered, but we would want to remain with the products that we launch. So both the Almond Drops extension as well as the ethnic range, both these will see launches even next year, some more, while these bases pick up. And as far as the hair oils are concerned, while we'll continue to push the already launched hair oils beyond HSU that we have, we might also look at one or two other variants that we might want to add on to the hair oils arsenal. This is the portfolio. So I think next year we should see even better numbers as far as the non-ADHO portfolio is concerned.
Sure, that's helpful. Two follow-ups on what you said. One was, you said in terms of sourcing of copra, now your, sourcing or say pricing, et cetera, is not very different versus market leader. So I wanted to understand that, because market leader is so much larger, so the scale advantage plus the kind of relationship they have been having with the, coconut, producers, how you are able to overcome that? And second is, when you say that market share gains have happened, any numbers you can give for the non-ADHO hair oils, some numbers on what are the gains?
See, as far as sourcing is concerned, as you are aware, copra is very, very localized sourcing at very specific locations there. So hence, while obviously scale is something that obviously cannot be matched in the near term, but every other parameter, whether it be the back-end coordination, back-end integration, understanding of how the copra dynamics work, et cetera, I think is not completely off its sides. And over the last two years, our team has also understood that, as I would think some of the other companies as well. It's not only... We are not an exception that we have understood that. So that monopolistic situation that existed may not remain on a continuous basis in the future.
So I personally think there, in the initial stages when we had launched, we were not sure whether we'll be able to get that kind of expertise, et cetera. But today, as to nearly 1.5 years, six quarters have gone by and we have been able to maneuver that market. Our understandings have become better, and our understanding of the entire ecosystem, right from the back-end of the ecosystem to where it is like up to the manufacturing stage, I think we have got that more or less right. So I think we are pretty confident that that is not going away anywhere. In terms of market shares, if you look at, our market shares have more or less remained where it is. It is about that 10%-10.3% is where our market share remains.
And because we have also at one stage, you will see that we have also slowly started focusing on products that would bring us higher gross margin. So, so for example, one of the ranges, which is the Amla range of products, which always typically has the lowest kind of gross margin, has seen a lot of bloodbath happening in that marketplace, and we have decided to remain away from that market because that kind of gross margin on the long term doesn't bode well for the long term of the organization. We would like to build brands where we can make some money. So, so we have stayed away from it. If and when we feel that there is money to be made in that, if there are specific SKUs, we will go much more aggressively in that. So that's where we have left that market intact.
I have seen some of the other, larger competition also has, get that back in market, and that's a, company-level, individual-specific strategy, people will take. But we have decided there are enough plays available for us, where there are brands that we can build, which have structurally higher gross margins, so, so that's where we have kept it. Yeah.
Sure. My last question is on organized trade. So first is in terms of, your share of, Modern Trade plus e-commerce, how much is that and, what is the change over the last, nine months? Second is, you have said your standalone Modern Trade has grown at—independent Modern Trade has grown at 50% versus, overall organized, at 25%. So if you could elaborate, what do you mean, in terms of the independent Modern Trade and what any difference, you're doing here, or your presence was much more limited here, and that's why the growth is, much faster? And lastly, on this only, what is the Quick Commerce, share?
I understand your products are not that much impulse purchase, more of a planned purchase, but if you could tell us any specific strategic initiative you are taking on quick commerce, given it's a more difficult channel for your kind of product?
So starting with your first question, what is our organized trade contribution? So today, our modern trade and e-commerce contributes about 20%, and additionally another 3%-4% comes out of our canteen business. So nearly about that way, nearly close to one-fourth of our business is modern trade, plus e-commerce, plus canteen business, just a little less, I would think. As far as independent chains are concerned, in modern trade, we talk of anybody who's not, let's say, a Reliance or a Vishal or a, you know, or a DMart. I mean, most of the... Well, not any of these large guys, Metro or Spencer, et cetera. Anybody outside that we consider as independent chain. So we have been doing very, very well in accounts like Saravana Stores, Pothys, National Handloom, V-Mart, also in terms of Apollo Pharmacy.
So these are the ones where our Apollo is not a pure independent chain, but also a large pharmacy chain which we are doing. So these are the ones that we are looking, but the 52% growth comes out of... As we had said last time also, that our focus to enter the South would also be through some of these southern, southern-based, strong MT independent stores. So our focus has been towards that, because an entry there, and then maybe we'll see how we can cover it. So most of the attempt last year was to take our independent chains at a higher growth rate, and that's what we have been able to do. And two things. One is entry into a certain geography.
The other is also that we wanted to broad base our, modern trade, customer base itself. I mean, DMart, Reliance are obviously two of the largest ones, along with Vishal, et cetera, playing in the fringe players. But we wanted to broaden the base so that at least our growth prospects do not get, too much altered by behavior of a particular market. So in that process, two things have happened. One is the geography has, expanded, diversification of chains have happened, and also we have been able to push our, larger portfolio beyond ADHO. So quite a few of the boxes have got ticked in that. In QCom, yes, it's not a very large portion of our e-commerce business.
Out of our entire B2C business, it's just about 5% of the business comes from, mainly from Nykaa. And that is something which is more, organic, I would say. It's not so much of, so much of specific effort that we put into that. Most of our effort goes into the larger, larger of the e-commerce, partners, which is your Amazon, Flipkart, Nykaa, et cetera, Myntra, et cetera. Yeah.
Thanks. That's all from my side. Thank you.
Thanks, Avnish.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Yeah. Hi, good evening, Jaideep and team. Most of the question has been asked by Abneesh. Thanks, Abneesh. Starting with, we have added three additional directors. So, Jaideep, I need to have your thoughts. Mr. Jagdish, Jagdish and Anupam Dutta and K. Narayan has come on board. So what is it that we want to do, and what is it that expertise we want to utilize, when they are on the board?
So, one of the things that we wanted to do is have a professionalized board, far stronger board in terms of stronger may not be the right word, more suitable for our business with the growth growth trajectory that we want to take on. Quite a few levers have already been pushed, whether be it in terms of the channels that you see, whether be it in the international markets, whether be it a new product diversification or portfolio, et cetera. Most of these levers have been pushed. There is a macroeconomic headwind that we are facing, that we think it is transient, it will pass away. We need to be ready for that next phase of growth.
While as a company we are working on that, we have a strategic leg also added to the team, we wanted also some outside in perspective who sit in the board and giving us perspective from a little outside the personal care business... So we have people, all these three, three gentlemen that you mentioned, have long experience, CEOs or head of businesses in consumer industries. So all of them. So they're bringing a varied experiences across FMCG, other consumer businesses, domestic, international, running international businesses outside the country, so that we can explore all the facets of what else other levers we can push. We did not want, more birds of the same feather, because most of the our industry, we have some understanding, and we would like to push that and maybe we can help, take help from the consultant.
We wanted completely outside in views. What are the views from the food side of the industry? What are the views from other consumer businesses? What is the view from the international? And that's where they come into our board. All three of them are professionals with 30+, 30, 40+ years of experiences, and I think that will add a lot of value to this board.
Yeah. Wonderful. Just one follow-up here. If I'm right, about 3 quarters before, we had a strategy hand. So in the current context, if the HFM markets are not picking up, hair oil consumption is declining, so what is the new strategy we want to drive? Or is the same strategy we would like to drive and wait for the market to turn positive?
So, as we like to talk internally, we talk of what we had put up at the first stage, which is those C4 levers, which is expansion of hair oil, getting into the AD extension, getting into the ethnic range and maybe a bit of digital peddling a little bit in the digital world. So that we term as well as the first phase of growth, and at least we are directionally what to be done. At least a lot of these levers are already working. What we are now looking at is getting a little more aggressive and looking at the second phase of growth. As to beyond this, which all portfolios are a little more focused portfolios, rather than approach it from where Bajaj has strengthened, rather than look it inside out.
So which are the portfolios we would like to invest for the long term? So we, internally, we have looked at a large range of FMCG categories and seen where we can look at, and now we are in the process of finalizing 2-3 broader categories as a company we would want to enter. Now, when we would enter is also absolutely right. We'll have to time our entry so that we are clear that this is when the headwinds, the tailwinds are coming in. So maybe the strategy that you will see coming out from our side may wait for another few quarters, but at least internal work is happening so that we are ready to ride the next tide when this... Anyway, as a company, we would like to expand aggressively.
So that lever will anyway get pulled, whether we whether it's headwind or not, unless there is very, very high, very, very strong headwinds, we would anyway like to get into the second phase of the strategy, which is expansion beyond that. We would want the first strategic product that we are launching gain some momentum, get some legs, while on the other side, international, which has already started doing very well, gain some legs, and then maybe get into the second leg of strategy, which is a form of structured approach towards what product ranges we would want to get in. It can be organic, it can be or inorganic growth.
Okay. My last question on the margin front. If I look back two years before you instituted and you pushed this strategy from one brand to many brands, and that has yielded some fruit, but however, in the medium term, you have lost the margin. If I trace your commentary last week, that directionally we will ensure, but again, this quarter the margin has been not that high. So in the short term, whether you will chase the growth and allow the margins to be at similar level, or you will chase the margin and wait for the market recovery?
We'll keep a mix of both. As we said, in terms of our guidance, we are looking at the 16%-18% is where we will keep our EBITDA in the near to medium term, while we keep investing in the brands. So obviously, a bit of tailwind will be required in terms of getting a large amount of growth. But at least if you can see from the levers that we are pushing, given that a single brand company which has very little maneuverability as far as in this kind of a market situation, we are still rubbing shoulder to shoulder in terms of growth rates coming out of the various initiatives that we are pushing. Now, most of them, if you see, are in the infancy stage. So they are just in the growth momentum.
They are catching the growth momentum, and we are seeing quite a few products giving us encouraging results. Same thing is happening as far as the international market is concerned. I mean, this is where we are investing. We have started, and that is a commentary I had made even 8 quarters back, saying that this is not the time that we will take up international. We will take it up 1 year later, which is what we did about 5-6 quarters, and we have started already seeing growth momentum coming in. The 2-3% salience that we had in international has already crossed 5%, and we are looking at that going rapidly higher up. So in overall terms, we'll chase sales from one side, I mean, a few, this thing, as well as in EBITDA, to ensure that ADHO itself becomes far stronger.
Some work is happening in ADHO brand itself. I mean, we would think that overall, we would keep the balance of keeping EBITDA about 16%-18% thereabout, and ensuring that the growth momentum sustains.
All right. Thank you, Deep, and all the best.
Thank you.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Majid Ahamed from Smart Sync Services. Please go ahead.
Thanks for the opportunity, sir. So my first question that I have is, now you are moving into the phase of,
... shampoos, lotions, and other things, all of it. Any plan to make it into sachet format so that your distribution goes to the tier 2, tier 3 cities, able to do that? Any plans like that?
Yeah. So, so that, that question is relevant as far as we are concerned, only to the, only to the, shampoo segment, not so much for, hair conditioners and at least we are not looking into hair conditioner. As you have rightly pointed out, in our INR 10,000 crore shampoo market, sachets contribute to about 65%-70%. And without being into sachets, really speaking, you would not, touch too much of the, too much - you will not make too much of a difference. Our aim, is obviously that way, hence twofold. We initially wanted to test our product, test our consumer responses, get a understanding of how the brand is performing overall in terms of pricing, in terms of the quality, in terms of packaging, et cetera. And that obviously, that obviously, that phase is really now getting over.
While we move into phase two, as far as shampoo is concerned, is where we look at, looking at a General Trade launch. And the moment it comes to General Trade, obviously, your answer is that we will have to get into, the sachet packs. So we are looking at what kind of pricing ensures that our Gross Margin that we have targeted to ensure at least a 40%-45%, as far as shampoo is concerned, is maintained. And that is where we are looking at to ensure that that is managed in once we launch in GT. So this is something that we should be seeing coming up in the next, financial year. Yeah.
That will show your gross margin in shampoo 40% currently?
It's a little higher at this stage, but, yeah, with the launch of the sachet, et cetera, we think it will come down to about between 40%-45%.
Okay. One other question that I have is, in the GCC market, you in Saudi Arabia. So any other geography in GCC, like Bahrain, Kuwait, Qatar, are you planning to do business there or you're presently present there as well?
So if you look at the six markets of Gulf Cooperation Council, GCC, that is. So we started by initially addressing the core, which is where we wanted to change our distributor in UAE. The basic focus has been, as far as GCC is concerned, that we ensure that you tie up with a pure FMCG distributor, and yet he's not too large that we are completely ignored. Or, I mean, you typically have two kinds of distributors. One is very, very large distributors who would find it difficult to work with smaller players like us. On the other side, you have players who are really not into distribution of FMCG products. We have been stuck with either of these problems in most of these markets. We wanted to change it, have exactly what we wanted.
Smaller players who would see our business as a decent amount, as a percentage of the business, typically touching double-digit or close to that as a percentage of their business, so that they are interested. That fortunately, we have been. That is something that we have been working very, very meticulously on that. In UAE, we had a good, good, track as far as that is concerned, so we have a fantastic distributor working with exactly our prerogatives. So new products are getting launched, and we will launch further. I have not talked too much about UAE's new product launch because it is still small, but I think, you will see more and more of, UAE as a story coming up. Saudi Arabia, following that, we have a very good distributor that we have put in.
I don't think distribution is still the best in Saudi, all parts of Saudi. Some good distribution happening in the Riyadh area, but the Jeddah, Dammam area, I think we need to become a little stronger. That is what we are working on. Qatar, Doha, we have had a good distributor, so that is something that is going good. Kuwait, we are changing our distributor. It's not yet that strong. Oman, we also had a very good distributor that we have put up about five odd quarters back. So great presence across Muscat, Doha, Muscat, Salalah, Nizwa, Sohar, et cetera. So that is going good. Bahrain, small country, really speaking, not that focused. We have a decent distributor currently. So, the Gulf is more or less well covered. We are getting further deeper into Middle East.
Some of the other countries we are looking into and a bit of North Africa. So I think that GCC market for us will be good business in the coming years.
Yeah, thanks for the detailed response. The last question that I have is, what's the marketing strategy going forward to increase your brand visibility? Like, any other strategies apart from digital marketing?
Sorry, can you repeat that again? Brand strategy, what, what was the question?
No, no, no. My question is, so regarding better brand visibilities of Bajaj Consumer Care, what other strategies do you have apart from digital marketing and influencers? Any other strategies you have?
So if you are looking at, it's a, it's a complete 360 strategy as far as we are concerned. So we'll obviously be present in traditional media. And as we have said, traditional media obviously being the spends, we have to be a little careful. National TV will only happen for ADHO. Regional television will be given support to a few brands where we see good traction coming up. Coconut got some regional TV visibility. We are looking at one or two other brands where we'll support regionally. Digitally, we have taken all the brands. Every single brand that we have talked about, we have increased our digital spends and ensured that digitally we are covering all of them, both in terms of on-platform as well as off-platform, which is pure digital advertising.
So I think we have been extremely active as far as social media is concerned, whether it be the Facebook, Twitter, Instagram, you'll see us, YouTube, a lot of content that is getting pushed in. So we are, as an organization, changing in terms of how we are seen by the new age customers, and we are seeing good responses coming up. As we look at the social chatters, we see good responses. And I think that is going to bode well for us as the company revitalizes itself and reinvents itself. I think, we'll see good traction, which we have already started slowly seeing at the moment, future.
... Yeah, yeah. So if I can squeeze in one more question, can I?
Yeah, please go ahead.
Yeah. Thank you. Yeah. So another question that I have is, what's the bifurcation in North Indian and South Indian markets, and what are strategies to get more into the South Indian marketplace?
Sorry, what was I again? I understood the second question was the strategy in the South India market. What's the first question? North India, South what?
Yeah, bifurcation. Bifurcation of your sales.
Oh, so, so South India contributes still a very marginal amount. It's still in single digits to our contribution. And I think there are other parts of India, which is West India, East India, which is what I would like to think, very, very different. So we, as is well known in as far as almond drops is concerned, we are very, very strong in the north. Relatively, that is, western, east, comes next, very similar, and then much lower market shares in south. So as I was answering the previous question, one of the approaches that we have taken is get through the modern trade and e-commerce route into the southern pockets, and we are seeing a bit of, traction as far as we are concerned.
Also, the fact that we have been able to expand our portfolio is also slowly showing results as far as the southern markets are concerned. This will be a long haul, but we are clear that we also want to crack South. We cannot keep South completely vacant like we are. There is a gradual approach. It is not that it has resulted in big numbers in the short term, but at least whatever we are tracking in terms of the kind of growth that we would want to have from the South in the modern trade and e-commerce channel, we are tracking very well. Yeah.
Yeah. Thank you. All the way, very good. Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Siddharth Khandelwal from Laburnum Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. My first question is, could you please tell me the NPD revenue contribution for this quarter? And second question would be, could you please tell me more about the profitability of NPD, at the gross or and, EBITDA level, even roughly will do? Thanks.
So first and foremost, I would not be able to tell you the gross contribution, this thing. I will give you some indications of how it works. So most of the new products that we launch, we plan to have a, at least a gross margin between 45%-50%. One or two might range in the range of, little, little lesser, but more or less, that's the target. Some of these NPDs have a gross margin which is higher than Almond Drops, which is typically between 55%-60% based on the, based on both the, raw material prices as well as the pack mix, that we are selling. So this is roughly what we aim to keep it at, 45%-50% as far as the gross margin for these various products. So this is what it is.
As far as the saliency is concerned, you should be able to derive the number. 17% in the nine-month period comes out of our non-ADHO portfolio, which is one-sixth of our portfolio, comes out of ADHO, and five-sixth of it by reverse number is from ADHO. And in this particular quarter, actually, the saliency of non-ADHO has been even higher. It is about 19%. And this is what we had also spoken of quite some time back, that in the midterm, we would like to take the non-ADHO saliency to 20%-40%, and I think we are tracking well in that direction. Because most of the non-ADHO, as you have seen, are just in the infancy stage, and they are catching up. So and with this kind of a launch, we think quite a few of them will ...
Already showing good encouraging signals, and with our support, I think should be doing well in the coming 2-3 years.
This is helpful. Another question I had was more on how do we sort of approach the NPD strategically? I mean, you know, how do we decide, you know, whether these new products are working or not? At what point do we scale up investment, you know, and what points do we think, you know, okay, so it's time to shut it down. Please could you tell me more about, you know, how our strategy fix really is in NPD?
So if it's a product which is in omni-channel, which is general trade, modern trade, and e-commerce itself, we would think a number of at least INR 50 crore, kind of a number over a three-year period is a good number to target. And if that number is exceeded, and we have had situations where those numbers get exceeded at times, which means we are in the good, we think. As far as e-commerce and modern trade specific numbers are concerned, we would think a number of about INR 25 crores for that specific product itself is a good number to achieve over the next three-year period. Okay?
And that with a boundary of a Gross Margin of about 40%-50%, 45%-50%, is what we think is a good number to have. In quite a few cases, those numbers are tracking well. We are going with them. One or two cases where we are seeing they are not tracking in this direction, we have actually dropped. So you'll see a coconut has got dropped from our ... The thing, we have not been focusing too much on Nativesoul. We might come back on Nativesoul, but at this stage, given the headwinds we see as far as the General Trade market is concerned, overall, we are not spending too much on Nativesoul.
So some of them we have put in the background and some of them we have shut down, but a lot of the products that I mentioned are all running at this moment.
This is helpful. My final question is, you know, which product is getting the most revenue traction in our NPD? If it is coconut, could you please share its approximate contribution in the NPD revenue pool?
So it is not only coconut that is selling well. As I said, all of these products we are seeing. In fact, only Amla, which we had specifically not pushed ... because of extremely low gross margins, and I don't see, because the product is only mainly LLP and RMO based. Some are one of them, and the other one is also LLP and RMO, a little less of RMO. With that kind of a structure and with our sourcing, we have a good understanding what the raw material structure of that product can be.
When we see the marketplace where the prices are being so, so low, we are very, very clear that the gross margins cannot be something that is either sustainable or should be taken up, at least for a company like ours, which is much smaller and does not need to get into that kind of value, volume growth, growth, aggression. So, so that is the only portfolio you see that we have not been pushing very, very aggressively. Other than that, we are seeing good scale-up happening, whether it is a newer range that we have launched or some of the little older range of products.
Some of them are a little smaller, like products like serum, et cetera, but I have seen fantastic offtake of serums that are coming up, and we are very, very in fact, some of it is actually very pleasantly surprising to us, the kind of behavior that products like serum, products like lotion is displaying. And we think that this will become strong platforms for us in the maybe 1 or 2 years to come. So Almond Drops extensions, the ethnic range, the coconut itself, all of them have been showing good results. Amla is something that we see good prospect, but we are giving a little slow, slow at this stage, especially the INR 10, INR 20 pack, where there is no money to be made, and we don't want to really push too much into categories where no money are.
Rather, let me rephrase it, saying that we cannot afford to push ranges just for value growth in categories where there is no money to be made. I understand that in rural, INR 10, INR 20 is a large pack. I understand that they are looking for cheaper products, but we really don't want to play that game. Where we will get you the value, but really speaking, not much structural strength we are building in the organization.
Understood, sir. Thank you.
Thank you. The next question is from the line of Nikhil from SIMPL Limited. Please go ahead.
Yeah. Hey, good afternoon. I hope I'm audible.
Yes, you are.
Yeah. Just an extension of the previous participant question, and my understanding could be wrong here. Jaideep Sir, you had mentioned that most of this, the Bajaj ethnic range and the coconut and the almond extensions were a GT kind of a product, which will help us grow the distribution and also move in the similar distribution which we have already developed for ADHO. But if I now look at our quarterly numbers, based on what we shared, the GT sales has been flat and the non, it, the NPD sales is growing. Is it right to say that in GT, specifically, ADHO sales is degrowing? This is a derivation, which I believe, and I could be wrong here. And if it is so, what are-
Can I accept that minor correction? Not all the products that have been launched are only all for GT. So, for example, the ethnic range, you are absolutely right, it is for GT. The herbals that we have launched are for GT. Bajaj extension, some of them are, at this moment, non-GT. As we discussed, shampoo was not GT, lotion is not a GT, and lotion may not see GT even in future, as far as we are concerned. Shampoo definitely will see the thing. Serum is going to get launched, but not yet got launched. So some of the products in the Almond Drops extension range that you see, have not yet gone into GT. Some of them, as I had mentioned in the previous call, will get into GT, not yet. So this is first part of the answer.
Second thing is, you are absolutely right. ADHO has not had... It is flat as far as nine months is concerned. It is tracking very similarly, to that. I mean, in fact, some of the packs and the interesting part is, overall, if you look at, as again, as a part of our strategy, we don't want to focus too much on the, just the INR 10, INR 20 packs, which is the lowest margin overall. Obviously, we have to play. It's not something that we would not like to play. But overall, as a strategy, we are trying to see where we can make more margin, and that's why the large pack focus in there. We have grown well in the large pack.
Midpack is where we have seen a little bit of a decline, and that's what we would like to some corrections, but large pack is what we have been focusing a little better, and that's where our focus has been. Yeah.
Okay, but sir, why I'm asking is, see, we have an internal aspiration of being in the range of 16%-18% EBITDA margin. Now, that will be a play of either getting better sales growth, which on the modern trade and the international part, we are getting. But it's the GT part which is not growing at all. Or either we improve our gross margins, which even in your initial commentary, you said most of the RM was flat, but still the gross margins, even sequentially, have not improved. It's like, it's a deterioration of 100 basis points. So if we have to sustain in that 16%-18%, either we grow our sales or either we improve our gross margins. How will we balance between these two?
Because the product ranges which we are launching are either in that 45%-50% Gross Margin bracket.
... So, so absolutely right. So either you grow your sales or you grow your gross margin. So in this case, it will be a combination of both. So you are looking at expansion of your sales through this expansion of the book, 45%-50% gross margin, but still a nominal, nominal profitability, where you put the fixed cost as a given cost, and some of the variables, some of costs beyond a certain point, because you will not be getting as far as this thing. So your economy of scale will straightaway come up, and the 16%-18% is still in the radar. We are still at 16%-18%. So, so it's not something that we are planning to go much higher than what we existing are.
So with this current situation, where LLP prices are also becoming a little more benign, we think that we should be overperforming in that, but this is inclusive.
Okay, and last-
Yeah, go on.
Okay. And last question. See, what my understanding, and this could be wrong, was that, one play was, Almond Drops and sustaining the strength of the Almond Drops brand through line extensions or through product extensions. The second one, the Bajaj ethnic range, where we were looking at using the Bajaj equity, but here the gross margins of the product which will be launched would be lower, which probably should get-
Just sorry, just correcting you, interrupting. Gross margins in the ethnic range will be much higher. In fact, will be higher than ADHO. The product categories might be smaller, but the competition will be small, lesser, and the gross margins will be higher.
Okay. Okay, so okay, my understanding was wrong here. And just last on the e-commerce brands, you said on Nativesoul and all, we've put them on a back burner. But we had discussed that we would like to own a category like Argan and also, how are we going about it? And we've not talked about launches on those segments.
So Argan category in Nativesoul still continues. It's not that we have closed down the Argan category, it's just that our entire spends, et cetera. So what we have decided is absolutely right. I mean, initially when we had launched Nativesoul, maybe we launched too many of the hero ingredients to start with. As a learning category, we cannot support so many hero ingredients. Like most of the digital brands, they have taken either onion or vitamin C, et cetera, et cetera, established and then proliferated. We also wanted by pushing only the Argan range. So that story still remains, the product still remain. They're still available in the marketplace, except that we would like... We are not scaling it up too much. We are not spending too much of digital money in that.
As and when we think that it fits into our portfolio, we can give it a thrust, we will take it up so.
Can I ask you why we were not pushing or investing behind those? Because I thought probably the idea was to create a D2C brand which could be, scalable, and the gross margins were also good there.
So it's all a question of—see, it's all a question of juggling the balls. With a kind of business that we are in, which ADHO is the only money spinner for you, you need to decide which are the paths you would like to track. I mean, on one side, you—we are talking of the 16%-18% EBITDA we made. And I think that's a fair call because we would—It's not because of anything else, but to ensure that at least a basic structure of the business. In case we really see traction coming up, and we would like to value the EBITDA going forward, where we are getting a, let's say, mid-teens growth, et cetera, that's a separate call.
At this moment, we see when the market conditions are difficult, we would like to ensure that growth happens without too much of dilution of our EBITDA margin, and yet create strength as far as various brands are concerned, where there'll be different levers to pull when the market conditions come back. Anyway, in a cyclical curve, at some point of time, the market will come back. And when it comes back, we should be in a position to capitalize most. As far as Nativesoul is concerned, we could have kept on investing, but our EBITDA would have kept on diluting. And I don't know whether we would have been able to sustain for, let's say, a 6 quarter, 8 quarter of investments without too much of large returns coming on from there.
So instead of that, and that's a call we have taken, and that can always be questioned. But we, we have decided that instead of pushing a completely new brand and pushing, getting the concept in with the kind of business that you generate out of e-commerce, because the dynamics and structure of e-commerce profitability is, as it is, we thought that it will be much better to push ranges that are lower hanging fruit for us. We can make a little more, top line sales as well as better, bottom line. So that's what we have taken up, and in case we feel that that also can be afforded into the entire game of having top line growth as well as the 16%-18% EBITDA, we will put that in. At this moment, it is not fitting in that.
Sure, sir. Thanks for the explanation.
Thank you.
Thank you. Ladies and gentlemen, you may press Star and One to ask a question. The next question is from the line of Kaustubh Pawaskar from Sharekhan. Please go ahead.
Yeah. Good evening, sir. Thanks for giving me the opportunity. Just one question from my end. In your initial comments, you mentioned that there was an impact of inventory correction. So what would be the impact on the overall volume growth, and when can we expect this, you know, inventory correction, you know, to stabilize, and from there, we should see a better, you know, kind of improvement?
So just to give you a factual number, just to give you a number which I was avoiding till now, we had secondary sales of INR 8 crore more than our primary sale this quarter. So if our primary sale was equal to a secondary sale, that would straightaway translate into another 3.5% growth as far as the business is concerned for the quarter. Now, obviously, that was the easiest incentive for us or easiest thing, but as a company, we have decided that we will not bite into any of the short-term measures to improve our numbers, to say we wanted to make it a structurally stronger company. So secondly, if it goes higher, we have reduced the inventory. We have not succumbed to the pressures of not giving credit to our distributors.
We don't see that happening in much of the. A lot of companies we see today have increased the credit period of the distributors, and we are also seeing a fallout of that, because the trade crunch is ensuring that slowly the distributor inventories are building up, and we are seeing some, in some cases, it is bursting from the seams for some of the competition. So we'll see how it goes, but as far as we are concerned, we are very, very clear that we remain in an extremely strong position with zero credit to the General Trade. In this case, where trade crunch has happened, where the inventory correction has happened, it's a good thing as far as we are concerned.
Yes, the numbers are 3.5%, subdued as far as numbers are concerned, but I am completely comfortable with that.
Thank you, sir. Thanks for the clarity.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you so much for patiently being party to this entire conference. It was a pleasure interacting with all of you. As we look at Q4 in the coming years and being an election year with the kind of budget that has come out, with the commitments that have come out from the government and those spendings really fructifying and results coming in, there'll be more money in the hands of the poor, poor, specifically in the northern belts, et cetera, in those states which are a little more stretched states than maybe the southern states.
We feel that we are in a coming into a very, very comfortable and a good position where we have a much more expanded portfolio, much better executions that are happening across most of the markets, as well as the expansion there. So quite a few growth levers have been initiated, are tracking well, and I think as market conditions, as the macroeconomic conditions improve, we should be taking advantage of it. So with that, I wish you a very, very good year, good ending of the year, and thank you so much for joining the call. Thank you.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your line.