Cooking and hair oil maker Marico group’s chairman Harsh Mariwala is fine-tuning his company’s rural and urban strategy to sustain growth momentum as a slowdown grips the Indian economy. The company will launch a series of new products and value-added brands to increase its market share. ?The biggest challenge today is how to maintain profits while driving top line growth,? says Mariwala, in an interview to FE’s Lalitha Srinivasan. Excerpts:

What are your organic and inorganic growth plans in the next two quarters?

We have expanded our manufacturing capacity by setting up a new factory at Baddi for Saffola, which has enough capacity to meet our future demands. Our core focus is to introduce new products and add value to existing brands to drive volumes. Our rural strategy is to tap distribution opportunities in the rural space and to increase sales. In fact, our rural growth is higher than that in the urban sector. As part of our inorganic growth strategy, we will look for acquisitions in both domestic and overseas markets. Our acquisition focus will be on beauty and wellness sectors.

In the second quarter, Marico held on to its retail prices even as raw material costs rose. Going forward, what?s going to be your pricing strategy?

It will depend on how raw materiel prices behave in the next few months. At this time, there will be a marginal increase in prices of Parachute. In fact, it’s too early to predict anything about raw material prices. They will not go down in the third quarter; but they may rise. Marico has followed a judicious pricing policy, despite the equity consistently displayed by its brands. We strongly believe in the long-term consumption story in India. After hiking prices for some time, Marico held retail prices for almost nine months to avoid too many price increases in a short time.

Despite rising inflation, many FMCG majors are increasing their ad budgets for the next two quarters. How about Marico?

At Marico, if you look at the first two quarters, it (ad budget) is a little lower than the last year as a percentage, but in absolute terms, it has not gone down. As a percentage, it looks low because of inflation growth. But, the actual amount may not go down? it may be around 10%. For the third quarter, it’s difficult to predict our ad spend. Right now, we will have to see how the profit pressure in the third quarter is, and depending upon that, we will take a final call.

What are the major challenges that Marico faces today? How do you plan to address them?

The biggest challenge that we face today is how to drive top line growth and maintain profitability while doing so. Basically, we have to go on improving our cost structures at one level and grow the market share on the other.

With our strategic plans, we expect a double-digit growth in terms of volumes in the third quarter.

What would be the major benefits of an early implementation of GST in India?

It will help the country’s growth because a lot of leakages and wastage will stop. But I do not see GST getting launched in the near future. With the implementation of GST, I think, our

tax collection will improve as there are a lot of leakages happening in the system. With GST, it will be simpler. You don?t need to have other depots in each states. Over all, a simplified way of working and standardised rates and leakage reduction will help the government.

Also, it will help all the stakeholders. I am sure tax-evasion will come down dramatically under GST.

Do you think the implementation of GST will lead to price reduction in the FMCG space?

Not necessarily. It all depends on what the current level of taxation is and what are the new rates that are coming up. This is because there are certain items that are currently taxed higher than what the GDP growth is, while there are some items that are taxed lower. The implementation of GST will certainly help the country’s GDP growth.

With the signs of economic slowdown, do you think consumer spend in India will be impacted?

There has been some impact so far. We have to wait and watch what happens to prices. But, there has been some negative impact in the last one quarter. Beyond that, I do not think it will be very bad.