After eight quarters of battling commodity deflation and subdued growth, Orkla India, best-known for its MTR, Eastern and Rasoi Magic brands, has returned to double-digit revenue growth in Q1, supported by broad-based demand across categories, channels and geographies. In an interview with Viveat Susan Pinto, Sanjay Sharma, MD & CEO of Orkla India throws light on the way forward for the firm and its investments for the future. Excerpts:
Q. What were the factors contributing to the strong revenue performance in Q1?
I think the strategy here was to focus on execution and be patient. We operate in categories such as spices, where prices had dropped nearly 30% over two years. This had affected topline growth. But now the picture is better. Our reported revenue growth was about 10.4% in Q1, but if you look at sale of products, which reflects the operating performance of the business, growth was approximately 11.5% with a volume increase of 1.7%.
If you exclude Kerala, our sales growth was approximately 12.1%, with volume growth of 4.4%. What is particularly satisfying is that the growth has been broad-based. Spices and convenience foods have both grown well. General trade, modern trade and quick commerce have all delivered growth, while both domestic and international businesses have fired.
Q. But price-led growth has been sharp in Q1 owing to the high inflation in spices. How are you managing your margins amid these shifts?
You are right. Spices have moved from being deflationary to inflationary now. Spice prices have gone up sharply, by about 32.8%, with chilli and coriander seeing significant increases. Despite that, we have managed pricing well and have ensured that our margins remain healthy. If you look at price-led growth, it increased from 6.5% in the March quarter to 11.4% in the June quarter.
There was a 150-basis-point improvement in Ebitda margins between the March quarter (16%) and June quarter (17.5%), though year-on-year there was a decline of about 120 basis points (18.7% in Q1FY26). This was because last year’s first quarter included benefits from PLI schemes, which boosted profitability.
Given that we remain in an inflationary environment, we will need to continue passing on prices to protect margins. Having said that, there is a balance we are looking to strike between volume and price growth. However, our preference remains driving volumes over the longer term.
Q. What explains for demand holding up despite these sharp price hikes?
Ever since the government took measures to increase disposable incomes via income tax and interest rate cuts and GST rationalisation last year, we have seen tailwinds in FMCG. And these tailwinds continue to be there despite macro-economic issues.
Rural demand continues to be strong, what is heartening is that urban demand is also improving despite the uncertainty around geopolitics, inflation and the El Nino impact on monsoons. I remain hopeful that we will see a good festive season this year, supported by stronger consumer cash flows and improving consumption trends.
Q. What are Orkla India’s priorities for future growth?
Our strategy is to build multiple growth engines that will make the business stronger, more diversified and more resilient.
The first priority is strengthening our core categories of spices and convenience foods. The second is building stronger channels, whether that is general trade, digital commerce or quick commerce. The third is expanding our geographic footprint by growing across India while leveraging digital commerce in the top 28 metros.
The fourth growth vector is building consumer platforms around regional innovations, premiumisation and a Gen Z portfolio. During the June quarter, we launched 23 innovations across these platforms, including regional masalas, premium products and protein-rich breakfast solutions.
We have also developed dairy-free, ready-to-eat products that allow us to export into markets such as the UK and Europe, where dairy regulations had previously restricted exports. Going forward, our breakfast, sweets and meal platforms will continue to see new innovations.
Q. What is the outlook on acquisitions?
Food is local in India, and if we want to strengthen our presence across states, we need to partner with strong regional brands.
We are actively looking at opportunities in spices and masalas as well as convenience foods. These are the two broad areas where we believe partnerships and acquisitions can help us accelerate growth.
Q. What is the progress on the Kerala redistribution project?
The Kerala redistribution project began earlier this year with three clear objectives. The first phase, which focused on convenience foods, has already been completed and has delivered higher sales productivity and better market coverage.
The remaining projects covering modern trade and the core spices business are progressing well and will be completed over the coming months. These are long-term strategic initiatives, and we are confident they will create significant value over time.