After battling nearly two years of spice deflation and navigating disruptions arising from the Iran war in the last few months, the Rs 2,509-crore Orkla India, best-known for the MTR, Eastern and Rasoi Magic food brands, says it is entering FY27 with a sense of caution. In an interview with Viveat Susan Pinto, MD & CEO Sanjay Sharma says inflationary pressures and pricing power will be challenges the industry will have to deal with this year. He throws light on the roadmap for the company for FY27. Excerpts:
1) How would you describe FY26 for Orkla India? And with sentiment turning cautious in FY27, your sense of demand trends in the ongoing financial year?
Over the last two years, we faced a strong headwind of spice deflation, with prices dropping by almost 30%. That created pressure on revenue growth. Throughout this period, we stayed focused on disciplined execution. We will take this learning into FY27 despite the market now moving into an inflationary cycle thanks to the Iran war.
We have taken around 6.5% price increase in Q4 of FY26 in our spices business. We anticipate another 3-4% price hike in the June quarter. Having said that, staples remains largely resilient from a demand perspective. We don’t see a significant impact on demand just yet, though we remain watchful as input costs remain volatile. Plastic packaging has gone up by almost 45%. Logistics costs are increasing and fuel inflation is also becoming an important factor after two rounds of petrol and diesel price hikes since Friday.
2) How has the West Asia crisis affected your operations in the region? What steps have you taken to mitigate the impact from the war?
Our resolve was tested with the West Asia crisis. About 14% of our total sales come from the Middle East. Initially, all our consignments were moving through the Strait of Hormuz into ports like Jebel Ali in UAE, Kuwait and Qatar on the eastern side of the Middle East.
We have now been able to pivot the supply chain by using alternate routes and ports on the western side of the Middle East (via the Red Sea). Transit times have increased from 15–20 days earlier to as much as 45 days now and freight costs have remained elevated. However, our observation is that businesses are coming to terms with the new normal. Of course, we continue to be vigilant with regard to how the situation is evolving in the Middle East concerning the Iran war.
3) What are you doing to expand distribution in your core markets in the south?
We are already extremely strong in our core southern markets. In Kerala and Karnataka, for instance, we are among the top FMCG brands in terms of distribution depth.
We currently service around 680,000 outlets, but our philosophy is not necessarily to chase breadth for the sake of it. Food is local. What consumers eat in South India is very different from what consumers eat in North India.
So, our strategy is to maintain deep distribution in our core southern markets while building a more targeted approach in the top 28 metros of the country through digital commerce and modern channels.
As far as Kerala is concerned, we restructured the distribution architecture in the state for the Eastern business. The earlier system was quite old and more of a one-size-fits-all approach.
We are now moving towards a more customer-centric distribution structure. It had a small short-term impact on Q4 performance, but we believe this is the right step for the long-term development of the business in the state.
4) How important is digital commerce becoming for the company?
India’s consumers are changing and digital commerce is becoming one of the biggest growth drivers across FMCG portfolios.
We have initiated Project Bolt, which is all about accelerating our digital commerce agenda and expanding our business across emerging channels. The objective is to build stronger capabilities, improve technology-driven decision-making and deepen consumer insights.
Today, digital sales contribute about 8.7% of our domestic revenues, including both e-commerce and quick commerce.
5) Will acquisitions be a key focus area in FY27?
Yes, we have an active pipeline of acquisitions that we are evaluating. We have about Rs 600 crore of cash on our balance sheet and we believe acquisitions can create shareholder value.
Most of the opportunities we are evaluating are in our core categories like spices and masalas. But acquisitions are always uncertain till the dotted line is signed, so we will speak more when something materialises.