By Kritika Arora and Rajesh Kurup
The fast-moving consumer goods (FMCG) sector is expected to post a gradual increase in volumes during the October-December quarter due to a fall in crude and vegetable oil prices during the past few weeks, Marico managing director and chief executive officer Saugata Gupta told FE in an interview on Monday.
“Consumption will take some time to improve, but I see a gradual improvement happening especially as you move into the second half of the year,” he said, adding the sector will continue to see the impact of “inflationary pressure” in the second quarter due to the raw material bought by companies earlier at higher prices.
He said Marico is on track to achieve its target of reporting revenues of Rs 10,000 crore in this fiscal, up from Rs 9,512 crore posted in FY22. “We are broadly on track, unless we have to take more price drops,” he said.
In the first quarter, Marico’s volumes fell about 6% in the domestic market, mainly dragged down by inflationary pressures, which also impacted consumer sentiments. The FMCG major’s volumes were hit as its key product, Saffola cooking oil, saw a dip in volumes of over 20% in Q1 on a year-on-year basis.
Parachute coconut oil also registered a volume decline of 2% during the reporting quarter. With a fall in commodity prices, Marico reduced prices of both Saffola (17-18%) and Parachute (6-8%), which has been helping bring volumes back.
Gupta said further price reduction would depend on commodity price movements.
On the rural front, he said demand is improving, but is yet to pick up pace even though the “worst is over”. The demand in rural segment is expected gain momentum from October-November, while that from urban areas is “much better”.
Marico also intends to grow its foods brand business to Rs 850-1,000 crore by FY24 from about Rs 450-500 crore in FY22.
“The entire organic food business’ growth would be based on expanding the total addressable market of Saffola, and its importance of being a healthier product. We had also acquired this brand called True Elements, which is essentially based on snacking cereals and other stuff, and I think between the two of them, we are pretty confident of reaching Rs 850-1,000 by FY24,” he said.
This would be based mainly on organic growth, and if inorganic growth happens that would be a further “top-up”, he said.
On the digital brands front, Marico will continue to look for acquisition targets.
“We believe this is a better time for acquisitions, compared with 12 months ago, the easy private equity money is no longer available. Further, we have proven to be good strategic partners for founders to actually work with us and scale up, like Beardo for example. We will continue to look for, and I am pretty confident in the next 12-18 months we will see more of such digital brands added to our portfolio,” he said.
Marico had acquired a 45% stake in Beardo, a male grooming products firm, in 2017 and the remaining stake in 2020.
In the direct-to consumer segment, the company has three digital brands — JustHerbs, Beardo and True Elements — and will expand these brands organically through innovation, expansion of distribution channels.
On the international business, he said there are no major concerns, while some markets could be vulnerable to high inflation, low consumption or some currency depreciation. “So international business, we are not concerned so far but we have opted for a wait and watch approach.”
On India’s economic position, Gupta said the country is far more resilient compared with certain other nations, but a growth trajectory will only occur gradually.