Marico expects premium brands biz to double in 3-4 years
The growth in the premium space will come through new launches and acquisitions, says Marico CEO Saugata Gupta
Mumbai: Marico Ltd has over the past year created a differentiated portfolio and strategy for distribution, sales and marketing of niche premium and mass brands, said a senior company executive. The shift in strategy comes even as the company languishes in its core business of selling Saffola and Parachute oils amid intense competition.
“We now have two sets of growth and they are completely different models and they can happily coexist as opposed to saying that one is growing at the cost of another,” said Saugata Gupta, managing director and chief executive officer, Marico.
Gupta is referring to Marico’s traditional consumer packaged goods business and the recent foray into the digital space with strategic investments in male grooming brand Beardo and fitness solutions app Revofit. The two businesses continue to be run as independent start-ups by the entrepreneurs.
Niche premium brands comprise about 4-5% of Marico’s overall revenue but can potentially grow at two or three times more than the traditional business, said Gupta. He expects business from the so-called “engine two” to double in size to become 10% of overall business in three to four years.
The growth in the premium space will come through new launches and acquisitions. “The plan is to grow our niche premium brands portfolio by acquiring 4-5 online-only brands and also launch 3-4 of our own online first brands over the next two years,” said Gupta while explaining that even if two to three brands cross the ₹100 crore in revenue, then the exercise will be considered successful.
Channels like modern trade which comprise 11% of India sales are growing at 39%, while e-commerce, 1% of India sales, is growing at four times the overall growth rate, according to an August report by SBICap Securities Ltd.
Analysts said however that Marico needs to do more in its core business. “The company’s efforts in terms of new product launches and focus on consolidating its positioning in the segment of the future such as health food and male grooming is encouraging and is margin accretive. While we are enthused by the effort, we think the priority should be to strategize better in terms of core,” said Nitin Gupta, analyst at SBICap.
Marico’s core categories are under stress. The company reported a muted two-year compounded average growth rate for volumes at 1% which was lower than the 6-8% seen by peers Hindustan Unilever Ltd (HUL), Dabur India Ltd and Godrej Consumer Products Ltd (GCPL), according to the brokerage firm’s report. Its two main brands Saffola and Parachute, which account for over half of its India business, remain stressed due to inflationary pressures and increased competitive intensity.
“The big opportunity continues to be affordability and availability in India,” said Gupta. “Here the company is focused on improving its rural reach and driving low price points in its premium packs,” he added.
Among the shares of consumer product companies, Marico has underperformed its rivals HUL, Dabur and GCPL but has outperformed Emami Ltd. While shares of HUL have gained 52% from its 52-week low to ₹ 1,169, Marico rose 33% to ₹ 378.2 from a 52-week low of ₹ 284.05.
GCPL gained 57% to ₹ 1,396.35 from its 52-week low of ₹ 888.45, Emami rose 12% to ₹ 558.55 from a 52-week low of ₹ 499.05 and Dabur gained 59% to ₹ 475.75 from its 52-week low of ₹ 298.60.