New Delhi: Marico Ltd expects new product launches in its personal care and foods portfolio to generate 7-8% of the company’s revenue by fiscal year 2022, up from the current 3-4%, chief financial officer Vivek Karve said.
In the last few years, Marico has increased the number of new product introductions as it seeks to diversify beyond its core products portfolio of Saffola and Parachute oils. “In personal care as well as foods we have had a busy calendar on launches. While today new launches might not have a significant impact in terms of share of the top line, the intent is to go up to 7-8% of the top line by FY22," Karve said post the company’s earnings earlier this week.
The company’s current pace of new launches is significantly higher than it has been in the recent past, Karve added.
On Tuesday, Marico announced a 5% growth in its domestic business. For the quarter ended 31 December, consolidated sales at the company stood at ₹1,861 crore, while profit rose 12.4% to ₹251 crore.
During the quarter, Marico launched a range of packaged health foods under the Saffola Fittify brand, which includes a range of premium green tea and coffee.
Additionally, it rolled out a dry fruit hair oil in Rajasthan and Maharashtra and new perfume sprays under the Set Wet brand. During the year, new launches at the firm included shampoo, hair conditioner, and serum under the Parachute brand; True Roots hair tonic for greys and an online-specific range of male grooming products under the Set Wet brand. It also added new variants of Saffola oats to its range.
In the next 12 months, the company is likely to roll out new products aimed at increasing the “contribution of the new launches to total turnover," Karve added. Marico has been rolling out newer products at a faster clip as growth from its core hair oils and cooking oil brands remains sluggish. In FY18, its Parachute rigid portfolio (its coconut oil sold in blue bottles) grew by 2%, while its Saffola refined edible oil saw a decline of 1% in volume. Brand Saffola and coconut oil together contributed to 64% of the company’s domestic sales in FY18.
“Saffola oil has been under pressure," Karve said, adding that the proliferation of other brands in the market claiming similar benefits has dented growth of Saffola. However, he maintained that “internally a lot of action is taking place on the core product to ensure that the consumer differentiates our product from competition." Analysts who track the company said that while pace of new product launches has accelerated, Marico will need to support these with higher ad spends.
“Marico has been on the higher side of innovation over the past few years. The number of launches is bigger than earlier and more in number. That’s because Saffola is facing issues from a growth perspective," said Abhneesh Roy, an analyst at Mumbai-based brokerage Edelweiss Securities. The company should continue supporting these launches with advertising spends, he added.
“Marico has been trying to find new growth drivers beyond hair oils and cooking oils, that explains higher innovations in the last two to three years," said another analyst on condition of anonymity. However, he added that these new launches are still niche and premium. “They need something that can reach more critical mass and can be scalable," he said.