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Business News/ Companies / News/  Our aspiration is to get into double-digit revenue growth: Marico
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Our aspiration is to get into double-digit revenue growth: Marico

In an interview, Saugata Gupta, MD & CEO, Marico Ltd, says that for companies in mass categories, direct distribution will be a source of long-term competitive advantage.

 Saugata Gupta, MD & CEO, Marico Ltd, (Photo: Mint)Premium
Saugata Gupta, MD & CEO, Marico Ltd, (Photo: Mint)

Mumbai: Parachute oil maker Marico reported a 3% rise in the March quarter volumes in its India business, while revenue from operations increased 2% year-on-year. Mint spoke to Saugata Gupta, MD & CEO, Marico Ltd, on the company’s plans to improve top-line in the coming quarters—after successive price cuts in its Saffola edible oil portfolio impacted revenues. The company has also announced investments to ramp up direct distribution in a move to reach more rural markets. It is working on expanding its food distribution. Edited excerpts:

Nielsen just announced improvement in rural demand in the March quarter. Is Marico seeing better sales in villages?

We saw some green shoots (in rural)...towards the end of the March quarter. It's a combination of a few factors—inflation is largely under control. I think the government continues to support direct benefit transfers, the monsoon predictions are pretty good. So, a combination of all these factors gives us hope.

You just announced plans to improve direct distribution. Were you late to the direct distribution play?

For companies in mass categories, direct distribution will be a source of long-term competitive advantage. Now in the last five to seven years, due to the growth of organized trade, smaller brands have proliferated. So we believe that in a post-GST world and with the formalization of the economy, and especially when we have a lot of challenger brands, the quality of distribution needs to improve. We were under-indexed in certain states and therefore, over the next three years, we want to move our direct distribution from 1 million to one and a half million. Our dependence on indirect distribution was more than other companies. We have an outlay of 70 to 100 crore over a three-year period, which is largely self-funded. By the end of 2027, we will be in the top quartile in terms of our direct reach. This is largely for rural markets; in urban areas there is scope for expanding presence in channels such as chemists, beauty stores and food outlets.

Your value-added hair oil portfolio (Nihar, Parachute gold coconut hair oil) was down 7% year-on-year in value terms last quarter. How do you plan to fix that?

We have seen significant competitive intensity at the bottom of the pyramid, so we have lost share in that. However, since the last quarter, we have started focusing far more on the mass premium-end (of hair oils) where our share is far lower. The value-added hair oil performance has been a little disappointing, but in the last three to four months, we are now getting our act right in the premium end of it. 

What is your short- to long-term goal on domestic volumes?

We expect volumes to improve. Our aspiration is to get into double-digit revenue growth. Now, the exact mix between volume and pricing would also come because of premiumization (products becoming more expensive on enhanced quality) of the mix. There will be slight inflation in our portfolio, which will give us revenue growth.

Marico has set targets to double categories like foods, premium personal care and digital-first brands over the next three years. How are you going about that while also ensuring profitability of new-age brands?

This year, we have actually not grown so much in foods. The reason was that we did a reset in terms of our gross margins; in foods we grew gross margins by 800 bps (basis points) last year. And the reason we did this is because food becomes a significant portion of our portfolio, it's important that we have a margin which is in line. Similarly within our digital portfolio, in Beardo (Marico's male grooming brand), we have started making some money. We have reduced the cash burn substantially in other digital brands too. In Plix and Just Herbs, the cash burn is very, very marginal. So overall, the digital business should turn positive this fiscal; and then we should get it to double-digit Ebitda (earnings before interest, taxes, depreciation, amortization) over the next three years. Ultimately if food and digital are 25% of our business, they should also start delivering Ebitda.

There was some news around exits at Beardo, can you help clarify?

There was one issue with an old distributor of Beardo that is sub-judice, so I don't want to comment on that. On exits—there was one CXO (at Marico) who also happened to be handling Beardo, he left. The other was a planned exit, he has gone on a sabbatical, he is still on our rolls (Sujot Malhotra). And there was one more person who has left, that's about it.

Are there any missing pieces in your portfolio?

In digital, maybe one or two spaces which we would like to look at. We look at categories where we believe there are adjacencies. There could also be some white spaces in foods and in premium personal care. I don't think our food journey is over. We have not explored everything in healthy snacking, for instance. We are test-marketing dried coconut powder under Plix; it is priced at 20 to 30 and can be consumed after mixing with water.

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ABOUT THE AUTHOR
Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 13 May 2024, 07:00 AM IST
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