MARICONSEQ3 FY25February 7, 2025

Marico Limited

8,739words
80turns
8analyst exchanges
2executives
Management on call
Saugata Gupta
MD & CEO, MARICO LIMITED
Pawan Agrawal
CFO, MARICO LIMITED
Key numbers — 34 extracted
2x
stable yet soft on a sequential basis whereas rural continued to witness improvement, growing at 2x suburban on a year-on-year basis for the third consecutive quarter. Resultantly, HPC categories c
90%
ng volume growth and a robust high teen revenue growth. Offtake growth remained healthy with over 90% Regd. Off: 7th Floor, Grande Palladium, 175, CST Road, Kalina, Santa Cruz (East), Mumbai – 400
80%
assification: Official of the business gaining or sustaining market shareand about 80% of the business either gaining or sustaining penetration both on a MAT basis. From a channel pers
1%
hute posted a resilient performance despite a steep input and pricing increases absorbing a circa 1% volume impact due to ml-age reduction in one of the price point packs. The brand maintained its s
3%
e bottom of pyramid segment where we are facing unreasonable competition. The portfolio delivered 3% growth which is in line with overall BPC categories.We will continue to reinforce our market lead
₹1,000 crore
al sentiment is likely to support consumption in this category. Food business scaled up to around ₹1,000 crores ARR in Q3 which was underpinned by broad based growth in the core and the new franchises. You wo
₹600 crore
well in line with expectations. The digital first portfolio scaled ahead of expectation, reached ₹600 crores in ARR in Q3. Beardo is on track to deliver double digit EBITDA margins, reinforcing the long-te
21%
and premium personal care including Digital first brands in the domestic business stood higher at 21% in 9M’FY25 despite significant pricing growth in the core portfolios. These businesses are now cl
₹1,900 crore
pricing growth in the core portfolios. These businesses are now clocking a combined ARR of around ₹1,900 crores, and represent a phenomenal shift in the growth trajectory and the potential of the India busine
2%
ity performance despite the impact of currency headwinds in key markets. Currency headwinds had a 2% impact on consolidated EBITDA this quarter. The Bangladesh business delivered a robust growth and
rs,
has been made possible by our unique M&A strategy which is a win-win for both of us and the founders, and our ability to learn from them with humility and seed founders’ mentality within our leadershi
60%
digital businesses is to have a sustainable profitable growth trajectory. Given a choice between 60% growth, and high cash burn, versus 25%-30% growth and having responsibility towards both capital
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Guidance — 20 items
Saugata Gupta
opening
“I would like to begin by sharing a perspective on the operating environment during the quarter, followed by our performance and the strategic objectives going forward.”
Saugata Gupta
opening
“Therefore, we will aim to deliver consistent and competitive growth in the medium term through a sharper and more targeted portfolio and SKU strategy in each channel.”
Saugata Gupta
opening
“We have taken another round of price hikes towards the end of Q3 as forecast suggest copra prices to remain firm in the near term.”
Saugata Gupta
opening
“Saffola edible oils also demonstrated stability despite significant price hikes over the past few months driven by the import duty hike, we expect the brand to remain steady unless there is significant volatility in vegetable oil prices.”
Saugata Gupta
opening
“Following the substantial expansion in gross margin last year, we expect gradual improvement in the profitability of the Foods portfolio as we build scale in the medium term.”
Saugata Gupta
opening
“Beardo is on track to deliver double digit EBITDA margins, reinforcing the long-term focus towards driving consistent growth and Regd.”
Saugata Gupta
opening
“Email: investor@marico.com Marico Information classification: Official improvement in profitability in the medium term.”
Saugata Gupta
opening
“We maintain our aspirations to achieve double digit EBITDA margin in the Digital first portfolio by FY27.”
Saugata Gupta
opening
“The composite revenue share of Foods and premium personal care including Digital first brands in the domestic business stood higher at 21% in 9M’FY25 despite significant pricing growth in the core portfolios.”
Saugata Gupta
opening
“Further, a notable improvement in profitability of these businesses over the last couple of years reinforces our focus on driving sustainable diversification in the medium term.”
Risks & concerns — 14 flagged
Pricing growth across categories was up sequentially as companies implemented pricing hikes to counter margin pressure from the sharp rise in commodity prices.
— Saugata Gupta
We will closely monitor consumption trends with this high pricing and the transient impact of shrinkflation of price point packs in the near term given the persistently inflationary market conditions which are expected to improve soon.
— Saugata Gupta
The business has continued to chart a resilient top line and profitability performance despite the impact of currency headwinds in key markets.
— Saugata Gupta
While input inflation has been higher than expected, this has put some transient pressure on profitability.
— Saugata Gupta
You will recall, first we called out and addressed the inter-channel conflict in India as early as 2019-20, as well as the GT stress and the need to support the distributor ROIs four to five quarters ago.
— Saugata Gupta
Recognizing the early signs of stress in GT, we chose to proactively invest and adopt a measured and structural approach to address the issues.
— Saugata Gupta
It included actions such as segregating facts across channels, implementing a minimum operating price and elevating our strain on our partners by reducing working capital pressure.
— Saugata Gupta
We have also exhibited resilience and grip which has led to our ability to tackle this slowdown by largely delivering what we have promised.
— Saugata Gupta
We think that while oats and the good thing is that even in the so-called food slowdown, our core which is oats and masala oats continue to give double digit growth.
— Saugata Gupta
So, if there is still an inflation, maybe your top line will continue to be good and the margins might be under pressure.
— Percy Panthaki
So, it is very difficult at this stage to share a margin percentage.
— Pawan Agrawal
Email: investor@marico.com Marico Information classification: Official improving further, is it largely because of the base effect that you have a decline now or are you actually seeing some traction in the initiatives you've taken?
— Arnab Mitra
I mean we can't move beyond that in terms of decline.
— Saugata Gupta
yes, there has been a little bit of a slowdown in modern trade.
— Saugata Gupta
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Q&A — 8 exchanges
Q
Yes, congrats on a good set of numbers. My first question is on Plix and True Elements. If you could tell us in terms of distribution scale up with respect to these two specific products, how much scale up is expected to happen in one year? In True Elements, competitive intensity I think is quite high. There are a lot of similar kind of companies in both legacy and startups as well. Hence, if you could discuss how things are on competitive intensity and in terms of profitability, how are things panning versus internal expectations?
Saugata Gupta
First, let me answer the last question. I think the cash burn in the businesses Plix is all profitable and the burn rate in True Elements is extremely low. Now coming to the growth expectation, one of the things we believe in digital businesses is to have a sustainable profitable growth trajectory. Given a choice between 60% growth, and high cash burn, versus 25%-30% growth and having responsibility towards both capital utilization and managing profitable scale up, we have chosen the latter. Therefore, as long as we deliver that kind of a growth, we would be happy. Now I think as far as GT is
Q
Hi Saugata. Congrats on a good set of numbers. I just wanted to understand your food business a little better, now that it has gained some kind of scale. So, could you just very roughly break up the total business in terms of percentage contribution of different segments, be it oats, honey or whatever else? And secondly, if you could give some idea on what kind of EBITDA margins this entire food business as a whole is generating and what kind of margins you would target over a 3 to 5 year kind of a period? Regd. Off: 7th Floor, Grande Palladium, 175, CST Road, Kalina, Santa Cruz (East), Mumbai
Saugata Gupta
I'll give you a broad macro flavor, Percy. I think if you look at it, obviously the largest is the oats, and the oats at a scale delivered almost near the company average. So, I think as you get scale, we get that. Okay. And as you would recall last year, we improved the gross margin by 800 basis points and we are working towards capability building. Are we there fully? We are not there, but still we are 7 or 8, I mean 7 on 10 today. I think we believe that the crux to it is to crack the GT in Foods and towards that SETU one of the drivers of SETU also is to expand food outlets. Of course, bes
Q
Hi team. I just wanted to clarify on this, on the food’s profitability bit. So, at the EBITDA level, the existing Foods plus premium portfolio, which is 21% of our business should be equal to company average right now or slightly less? I'm sorry, I just wanted to kind of understand that. Where do we see it in FY27 or how do we see kind of progressing towards FY27?
Pawan Agrawal
So, currently at a weighted average level, what Saugata mentioned is that we try and manage that the weighted average gross margin portfolio, the weighted average gross margin of the Foods plus digital portfolio has to be higher than the company gross margin. So, that's one, that Regd. Off: 7th Floor, Grande Palladium, 175, CST Road, Kalina, Santa Cruz (East), Mumbai – 400098. CIN: L15140MH1988PLC049208. Email: investor@marico.com Marico Information classification: Official we definitely ensure. As far as Foods margin is concerned, masala oats has definitely reached EBITDA of company. However,
Q
Hi, Saugata and Pawan. Congratulations on a good performance in this tough environment. My first question was on Foods and personal digital-first brands. Correct me if I'm wrong, but it seems Plix has been a big positive surprise on both sides. So, on the Foods part, my question Regd. Off: 7th Floor, Grande Palladium, 175, CST Road, Kalina, Santa Cruz (East), Mumbai – 400098. CIN: L15140MH1988PLC049208. Email: investor@marico.com Marico Information classification: Official was is it still very ACV driven or how has been the progress in diversifying the portfolio outside ACV, which was I think
Saugata Gupta
I think two things which are differentiated for Plix. If you look at it, Plix is essentially far more a D2C driven brand. Therefore, given the higher AOVs, it's reasonably profitable and has low cash burn. Now the diversification from ACV has started and obviously, as you know that in any nutraceutical brand you have five platforms which is basically weight management, heart care, diabetes, gut health, bone health and sleep. We have gone into one or two of these platforms and we will obviously go into others as there is a diversification agenda. Having said that, I think it's very important to
Q
Thank you for the opportunity. Sir, I have two questions. The first one is on channel. You have commented in your information updates that modern trade and e-commerce, including quick commerce have been growing at high double digit volume growth. Could you give us some context or perspective on what those volumes growths are and how divergent they are between the two channels?
Saugata Gupta
I think quick commerce obviously is the biggest driver of growth and what we have realized that we need to have a differentiated portfolio in quick commerce and interestingly even some of the digital brands are also doing well in quick commerce. Now coming to modern trade there. yes, there has been a little bit of a slowdown in modern trade. Having said that, I think we are still growing in double digit in both marketplace e-commerce and modern trade. The growth in quick commerce is being 50%+ Regd. Off: 7th Floor, Grande Palladium, 175, CST Road, Kalina, Santa Cruz (East), Mumbai – 400098. CI
Q
Thank you. Thanks for the opportunity. My question was on the different channels if you could describe the salience of different channels. Could you provide insights into the profitability and working capital intensity across different channels—GT, MT, and e-commerce—in the domestic India business?
Pawan Agrawal
Basically, alternate channels contribute about 30%. Then there is a CSD which is for the defence personnel that is about 6% to 7%, and balance is GT. Now we haven't really gone public with respect to channel wise profitability. But yes, the profitability in GT is better than alternate channels. Having said that, we have taken a lot of measures to improve profitability on alternate channels. That is not very significantly different from GT. Now in terms of working capital intensity of course the receivables etc. is higher for GT channel and that is why you would have seen that debtor days would
Q
Thanks for taking my question. Saugata, my first question was on VAHO portfolio. I mean you gave very detailed explanation on how we are shaping up the food business and what are the trends. But with respect to VAHO portfolio and the competitive landscape seems to be very challenging for last many quarters or so. Is there a reset or a rethinking around rebuilding a Regd. Off: 7th Floor, Grande Palladium, 175, CST Road, Kalina, Santa Cruz (East), Mumbai – 400098. CIN: L15140MH1988PLC049208. Email: investor@marico.com Marico Information classification: Official portfolio here or is there any oth
Saugata Gupta
Okay, so I will give you a broad construct. We initiated the reset last quarter, but this process takes at least a couple of quarters to complete. We have said that ultimately, we will do a reallocation of resources towards investing in the mid and the premium part of the portfolio, we are not `looking to engage in intense competition at the bottom of the pyramid by over-investing in BTL, as this approach often leads to unsustainable and unprofitable growth. As an organization, we don't want unprofitable and unsustainable growth because otherwise, we could be expanding into categories like ric
Q
Thanks for listening on the call. To conclude, we have remained steadfast in pursuing our strategic objectives, set out at the beginning of the year both in India and international markets amidst the evolving demand and macroeconomic environment. Sustained investment towards the accelerated scale up of our Foods and premium personal care portfolio in India and ramp up in MENA and South Africa and international is resulting in a visible shift in the revenue construct of the business. And we have also established an improving trend in profitability of these portfolio. While we are contending wit
Management
Speaking time
Saugata Gupta
27
Pawan Agrawal
11
Moderator
10
Sheela Rathi
8
Abneesh Roy
5
Percy Panthaki
5
Arnab Mitra
4
Kartik Chelappa
4
Avi Mehta
3
Bhavdeep Vora
3
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Opening remarks
Saugata Gupta
Hi everyone and all those who have joined the call and my best wishes to all of you for a very Happy and Prosperous 2025. I would like to begin by sharing a perspective on the operating environment during the quarter, followed by our performance and the strategic objectives going forward. The FMCG sector exhibited reasonably steady demand sentiment during the quarter. Retail and food inflation were at elevated levels but showed some signs of easing in December. Urban demand remained stable yet soft on a sequential basis whereas rural continued to witness improvement, growing at 2x suburban on a year-on-year basis for the third consecutive quarter. Resultantly, HPC categories continued to outperform packaged food on a year-on-year basis. Continued government schemes, rise in MSPs and a favorable crop season bode well for the ongoing rural recovery. In urban, consumption sentiment remained reasonably stable and healthy amongst the affluent and upper middle-class segments. While middle an
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