Marico Goes Bare-Knuckled in Fight for Volumes
The company is looking to double its revenue from the food business in the near term.
Marico Ltd, the maker of Saffola and Parachute Oils, is targeting doubling its revenue to Rs 200 crore in its food business in the near term, and will continue to focus on growing the core edible oil franchise.
The success in the coconut hair oil segment is the result of market share dominance, and shift of consumers to the branded products segment from unbranded ones, Managing Director and Chief Executive Officer Saugata Gupta said in an interview.
‘Branded Products Key to Growth’
The value added hair oil segment has seen consistent 20 percent annual growth over the last 5 years. Gupta acknowledges that the company has a broader play across product categories compared to its competitors, and growth in the segment has been further aided by market share gains in volumes and value. Marico will continue to focus on premiumisation and at the same time invest in products targeted towards the bottom of the income pyramid, Gupta told BloombergQuint.
Like Parachute, Saffola had a superior market share of over 60 percent for decades but has contributed only 14 percent to Marico’s revenue pie in financial year 2016-17. Saffola has a high market share but it is present only in the super-premium segment which is a relatively small market, Gupta said. The company will continue to focus on growing the core edible oil franchise, going forward.
Marico has increased spending in its food business and expects “the concept of in-between meals with an Indian taste” to be one of the many drivers of growth. Gupta is targeting food revenue to grow to Rs 500 crore over the next 4 to 5 years.
Balancing Volumes, Growth, and Margins
The recovery in consumption growth will be gradual, Gupta said, and the pickup will likely start in the second half of the financial year as inflationary pressures ease.
Marico will look to maintain margins at a level which is sustainable and allows for growth maximisation. Since the company operates in emerging markets, the focus will be on volume growth and market share, rather than just short-term margins, Gupta pointed out.
Growth Over Margins
The company is comfortable maintaining 17-19 percent margins as long it is able to deliver on growth. Gupta acknowledged that while gross margins could see some expansion, it will not be driven by input cost advantages, as the cost of basic raw materials has bottomed out.
Bangladesh Market Key to Growth
The company expects growth in Bangladesh, its second largest market after India, to be a challenge due to single brand dependency on Parachute, which constitutes 80 percent of its Bangladesh portfolio.
Gupta sounded confident that other products will eventually contribute nearly 40 percent to the portfolio in the next two years.