Marico's gross and earnings before interest, taxes, depreciation and amortization (Ebitda) margins expanded year-on-year in its Q1 earnings report. However, quarter-on-quarter, the gross margins declined to support volumes.
Saugata Gupta, managing director and CEO of Marico, discussed the company's earnings report and its future plans.
“I think the consumption situation is soft, also I think it's not just the consumption situation. It is also the liquidity in the channel. So both are perhaps impacting the category growths in different sectors. While at one end there is both modern trade and e-commerce driving a little bit of premiumisation, I believe that there are some channel things which are changing in the form of channel dynamics.
"So therefore organised players, consumer packaged goods (CPG) players who have more direct distribution especially in rural areas are likely to have long-term competitive advantage even in these hard times,” he said.
Speaking about copra prices, he added, “If you look at over on a quarterly basis, copra prices are down 25 percent. Having said that I think on an annualised basis it will be 20. Normally [this is] what happens — this is the flash season — then as we enter the off season there could be a slight uptick. I would say overall on an annualised basis or the balance sheet, it would be a 20 as opposed to a 25.”
Talking about Marico's flagship product Parachute, Gupta said: “If you look at the Parachute volume and value, there is a 1 percent deflation. So while we are not taking across the board price drops, so what we are doing is we are doing some tactical things in certain packs and in terms of consumer promotions. So we have done a marginal pass off and we believe that we will wait and watch. For us, market share and volume growth is of paramount importance so we will be carefully watching our pricing.”
On value added hair oil (VAHO), he further said, “There is a slight slowdown in consumption. There has been much more competitive action at the bottom of the pyramid. So I think bottom to mid pyramid, we are now okay and also we see in organised place consolidating market share there. We have been facing problems at slightly more premium end to premium end where some of our brands have not been doing well.
“I think new foods should be exiting at a run-rate of say around Rs 3-4 crore per month towards end of the year. That is something we should be able to do,” he added.