BL interview. Journey to ₹15,000 crore revenue mark may be faster but growth has to be profitable: Marico MD & CEO

The ₹10,000 crore revenue is not the issue, it is delivering growth. The pandemic has evolved our portfolio. We have reduced our dependence on Parachute oil, Saffola, and Shanti Amla in India. Overseas, we had Parachute and coconut oil concentration but over the last three years, we have reduced that. We will have better volume growth than last year with an improvement in margins.

We look at value share and not volume share. One of the reasons is that many categories have high penetration and the volume will remain in the mid to high single digit for some time. In the food segment during the pandemic, we grew from less than ₹200 crore in FY20 to nearly ₹600 crore in FY23. We witnessed an 18 per cent value growth in FY23 from the previous year.

The food segment has a far higher runway and the reason is that branded to unbranded, there is a significant story. Food also has the advantage of a huge unorganised market. If we were a food company, the chances of delivering double-digit growth are far higher: however, the food margins are also low. What we launch in food has to have a higher margin and long term than Saffola oil. Snacks and munchies are the next big thing. Food has a better tailwind and more consumption.

I do not see any more prices going down. There could be cuts in Saffola because the prices are influenced by imports. It is difficult to predict commodity prices but it is expected to remain range bound.

Rural recovery will be gradual, not a sharp spike. This is because the base is correcting itself. The FMCG segment in this quarter has gone into a positive value after a long time. The revenue growth will be slightly moderated next year. This year, there was an inflationary component. The choice is with companies on how much to pass down to consumers to get volumes versus retaining extra margin. Urban was largely unaffected and it has been steady and moderate. The pressure on consumption was largely rural. In the value-added hair oil category, we found people down-trading in top-end brands. This year, the consumption will be better.

Inflation is broadly under control. In some of the markets it has been quite tough. Bangladesh is coping better than Turkey, which has 50-60 per cent inflation. Compared to that, India’s situation is better. At the end of the day, we are a domestic consumer market. Unless there is some big diversion like El Nino or rainfall, the worst is over as far as inflation is concerned. When there is high food inflation, the usage volume is independent of your income strata in FMCG. In the case of discretionary products, going up the chain, there is more usage. As a result, when there is high inflation because their disposable income is relatively lower, they don’t compromise on food. Pressure is on FMCGs, whether tight trade or down trade, branded to unbranded.

It has to be a strategic fit with fair valuation and we would love to work with founders who want to build to last rather than build to sell. We have identified certain categories that are attractive and we never do acquisition for vanity. We have a playbook now with handling so many brands and are far more confident on the path to profitability. I believe Beardo and Just Herbs are two brands that will see the path in 12-18 months.

India is a large country and direct distribution in rural areas will continue to be a barrier for D2C players. Organised retail or e-commerce is not easy to penetrate beyond a certain threshold.

A traditional distributor takes orders; we deliver and provide the market with credit, and keep stock. Maybe in five years, one still can take an order but I can reduce the frequency and do it through an application.

Consumer Packaged Goods (CPG) companies are still not the best in the class; we are better than average. We are using a lot of analytics in the supply chain, and talent management. We have a digital quotient that takes in social listening. We design and package for general and modern trade, and e-commerce, even digitally. Our digital spending has crossed 20 per cent overall, and some brands have 60 per cent.

We have an undergraduate program and take a lot of talent from digital and start-up brands. It is paying us good dividends. In the last six months, people have shifted to start-ups, and I think they will return.

I would certainly like to increase the pace of it. However, it has to be responsible sustainable, profitable growth, and it is more important to have a differentiated portfolio.