Companies

Our supply chains remain intact: Marico CFO Pawan Agrawal

Abhishek Law Kolkata | Updated on May 18, 2021

Pawan Agrawal, CFO, Marico

‘As nearly 90% of our portfolio falls under essentials, the Covid-19 impact will be minimal’

Homegrown FMCG major Marico Ltd reported a 25 per cent jump in domestic volumes in Q4 FY21 (January–March) – one of its highest quarterly jumps. But a second and more brutal wave of Covid-19 infection and localised lockdowns had some impact on business from late April onwards, even though the company is hopeful of “healthy growth” in FY22. According to Pawan Agrawal, CFO, Marico Ltd, the company is hopeful that as 90 per cent of its portfolio consists of daily-use items, the impact would be minimal. There are no supply chain disruptions at present like last year. There are no new product launches planned and discretionary items will see softer demand. In an interview with BusinessLine, Agrawal spoke about the consumption patterns, impact of the second wave on the company, and outlook for FY22. Excerpts:

Post the second wave, what are the initial trends, especially in terms of home consumption, that you are witnessing?

First of all no one saw the second wave coming. However, as States went into lockdown and shutdowns became localised, we saw some impact in the last few days of April. Primarily these were not consumption-related, but with sequential lockdowns and reduced operating hours for grocery stores, there were supply chain issues at the distributor end.

However, our supply chains remain intact and all our factories are operating. As of now we do not see any significant impact on consumption. Nearly 90 per cent of our portfolio is essentials. So impact would be minimal.

So between Lockdown 1 and local lockdowns now, what is the change in approach?

Last year, we were obviously under-prepared in terms of logistics, etc. The lockdown hit us suddenly. We believed things would be getting back on course around June–July last year.

But this time, people need deliveries or you want distributor stock points to open, we are working on those lines. Overall I would say, localised lockdowns have a more limited effect compared to a centralised one.

For instance, in the initial days of the second wave, infections surged in Maharashtra, then Delhi and later in the eastern States. Lockdowns were announced in a phased manner. Some States had stricter norms than others. But localised lockdowns this time allowed us to get the supply chains in place, ensure deliveries within a select available time window and so on.

In terms of channels, general trade and online continue to see traction, while social distancing norms and virus spread fear continue to impact organised retail (modern trade) operations.

For rural and urban India, how has the second wave of infection hit growth?

The second wave obviously has a greater impact in rural areas than the first one. However, urban areas also continue to be hit. So between the two waves, and in the current context, rural growth, though impacted, continues to be higher than urban.

Moreover, there are other factors coming into play in rural areas. Monsoons, the government’s cash doles and crop prices will also play a factor in generating rural demand.

Has there been any change in demand patterns?

Marico took a tactical call to reduce its exposure in hygiene offerings (like sanitisers, disinfectant sprays and so on), and it continues. We believe, trusted and older players have a better chance in this segment than newer ones like us.

Health offerings — particularly in foods — will be a focus and there is a permanent shift in people’s preferences towards these categories. We have a portfolio covering oats and noodles (healthy snacking), honey, immunity boosters, Saffola Chawyan Amrut and soya chunks. We will consolidate our position in these categories.

We had expected foods to be a ₹300-350 crore business in FY21 and a ₹500-crore business in FY22. We are on course. In FY21, the foods vertical reported revenues of over ₹300 crore.

And for discretionary items...?

The segment was witnessing some revival towards the second half of last fiscal. But now with the lockdowns, people are back to staying indoors. Within personal care, we observed a gradual revival in demand in segments like the Livon serums portfolio. Male grooming and skin care portfolios have remained soft .We expect discretionary categories to remain under pressure but intend to build these portfolios into growth engines once the macros stabilise, maybe from Q2FY22. Discretionary items are about 5-7 percent of the domestic portfolio.

Items like value-added hair oil (VAHO) saw good broad-based growth in January – March period. We will focus on building a sustained double digit growth trajectory in VAHO over the medium term on the back of strong equity and a pricing strategy that will cover all segments.

Is it possible to give an outlook for FY22?

We remain cautious. Q1FY22 (April to June) period will have healthy numbers over last fiscal because of low base effect. But, to share an outlook for the future quarters is difficult as the scenario is still evolving. For the full year, we continue to expect decent growth. A lot depends on the vaccination drive and how it picks up and also the intensity of the third wave and how and when it will hit.

Published on May 18, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor