Rural consumption will see gradual improvement in H2 FY23: Marico’s Saugata Gupta

I think the worst is over. There are elements that drive consumption and there are some that drive inflation. As far as inflation is concerned, vegetable oil and palm oil prices have seen some cooling off. Crude has considerably cooled off from its peak though it is on the higher side and we hope that it will also stabilise at current levels or trend a little downwards.

Food inflation consists of different factors. While the edible oil prices have come down, there is slight inflation in wheat and rice and we have seen the government trying to manage this through certain measures. Monsoons have also largely been on track except in 2-3 States. If one puts together all these factors, there could still be some pain points but gradually, things are improving.

For the FMCG sector, the margin pressure and the cost pressures will see improvement. Having said that, while consumption will improve, the improvement will be gradual as we get into the second half of the year.

We have, in fact, taken price drops on both Saffola and Parachute. And if there is further softening in costs, we will even pass on the benefit to consumers as it is critical to ensure that we maintain our volume growth and market share.

In terms of edible oils, the steep inflation that one saw in the first quarter has come down. Although there is still a slight inflation, we have seen recovery especially for our brand Saffola. Its a premium brand and we had taken significant price increase earlier and therefore, had led to some downtrading etc. So that is largely behind us. As far as personal discretionary products are concerned, while some categories have come back to pre-Covid levels, others have even crossed them. Growth is back in the premium discretionary segment. 

With the monsoon largely being on track except in 2-3 States, I would think that we will see a gradual improvement in rural consumption in the second half of the year. But as of now, the urban consumption and premium segment is much better placed especially because the premium discretionary FMCG segment had a far lower base last year, especially in categories that were related to outdoor consumption.

In the first quarter, we saw a little bit of softening of growth since nearly 100 per cent of our portfolio is skewed to in-home consumption and also because of a higher base in the year-ago period. But if we look at the current trends, growth is back and we are fairly confident of fulfilling our revenue aspirations of ₹800-1,000 crore by FY24.

We expect it to keep growing every quarter till it reaches ₹450-500 crore mark in FY24. In the last two years, there has been a significant growth in the e-commerce channel at the expense of modern trade on the back of Covid-related restrictions. While e-commerce channel continues to see growth, there has been a bit of stabilisation. In the last two years, there had been significant cash burn in the D2C space with very high levels of ad spends. With the cash availability becoming less liberal this year, the noise levels around ad spends by D2C brands have also come down and things have become more reasonable in terms of unit economics and cost of doing business. This is good for players like us. This will also help founders who want to scale up choosing strategic partners for their growth journey.

We will continue to look at opportunities as a strategic investor and we have identified certain white spaces which will help plug our portfolio in the digital space. So we are looking at it but it all depends on the right valuations and other factors. We have a very rigorous playbook based on our past successes in terms of identification and partnering with certain founders.

In the last two years, e-commerce channel certainly saw a very sharp growth and compared to that it will grow at a slower pace. However, I certainly believe the growth rate of e-commerce and modern trade will be higher than general trade and these channel’s contribution will continue increasing. At the same time, in this country there is a unique structure and general trade remains resilient and will continue to be a significant channel.