Marico: Foods & premium personal care to be scaled up

16 Feb 2024 , 10:41 AM

Analysts of IIFL Capital Services met with the management of Marico at IIFL’s 15th Enterprising Bharat – Global Investors’ Conference in Mumbai. Though the consumption trend has been witnessing a slowdown, the company remained optimistic for its growth on the back of scale-up of its foods and premium personal care segment to ~30% of sales. Marico has been focussing on expanding its distribution footprint in the rural markets and have taken pack-size and pricing related actions across key SKUs in the rural market. 

Focus on increasing the sales contribution from foods business: 

The Company aims to grow the saffola oils volumes in mid-to-high single digit, however it stated that the next driver of growth for the saffola franchise will be the foods business. The company aims to grow the foods business by 20-25%. Currently, the foods business contribute to ~10% of the sales for Marico and is expected to clock a revenue of Rs7bn in FY24. The company aims to scale this up to ~15-20% in medium term. The acquired businesses “Plix” and “True Elements” are expected to clock a revenue of Rs2bn and Rs1bn respectively in FY24.The foods business have higher margins than the saffola oils business and are also less sensitive to the commodity pricing. 

No concerns on relevance of hair oil category: 

The Company remains optimistic about the hair oil consumption and does not have a concern on hair oil category in India. It stated that it has not seen any downtick in hair oil penetration as well as frequency of hair usage in India whereas, the quantum of usage per occasion has gone up. The company is moving towards contemporary offerings in hair care (eg: serums) and is focussing on functional innovations (ingredient based) like onion oil, aloevera oil, etc. Marico is also focussing on the premium personal care category such as hair gels, hair sprays, serums etc. It contributes to ~10% of the sale of the company. Marico wants to scale this up as these enjoy higher margins and are not sensitive to the commodity prices. 

Inventory reduction across key portfolios: 

GT is an important constituent for Marico as it contributes to 60% of the business. As a result of liquidity crunch in the retail and to elevate the ROI of its distributors, Marico had to undertake inventory reduction across key portfolios. The company stated that though the near term growth may not be attractive for this channel, getting the pipeline corrected was a strategic decision to get the structure right.