Marico

Marico observed stable to improving demand trends across urban and rural India during Q1 FY26. Premium categories continued to outperform mass segments, while alternate channels like Modern Trade, E-commerce, and Quick Commerce led growth. General Trade also showed growth after several quarters, attributed to focused initiatives and Project SETU. Management expressed optimism for a gradual and broad-based recovery in consumption sentiment, supported by easing retail and food inflation, favorable monsoons, increased government spending, and higher MSP.

The India business delivered a sequential uptick in underlying volume growth, nearing double-digits, and revenue growth reached multi-year highs. This was driven by improving traction in core categories, GT improvement, and sustained momentum in new businesses. Offtake trends remained encouraging, with nearly the entire business sustaining or gaining market share, and over 80% of the business improving penetration. Pricing actions in core portfolios, taken in response to sharp inflation in key commodities like copra and edible oil, supplemented the volume trajectory.

Parachute demonstrated resilience amidst hyperinflationary copra prices, which saw an effective price increase of over 60% due to supply-demand gaps and speculative activities. Despite this, the brand experienced minimal volume impact and consolidated market share. Copra prices have recently corrected by approximately 12% from their highs, and management expects the market to settle over the fiscal year, leading to a meaningful recovery in Parachute's volume growth.

The Digital-first portfolio, including Beardo, Just Herbs, and Plix Personal Care, exited the quarter with an Annual Recurring Revenue (ARR) of over ₹850 crores. Beardo is close to double-digit EBITDA, and Plix has broken even. Management aims to reach 2.5x of FY24 ARR by FY27 and deliver double-digit EBITDA margins in this portfolio by FY27, leveraging cost synergies from Marico's overall structure and insourcing manufacturing (e.g., 500-600 bps gross margin improvement for Beardo).

Marico's international business recorded high-teen constant currency growth, maintaining stellar momentum. Bangladesh delivered a robust performance with broad-based growth across core and new franchises. MENA (Gulf and Egypt) saw accelerated scale-up, supported by new franchises and market share gains, growing over 30% last year. Vietnam experienced a muted quarter, but strategic interventions are underway, with expected gradual recovery in the quarters ahead. South Africa was static this quarter, with aspirations for full-year growth.

Project SETU, aimed at enhancing direct distribution, has started showing positive impact, particularly in rural and mid-premium VAHO segments, with better results expected in H2. The company is also expanding its urban presence in specialty stores. Consolidated advertising and promotion (A&P) spends increased by approximately 25%, though India's A&P was down 20% due to rationalization of non-media spends and efficiency gains, not media cuts in focus categories. Management expects India A&P to trend upwards.

Marico aims for a double-digit profit CAGR over the next two years, following moderate profit delivery in inflationary years. The company believes it has a fair chance to reach ₹15,000 crores in revenue over the next two years and achieve the ₹10,000 crores to ₹20,000 crores leap within the next five years. This vision is supported by diversification, double-digit VAHO growth, and mid-teen international business growth, with inorganic growth serving as an accelerator rather than a substitute for organic growth.