Skip to content

    Marico

    MARICO
    Fast Moving Consumer Goods·7 Feb 2025
    Management Summary

    Marico delivered a strong Q3 FY25 with high teen revenue growth in India and double-digit constant currency growth internationally. The Foods and Digital first portfolios demonstrated significant scale-up, contributing to strategic diversification. Despite elevated input costs and currency headwinds, the company aims to maintain a 20% operating margin for the year, driven by proactive pricing actions and cost management.

    Highlights

    5

    • India business achieved a sequential uptick in underlying volume growth and robust high teen revenue growth, reaching a 13-quarter high.

    • Food business scaled to ₹1,000 crores ARR in Q3, with Saffola oats delivering double-digit growth.

    • Digital first portfolio reached ₹600 crores ARR in Q3, with Beardo on track for double-digit EBITDA margins.

    • International business sustained double-digit constant currency growth momentum, with strong performance in Bangladesh and MENA.

    • Strategic diversification into Foods and premium personal care (including Digital first brands) now accounts for 21% of domestic business in 9M FY25, with a combined ARR of ₹1,900 crores.

    Concerns

    5

    • Input inflation was higher than expected, putting transient pressure on profitability, especially from firm copra prices.

    • Currency headwinds had a 2% impact on consolidated EBITDA this quarter.

    • Shrinkflation in Parachute's price point packs led to a 1% volume impact, expected to continue for a couple of quarters.

    • GT channel experienced prolonged sluggishness, though initiatives are underway to revive it.

    • Southeast Asia business was muted due to a tepid consumption environment in Vietnam and geopolitical issues in Myanmar.

    Key financials

    Metrics

    6

    Periods

    3

    Headline

    4
    • Food Business ARR
      ₹1,000 Cr
    • Digital First Portfolio ARR
      ₹600 Cr
    • Foods & Premium Personal Care Combined ARR
      ₹1,900 Cr
    • Consolidated EBITDA Currency Impact
      -2%

    9M FY25

    1
    • Foods & Premium Personal Care Share
      21%

    FY25 Target

    1
    • Overall Operating Margin
      20%

    Guidance & targets

    12
    CategoryTargetPriority
    Volume
    India business volume growth
    top quartile
    		High
    Profitability
    Digital business margin
    merge with company margin
    		Medium
    Profitability
    Total digital business EBITDA margin
    positive
    		High
    Profitability
    Overall operating margin
    about 20%
    		High
    Profitability
    Foods plus digital portfolio gross margin
    higher than company gross margin
    		High
    Revenue
    Plix ARR
    500 crores
    		Medium
    Business Mix
    Foods dominance over Saffola
    dominate Saffola
    		Medium
    Channel Growth
    OT vs GT growth
    OT higher than GT
    		High
    Channel Growth
    GT growth
    marginally improve
    		Medium
    Channel Growth
    Digital brands in GT
    reasonable amount of growth
    		Medium
    Portfolio Strategy
    VAHO portfolio transition outcome
    higher value growth, increased value share, and a continued focus on long-term growth
    		High
    Portfolio Strategy
    VAHO bottom of pyramid share
    bring down share much more rapidly
    		High

    Copra price trends

    early Q1 FY26
    CurrentFirm in near term
    TargetCooling down from early Q1 FY26

    Why it matters

    Copra prices are a key input cost, and their moderation is expected to ease margin pressure and allow for volume-protective pricing.

    Prices are expected to cool down once the flush season resumes from early Q1'FY26.

    How to verify

    risks_and_concerns[risk='Input cost inflation (copra, veg oils)']

    Risks & concerns

    6
    RiskSeverity

    Input cost inflation (copra, veg oils)

    Input inflation was higher than expected, putting transient pressure on profitability; copra prices are forecast to remain firm in the near term. — Management acknowledged

    medium

    Shrinkflation volume impact

    A 1% volume impact due to shrinkflation in price point packs is expected to continue for a couple of quarters due to anniversarization. — Management acknowledged

    medium

    GT channel sluggishness

    The GT channel has seen prolonged sluggishness due to evolving inter-channel dynamics, conflict, and shifts in consumer behavior. — Management acknowledged

    medium

    Competition in VAHO (bottom of pyramid)

    Unreasonable competition in the bottom of the pyramid segment of Value Added Hair Oils (VAHO) is impacting performance. — Management acknowledged

    medium

    International market challenges (currency, consumption)

    Currency headwinds had a 2% impact on consolidated EBITDA, and Southeast Asia was muted due to tepid consumption in Vietnam and geopolitical issues in Myanmar. — Management acknowledged

    medium

    Subdued middle and bottom of pyramid segments

    Middle and bottom of pyramid segments appeared relatively subdued by inflation and slow wage growth. — Management acknowledged

    low

    Q&A highlights

    8

    “Given a choice between 60% growth, and high cash burn, versus 25%-30% growth and having responsibility towards both capital utilization and managing profitable scale up, we have chosen the latter.”

    Management clarifies its strategy for D2C brands, prioritizing sustainable profitable growth over aggressive, high-burn growth, and focusing on differentiated portfolios for GT.

    asked by Abneesh Roy

    2 min read6 chapters

    Detailed Narrative

    01

    Operating Environment and Demand Trends

    The FMCG sector experienced reasonably steady demand in Q3 FY25. Retail and food inflation, while elevated, showed signs of easing in December. Urban demand remained stable but soft, whereas rural demand improved, growing at 2x urban on a year-on-year basis for the third consecutive quarter. HPC categories continued to outperform packaged food, supported by government schemes and a favorable crop season.

    02

    India Business Performance and Strategic Diversification

    Marico's India business posted a sequential uptick in underlying volume growth and robust high teen revenue growth, marking a 13-quarter high. The Foods business scaled to ₹1,000 crores ARR in Q3, with Saffola oats achieving double-digit growth. The Digital first portfolio reached ₹600 crores ARR in Q3. Foods and premium personal care brands now constitute 21% of the domestic business in 9M FY25, with a combined ARR of ₹1,900 crores, demonstrating successful diversification.

    03

    International Business Resilience

    The international business sustained its double-digit constant currency growth momentum despite a 2% impact on consolidated EBITDA from currency headwinds. Bangladesh delivered robust growth, and MENA markets (Gulf and Egypt) showed strong growth and market share gains. However, Southeast Asia was muted due to a tepid consumption environment in Vietnam and geopolitical issues in Myanmar.

    04

    Margin Management and Input Cost Outlook

    Despite higher-than-expected input inflation, particularly firm copra prices, Marico implemented price hikes towards the end of Q3. Management expects copra prices to cool down from early Q1 FY26. The company aims to hold an overall operating margin of about 20% for the year, leveraging pricing power and cost management initiatives.

    05

    Channel Strategy and Digital Growth

    Alternate channels continue to drive growth, with quick commerce growing over 50% and modern trade/e-commerce in double digits. The GT channel experienced sluggishness, but Project SETU (now in 11 states) and a focus on differentiated portfolios are expected to revive its growth. The digital first portfolio is moving towards positive EBITDA next year, targeting double-digit EBITDA by FY27.

    06

    VAHO Portfolio Reset

    The Value Added Hair Oils (VAHO) portfolio is undergoing a reset, shifting focus towards mid and premium segments and away from intense competition in the bottom of the pyramid. This transition, expected to yield results by FY25-26, aims for higher value growth and increased value share, supported by investments in brand equity rather than BTL activities.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.