Skip to content

    Sundrop Brands Limited

    SUNDROPGood
    Fast Moving Consumer Goods·13 Nov 2025
    Management Summary

    Sundrop Brands reported robust Q2 and H1 FY26 performance, driven by strong growth in B2B and e-commerce channels, alongside significant margin expansion from cost efficiencies. Despite a temporary 2-3% GST transition impact on Q2 growth, the company maintained aggressive advertising investments and continued its focus on core categories. Management outlined a clear long-term vision for double-digit EBITDA and substantial revenue growth, supported by strategic innovations and operational improvements.

    Highlights

    8

    • Q2 revenue grew 8%, with H1 revenue growing 10%.

    • Adjusted EBITDA increased 29% in Q2 and 30% in H1, excluding ESOP and one-time project costs.

    • Gross margin expanded by 250 basis points in Q2 and 190 basis points in H1 due to cost efficiencies.

    • B2B business, primarily Del Monte, accelerated with 23% growth in Q2 and 12% in H1.

    • E-commerce channel demonstrated strong growth of 41% in Q2 and 42% in H1.

    • Advertising investments aggressively increased by 34% in Q2 and 44% in H1.

    • Core categories now contribute 64% to business saliency, an 11% increase from FY23.

    • The company targets doubling its pro forma top line from INR 1,500 crores to INR 3,000 crores over the next four to five years.

    Concerns

    1

    • Competitive Pressure in Peanut Butter

    What Changed2

    vs Q3 FY26

    Guidance items11 → 10 (-1)Q&A highlights8 → 3 (-5)
    Key financials

    Metrics

    11

    Periods

    2

    Headline

    7
    • H1 Revenue Growth
      10%
      YoY+10%
    • H1 Adjusted EBITDA Growth
      30%
      YoY+30%
    • H1 Gross Margin Improvement
      190 bps
    • Net Worth
      ₹1,450 Cr
    • Free Cash Balance
      ₹24 Cr

    Q2

    4
    • Revenue Growth
      8%
      YoY+8%
    • Adjusted EBITDA Growth
      29%
      YoY+29.0%
    • Gross Margin Improvement
      250 bps
    • Ad Spend Growth
      34%
      YoY+34%

    Segment breakdown

    Sundrop Brands (as a company)
    11% H1 Growth7% Q2 Growth
    Del Monte
    9% H1 Growth10% Q2 Growth
    Popcorn (ACT II)
    12% Q2 Value Growth16% H1 Value Growth
    Culinary (Ketchups, Mayo)
    15% Q2 Value Growth12% H1 Value Growth
    Premium Staples (Edible Oil)
    13% Q2 Value Growth16% H1 Value Growth
    Italian Business (Olive Oils, Pasta, Olives)
    -3% Q2 Value Decline10% H1 Volume Growth
    Peanut Butter
    -11% Decline
    Ready-to-eat Popcorn
    43% Growth
    E-commerce
    41% Q2 Growth42% H1 Growth
    B2B (Del Monte)
    23% Q2 Growth12% H1 Growth
    List

    Guidance & targets

    9
    CategoryTargetPriority
    Tech Platform Coverage
    Field force on mobile platform
    100%
    		High
    Growth
    Growth multiple vs. industry
    2x
    		Medium
    Gross Margin
    Gross Margin Range
    40% to 45%
    		High
    Operating Costs
    People Cost as % of Revenue
    10% to 14%
    		Medium
    Operating Costs
    Advertising Costs as % of Revenue
    7% to 8%
    		Medium
    Operating Costs
    Manufacturing & Logistics Costs as % of Revenue
    14% to 15%
    		Medium
    Revenue
    Pro forma top line
    INR 3,000 crores
    		High
    ESOP Costs
    ESOP P&L hit
    Higher in first 2 years, lower in last 3 years
    		High
    One-time Costs
    Remaining one-time costs
    20%
    		High

    Risks & concerns

    6
    RiskSeverity

    GST Transition Impact

    Q2 growth impacted by 2-3% due to new GST rates introduced from Sept 23rd, causing trade destocking. Expected to recover in H2. — Management acknowledged

    medium

    Commodity Price Inflation (Sunflower Oil)

    Steep commodity prices for sunflower oil led to erosion in bulk pack volumes as institutions shift to cheaper alternatives. Expected to be transient. — Management acknowledged

    medium

    Competitive Pressure in Peanut Butter

    Peanut butter business is declining by 11% due to strong competitive challenges, new entrants with high-protein/chocolate variants, and aggressive offers. Management is addressing with new product launches and sourcing changes. — Management acknowledged

    high

    Value Decline in Italian Business (Olive Oil/Pasta)

    Strong volume growth but 3% value decline in Q2 due to softening olive oil prices, with benefits passed to consumers to maintain margin profile. Considered transient. — Management acknowledged

    low

    Areas of Evasion(2)

    • Exact ESOP cost modeling for FY26-28
    • Specific quantitative benefits (e.g., line items per outlet) from sales force automation in early stages

    Q&A highlights

    3

    “I would say if you look at popcorn as a business, our unit sales growth is a more important determinant than the volume growth... So, overall, I wouldn't say that the number, the way you are looking at 2% to 4% is a right view to look at.”

    Analyst questioned the low volume growth (2-4%) despite 'low-hanging fruits,' prompting management to clarify that unit sales are more relevant for popcorn and that GST impact temporarily slowed growth, expecting recovery in H2.

    asked by Percy Panthaki

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 & H1 FY26 Performance Overview

    Sundrop Brands reported a strong Q2 FY26 with 8% growth and H1 FY26 with 10% growth, despite a 2-3% impact from GST transition in September. Adjusted EBITDA saw significant growth of 29% in Q2 and 30% in H1, excluding ESOP and one-time📎 project costs. Gross margins expanded by 250 basis points in Q2 and 190 basis points in H1, driven by relentless focus on cost efficiencies in material, manufacturing, and supply chain.

    02

    Strategic Channel Growth and Investments

    The company's B2B business, primarily led by Del Monte, accelerated its growth to 23% in Q2 and 12% in H1. E-commerce emerged as a key growth hero, expanding by 41% in Q2 and 42% in H1, backed by aggressive marketing investments. Overall advertising spend increased by 34% in Q2 and 44% in H1, indicating a strategy of investing ahead of the curve to drive business momentum.

    03

    Category-wise Performance and Challenges

    Core categories now contribute 64% to the business, up 11% from FY23. Popcorn (ACT II) grew 12% in Q2 and 16% in H1 (value terms), with ready-to-eat popcorn growing 43%. Culinary (ketchups, mayo) grew 15% in Q2 and 12% in H1. Premium staples (edible oil) grew 13% in Q2 and 16% in H1, though bulk sunflower oil volumes were impacted by high commodity prices. The Peanut Butter business remains a concern, declining by 11% due to strong competitive challenges.

    04

    Innovation and Product Development

    To counter competitive pressures, particularly in the spreads and dips category, Sundrop Brands launched two new high-protein variants (dark chocolate and honey flavors) and two new mass-segment products (jaggery and chocolate formats) in September 2025. In the popcorn segment, two new packs were launched in Q1, contributing 5% of business volumes, and two new ready-to-cook flavors (butter blast and cheese blast) were introduced in Q2.

    05

    Operational Efficiency and Digital Transformation

    The company is actively implementing a tech platform for its field force, with 79% of the sales team already on mobile platforms, aiming for 100% coverage by year-end. This initiative is expected to drive efficiency, productivity, and outlet-specific growth. External partners were onboarded to improve margins in packaging, manufacturing, and logistics, with 80% of associated one-time📎 costs already incurred.

    06

    Long-term Vision and Financial Targets

    Sundrop Brands aims to achieve strong double-digit EBITDA margins within the next four years and grow at 2x the industry rate. The management targets doubling the pro forma top line from INR 1,500 crores to INR 3,000 crores over the next four to five years. Gross margins are expected to be in the 40-45% range, with people costs at 10-14%, advertising at 7-8%, and manufacturing/logistics at 14-15% of revenue.

    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.