Marico expects mid-teen volume growth in next couple of quarters

FMCG company Marico expects to deliver "mid-teen growth" in volume terms in the next couple of quarters helped by "strong revival" in consumer demand as well as sentiments, and to continue "good growth" from the rural markets, said a top company official.

There has been a decent revival in the urban growth as well, and the company expects modern trade channels, which were not performing well, to start growing in the next financial year.

Besides, Marico has a revenue target of Rs 500 crore from immunity and healthy foods for 2021-22, a segment in which it has introduced several new products.

"We have seen a strong revival in consumer demand and consumer sentiments in the past couple of quarters. So, we believe that at least in the next couple of quarters, we should definitely deliver mid-teen growth," Marico Chief Financial Officer Pawan Agrawal told PTI.

The company expects growth to be first driven by rural and then urban, where the modern trade channels are improving.

"I think the growth will be driven by rural followed by urban, where it is currently being driven by e-commerce. But, that will improve. We believe the other channels will also participate in the growth," Agrawal said.

In the third quarter ended December 2020, Marico rural sales grew 24-25 per cent while urban sales rose about 10 per cent, he said.

Currently, Marico's 33-34 per cent sales come from rural areas. And, excluding its health care brand Saffola, an urban-centric brand under which it mainly sells edible oils, the contribution from rural goes up to 40 per cent, he added.

However, Agarwal also added that in the short term, there could be a bit of pressure on margin due to cost increase. He, however, added that it is a matter of 3-4 months and then subsequently, it should go back to its threshold level of operating margin in the range of 19-20 per cent.

"While there are some immediate cost pressures because of which, it may have taken a little bit of price increase, we believe these cost increases are transient and should start seeing a correction in the next 2-3 months," he said.

The company, which has seen a good revival of demand in its core categories, now also expects consumer demands to come back to pre-COVID-19 levels soon in the discretionary category, and has plans to invest in that.

"Hopefully, in the next couple of quarters, we believe that even the discretionary categories will start growing and back to pre-COVID-19 levels. And, accordingly, we will start investing in this category," said Agrawal.

Marico would continue its push into the immunity and healthy foods segments, where it has launched several new products and entered into the mid-sized mass categories such as honey, chyawanprash, soya nuggets and recently into noodles.

"I think immunity and healthy foods continue to be our focus," he said adding that "we believe that these categories have good potential for us to build a sustainable business over the medium term".

Marico has a target of having Rs 500-crore revenue in both segments during 2021-22.

"We are very much on course to achieve those numbers.

"We should definitely reach about Rs 325-Rs 350 crore in 2020-21. Hopefully, with all the new products and also the base which is oats and masala oats, the kind of growth that we are experiencing in those categories, we believe that we can reach Rs 475-500 crore next year," said Agrawal.

However, the company would slow on the hygiene segment, which has emerged strong into the FMCG segment after the pandemic.

"Hygiene is a category where we would want to de-prioritise and de-focus as the impact of the pandemic recedes. People have started living in the new normal and there has been an accelerated demand what we have seen in Q1 and Q2, and now its is going down. And, therefore, we will not focus on hygiene," he added.

Besides, Marico, which is currently getting around 8 per cent of its sales from e-commerce channels, expects this to contribute in double-digits and not to decline as the other channels recover.