Marico Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : My first question is on the urban demand which you mentioned is stable. You did mention that at the lower end, there is a challenge of food inflation and muted sentiment. Now if I see QSR sector, pizza, and burger sector, they have faced seven quarters of slowdown. Now when I see your numbers, good set of numbers, foods, 28% growth, premium personal care trending ahead of expectations. So in your these two segments, which are more indexed to urban, because they're more catering to mid and premium, wouldn't say that the risk in coming quarters is not something you'd be worried on? And second, of course, is in terms of the Plix performance, et cetera, if you could give more details because you did mention that 28% is the food growth, but the Saffola oats growth is mid-teens, which means other segments have also done well. And last point on urban, you said the food inflation and muted sentiment. Now if food is in one quarter, could you also discuss the rooted sentiment, what is the issue there? Those will be the first question.

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Sure. My second and last question is on the Saffola edible oil. So when I see Q2, we have seen the number one edible oil company, Adani Wilmar saw double-digit volume growth. So here if I see Saffola edible oil is clearly a premium part of the urban consumption and it is help focus also, which is a very clear theme. So in the second half, what is your expectation on Saffola edible oil because this time, it is flat versus say, double digit for the economy. And now the pricing is going up for both. So -- and there is the challenge of overall urban demand. So if I put all this, where is the issue? Is there some level of now cannibalization, say, from the economy edible oils also having very similar adds to what Saffola had? Or is it just a transient issue of, say, the pricing, et cetera, changing past few quarters. So where is the issue when you see the volume difference between your growth and say Adani Wilmur's growth?

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : Sir, I just wanted to kind of on the margin a bit. Now given that you have taken another round of price increase in Parachute and I'll comment that there is no competitive concerns from price discounters. Could you please elaborate why -- whether your comment of being watchful on margins in the second half, does it suggest a previous revisit of the earlier expectations of flattish margin FY25?

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : So you mean at worst, right?

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : Okay. Got it. Perfectly clear. The second question is on -- I know it's early stages for Project SETU, but would love to get any early insights on how are you seeing the benefits flow through -- in the initiatives to where this was rolled out and where we have some history?

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : Got it, sir. So in all clear on this. And by when do you think you'd be able to quantify or give us some better color on the likely benefit in terms of financial.

Question: Vivek Maheshwari - Jefferies Financial Group Inc. - Analyst : A few questions. So fast again on the industry -- do you -- these are very difficult to forecast. But do you see a scenario for last two quarters, let's say, giving last couple -- was somewhat under pressure and then urban was doing well. Do you think that there scenario where rural actually picks up reasonably and continues to show the trends that we are seeing. But urban actually continues to disappoint in the foreseeable future, which again pulls down the overall performance of the sector?

Question: Vivek Maheshwari - Jefferies Financial Group Inc. - Analyst : Okay. Got it. Got it. Just in again on VAHO, which has been asked you at different points of time over the past few quarters. But VAHO numbers, again, you have gained market share, and I think your number is minus eight. And again, I'm sorry, I'm asking with this directly, but do you genuinely trust the market share number because are you seeing a scenario where the market itself is kind of declining? Or do you think that there is some -- normally, there are some business players who may be copying up and REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 12:30PM, MRCO.NS - Q2 2025 Marico Ltd Earnings Call taking away share, because it's baffling to see VAHO actually not performing -- I mean there were periods where it did perform, but through the course of, let's say, five, seven years, if you look, the growth is very anaemic compared to, let's say, how well you have done in. And then I think this cycle that we have seen in both Parachute and Saffola. But unfortunately, that cycle has also not shown up in VAHO. It has been fairly muted growth.

Question: Vivek Maheshwari - Jefferies Financial Group Inc. - Analyst : Sorry. So just a couple of follow-ups. So one, you are saying when you say bottom out as in in terms of -- there will be growth from this quarter onwards.

Question: Vivek Maheshwari - Jefferies Financial Group Inc. - Analyst : Got it. Got it. And in terms of -- one more thing, Saugata, do you see a period of, let's say, sustain, let's say, three, four years, where VAHO could grow in reasonable double digit. Is that something that you think can be the base case here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 12:30PM, MRCO.NS - Q2 2025 Marico Ltd Earnings Call

Question: Vivek Maheshwari - Jefferies Financial Group Inc. - Analyst : Got it. Last question on Plix portfolio again. So I saw your presentation slide, and I know this was always there, but the personal care between Plix as against I mean I know there are examples of, let's say, someone like but do you think a personal care and in nutrition can be under the same brand umbrella and can be scaled up without having any concrete confusion or whatever it may be?

Question: Vivek Maheshwari - Jefferies Financial Group Inc. - Analyst : Okay. So -- and just a small follow-up. So when you think about Plix, is it, let's say, the nutrition brand for -- does it become more like a brand for you? Or it is personal care or do you think it is equally spread between the two, when you think about the.

Question: Arnab Mitra - Goldman Sachs Group, Inc. - Analyst : My first question was actually on your performance this quarter as well as your outlook seen significantly better than many of the other companies. You, of course, outlined certain reasons. But I just wanted to check, is it also a factor that you have done a lot of channel corrections over the last like four, five quarters due to this channel shift that is happening. And therefore, you are in a better position in terms of channel inventory, which is helping you like deliver better numbers, while maybe many of your peers set have to correct that. So just wanted to understand, is your channel destocking that you were planning behind us buying us? And are you now well sit in terms urban REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 12:30PM, MRCO.NS - Q2 2025 Marico Ltd Earnings Call

Question: Arnab Mitra - Goldman Sachs Group, Inc. - Analyst : That's very helpful. My second question was Saffola, in Parachute we have seen the commodity goes up, you take price hikes, you tend to actually also accelerate volumes given the setup of the category. In edible oil, what is your expectation we are getting into an inflationary cycle, you've taken a 15% hike. Could it have a significant negative impact on volumes because this is an expensive product, absolute price gap is quite large. Any sense of what you expect to happen on the Saffola volumes in the term as pricing goes into the market?

Question: Arnab Mitra - Goldman Sachs Group, Inc. - Analyst : Understood. And my last question was on Plix and Beardo you're looking to potentially these brands could become very large over the next few years. Fundamentally, what's the gross margin profile of these brands? And at scale, do they make the Marico average EBITDA margins once the brand scale up?

Question: Manoj Menon - ICICI Securities Limited - Analyst : I've got a few questions, but I'll just start with what my friend asked a little earlier on the digital brands. I recall, around 12 months back, you actually had -- there was an exchange release, which spoke about -- you've got a new EVP digital, which was maybe my understanding the first in the industry. And 12 months later, when I look at the performance, it definitely seems to be one of the important interventions you would have taken, which is working. Just only one question here -- rather two, I would say. Look, when you -- could you just quantify the online, off-line, let's say, in salience, looking at the D2C brands which you have, may be not D2C anymore? Secondly, I just also want to understand, let's say, the off-line journey which you had in the last, let's say, 12 to 24 months and the learning, particularly in the aspect of demand planning, because when I look at some of the peers who would have -- peers in that segment would have gone from online to offline. One of the challenges which I find they're facing is to, let's say, to increase the demand planning accuracy. So two questions. Let's say, you're off-line journey, and point number two, the demand planning part.

Question: Manoj Menon - ICICI Securities Limited - Analyst : Understood. That's very clear. And I honestly, I have a follow-up on this a little later team. Just only one thing which I understood on the initial part of the comment is that, so most of the growth is still driven by online, which means that, let's say, the offline piece, is it to happen in a material way?

Question: Manoj Menon - ICICI Securities Limited - Analyst : Understood. -- which is a pretty -- I mean, I would say it's a good performance actually. And lastly, on this aspect, if I move on to the other one, any experiments, anything you have done, let's say -- let me if I can -- I don't know, please feel if you disagree with me. If I consider Marico as an offline-first thinking sort of DNA. Trying to, let's say, take a D2C offline. Like any experiments you have done where, let's say, you could do far better than, let's say, B2C trying to do offline in terms of, let's say, all your forecast getting right?

Question: Manoj Menon - ICICI Securities Limited - Analyst : Fair enough, actually, that's loud and clear. Just lastly, relating one thought, which I have heard largely from long-haul investors is about Bangladesh. While the current quarter performance may not fully reflect the changed, let's say, equation on the ground, et cetera, et cetera. If there is a, let's say, parallel when we think about what happened, let's say, to a Burger King in Indonesia. Are there anything -- I know that it's not a statement, it's a sensitive one for you to comment upon that one of the worries which investors have is that this can actually happen in Bangladesh?

Question: Manoj Menon - ICICI Securities Limited - Analyst : And one last thing, Saugata, gain sensitive one for a public forum. So there is a two-year extension for the MD and CEO done about 18 months back, still six months to go, any qualitative comments -- I do recall.

Question: Harit Kapoor - Investec Bank plc - Analyst : So just on the ad spend side, you've seen stand-alone entity, you see in two quarters of declining spend. I understand that some of the digital-first brands don't get reflected in the time numbers given that you are part of the subsidiary team, but I just wanted to get a sense on, has there been any ATL versus BTL shift on the core? Or you've not needed to -- you spend competitively, but it's still showing a decline. So any thoughts on that and outlook going forward?

Question: Harit Kapoor - Investec Bank plc - Analyst : Very clear, Pawan. Second thing was on the food side. So first half growth has been very strong, even if you kind of ex out Plix, if you could you give us a sense of, apart from where are you seeing the high pockets of growth in the subcategories which you're there now in, any kind of qualitative view also on that would be also very helpful.

Question: Harit Kapoor - Investec Bank plc - Analyst : Got it. One last bookkeeping was on the stand-alone side, while you explained the higher other income on a consolidated level. Can you just give a sense about why the standalone number looks even higher at INR300 crore-odd , if you can help with that?

Question: Tejash Shah - Avendus Bank Institutional Equities. - Analyst : All the major FMCG companies flagging off an urban slowdown, and at the other end, quick commerce guys are again -- which are heavily indexed to urban demand are showing strong growth. So just wanted to check if our salience in the quick commerce channel is as high as GT, and the slowdown observation is not the outcome of key channels, which is GT losing market share in overall urban demand shift that we are witnessing.

Question: Tejash Shah - Avendus Bank Institutional Equities. - Analyst : Okay. Second, just one small observation. If I look at employee cost as a percentage of sales, it has increased from 6.5% roughly that run rate pre-pandemic to now 8% this quarter. Does this suggest that the incremental growth of the nature of growth that we are demands higher very different kind of talents on like cost will remain at elevated level than versus what we saw pre-pandemic level?

Question: Mihir Shah - Nomura Securities Co. - Analyst : Congrats on a good set of numbers. Pawan, one small clarification first. On the operating margin contraction of 40 to 50 basis points that you called out, that was for the full year, right, not for the second half. Is that correct?

Question: Mihir Shah - Nomura Securities Co. - Analyst : Got it. No, that's clear. Firstly, on Saffola, the import duty hike, there was on palms, soya, and sunflower, and not on rice brand. Does this help in improving your competitive pricing in any way? And when was the 15% price hike implemented? And how should one think about volumes on the back of this 15% price hike? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 12:30PM, MRCO.NS - Q2 2025 Marico Ltd Earnings Call

Question: Mihir Shah - Nomura Securities Co. - Analyst : Secondly, on foods again. Can you talk a bit on what is the contribution -- ballpark contribution maybe of your core brands of oats, honey and chunks, because I wanted to get a sense of your -- the journey of foods from 2X to 4X that you're talking about from '24 to '27, which other brands do you see that can help you -- what will be the glide part to that journey basically? How much you think that can add maybe some categories that you are thinking about? I understand Plix is there, but other than that.