NEW DELHI, July 14: FMCG firm Marico expects demand and margin trends to improve towards second half of FY23 on likely easing of crude and edible oil prices in next few months, said the latest annual report of the company.
It will closely watch the rural growth and is hopeful of a recovery in demand in light of the good harvest season, normal monsoon forecast and government spending.
On the margin front, Marico, which has oil brands such as Saffola and Parachute in its portfolio, said there is “some degree of comfort” given that copra price, which constitutes about half of its raw material basket, is expected to remain benign.
“Therefore, we expect demand and margin trends to improve towards the second half of next year. In view of these factors, consolidated operating margin should be in the range of 18-19 per cent in FY23,” said Marico in the FY22 annual report.
It said though in the domestic business, the near-term demand outlook is “uncertain”, it is confident of staying well ahead of the market growth.
Marico, which also owns brands such as Hair & Care, Nihar and Livon, will continue to maintain a sharp focus on driving penetration and market share gains across its portfolios aided by distribution expansion, cost controls and investment in market development and brand building.
Addressing the shareholders, Marico’s MD& CEO Saugata Gupta said the company is strengthening the faster-growing new channels such as e-commerce but believes traditional trade will continue to be the largest ecosystem for the consumer.
“In rural, while we extend our footprint, we are also expanding our stockist network to expand our direct reach. In urban, we will maintain focus on augmenting our reach in chemist and cosmetic outlets,” he said.
Besides, Marico which in FY22 got 23 per cent FMCG business from international markets, has maintained a steady momentum and is “confident of maintaining the double-digit constant currency growth momentum in the coming quarters”.
“As the pandemic has subsided across regions, we expect the business environment in the markets we operate in to remain stable unless any major geo-political concerns flare up. However, if inflation persists, there is a possibility of some currency depreciation in some markets,” it said.
Marico, with a primary presence in India, and select markets across emerging countries of Asia and Africa, intends to develop scale in the businesses in South East Asia, the Middle East, Egypt and South Africa.
In FY22, Marico’s revenue from operations was at Rs 9,512 crore.
The company said it remains confident of the medium-term prospects of the FMCG sector once transient macro disturbances settle down and fundamental drivers of the India consumption story come to the fore.
“We hold our medium-term aspiration to deliver 13-15 per cent revenue growth on the back of 8-10 per cent domestic volume growth in the domestic business and double-digit constant currency growth in the international business. We will aim to maintain consolidated operating margin above the threshold of 19 per cent,” said Marico.
Marico Chairman Harsh Mariwala said the company aims to become a leading emerging market FMCG multinational in chosen markets in Asia and Africa.
“We consistently endeavour to delight consumers with best-in-class products that meet their needs and aspirations by nurturing and building trusted brands with a strong purpose and proposition,” he added.
In addition to strengthening the core franchises, Marico is working towards diversification of the overall portfolio with focus on foods, premium personal care including digital-first brands, and accelerated growth in the international business, Mariwala added.
Saugata Gupta said to unlock the next phase of growth – the company is working on ‘4 Ds’ – Diversification, Distribution, Digital and Diversity.
The first dimension is diversification of business in both domestic and international markets, led by innovation.
In international markets, the focus will be to scale up newer portfolios in Bangladesh and similarly expand the addressable market of the businesses in Southeast Asia and MENA (Middle East and North Africa ) by replicating the company’s successful operating model in Bangladesh. (PTI)
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