About the Company

Marico Limited is one of India’s leading consumer goods companies providing consumer products and services in the areas of health, beauty, and wellness. With its headquarters in Mumbai, Maharashtra, India, Marico is present in over 25 countries across emerging markets of Asia and Africa. It owns brands in categories of hair care, skincare, edible oils, health foods, male grooming, and fabric care.

Q2FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 1695 1555 9.00% 1535 10.42% 3230 3358 -3.81%
PBT 360* 327 10.09% 319 12.85% 679 646 5.11%
PAT 313 259 20.85% 255 22.75% 568 510 11.37%

 

Consolidated Financials (In Crs)
  Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 2016 1864 8.15% 1944 3.70% 3960 4058 -2.41%
PBT 342* 341 0.29% 505** -32.28% 847 764 10.86%
PAT 273 253 7.91% 388 -29.64% 661 568 16.37%

*Contains provision for impairment of inventory of Rs 33 Cr

**Contains Exceptional item of income of Rs 64 Cr.

Detailed Results

  1. Consolidated revenues grew 8% YoY in Q2.
  2. EBITDA margins were up 30 bps YoY at 19.6% for Q2.
  3. PAT for Q2 rose 8% YoY.
  4. The exceptional item in Q2 includes a provision against impairment of inventory for Rs 33 Cr.
  5. In Q2, sales volumes were up 11% YoY.
  6. The domestic business clocked sales at Rs 1,508 Cr which was up 8% YoY.
  7. Traditional channels continued to outperform with rural growing ahead of urban, while in the new-age channels, strong acceleration continued in E-Commerce. MT remained subdued and CSD continued to witness a steep decline.
  8. Parachute Rigids registered 10%volume growth during the quarter.
  9. Value-Added Hair Oils registered a smart recovery and posted a resilient 4% volume growth. The premium segment in this division continued to face headwinds.
  10. Saffola Edible Oils continued its stellar run with 20% growth in volume terms. 62% of the growth was attributed to increased penetration on account of new users and increased retention.
  11. The Foods portfolio grew by 55% in value terms, riding the tailwind on health and convenience with the base Oats franchise posting a strong 45% value growth. The brand continued to attract new consumers with 60% of the growth coming from increased household penetration.
  12. The company launched Kadha Mix & Golden Turmeric Milk Mix under the Saffola ImmuniVeda brand. It also launched its own Saffola Arogyam Chyawan Amrut, a value-added Chyawanprash.
  13. Advertising & Sales Promotions pend was back to pre-COVID levels at 9.5% of sales.
  14. Livon Serums regained traction and delivered marginal volume growth in Q2FY21.
  15. The volume market share of various divisions is at:
    1. Coconut Oils: 62%
    2. Saffola –Super Premium ROCP: 77%
    3. Saffola Oats: 34%
    4. Value-Added Hair Oils: 36%
    5. Post wash Leave-on Serums: 65%
    6. Hair Gels/Waxes/Creams: 59%
  16. In Q2FY21, the market price of copra was up 11% YoY and up 9% sequentially.
  17. Rice bran oil was up 26%YoY. It is expected to soften from the middle of Q3 as the on-season begins. Liquid Paraffin (LLP) was down 6% YoY, while HDPE was flat.
  18. During the quarter, Modern Trade declined by 12% but has started faring better more recently. E-Commerce grew by 39% and now contributes 8% to the total turnover. CSD declined by 29%, due to scaled-down operations during the quarter.
  19. International business grew by 7% YoY in Q2 in constant currency terms.
  20. The operating margin in the international business expanded to 23.1% in Q2FY21 vs 21.5% in Q2FY20.
  21. The international revenue breakup is:
    1. Bangladesh: 49% (up 16% YoY)
    2. SE Asia: 26% (down 4% YoY)
    3. MENA: 12% (down 6% YoY)
    4. South Africa: 7% (up 16% YoY)
    5. Others: 6% (down 5% YoY)
  22. Marico’s International business grew by 7% in Q2FY21 in constant currency terms. The operating margin in the international business expanded to 23.1% in Q2FY21 vs 21.5% in Q2FY20.
  23. Market share in Bangladesh for Parachute coconut oil was at 82%. Parachute Coconut Oil grew by 8% in constant currency terms. The non-Coconut oil portfolio in Bangladesh grew by 31% and 25% in Q2FY21 and H1FY21. The non-Coconut Oil portfolio in Bangladesh constitutes 35%of the total business.
  24. The Capex for FY21 is expected to be around Rs 125-150 Cr.
  25. The current MAT credit stands at Rs 144 Cr as of 30th Sep 2020.
  26. The company improved its ROCE in Q2 by 220 bps YoY to 39.3%. The debt to equity was maintained at 0.09 times.
  27. The net surplus for the company was at Rs 1358Cr after a gross debt of Rs 329Cr as of 30th Sep 2020.
  28. The company is targeting 8-10% volume growth in H2 and 13-15% revenue growth.
  29. It aims to reach Rs 450-500 Cr Markin Foods category by FY22.
  30. The company is looking to maintaining an operating margin at 19%+ over the medium term. It is expecting operating margins to be above 20% for the rest of the year.

Investor Conference Call Highlights

  1. The premium segment in VAHO continued to face headwinds given the current macroeconomic situation, both mid-and Bottom of the Pyramid segment recovered. Nihar Shanti Amla led the growth for the franchise.
  2. Saffola Honey, launched in the previous quarter, has already garnered a market share of 8% in modern trade within 3 months of its launch.
  3. The company is on track to deliver INR 300 crores to INR 350 crores of food turnover this fiscal.
  4. South Africa had a good quarter on the back of buoyancy in the healthcare portfolio.
  5. Vietnam posted a decline in the quarter due to sluggishness in demand in the Personal Care segment.
  6. With an aggressive cost optimization initiative of delivering INR 150 crores plus in structured savings, the management is confident of maintaining a threshold operating margin of 20% this year.
  7. 75% of our international business comes from high growth, high potential countries like Vietnam and Bangladesh, and Marico is ready to replicate the successful Bangladesh playbook in Vietnam according to the management.
  8. The management believes that the share of healthy products in in-home snacking is increasing.
  9. In VAHO, Marico’s objective is to have a broad participation strategy and maintain a market presence in all segments in the category. The major opportunity for big players in this category is to take market share from smaller players.
  10. In coconut oil, the market share in urban is close to 60%, and the market share in rural is 46%.
  11. The management believes that there is at least a runway for 8 to 10 years before saturation happens just like in Bangladesh.
  12. Despite normalization in eating habits, Saffola saw sustained growth momentum mainly on the back of branding exercises and a shift in consumer preferences towards healthy oil brands.
  13. The company is looking to maintain the image of Healthy better-for-you brand for Saffola and that’s why it has extended into honey and ayurvedic products.
  14. The company will adopt a wait and watch approach for Parachute Advanced Gold will look to drive this product once the premium segment in the VAHO category gains momentum.
  15. The pandemic has brought about an accelerated move towards digital adoption of consumers and the company has done well to stay ahead of its peers in this. This is also expected to help the general trade channel see consolidation and automation.
  16. The company has indeed done a price increase in Saffola but this increase has not been proportional to the RM cost rise as the rise was transient and has been cooling down. They can absorb transient input costs for a few months and thus maximize volumes and drive the penetration of the brand.
  17. The aspirational period for any brand to solidify is around 3 years for the company. The company is looking to leverage its learnings with Beardo to build new digital brands.
  18. The impairment in capacity is mainly due to shifting some machinery to more in demand zones and reconfiguration of the manufacturing footprint.
  19. The medium-term aspiration for VAHO is to grow >10%. This should be led by Marico filling empty spaces in the value spectrum like hair fall or some of the premium end or other spaces in the mid or bottom segments.
  20. The management remains confident of delivering INR 150-crore plus of structural cost savings in FY21.
  21. The company has done a lot of work in tightening inventory norms and SKU rationalization and has put in a lot of automated systems which has resulted in inventory turnover days coming down from 66 to 58. The new working capital requirements will be determined by the new manufacturing footprint, the reduced inventory days at the depots or at the distributor and the aggressive SKU rationalization exercise.
  22. The management has stated that if there are opportunities in the Middle East and North Africa to gain market share versus someone, Marico will definitely go ahead with that.

Analyst’s View

Marico is one of India’s leading FMCG companies with many market-leading brands like Saffola and Parachute. The company has done well to maintain value growth on a YoY basis in almost all categories and sustain growth momentum in domestic business. It is showing encouraging performance in the food category. The company has seen decent growth in overall volumes and has maintained its leadership position in all categories highlighting good brand resilience. In light of the COVID-19 disruption, the company has done well to develop direct distribution channels and rationalize its SKUs The company’s focus on expanding into new health food categories under the Saffola brand and the in-demand hygiene looks shows good room for growth in these segments. It remains to be seen how long the COVID-19 situation lasts and what second-order effects it has on the company and general consumer behaviour. Nonetheless, given the company’s solid standing in its core categories, its expansion plans for high margin food categories, and its robust distribution network, Marico looks like a pivotal FMCG stock to watch out for.

 


Q1FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 1535 1803 -14.86% 1293 18.72%
PBT 319 319 0.00% 284 12.32%
PAT 255 251 1.59% 227 12.33%

 

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 1944 2194 -11.39% 1528 27.23%
PBT 505* 423 19.39% 252 100.40%
PAT 388 315 23.17% 199 94.97%

 

Detailed Results

    1. Consolidated revenues declined 11% YoY in Q1.
    2. EBITDA margins were up 300 bps YoY at 24.3% for Q1.
    3. PAT for Q1 rose 23% YoY.
    4. The exceptional items include the profits from the remeasurement of the existing stake of the company in ZED Lifestyle Products where the company acquired the remaining 55% stake in Q1. There was also the impairment of goodwill of Rs 10 Cr from South African Hair styling brand ISO Plus and expenses in relation to the amount paid towards voluntary retirement scheme offered to the employees on the close of operations at the Kanjikode factory of the company.
    5. In Q1, sales volumes were down 14% YoY for domestic operations due to supply-chain disruptions following the extension of the national lockdown.
    6. The domestic business clocked sales at 104% of the annual average monthly run rate of FY20 since opening up.
    7. The CSD business during the quarter was nearly reduced to its half, which had a meaningful impact on the overall volume growth of the India business.
    8. International business declined by 4% YoY in Q1.
    9. The company had sales of largely Saffola Oils and foods portfolio in the last week of March.
    10. The company saw stress in personal care categories before the onset of COVID-19. It also saw demand uptick in food and allied categories during the same period.
    11. In international business, MENA (the Middle East & North Africa) & South Africa saw sharp drops (50% & 25% respectively in cc terms) while Bangladesh and Vietnam remained positive (6% & 1% respectively in cc terms) for the company in FY20.
    12. In Parachute Rigids, volumes fell 11% YoY but sales were at 111% of the annual average monthly run rate of FY20 in Q1FY21.
    13. In value-added oils, volumes declined 30% YoY but sales were at 94% of the annual average monthly run rate of FY20 in Q1FY21.
    14. Saffola Edible Oils saw good volume growth of 16% YoY.
    15. The oats portfolio saw a growth of 41% YoY in value terms. The company also launched Sffola Honey in Q1.
    16. Premium Hair nourishment & male grooming portfolio fell sharply mainly due to falling demand during the lockdown period.
    17. Ad & promo spending for Q1 was at 7.1% of sales.
    18. The Hygiene portfolio started well with encouraging response to Mediker Hand Sanitizers and Veggie Clean. The company also expanded the range with the launch of indoor and outdoor surface disinfectants, under the brands’ House Protect and Travel Protect.
    19. The volume market share of various divisions is at:
      1. Coconut Oils: 62%
      2. Saffola –Super Premium ROCP: 77%
      3. Saffola Oats: 34%
      4. Value-Added Hair Oils: 36%
      5. Post wash Leave-on Serums: 65%
      6. Hair Gels/Waxes/Creams: 59%
    20. The Parachute brand reinforced its hygienic processing and safety credentials in the minds of consumers with the launch of the “Untouched by hand” campaign.
    21. The company launched its digital-first Hygiene brand ‘KeepSafe in mid-June on all leading E-Commerce channels.
    22. In raw materials, the price of copra was up 7% YoY. Rice bran oil prices were up 17% YoY, liquid paraffin prices were down 9% YoY & HDPE prices were down 14% YoY.
    23. In Q1, urban & rural sales fell 17% & 10% YoY respectively in volumes terms. Modern trade fell 17% YoY while e-commerce grew 37% YoY. CSD declined 48% YoY due to scaled-down operations during the quarter.
    24. The international revenue breakup is:
      1. Bangladesh: 49% (up 10% YoY)
      2. SE Asia: 26% (down 17% YoY)
      3. MENA: 12% (down 27% YoY)
      4. South Africa: 7% (down 25% YoY)
      5. Others: 6% (down 16% YoY)
    25. The capex for FY21 is expected to be around Rs 125-150 Cr.
    26. The current MAT credit stands at Rs 141 Cr as of 30th June 2020.
    27. Overall other expenses fell 9% YoY with fixed costs rising 11% YoY while variable costs falling 16% YoY.
    28. The company improved its ROCE in Q1 by 100 bps YoY to 52%. The debt to equity was maintained at 0.11 times.
    29. The net surplus for the company was at Rs 935 Cr after a gross debt of Rs 333 Cr as of 30th June 2020.
    30. The company is targeting 8-10% volume growth and 13-15% revenue growth at a consolidated level.
    31. The company is looking to maintaining operating margin at 19%+ over the medium term. It is expecting operating margins to be around 20% for the rest of the year.

Investor Conference Call Highlights

  1. Given reverse migration of labour, government stimulus, good rabi season and no adverse impact on agricultural output during these times, rural in Q1 grew at 120% of FY20 monthly run rate.
  2. The company is looking at a three-pronged strategy of gaining market share in the premium segment, driving value in the mid-segment, and aggressive pricing in the bottom-of-pyramid segment.
  3. Marico Bangladesh has launched Mediker SafeLife Hand Sanitizer and Hand Wash and introduced Mediker SafeLife Veggie Wash in Q1. The company also launched Parachute Natural Shampoo in 3 variants here.
  4. The company is looking to build a hygiene portfolio with a significant acceleration in e-commerce and digital spends. It expects the hygiene business to be around Rs 80-100 Cr in FY21.
  5. Marico is also expecting the food business to clock Rs 300-350 Cr in FY21 and target Rs 500 Cr in FY22.
  6. The management is targeting to maintain Parachute as a premium brand in its segment and expects any market share gains from the price cut to be permanent.
  7. The management also expects at least 10% embedded growth in Saffola due to higher usage from more in-home cooking.
  8. The company has managed to work now with 70-80% of its SKUs and considering this the 3% growth in general trade seems very significant.
  9. The management has stated that to reach its target of Rs 500 Cr foods business in the near future, it is looking to expand into food segments with one large incumbent with high market share and the rest being fragmented to play on the brand image of Saffola and become number 2 in the category swiftly. This is the reasoning behind the foray into honey.
  10. The management has stated that the reason behind the fall in VAHO is the lack of participation in the bottom-of-pyramid where the company is dominant.
  11. The company is looking to launch a few new products in the foods category in the next quarter. Its base strategy here is to chase tailwind large categories using the strong Saffola brand instead of trying to create niche categories.
  12. In coconut oil segment, the company is looking to capitalize on its competitive advantage of having the agility to distribute and supply chain assurance along with the strong brand appeal. IN the VAHO segment, there is significant conversion going on from loose mustard to value-added hair oil. The company is looking to accelerate this conversion.
  13. There is still room for growth in Parachute as rural market share is still at 40% for the brand as compared to the urban market share of 60%.
  14. The performance in Bangladesh has been robust as the lockdown didn’t stop factories from working. Thus the disruption to the business was low.
  15. The company is not looking to enter into any of the consumer staples areas as they are all low margin. It is only looking into segments that are margin-accretive to the base edible oil.
  16. The company is increasing the footprint in direct distribution in terms of converting a lot of stockist towns and sub-stockist towns to direct. It is also looking at underpenetrated states for more focus.
  17. The company has launched shampoo in Bangladesh but does not plan to do so in India as the category is highly penetrated with pre-incumbents having 70% to 80% market share.
  18. Ecommerce contributed to 7% of sales in Q1.
  19. SKU rationalization is expected to continue. The company is now looking to focus on the small pack given the consumer outlay and the consumer disposable income is challenged.
  20. The management is not looking at any price cuts or promotional discounts in the edible oils segment as Saffola has a significant brand image here and it has already taken significant cuts in end consumer price by rationalizing all promotion and trade spend.
  21. The Veggie Clean and sanitizer contributed to 1.5% of total sales in Q1.
  22. The company was focusing only on large packs in the first 2 months because of production constraints in Parachute. It is now seeing significant traction in the small pack.
  23. For cost transformation, the company is looking into all aspects of operating models in its international units. In India however, it is only looking at discretionary items and keeping the operating model stable.
  24. In personal care and male grooming segments, the company is looking to drive higher sales through digital e-commerce as customers in this channel continue to have disposable income.
  25. On average, the company has serviced 70% of its outlets in Q1. The management expects there to be a significant rise in direct distribution especially in rural going forward.
  26. The company’s goal for implementing technology for order taking at the distributor level is to maintain growth and not lose orders. An increase in efficiency is not expected to happen in the short term and will only happen over the long term.
  27. These measures are expected to reduce the number of salespeople at the distributor level in the long term.

Analyst’s View

Marico is one of India’s leading FMCG companies with many market-leading brands like Saffola and Parachute. The company has done well to maintain value growth on a MoM basis in almost all categories despite fall in overall volumes everywhere. It is showing encouraging performance in the food category. The company has seen a decline in overall volumes but has maintained its leadership position in all categories highlighting good brand resilience. In light of the COVID-19 disruption, the company has done well to develop direct distribution channels and rationalize its SKUs The company’s focus on expanding into on high margin food categories and the in-demand hygiene looks shows good room for growth in these segments. It remains to be seen how long the COVID-19 situation lasts and what second-order effects it has on the company and general consumer behaviour. Nonetheless, given the company’s solid standing in its core categories, its expansion plans for high margin food categories, and its robust distribution network, Marico looks like a pivotal FMCG stock to watch out for.


 

Q4 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1293 1387 -6.78% 1510 -14.37% 6161 6272 -1.77%
PBT 284 285 -0.35% 328 -13.41% 1258 1183 6.34%
PAT 227 429* -47.09% 269 -15.61% 1006 1129* -10.89%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1528 1637 -6.66% 1853 -17.54% 7439 7437 0.03%
PBT 252 270 -6.67% 358 -29.61% 1374 1257 9.31%
PAT 199 403* -50.62% 276 -27.90% 1043 1131* -7.78%

* Contains negative tax adjustments of Rs 188 Cr.

Detailed Results

    1. Consolidated revenues declined 7% YoY for Q4 and were flat for the year.
    2. EBITDA margins were up 58 bps YoY at 18.9% for Q4 and 200 bps YoY at 20.1% for FY20.
    3. PAT for Q4 declined 0.3% YoY disregarding the above-mentioned tax adjustment in Q4FY19.
    4. In Q4, sales volumes were down 3% YoY for domestic operations while total volumes were down 4% YoY.
    5. In FY20, sales volumes were up 1% YoY for domestic operations while total volumes were up 3% YoY.
    6. The company had sales of largely Saffola Oils and foods portfolio in the last week of March.
    7. The company saw stress in personal care categories before the onset of COVID-19. It also saw demand uptick in food and allied categories during the same period.
    8. In international business, MENA (the Middle East & North Africa) & South Africa saw sharp drops (50% & 25% respectively in cc terms) while Bangladesh and Vietnam remained positive (6% & 1% respectively in cc terms) for the company in FY20.
    9. In Parachute Rigids, volumes fell 8% YoY but the brand managed to increase market share by 250 bps to 62% in Q4.
    10. In value-added oils, volumes declined 11% YoY but the segment maintained its market share of 35% in Q4.
    11. Saffola Edible Oils saw good volume growth of 25% YoY with market share at 76% in Q4.
    12. The food portfolio saw growth of 22% in value terms which was led by the oats portfolio which increased value market share by 354 bps YoY to 33% in Q4.
    13. Premium Hair nourishment & male grooming portfolio fell 19% and 9% in volumes mainly due to fall in demand during the lockdown period.
    14. Ad & promo spending for Q4 was at 8.4% of sales which is down 109 bps YoY.
    15. In raw materials, the prices of copra remained flat YoY. Rice bran oil prices were up 7% YoY, liquid paraffin prices were down 3% YoY & HDPE prices were down 15% YoY.
    16. In sales 7 distributions, the company reached a milestone of 5.1 million retail outlets with direct distribution to 0.9 million outlets. The company also has a rural reach of 58000 villages.
    17. The company also joined up with Zomato & Swiggy to use their platforms to provide direct delivery of its products to customers.
    18. In FY20, urban & rural sales fell 8% & 3% YoY respectively in volumes terms. Rural contributed to 31% of total sales. Modern trade grew 27% YoY while e-commerce grew 43% YoY.
    19. The international revenue breakup is:
      1. Bangladesh: 49%
      2. SE Asia: 26%
      3. MENA: 12%
      4. South Africa: 7%
      5. Others: 6%
    20. The company improved its ROCE in FY20 by 40 bps to 42.4%. The debt to equity was maintained at 0.11 times.
    21. The net surplus for the company was at Rs 607 Cr. after a gross debt of Rs 340 Cr.

Investor Conference Call Highlights

  1. The management is observing resilience in the mass market brands for the company with the majority of the declines in volumes coming from the premium segments. It believes that given the company’s strong presence in the bottom of the pyramid segment in the personal care sector, the company will be able to achieve good sales growth post-COVID-19 as customers go for more value saving products.
  2. The company is also well placed to capitalize on the health foods wave especially with its oats portfolio.
  3. The company will scale down investment in declining categories and channel its resources towards the core and emerging categories both through traditional sales channels and e-commerce.
  4. The management is confident of recovery in MENA and growth in Bangladesh and Vietnam in FY21.
  5. The company will continue to boost promotions in digital platforms to promote e-commerce sales which accounts for 5% of total sales currently. The management will also look into furthering the new channel mechanism of using food delivery platforms for sales and distribution even after the COVID-19 situation gets resolved.
  6. The management expects the prices of copra prices to go down due to an increase in the supply of coconuts from the reduced sales due to the lockdown.
  7. The management expects to use its learnings from developing personal care products in India to grow its business in Bangladesh, especially for the hair oils business.
  8. The management expects the non-parachute component of hair oils to be 40% in the next 2 years. It is currently at 30% and it was 10% at the start 2 years ago.
  9. The company expects Bangladesh GDP to remain subdued this year and it will aim to maintain volumes and gain market share.
  10. The management believes that the key in bottom categories is reducing costs and passing on the reduction to enhance the value proposition of the company’s products.
  11. The management aims to drive market share by passing on all cost reductions to customers and by driving rural distribution for the company.
  12. The management expects the wholesale channels to remain subdued and direct distribution and Kirana shops to gain in the year.
  13. The company is looking at ad & promo spending of 100 bps in terms of sales.
  14. In the food business, the company believes that the high-end health foods segment should not suffer and should see better pickup from its customer segment given the increasing focus on health and wellbeing.
  15. The management is expecting a drop in category growth in almost all its businesses and it aims to maintain volume growth and gain market share in all categories.
  16. The company will aim to drive sales of large packs of Saffola instead of small packs as home cooking has boomed due to the lockdown and COVID-19. The management also stated that productivity in making large packs is greater than making small packs.
  17. The company is not seeing panic buying and pantry loading since the start of the lockdown and customers continue to buy large packs to prevent shortage at home sand reduce physical transactions as much as possible.
  18. The input costs have been volatile but the management does not expect them to vary greatly.
  19. The management believes that disposable income will not be affected as significantly in rural areas as in urban areas. The keys to success in rural areas will be the direct distribution and value proposition.
  20. The management sees 3 structural changes coming in which are the revival of Kirana stores, rise of e-commerce for modern trade players, and significant change in urban order taking/filling mechanism. Another large expected change is the sale of premium personal care products through chemist shops.
  21. The capacity utilization is around 75%-80% before the lockdown.
  22. The food portfolio had sales of Rs 200 Cr for FY20.
  23. The company has also provided support to distributors like credit extension, COVID insurance, one-month cash support to the distributor sales force, etc in light of the current COVID-19 disruption.
  24. The management states that it does not see much drop in the premium problem-solving solutions category in the mid and premium personal care segments.
  25. The management has admitted that beyond the stockist level, the visibility of activities on the ground is limited currently. The outlets should be working at 50-60% capacity.
  26. The management has good expectations form the Fittify portfolio but it will take some time for this product segment to establish its niche in the market.
  27. The credit cycle should come back to normalized levels once the COVID-19 situation goes away.
  28. The management has also clarified that e-commerce receivable days are just a little bit longer than those of modern trade channels.
  29. The last pricing action the company took was on Parachute in Jan-Feb.

Analyst’s View

Marico is one of India’s leading FMCG companies with many market-leading brands like Saffola and Parachute. The company has done well to maintain volume growth in its core Saffola brand and is showing encouraging performance in the food category. The company has seen a decline in volumes in its hair oil categories but has maintained or gained market share in its specific categories highlighting good brand resilience. In light of the COVID-19 disruption, the company has done well to develop alternative distribution channels for its products through Zomato and Swiggy. The company’s focus on enhancing the value proposition of its products and its push for rural expansion and consolidation should reap a lot of benefits in the near future. It remains to be seen how long the COVID-19 situation lasts and what second-order effects it has on the company and general consumer behavior. Nonetheless, given the company’s solid standing in core categories of cooking and hair oils and its robust distribution network, Marico looks like a pivotal FMCG stock to watch out for.

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