Marico Ltd
NSE:MARICO
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Marico Ltd
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Ladies and gentlemen, good day, and welcome to Marico Limited Q4 FY '23 Earnings Conference Call. We have with us the senior management of Marico represented by Mr. Saugata Gupta, MD and CEO; and Mr. Pawan Agrawal, CFO. [Operator Instructions] Please note that this conference is being recorded. Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts. And therefore, if there is anybody else who is not an institutional investor or analyst, but would like to ask questions, please directly reach out to Marico's Investor Relations team. I now hand the conference over to Mr. Saugata Gupta for his opening comments. Thank you, and over to you, sir.
Yes. Hi, everyone, and good evening to all those who have joined the call and hope all of you are doing fine. As FY '23 has come to a close, I would like to reflect on the operating environment during the year and the quarter gone by, after which I shall touch upon our performance. FY '23 started with escalating geopolitical tensions in Ukraine leading to steep inflation and interest rate hikes globally.
In India, this led to climbing food and retail inflation, which adversely affected the overall consumption sentiment. However, over the course of the last 6 to 9 months, there has been moderation in key commodity prices and retail inflation levels, which has most likely brought about a gradual recovery in FMCG consumption.
Looking at FMCG volume trends in this period, we believe the prospects of a sustained recovery have strengthened. After 5 quarters of volume decline, the sector has posted volume growth. Urban consumption has been steady, while rural is also showing some convincing signs of having bottomed out.
Foods continues to drive growth for the sector, while HPC has also entered positive territory after an extended slowdown. As we move forward into the next year, we believe that subject to a near-normal monsoon prediction the certainty of a moderating retail inflation and less volatility in crude prices bodes well for a sustained reversal in the sector.
Coming on how we fared in Q4, we are continuing to see a sequential uptick in domestic volume growth and robust growth in our international business. If you look at our performance from a medium-term lens, we have delivered a 6% domestic volume growth on a 4-year CAGR basis, while sector volumes have grown between 2% and 3% correspondingly.
Similar, even in our international business, has delivered 11% constant currency growth on a 4-year CAGR basis. And in the last 9, 10 quarters, has been consistently delivering double-digit except 1 quarter which did a 9%. In terms of profitability, our gross margins have expanded both Y-o-Y as well as sequentially with moderation in input prices and a more favorable portfolio mix in the domestic business.
While we have passed on the benefits of lower input cost to the consumer, we have maintained A&P spends, which has grown 8% on a 4-year CAGR basis, which we believe drive long-term growth and brand equity. Delving deeper into the India business, we shall touch upon the key trends in each of our categories and our strategy and outlook for the period ahead.
Parachute had a strong quarter with a 4-year volume CAGR at 6%, driven by a pickup in loose to branded conversion and penetration gains. As we envisage in the last quarter, we have started to see healthier trends in the branded coconut oil market after stability in copra and consumer prices were restored beginning December '22.
Parachute Rigids gained 70 bps in volume market share during the quarter with copra prices likely to remain in a comfortable zone in the near term, we expect volume growth in FY '24 to track in line with medium-term aspirations.
The coconut oil market -- branded coconut oil and category in quarter 4 turned back into positive, which is also a very good sign. Value-added hair oils delivered double-digit growth after subdued growth in the last 5 quarters. The category continues to be directionally in line with mass personal care categories, and we expect a gradual uptick in growth over the course of the year ahead. In fact, towards mid-quarter, it started turning positive. And even in March, we experienced positive category growth in value-added hair oils.
Value growth in the VAHO portfolio was in mid-single digits on a 4-year CAGR basis, lower than our medium-term aspiration owing to the extended slowdown in rural and also some of the other issues which happened in terms of commoditization. While mid and premium segments continue to do far better with lower inflation and reduced proclivity of competition to commoditize the category, we expect the recovery in growth to be more broad-based.
Saffola edible oil had a soft quarter, owing to a high volume base of in-home consumption last year. However, we continue to witness healthy offtakes during the quarter. The brand as well delivered high-single-digit volume growth on a 4-year CAGR basis, which is in line with our aspiration with stability trends persisting in the global vegoil market, we expect the brand to be steady in the coming year.
The foods business has delivered a high-teen growth during the quarter and ended the year close to the INR 600 crore revenue mark. The oats portfolio continues to anchor the growth and maintain a strong leadership position with a 43% share. With -- while honey and soya chunks have been scaling up well, some of our new categories, namely mayonnaise, peanut butter and munchiez have been beginning to get traction.
We expect to cross INR 850 crores in top line in Foods in FY '24. This would be underpinned by expected buoyancy in urban consumption while we maintain steadfast focus on market development, brand building, food GTM expansion and sustained innovation to extend our addressable market in the value-added packaged foods.
Premium Personal Care has recovered smartly from the COVID lows with 40% growth this year. The portfolio closed just shy of the INR 350 crore revenue milestone. And going forward, we aim to deliver a 20% plus growth consistently across the portfolio. And as you know that Premium Personal Care is a high-margin portfolio.
The digital portfolio has been scaling up well in line our internal targets. The current portfolio is poised to reach ARR of INR 400 crores -- exit ARR of INR 400 crores next year, and this does not include any future acquisitions.
Moving to the international business. We have delivered another stellar quarter with each market playing its part despite the macroeconomic situation and currency headwinds in some of the markets, which is reflective of the robust business models of our international franchises. Bangladesh has been resilient as ever amid external challenges, which is testament to our portfolio strength, distribution power and consumer belief in our brands in the market and of course, the quality of leadership.
The newer portfolios of Shampoo and Baby Care are getting [indiscernible] left along the core portfolios. The Vietnam business further strengthened with both HPC and Foods delivering healthy growth. The integration of recently acquired brands in female Personal Care, Purité and Ôliv has been completed.
[indiscernible] delivered double-digit constant currency growth as a market that presents a sizable opportunity in terms of the addressable market share and top line pools. South African entity business also continued on its strong growth journey.
Looking ahead, I would like to draw your attention to Slide 14 of our earnings presentation. Firstly, domestic volume has stayed well ahead of the sector and is poised to maintain an improving trend in FY '24 in line with the sector. Revenue growth will inch up as the year progresses as pricing comes into the base in the latter half of FY '24.
We expect steady growth in our core categories of coconut oil, Saffola edible oil and VAHO, with inflation, volatility subsiding and price stability prevailing. Secondly, we have taken visible leaps in the diversification journey and the evolution of portfolio in the India business, which began a few years ago, resulting in a healthy pace of growth.
This is reflected in the share of revenues from your portfolios comprising of Foods, Premium Personal Care and Digital First which have seen a shift from 11% in FY '22 to about 15% in FY '23. And is likely to move to 20% of our domestic business in FY '24, which means we have added an incremental top line of about INR 750 crores through these portfolios in a couple of years' time.
With some of the Foods and Digital First business have attained a certain scale, we'll continue to drive accelerated growth, as indicated earlier, and focus significantly on improving the profitability in tandem. Once the shift of profitability is achieved, we'll reallocate some of the resources to the core to drive market share while fortifying the long-term margin profile of the overall business.
We have a track record of success in oats as far as Foods is concerned, with the funding winter setting in and more sanity in the ecosystem, we'll be able to improve profitability, and leverage far more synergies while moving our Digital First brands into their next leg of growth.
On M&A front, we shall be constantly scouting for businesses which have a right to win in their respective categories and are synergistic to the overall Marico strategy. We will make sharp choices and refrain from venturing into fragmented and commoditized categories even if they give scale.
Thirdly, in the international business, we believe we are presently in a relatively unique mix of markets and our portfolio diversification efforts further insulate us from any concentration risk and ensure consistent in performance. You are aware that in FY '20, we had a concentration risk of our business from Bangladesh and within Bangladesh, a concentration risk of PCNO. And therefore, we have had significant diversification in our portfolio and reduced this concentration risk to a large extent.
We have proven that despite black swan events, we have a robust and profitable business model, which enable us to avoid yo-yos and surprises in the international business. Last but not the least, we have maintained an uptrend in gross margins over the last 2 years and we expect an uptick of another 200 to 250 bps Y-o-Y in FY '24, keeping all factors constant, given the cooling off and commodity inflation and portfolio mix normalizing favorably.
As we have emphasized in the past, A&P investment will continue to be a key trust for our growth as we believe that long-term brand building certainly is a much better choice over short-term profitability gains. Further, our focus on cost savings will continue and will be deployed to drive incremental growth. Owing to the above, we expect operating margins to move up by more than 100 bps year-on-year basis in FY '24.
We believe that we are moving in the right direction along the 4 strategic areas of diversification, distribution, digital and diversity, and we are confident of delivering improvement across all the 3 parameters of volume, revenue and earnings growth in FY '24.
We continue to make visible progress in our ESG program in each of our focus areas, creating shared value for all remains the [indiscernible] purpose of our business and will allow us to drive superior long-term performance. We are committed to achieving net zero emissions in our domestic operations by 2030 and global operations by 2040.
Our ESG and other initiatives continue to get recognized in the various awards we have won in the last 1 year. With that, I will now close my comments. Thank you for your patient listening, and we'll now take your questions.
[Operator Instructions] The first question is from the line of Avi Mehta from Macquarie.
Sir, I just wanted to kind of clarify on the margin expansion comment. With the input cost more or less stable now, would it be fair to see the gross margin expansion more front-ended and the flow-through will probably be dependent over time? How do you see this during the year kind of panning out? If you could give us some sense.
Yes. Avi, we believe that gross margin expansion should happen right from quarter 1 itself. Although given the kind of environment that we're operating in, while currently the commodity table has been stable. We would rather say that should take it more from a full year perspective that at least gross margin would expand by 200, 250 basis points. And given the new product agenda that we have, we would, of course, want to invest it back into some of the products. And therefore, from an operating margin perspective, we are saying at least we should expand by 100 basis points.
Just to add, I think other than commodity gains, as I said, that now that our food and digital business has gone to scale, there will be a significant focus on improving their profitability.
Okay, that -- okay. Got it, sir. So that should be an additional kicker, if at all, and that is what will kind of take time to flow through as well, that could be the icing on the cake, if I may say.
Yes.
Sir, the second bit was on the sales growth front. Now I understand your comment on pricing headwinds, but with Parachute stabilizing and actually back on the growth path, Saffola offtakes improving, volume growth rate should normalize to the -- to our kind of stated targets in the first half itself. It's just the pricing headwind. Is that understanding correct, sir?
No, I think the best way to assume that's why I'm just saying that I am unwilling to give an idea of how will it pan from quarter-to-quarter because it's -- there's a base effect, there could be volatility. But all I can say is that we expect the volume growth for next year, which is rather this year, is to be better than what it was last year. And therefore, on a full year basis, both on volume growth, revenue and margins will be definitely better than what we delivered in this year.
The next question is from the line of Vivek Maheshwari from Jefferies.
A few questions. First, on VAHO. If I look at the base for the next few quarters also remains low. So does that mean that the base tailwind will help and the numbers for VAHO at least in the foreseeable future for the next 3 quarters or so will be like in double digits?
So I think the way to look at it, as I said, let's not go from quarter to quarter because I think the best way to see is that I think it is an improving trend. And as I said, there are 2 factors. One, I think VAHO, as you know, has a significant rural contribution. And given the fact there was a stress in the rural consumption and the fact that there was 2 things. One was significant food and retail inflation and commoditization by competition. I think all the factors have become more favorable. So all I can say is that the VAHO -- again, the number which is there, which will improve. Number two, I believe that the other change that will happen in the value-added hair oil market is that as a result of this, also that last year, the slightly premium brands, which are slightly higher say 1.3 to 2 RPI. Our brands and -- that sector was not performing well. I think that will start performing well and there'll be a little more broad-based growth. As a result, I think not only we'll be witnessing value growth, and I believe we'll also continue to gain value share.
Just to -- as I said, just to reinforce that while in coconut oil, we saw some growth -- category growth coming back given the fact that the pricing got right, the inflation was in control. In value-added hair oils also towards the second half of the quarter, if I go a month basis and definitely by March, the category came back into growth.
Okay. And one follow-up. If I look at between third and fourth quarter last year or year before that also, the base was reasonably the same or there is no big disparity, but there is a big uptick in growth. Would you attribute most of this to the industry trend? Or there were some self-help measures, which also help you to have this kind of growth?
No, no. So we have grown ahead of industry, obviously, as I said that, for a quarter basis, there was still a slight decline. I mean it's less than -- I think it's minus 1.
0.7.
0.7. So it's a slight decline. I think what has happened is, as I said that 2 things have happened that I think relative competitive commoditization and intensity in the commoditized part of the category has changed. Number two, obviously, some of our initiatives to gain value share has started kicking up. And I think also we see the rural consumption situation bottoming out. It's a combination of external and internal, I would say.
Okay. Got it. Second, Saugata, likewise, can you also comment on Saffola, I mean, you have mentioned in your opening remarks, but can you just talk about your outlook as we head into the next year? I mean this quarter was obviously there have been multiple pressures. But how do you think this portfolio shapes up in F '24?
I'll tell you first, talking of this quarter, obviously, the last year had first an Omicron base in January where it was the peak of the Omicron and therefore, there was higher in-house home consumption. Then when the Ukraine thing happened in anticipation of higher prices, I think in March, there was far more retail pickup of stock. So it might not that growth, which was there on the base was not necessarily offtake based but also people stocking more in anticipation there will be significant inflation. Now again, on Saffola, I will give you a yearly position that if the things are stable and not volatile, we should be able to give the growth which is commensurate with our medium-term aspiration of kind of a mid- to high-single-digit growth kind of a thing is possible.
Okay. And 2 industry-level questions, if I may. One is your press release talks about the GT declined low-single digits. If you take -- and of course, you have spoken about e-commerce and modern trade. If you take a medium-term view, do you think that is how the business -- the GT channel will shape up? Or do you think GT will be an important one and will continue to grow if you take a 5, 7 years' view?
I think even over 5, 7 years, GT will be an important channel. So the reason there is a compression in GT is a combination of both things. One is that, obviously, if you look at last -- compared to 2 years back, modern trade has done a smart recovery. In our case, as you see, a lot of innovation, which we have done is digital and foods are very, very urban-centric and with the SKU in modern trade and e-comm, and GT has a significant portion of rural, which underwent some consumption stress. So I think slowly, I would say, GT will start recovering for the sector. Now I don't know about -- overall, GT obviously has performed. If I look at the FMCG sector because of the rural bias, a slightly lower performance compared to MT and e-comm.
But all I can say that it is going through a transformation. And there is no substitute for direct rural distribution, which will continue to be a source of competitive advantage for FMCG players, and it will have a significant, what I call, entry barrier for some of the players. For a lot of D2C players they have obviously an advantage and capability of digital marketing. But I think when they get scale, they move into GT compared to organized -- they have to face organized players. And that is where they have -- organized players have a significant competitive advantage.
So in India, it will be an end growth. Maybe the GT model will keep on changing in terms of consolidation, the way we do business, there's a transformation happening. But let me tell you, the neighborhood kirana is very, very critical. They are here to stay, they are smarter than a lot of other people and they're smarter than what we think. And therefore, I think even if I look at a 2030 kind of a scenario, GT will still be the majority in India.
Got it. And last question on the industry. Nielsen FMCG volume growth what you have put out there. So HPC turning, let's say, flat to positive is a good thing. But at the same time, Foods is also accelerating. So is it a simple case of sort of a lower penetration in case of Foods and therefore, structural story is far better or there is some cyclicality between the 2 because the per caps and penetration of Foods has always been lower. But in the last decade, also, there have been periods where HPC has done better than Foods and there have been periods where it has been vice-versa. What do you think is happening between the 2 here? .
So let me tell you something. So there are 2 things. One is Foods has a far more urban SKU and also a little bit of top-town modern trade e-comm SKU. There is a significant, what I call, conversion from unbranded to branded growth in packaged foods because penetration is low. I think there are also some trends in terms of health, in terms of wellness and also the fact that healthy snacking. And I think COVID aided us a lot of in-home consumption and gave a lot of fillip to the Foods category. HPC has 2 issues going for. One is the rural SKU is far more. And rural is where -- and HPC is far more secular across income classes.
And therefore, whenever there is high food inflation and consumption stress, HPC gets more impacted than Foods. The second thing is some of the HPC categories, obviously, there is what I call higher penetration. As a result of this high penetration, a significant growth happens, 2 factors. One, absolute population increase. Number 2 is premiumization. And therefore, whenever there is high inflation, obviously, the premiumization journey undergoes a shift to downgradation. And what we have seen. Number three, I think the input cost pressures, which has happened in HPC because of crude and other things, has led to a lot of people managing, as you know, price points in HPC through shrinkflation.
Now what happens is that the rural consumer, especially on the bottom of pyramid, they fix outlets. And therefore, whenever there is when you think that you have managed MLH and you will manage transaction, people actually adjust consumption. So I think it's a combination of all this, and I believe that slowly HPC will come out of it. Having said that, the long term -- perhaps the headroom or the runway for Foods is slightly more than HPC.
Got it. And I also want to thank you for incorporating some of the data points on Slide 14, very useful. A couple of data points are really useful from FY '24 perspective. All the best.
The next question is from the line of Percy Panthaki from IIFL Securities.
Just again, wanted to do a deeper dive into the VAHO segment here. So I was looking at the 4-year CAGRs here. Bajaj Consumer is close to flat. Dabur is a 1% 4-year CAGR. You are at a 4% 4-year CAGR in VAHO. So is there at all any kind of sort of pipeline or any kind of one-off that we need to be aware of? And if not, basically, what has driven this? I mean, within VAHO, was 1 or 2 brands suppressed, which has come back to full strength? Or what exactly is the story behind these numbers? .
So I think as I said that you have to look at 2 things. One is, if you look at -- we have been consistently gaining value share quarter after quarter. Number two, as I said that actually, the value over a 4-year period, I think there have been instances, especially at least out of 2-1/2 to 3 years, in the 4 years there has been COVID base also. So I think this #2 instance there has been, I think till December or even November, there has been a significant competitive intensity at the bottom of pyramid, where bottom of pyramid growth have happened.
So the reason is value growth has also happened, as I said, is that we believe due to a combination of that less focus or less intensity in the bottom of pyramid. Number 2 is because of lower inflation leading to I think the some of the mid pyramid and the higher top of pyramid brands have started growing in the categories, okay. And there, our participation is far higher. Our focus has been higher because we have been focusing on value share. And that is the reason the value share has started growing. And as I said, and in Marico, we don't normally, there is no adjustment that happens between primary and secondary. Normally, we keep broadly constant.
Right. So basically, just to summarize what you're saying is that out of this differential between, let's say, other players at 0% to 1%, and you at 4%, that 300 bps differential on 4-year CAGR, mind you it's a CAGR. So that's like a 12% or -- yes, 12% point-to-point kind of a differential that is mainly mix only, it seems rather difficult to believe that, Saugata?
No, it's not a mix. It's a combination of -- as I said, it's a combination of -- we have a broader participation strategy, okay? Because if you see the -- we also have had innovations in this space because, as you know, there is Aloe, we have just launched Onion Oil. We are now participating in mustard. So it's a combination core growing. It's a combination of some of the new things growing. And the fact that we participate across price points, we have had a broad-based growth. And if you look at it, see it could be in certain players, all the growth have either happened in price point packs on the bottom of pyramid and a decline in packs, which are of higher either higher packs or higher RPI brands. So it's a combination of all of that. .
Okay. And..
If you had to assure me -- I mean there is -- I mean, as I said, the 4-year primary will be equal to 4-year secondary.
Yes. Yes. That point I got, I'm not doubting you on that. I'm just trying to find out the underlying drivers, like is it Nihar Shanti Amla, which has grown ahead or is it these new aloe vera variants, et cetera, which have driven the growth.
Okay. Okay, Percy, listen, we have 5 big brands, okay? So we have Shanti, we have Jasmine, we have Hair and Care, we have Nihar Perfumed Coconut Oil and we have Aloe, okay. And now if you look at it, these brands operate between 0.7 to 1.6 in RPI. Now it could be, as I said, I'm reinforcing so that you will get a better color to it. If I grow all across these brands from 0.7 to 1.6 RPI, versus somebody only growing at a lower RPI and declining in higher RPI, this difference happens, no?
Right, right. So I got the point that you're gaining market share and you're doing better at the premium end versus others. So if you can just share as to what are the inputs you have put into the business and what you are doing differently versus competition that you are succeeding where others are not.
No, no, I don't. I mean I think it's about -- I mean, I can't get into details. We have a plan. We have to execute it well. And I don't think we are still happy with what we are doing. We have to do better.
Okay. Second question, Saugata, is on Foods. Just correct me if I heard you wrongly, but I think you said that this year, you are ending just shy of INR 600 crores, right?
Around INR 600 crore, yes. .
Okay. And you're targeting INR 850 crore next year. So that's like a 40% to 45% kind of value growth, which I think is higher than the kind of value growth we have done this year. And this year was a year of general price inflation. Next year, in fact, on a Y-o-Y basis, the price inflation might not be much you don't get the kicker from that and you have to deliver most of that 40%, 45% through volume. So just wanted to understand what makes you confident of accelerating the volume growth to such a high level.
Okay. First of all, let's put our perspective. We ended FY '20 at INR 170 crores. We have reached INR 600 crores in 3 years. I think it's a significant amount, and I think it is equal to a size of some of the small companies and in fact, larger than some of the so-called some of the companies which we have in Foods. Now there has been -- if I look at the launches, which are there, all the launches happened in quarter 3 and quarter 4 and a lot of them have not got scaled up. Number two, we started the Foods GTM which is, again, from quarter 3, where we are expanding into actually 10,000 to 12,000 outlets with a separate sales force. So it's a combination of that. And I think whether we reach INR 840 crores or INR 850 crores or INR 860 crores, I think the question will be that we would have added INR 700 crores. And you never know, there could be some inorganic also.
The next question is from the line of Kunal Vora from BNP Paribas.
I wanted to understand about MT and e-comm, contribution is now almost gone up to 30%. You mentioned that GT will now recover. So how do we see this mix going forward? MT and e-comm will continue to increase or there would be some reversal. And how do you see the higher contribution of MT and e-comm in the medium to longer term, considering that there is a higher level of concentration and bargaining power of the buyer?
So I think it has also happened because of the kind of new launches we have done. If you look at Foods for example, we have a significant skew towards MT and e-comm. It is only now where we are expanding the GT. We hadn't because, as you know, that our GT was not aligned to a lot of food outlets. Number 2 is, if I look at it, also some of the -- especially the e-comm growth was led by the tailwind. We believe because of our acquisition of some of the digital brands, our digital marketing and e-comm capabilities perhaps leading edge in the industry. And this year, MT also recovered. And also some of the brands like Saffola and all have a natural this one.
So I would say 2 things. One, I think we need to do a better job in GT. I believe GT obviously has opportunities and I think GT, a lot of -- as I said, the GT has suffered last year also because of 2 things. One is the rural consumption here. And number 2 is, obviously, in urban, what is happening is that because of the growth in e-comm and modern trade, the GT distribution system is under stress and it is undergoing some transformation. So I think it would -- so I would think that -- that's why I said that I think we need to perhaps get GT back into growth, and I'm extremely confident that this year, we will be growing in GT.
And are you seeing a higher level of consolidation on the other side in MT and e-commerce? And any impact on margins from that? .
So I think 1 thing, as I said, that we have to continuously innovate. And you have to be a #1 and #2 player. Number 2 is, I think, Obviously, the cost of sale in e-comm and modern trade could be higher, and therefore, we have to continuously premiumize the portfolio. And thirdly, I talked about a significant focus on improving the profitability or the -- in terms of COGS, in COGS terms and other things in food as well as digital. And that will neutralize this increase in cost of sales, which we are talking about.
Okay. Fine. Second and last question, if you can talk about the macro situation in Bangladesh a couple of quarters back, there were certain problems, currency was depreciating. And also, along with that, how is the mix of business changing coconut, non-coconut and how do you see the growth rate going forward?
No, I think whenever there is disruption, history has shown the strong gets stronger and the weak gets weaker. In Bangladesh, our relative strength is significant. I believe we are the top 2, top 3 FMCG players in Bangladesh in our relative strength and we are far more stronger in Bangladesh than there. And I think just not brands or distribution or equity, I think we have extremely strong leadership. And one of the things we have done in the last 5 years, 6 years in the international business is a methodical way where we have now a playbook, which we are now replicating across Vietnam and Middle East, the Bangladesh playbook.
Now coming to Bangladesh macro situation, I think there is a combination of inflation, which has moderated a bit because, as you know, crude prices and overall vegetable prices and wheat prices across the world have moderated compared to what it was peak when the Ukraine issue started. The devaluation has happened. But again, the devaluation, we believe that it's -- I think we have learned to manage the devaluation. And the third thing is that, obviously, we have continued our diversification journey. So today, the dependence on -- if you look at coconut oil dependent Parachute coconut oil, say 4, 5 years ago, it was 98%, has moved now to 60% or even it will move back below 60%. So we have done these 3. So therefore, there is -- and we have continued to invest even if there's force of inflation. Obviously, it's a tough situation. But I think as far as the Bangladesh macros are concerned, I think we have learned to live with it, and I don't think it's deteriorating. I think whatever shock happened has happened, and I believe that there's a stable government. And everything, the situation will be, I think -- and a Bangladesh economy and the way it is run. I think it's pretty, pretty, pretty good. And therefore, we believe that the Bangladesh study and the Bangladesh growth opportunity is very much intact.
The next question is from the line of Sheela Rathi from Morgan Stanley.
My question was partly answered, but let me take it up again. With respect to the VAHO portfolio, Saugata, what I understand, based on your comments is that the growth has been much better broad-based. We are kind of premiumizing the portfolio. Is it fair to believe that we are shifting away from rural towards more urban India? And second is, what kind of NPDs we have had in this portfolio on a percentage basis? And is the distribution for the NPDs as deep as our existing portfolio?
Okay. Firstly, I don't think there is a shift from rural to urban. I think what I'm trying to say again is that if you look at the VAHO growth in the last -- I mean, at least till December what happened, a significant portion of the VAHO growth was happening in price point packs at the INR 10, INR 20 and some of the brands like Mustard and some of the other, what I call, price warrior brands in the space, okay? Now that 2 things have changed. One is that the first shift that happened was that in November, December, so a lot of competition, at least was not taking price increases in spite of a huge input cost.
But I guess, because of other pressures, competition was forced to take price increases. That led to some -- what I -- and also what happened in this category is that a lot of players other than us was that converted a lot of ATL to BTL, and they were spending on BTL. Now that has got reversed. We continue to spend more on ATL, we believe in the long-term ATL story. And that's why the growth in the other parts of the portfolio and other than the price point packs has increased.
Now coming to innovation, I think our biggest one, which we have launched in the last 4 years, 4, 5 years is Aloe Vera which has crossed INR 100 crores. We are just about taking Onion Oil to GT. We believe that our right to win versus a D2C brand, Onion Oil is a category which is now accepted, it is reasonably salient. Our right to win in terms of pricing, distribution, ability to execute in GT is far higher than a D2C player. We will also see some more launches. We have also now entered -- we were earlier trying to compete in mustard or sarso in a very me-too product. We now have a differentiated product.
And therefore, you will see far more -- and you will see far more -- maybe 1 or 2 more innovation in value-added hair oil as we move down in this year. So I would say it's a combination of that, and I don't think there is any urban bias. Having said that, I think we will also see a premiumized portfolio slowly, which will come into place -- and our focus, I think we have a disproportionate share in modern trade. And in e-comm, where obviously, there are players which have far higher AOVs and have premium offerings, which we need not play through our core franchise, but through some of our digital brands, for example.
Understood. And just a follow-up here, some broad number here, what would be the share of premium like portfolio now for us versus, say 4, 5 years ago?
No, I don't want to get into numbers, please.
Okay. And my second and final question was with respect to the Foods business. What would be the distribution reach for us currently? And where do we aspire to take it say in the next 12 months or 24 months? .
Foods. You're talking of Foods?
Yes.
Yes. So I think, obviously, in terms of -- I think our availability in e-comm and modern trade is almost nearly there, okay? Not so much for some of the new things like snacks and all, which we are launching. As far as GT is concerned, we believe that we are first focusing on -- now if I look at Masala Oats, I think it reaches 2 lakh outlets. So that's where Masala Oats which is the most distributed brand. Now what we are doing is we believe honey and soya are the ones which will first get mass distributed and then we'll see snacks. Having said that, there will be a part of our portfolio, which will not be an ATL-driven portfolio.
So we now have around 10,000 food GTM outlets, which are -- a lot of them are open format stand-alone outlets which we will focus on, and that number we'll slowly try to increase. Now you must realize that food has a lower shelf life. Therefore, supply chain replenishment, the way you sell foods in terms of frequency of billing is completely different from our core portfolio. And that's the capability we are trying to capture. So we are going about in a slightly more careful manner so that we don't want to scale up high and then fall flat in terms of not being able to manage shelf life and other things.
Understood. And just one final point here is on the new product launches side, should we expect new product launches more on the Personal Care Side or on the Foods side going in F '24?
We would like to launch both. I think in the last 3 years, obviously, there has been much more this one on Foods. But you will see some definitely prototypes in the personal care side definitely because I think we have a premiumization agenda. Our premium portfolio is doing well. I think most of them have gone back higher than the pre-COVID levels. And therefore, you are going to see, I think, compared to the last few years, where it has been far more food, you will see a much more balanced kind of a picture as far as innovation agenda is concerned.
The next question is from [indiscernible] from Fidelity.
Congratulations on a good set of numbers. Just a couple of questions. On VAHO, good to see value growth come back to double digits here. Just generally over the next 2 to 3 years, not asking for a guidance, just generally how you're thinking about that business in terms of growth aspirations over there, if you could share for next year great, but definitely over the next 2 to 3 years, what are your aspirations? What needs to happen for you to say it's a good job. That's question one. I have another question, but I'll wait for this answer.
So I think if rural comes back, there is -- I think our aspiration is to get into double digits and hit double digits. And I think there will be a little more broad-based play. I believe that also there is now far more sanity in the category in terms of people growing brand through ATL and equity. So therefore, I think our aspiration, and we will -- I think there will be a significant focus area will be to hit a double-digit growth in VAHO in the next 3 years.
Okay. Great. And then on edible oils, if there is...
Just wanted to add, please don't hold us from every quarter. I mean you have to look at it on a yearly basis.
No, no, no. That's why I said as a broad 3 years -- as a broad 3-year guidance. Because it's too volatile, I completely appreciate that. On the edible oil business then. And that's a little more tactical and near-term question. The raw material pricing has been very volatile. How are you managing it right now? There have been times where we focused on volume share. There have been times where we focused on margins. Where are you on the pendulum right now? And [indiscernible] if I can peel the onion on your comments around value growth, is it more coming from edible oil? Or is it more coming from coconut oil where there is a pricing headwind?
No, no, no. So see, at the end of the day, and I think the approach to Saffola is very clear that we will be -- continue to be competitive, pass on value to the consumer, subject to a threshold level of margin. I think we will not definitely go for volume growth, which are not sustainable. Now we have had situations in the past during COVID times, but that was because it was a tactical opportunity. But I think going forward, we're absolutely clear that we will maintain a threshold level of margin. As I said that both the Saffola and the Food business, I think margin expansion and Saffola has protection of margin and food margin expansion, this will be something our primary focus area.
Okay. Great. And a last housekeeping question. Just on the employee cost side, there seems to be a large bump this quarter. Was there anything one-off that you'd like to call out? Or is this par for course?
I think for a fixed overhead line, I think it is better to look at full year number. And if we look at a full year number, it's growing at about 11%, which is a tad higher. But there are 2 reasons for that. One is that some of the cost was not in the base for a couple of acquisitions that we did, which is True Elements and Beauty X in Vietnam. And second, there were some one-off reversals of management incentive in the base year due to some nonachievement of interest target. If you exclude them, then the growth will be about 7% to 8%, which is largely in line with industry averages.
The next question is from the line of Tejas Shah from Spark Capital.
[indiscernible] extension. A couple of questions from my side. First, on debtor days, if you see there is an expansion of debtor days and if I try to correlate with the commentary that you spoke about that modern trade and e-commerce have gained higher share. Is this an outcome of that mix change? And then if that's the case then how should we see this trajectory going forward?
Well, you're right Tejas. Some part of the increase in debtor days is the function of our contribution increasing from alternate channels. If you compare with last year same quarter, it's about 3% to 4% high. So that's structural, I would say. But apart from that, as you know, in our business, there was a deflation, right? So the revenue growth was not very, very healthy, and therefore, distributor had also ROI pressure. So even in GT, we have sort of given some additional selective credit. So that also has led to increase in debtor days. But that's more temporary. And when the deflation gets into base and we start growing revenues in the second half of the year, that credit extensions, of course, will come down, and that will definitely -- so I believe that going forward, you can expect there could be some reduction from quarter 2 onwards. .
Sure. And in terms of private label strategy, we are seeing a lot of aggression from national chains now and modern trade. So what's your read on that and Saugata briefly touched upon it that the [indiscernible] be to gain market share and be 1 of the top 3 in each category, but it won't be possible across especially with pushing so many NPDs, SKU, MT and e-comm. How do you think -- how do you strategize for private label aggression from a modern trade line?
So I think, as I said, that if you look at modern trade globally that where are we vulnerable to private label, there are 2 things. One, depending on the category, for example, there are certain categories which have a higher proclivity towards private label. The second thing is, I think, fortunately, we are #1 or #2 in more than 90% of the portfolio. Usually, the #3, #4 guy gets squeezed. And the #3 mantra for this is that you shouldn't make super normal profits in a category. So if you follow all this, I think you are less vulnerable and you should continue to innovate. I think if you follow all this, you are -- obviously, there is always a threat, but you can manage that threat. So that it's not a significant impact.
Sure. And then last one, if I may. Saugata, for the last almost 4, 5 years for industry, we have seen that overall growth has been volatile. It has -- there is some bump up and then again, we lose the momentum as an industry -- so what's your read? Because if we step out of our sector, and we see some of the other categories in consumption basket and otherwise. The rural distress is not as high as we are kind of resisting in our sector. So do you think the wallet share changes impacting us more than the consumption slowdown or consumer slowdown that we have been highlighting in the sector.
So I think it's a combination of 2 things. One, I would say that our usage or consumption is equal across population and income strata for most of the categories, okay? Secondly, most of the categories, especially in HPC, are well penetrated. And thirdly, in a lot of categories, the opportunity exists for the consumer to downgrade, which would not be always. In the case of other things, Also, the fourth thing is in a lot of categories, discretionary, it's a question that brings you either a tad of joy or sometimes what happens, it's a tad of luxury you want.
While these are items of daily consumption, which you might say that I can easily downgrade. So to give you an example, I think as the thing opened up post COVID, a lot of things like eating out or traveling all that has significantly increased and some with a vengenace. Now after some time, that will settle down. So I would think these are perhaps this one. And if I look at it in a case of certain categories, also, there is a lot of unbranded -- people may move from branded to unbranded also. Those opportunities don't exit when you buy a 2-wheeler or buy a refrigerator or go for a QSR. I mean, you can downgrade, but there is a basic threshold thing there.
The next question is from the line of Ajay Thakur from Anand Rathi.
Just wanted to understand in terms of the new competition coming in the Parachute space, the coconut oil space, how do we see them shaping up given that they are kind of playing more of the pricing game. And I believe in certain aspects, the category has some price-sensitivity in that context.
I think the best way to look at it is how we are performing on market share. I think over the last 3, 4 years, we haven't lost market share. So I think that's the best way to look at it. And we also have flankers.
Okay. But do you believe that given the size that they are right now and the kind of growth they are witnessing, they can be kind of a threat going forward to us. in terms of the market share? Or we will have to start spending more behind the brand kind of...
I will not be able to share what we want to do. But all I can say is that you have to see that we will protect our market share. Whatever may happen, we will protect it, okay.
So secondly, I was also trying to understand in terms of the edible oil, given the fact that right now if I were to put across Saffola prices are kind of over-indexed versus some of the other brands, maybe something like a Sunflower Oil or in the market? So do you -- can that be kind of having some implication in terms of the volume growth aspiration for the current year for us? .
Again, I said that I think we have to look at a long-term aspiration, for driving a mid-single-digit kind of volume growth to a high-single-digit. And number two, we'll keep a threshold on the profitability, and we will not grow at any cost. I think as prices come down, what I call people willingness to upgrade becomes higher because they don't look at percentage or absolute rupees. And Saffola is a very, very strong brand.
The next question is from the line of Abhijit Kundu from Antique Stock Broking.
My question was primarily on -- you said that March was -- March, you got into a positive territory in terms of rural growth. So how do you -- and you are saying that -- you also said in 1 of the comments that you are seeing bottoming out of rural slowdown and improvement from there. Any instances or anything that makes you so confident that, I mean, there is a bottoming out of rural slowdown, any instances of that? And secondly, in terms of geographies, your coconut oil portfolio is more skewed towards South, East, West. And where the pain point anyway is not much. It's more in north and it's more in -- so how are you -- and to what extent your value-added hair oil has some amount of exposure. So in terms of geographies, how have they panned out in the sense that how has HSM panned out for you, [indiscernible] here. So which geographies have done nicely, which geographies are now, you think that it will improve some of that in terms of geographies and value-added hair oils.
I don't know what gives you the idea that HSM is not doing well and South and West doing well. If you look at Nielsen, I don't think there is any such skew. Maybe some people have not done well there in HSM, but I don't know about that. All I can say is that what I mentioned about rural growth in VAHO is that if I look at the decline, they have started improving quarter-on-quarter, and we believe that the -- in the quarter 4, the drop was around only minus 0.7%. It was 3%, 4% decline, which was in Q3, so it's improved.
And even if you see Jan, Feb, March, it is improving. So therefore, as I said that it's not about -- these numbers tell me that things have bottomed up. Now if these numbers change, I can't help it. Because I can't really -- it's very difficult to predict because ultimately, it also depends on how monsoon pans out. But as of now, that is the situation. And I don't think there is this thing about this HSM or not is the problem and South and West doing well, I think the stress was reasonably everywhere.
okay. Understood. Understood. So that's basically the numbers say that -- [indiscernible] numbers say that it's...
It's a gradual improvement. I don't think it's like I mean, as I said, that is a gradual improvement, and I think things should improve unless something happens on the monsoon. That's all.
Okay. And the aspiration is that you should grow during the year or the year or 2 in double digits in value-added hair oils.
Always want to have aspire go well.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
To conclude, while FY '23 has been a year marked by a challenging operating environment. the improving trajectory of volume growth and profitability in the domestic business and the robust and rational business keeps us fairly optimistic of a better FY '24 than FY '23 on both revenues and bottom lines. The initial results of our diversification efforts in India and some of the overseas markets have been quite encouraging. We believe this sets us up for a sustainable and profitable growth in the medium and long term and in turn, create incremental value for all our stakeholders. If you have any further queries, please feel free to reach out to our IR team, and they'll be happy to address them. Thank you.
Thank you. On behalf of Marico Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.