‘We may consider acquisitions in South East Asia’
Marico has had two consecutive quarters of double-digit volume growth in Q2 and Q3 of FY21, led by a revival in consumer demand across markets. In an interview with Viveat Susan Pinto, SAUGATA GUPTA, managing director (MD) and chief executive officer (CEO), Marico, lays out the company’s roadmap for the future. Edited excerpts:
How will the Budget impact the fast-moving consumer goods (FMCG) market?
You have to look at it from a longterm perspective. Given that the government had a lot of balancing to do, this is a good Budget. What is important for the economy? Investment in infrastructure, health care, rural and creating a favourable environment for corporates and employability in general. The Budget has attempted to address all of these issues. Consumption, therefore, will be driven by economic recovery and growth, rather than short-term measures of putting money in the hands of consumers. Those are steroids in my view. If the government can continue to get revenue through better tax compliance and the disinvestment programme as well as encourage investment across sectors – thereby improving job creation – consumption will automatically come. Also, buoyancy in the rural segment is good for the FMCG market. Again, this has to be driven by long-term investment into the rural economy, not short-term measures.
But increasingly, FMCG companies are looking at the domestic segment rather than international markets for growth. So, why then are you looking at foreign markets for inorganic growth?
Our domestic business is our first focus. In terms of international, what I meant is those markets where we have steady growth. I don’t see us getting into acquisition mode in Middle East and Africa. Definitely not. In countries in South Asia or South East Asia. such as Vietnam, we may consider acquisitions, where we have stability of growth. But again, these acquisitions will act as accelerators. We do not want to expand footprint as was the case in the past.
Your bet in foods appears to be paying off. Saffola has seen five consecutive quarters of growth. What has worked for it?
Saffola has gained from the trend of pantry loading and then inhome consumption visible during the Covid-19 pandemic. People are opting for trusted brands and this helped the growth of Saffola.
Edible oils (part of the Saffola portfolio) have a strong base of consumers. New areas such as honey and chawanprash are also taking off. Honey, for instance, is a category that is growing significantly. Our objective was to introduce a product (Saffola Honey) that was superior in terms of purity. I believe that it has established itself well, since launch a few months ago. We are confident that we should be able to garner more market share, even as the category expands. Honey should get into a ~100-crore run rate by next year.
How much of a threat is inflation to the FMCG revival story?
I believe inflation is going to be transient. It is very important to continue to focus on volume growth, market share and absorb some of the costs. We will continue to ensure that we provide value to the consumer. We have taken some price increases to mitigate the impact of inflation in the short term. But we will prefer to look at the medium term rather than short term in our pursuit of growth.
SAUGATA GUPTA MD & CEO, Marico
What is your strategy as far as acquisitions are concerned?
We are bullish about foods and digital-first brands. We will look at acquisitions in these areas. Acquisitions within foods, however, will be more of an accelerator and not a substitute to organic growth. We will also look at acquisitions in one or two international markets where we have stability of growth.