Marico develops an appetite for foods
The launch of instant noodles, honey and plant proteins is part of a larger strategy to cash in on consumer demand for packaged products
Consumer goods major Marico has been biting into a number of food categories of late. This includes segments as diverse as honey, chyawanprash, plant proteins, turmeric milk mix and instant noodles, to name a few. The strategy will not stop there though.
Best known for its Parachute coconut oil and Saffola edible oil, Marico is eyeing a broader play in foods. Saffola is the brand that will champion its foods play and has already seen five quarters of double-digit growth, pushing the company to set ambitious targets in foods. From just under ~200 crore in FY20, the company plans to more than double its top line from foods to ~450-500 crore by FY22-23.
Foods remains a division within Marico for now. As a percentage of total sales, foods stood at 2.73 per cent of Marico’s consolidated turnover in FY20. Analysts estimate that it can double to nearly 6 per cent in two years (see chart).
Also, foods is a bigger bet than personal care for Marico, said experts, given that it is considered essential to a consumer as opposed to the latter, which is discretionary in nature. So, growth in foods will continue as people turn to trusted names for consumption.
Marico has identified building blocks to achieve this target. This includes finding food segments that can expand rapidly. As Saugata Gupta, managing director and chief executive officer, Marico, said, “We are cherry-picking categories that have tailwinds, which are at least ~800-1,000 crore in size and where we can have a position of differentiation and gain scale.”
Honey, for instance, said Gupta, was a good example of this strategy within foods. “We should get into a ~100-crore run rate in the next financial year (FY22). I say this because honey as a category is expanding,” he said. “Our objective was to introduce a product that was superior in terms of purity. Saffola Honey has established itself well since its launch in June. We are confident that we should be able to garner more market share, even as the category expands.”
Industry sources said Saffola Honey has crossed 10 per cent market share in supermarkets and e-commerce, as consumers seek trusted brands in a world still grappling with the Covid-19 virus. At the same time, a recent report by the Centre for Science and Environment (CSE) had found several honey brands to be adulterated in India. Marico’s Saffola Honey, among a few others, had cleared the adulteration test, giving the brand a boost.
Gupta said the company has been rapidly taking its honey brand across general trade in the last two months, after launching it in e-commerce and modern trade initially. While capacity constraints did hinder distribution expansion, it has since been sorted as demand remains high for the brand.
Chyawanprash, plant proteins and products such as turmeric milk mix are immunity-building products, which will take a longer time to grow, sector experts said, since weaning
consumers away from other trusted names will take time. For instance, the market for Chyawanprash is estimated at ~500 crore, led by players such as Dabur and Patanjali. Plant proteins such as soya-based products are an emerging category, led by brands such as Nutrela, promoted by Ruchi Soya, which is now part of the Patanjali family.
Instant noodles, on the other hand, are a different ballgame. It is estimated to be ~4,000 crore in size, led by players such as Nestle India and ITC. Some of the other brands in the space include Wai Wai Noodles from CG Foods, Ching's Secret from Capital Foods etc.
Analysts tracking the company said instant noodles are clearly Marico’s boldest bet so far in foods. As Kaustubh Pawaskar, associate vice-president-research at Mumbai-based brokerage Sharekhan, pointed out, Marico has carefully identified food segments in which it wishes to participate. These are typically emerging categories that have the potential to scale up. Instant noodles bucks that trend.
“Look at oats, for instance, which was amongst Marico's earliest forays into food. It ticked all these boxes of emerging categories with the potential to expand. Instant noodles, meanwhile, is already a large category with strong incumbents who have invested in the segment for a long time. Shaking up the market will not be easy,” he said.
Yet, Marico has no plans to give up. It hopes to ride the inhome consumption wave still visible among consumers. Instant noodles, launched under the Saffola brand, will be retailed on the company’s own direct-to-consumer platform Saffola stores, apart from online platforms such as Amazon, Bigbasket, Grofers and Flipkart. It could be pushed into offline stores in the future.
“Saffola has gained from the trend of pantry loading and then in-home consumption visible during the Covid-19 pandemic. While the economy has unlocked, the need for safety and hygiene remains. Organised food players will benefit as a result," Gupta said.
Food companies such as Britannia and Nestle have all articulated this view, saying that a heightened sense of hygiene among consumers will continue to drive the packaged foods market in the country, giving a fillip to organised food players. Marico’s food bet, therefore, comes at an opportune time, said experts.
With instant noodles, Marico will partake of growth during inbetween snacking occasions. It already has a presence on the breakfast table with oats and lunch with edible oils.
Gupta said edible oils has a strong base of consumers and will continue to grow.
Marico is already a key player in oats and is ranked second after Pepsico's Quaker Oats, said industry experts. Market share, according to its December 2020 quarter investor update, stands at 33 per cent. The next phase of growth, therefore, will involve strengthening its presence in other meal occasions.
Marico clearly has a lot on its plate for now.