No price revision despite fall in raw material cost:Marico

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No price revision despite fall in raw material cost:Marico

FMCG major Marico, popularly known for its 'Parachute' brand posted stellar results beating the street expectations. The sales were up 29.4% at Rs 1057.8 crore as against expectation of Rs 994 crore. The overall domestic volume growth was 16% versus expectation of 11 -12%.

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FMCG major Marico , popularly known for its 'Parachute' brand posted stellar results beating the street expectations. The sales were up 29.4% at Rs 1057.8 crore as against expectation of Rs 994 crore. The overall domestic volume growth was 16% versus expectation of 11 -12%. The operating profit margins were lower mainly on account of higher marketing spend.

Milind Sarwate, chief finance, HR & Strategy at Marico says, "Parachute Rigids which is the main staple SKU clocked 13% volume growth." He is hopeful of international businesses catching up with the Indian business in next 2-3 years. 

The company has no plans to revise prices despite fall in cost of raw material.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q1: Marico posted 16% volume growth which is way ahead of market expectations. Can you give us break up of the segments along with growth?

A: The growth came in from several factors. Firstly, our staple main category of coconut oil did well. We had a 15-16% growth overall in this segment. Parachute Rigids which is the main staple SKU clocked 13% volume growth. Hair oils segment grew by about 20%. Saffola has continued to grow over the past 10-11 quarters at steady rate of 15%. The growth in India across various categories was very good. Even in international business there has been a very strong value growth overall of about 39%. Kaya has continued to grow on a same store basis with 15% growth for five consecutive quarters. So overall it was a very good volume growth.

Q2: You have actually seen some margin improvement as well. Is it just because copra prices came down or some other elements kicked in?

A: The volume growth is phenomenal and it has been a main driver of the margin growth as well. But if you look at it carefully margins drop by 70 bps as compared to the corresponding quarter last year. We have taken a conscious call in recent times that we will not sacrifice margins for volume growth and that story is playing out. The softening of copra prices in the last quarter helped us. We had taken price increases in the second half of FY11 and we were a little concerned in the midyear whether those increases along with the copra prices continuing to go up will hurt our margins but that apprehension has been partly nullified during this quarter.

Q3: What kind of product price improvements do you expect going forward? Do you think will it be able to hold margins up and contribute to your overall revenue growth?

A: Yes, I think our margin would be better than what it is today, but looking at the India story we should not focus too much on margins quarter-to-quarter basis. We have a design in place for how to tap into India's favorable demographics and growth which will continue to play out. For example, the kind of volume growth that we are seeing in our main categories is quite good and if we are able to sustain then I think it's a question of time before margins could follow.

If you look at it carefully our Indian business has continued to run margins of over 16% which is very good. Our businesses in Kaya and the business in international areas will take time to catch up. So in another 2-3 years time I think the international business will catch up with the Indian business and I feel we have a very good long-term story going ahead.