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    Marico confident of 8-10% volume growth in H2

    Synopsis

    Rural India continues to deliver higher consumption trends than normal, says Marico MD.

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    We are 7-8% higher than the pre Covid average run rate, says Saugata Gupta, MD & CEO, Marico.

    Are there any new trends witnessed in the consumption pattern? How far are you from pre-Covid levels?
    We crossed the pre Covid levels in May and June and we are ahead of the pre Covid base of last year. We are 7-8% higher than the pre Covid average run rate. As far as the consumer trends are concerned, at the start of the lockdown, there was significant panic buying and pantry loading of food and there was a huge surge in both things like hygiene and immunity which is sanitizers, disinfectants and immunity products.

    As the quarter one and quarter two gradual unlocking happened, the entire pantry loading and in-house consumption slowed down with people going back to workplaces. I believe also some of the hygiene categories are settling down at a slightly lower level but we will continue to see a trend in which people are continuing to adopt immunity, a healthy lifestyle and there is a huge trend of people opting for trusted brands, especially on the health platform.

    The other change which we are noticing, especially in urban areas, is that peoples’ disposable income is challenged and so people want to downtrade. But if the consumer brands are giving value, especially in the leader and trusted brands, people would like to down trade within the brand or a portfolio rather than go outside the brand or the company’s portfolio.

    The last trend we are noticing is that because of some of the government schemes doing well, a good harvest and also the reverse migration, rural India continues to deliver higher consumption trends than normal. In urban India, while e-commerce continues to grow rapidly with people adopting more digital adoptions in terms of both purchase and purchase consideration, there is a slight stress in modern trade. GT continues to do well and we will see gradual recovery of urban consumption should there be no more surge in Covid post the festival season.

    After three consecutive quarters of decline in domestic volume growth, Marico has reported double digit volume growth. What led to this and what can we expect for the rest of FY21?
    Firstly, should there be gradual economic recovery with no significant surge in Covid, we believe we could deliver 8-10% volume growth for the balance second half.

    As regards what drove this volume growth, we are helped by a superior execution, agility in the marketplace, getting the supply chain right, and having strong brands. As much as 95% of our portfolio consists of brands where we are number one and number two in the market. Our discretionary portfolio is only 5%. and Lastly, we have started investing in some of the categories and especially in food. So with a combination of trusted brands and very agile execution, in August-September, our distribution was ahead of pre-Covid levels.

    I am pretty confident that if the situation continues in terms of both demand and the economic situation, and which we expect to improve gradually, we are fairly confident of delivering a 8-10% volume growth in the second half.

    The volume growth in Saffola at 20% has been better than last quarter. We have seen good consumption of food products and edible oil especially during the lockdown. How much of this is sustainable?
    Even in Q3 last year we grew 11%. Last year in Q4 we grew 24%. Even before Covid struck, that is till the first or second week of March, Saffola volumes were growing at 15%. We ended up growing 24% in Q4 last year because there was a pantry loading towards the end of the quarter when the lockdown was announced on March 23.rd

    In Q1 we grew 16% and in Q2 we grew 20%. We recently did some consumer analytics and household panel data which shows still 60% plus of the volume growth has come from increased penetration and a combination of accelerated trials. The retention rate of Saffola has gone up and within dual or multi brand households the share of Saffola has gone up. We are seeing a significant improvement even in modern trade this quarter.

    Our medium term aspiration continues to deliver a 10% plus volume growth in Saffola which we should be able to achieve although in the second half we have a very high base. Secondly, 38% of the growth in this quarter has happened from increased consumption and as the unlocking happens, that may go down but there has been a significant habit change and people will still want to have healthy food at home and will continue to adopt brands which are healthy and brands which can be trusted.
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