Marico Limited (531642) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Marico Limited Q4 FY '21 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Shah from Axis Capital. Thank you, and over to you, sir.

Yes. Good evening, everyone, and I hope everyone is safe. On behalf of Axis Capital, I welcome you all to the Q4 FY '21 earnings call for Marico. We have with us the senior management of Marico represented by Mr. Saugata Gupta, MD and CEO; and Mr. Pawan Agrawal, CFO. Just a brief disclaimer rather 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 -- 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. With that, I would like to hand over the call to the management for opening remarks. Thanks, and over to you, Saugata.

Yes. Good evening to all those of you who have joined the call. I hope all of you, your friends and family are safe and healthy. Given that we are in a state of a lockdown, again, we have lockdown to this call from our respective residences. So kindly bear with us in case of any technical difficulty. We might have some kind of interruption. So the pandemic has taken a vicious turn impacting the community at large even more gravely than the first wave last year. Given the unprecedented surge in the number of cases this time around, it seems we are all perhaps be associated with someone who has been directly or indirectly impacted. We've also had many of our own Marico members and our families who have been affected, and this may be the case for a lot of you. Our thoughts and prayers go out to all of them. We'd also like to extend our heartfelt condolences to the family and relatives of Mr. Shiladitya Dasgupta from ICICI Prudential Life, whom my team and I have known personally and would be known to many of you on the call. We at Marico remain committed to our purpose of making a difference to every life that we touch. Given that members have always been at the forefront at Marico, we are focusing on the well being of all our members and the extended force and taking all possible steps to provide the support required to cope up with these extremely difficult times. We sincerely hope that we can overcome this adversity and restore normalcy soon. We continue to stand by our philosophy of people first and business and profit comes next. Coming to our quarterly results, as consumer trends continued to recover for most of the quarter other than maybe last 3, 4 days, the company delivered a resilient performance in both the domestic and international business with each core segment and market-leading growth and new engines scaling up well. Consolidated revenues grew 34% on the back of 25% domestic volume growth and 23% constant currency growth in the international business. This is one of the best quarterly performances in terms of growth in recent memory. There has been a consistent uptick in input costs in the last quarter, which we have partly passed onto consumers through multiple rounds of pricing in some of the key portfolios and have chosen to absorb the balance to ensure that we don't upset the volume growth and market share gain momentum, which we have been witnessing in the recent times. Advertising expense at 8.7% of sales were up 36% with focus investments behind some of the core engines and the food innovations. Consequently, consolidated EBITDA grew 13% and like-to-like PAT was up 17% on a year-on-year basis. In India business, the optical volume growth was also a function of a low base, although our last year's Q4 decline of 3% was much lower than peer set companies, an adjustment of a -- slight adjustment of the historically quarterly skew in our Q4 and Q1 revenues. Adjusting for these, the nominal volume growth would be in the range of 18% to 20%, at least, which is also the highest quarterly volume growth in recent terms. We continue to gain market share in each of the portfolios on a MAT basis. General trade continues to have a good year with rural market growing at 1.8x of urban. Over the last 2 years, Marico has identified rural as a growth engine given the increase in rural income driven by good harvests and government stimulus. In order to leverage this increase in rural consumption, Marico has invested to improve the rural GTM network as well as drive relevant pack and portfolio mix. In FY '20, we expanded our rural stockist network by 25%. While we took a pause in FY '21 due to COVID disruption, in the beginning of -- in quarter 1, we have restarted the task of further expanding our rural network by another 25% over the next 2 years. The rural contribution to the domestic sales has increased by 2% this year. E-commerce, now 8% to our revenues, continue to grow from strength to strength as modern trade posted a year-on-year drop due to the pre-lockdown pantry loading in the base quarter. CSD also grew on a low base. Delving further, Parachute grew at 29% in volume terms, although we pulled back consumer offers and increased pricing. Parachute has continued gaining share in the rigid price during the quarter as well as MAT leases. While the increase in effective consumer prices of 9% in H2 was much lower than the rise in copra prices, the magnitude of the volume uptick is a sheer testament to the balance between pricing premium and volume growth that we have been maintaining in Parachute and also reinforces the aspirational value of the brand if the pricing is correct. As per forecast during the last earnings call, copra prices were to come down by 8% to 9% in Feb and March, but unexpectedly went up 8% during this period due to low off-seasonal supplies initially, delayed seasonal arrivals subsequently in addition to some localized issues. However, as anticipated, good seasonal arrival from the end of March have led to price correction in the past couple of weeks. Copra prices have corrected 15% to 16% in April from its peak in Q4 FY '21, and we are now at the expected levels, which we had earlier predicted with a lag of 2 months, around 60 -- 50 to 60 days. Therefore, margins we have forgone in Q4 will be gradually recouped in the coming quarters. The margin impact in this quarter is also a function of the significant pricing in the top line. As you would be aware, we maintain an absolute gross margin per unit, which is rupees per tonne instead of a percentage margin. Going forward, given the improved productivity, which leads to a 5% additional supply, we expect prices to remain subdued in the near-term and to be flat to marginally higher in FY '22 on an annualized basis, depending on monsoon this year and alternate consumption of copra. So in a nutshell, the original forecast of copra, which we had talked about even in the last earnings call of full year flat-to-marginal slight increased times. Value Added Hair Oil posted a broad-based 22% volume growth in Q4 after a new washout of April '20 due to lockdown restrictions at that time. We have delivered 11% volume growth in the balance part of the year, which is the 11 months. Having gained 200 basis points in volume share on a MAT basis, which is one of the highest in the last 4 years, Marico's volume market share in VAHO stands at 37%. We believe we have now got the fundamentals right in most of the VAHO brands, and we'll focus on building a sustained double-digit growth trajectory over the medium-term on the back of strong equity and proposition of our brand portfolio that straddles the entire pricing pyramid. Saffola Edible Oil delivered 17% growth. The brand has grown in double digits for 6 consecutive years, undeterred by the strong brace and price hikes to a tune of 30% in H2. In addition to the in-home cooking tailwind, the brand has also seen a significant increase in household penetration with the growing relevance of healthy living and its tracted health equity. The continued rise of more than 20% in key edible oil prices in March had necessitate pricing intervention in April. We have, therefore, taken further price hikes of 15% to 22% -- 15% to 20% in 2 rounds of pricing in April as well. Given the growth has not let up even after substantial price hikes to the extent of 50% in Saffola from October 20 to April 20, we believe this is evidence of the extent of pricing power that the brand commands. That being said, as the pricing has not been commensurate with the cost push because we are chasing sustained price hikes with a 3-4 week lag. The value proposition has been attractive for new consumers that have always aspired to be Saffola consumers. While a variety of global factors have led to this persistent rise in edible oil prices, we expect prices to remain wage bound in the near-term before retracing back from sometime in June or July. We will, therefore, be gradually regaining the margin on Saffola from now through Q2. Coming to the food business, the portfolio grew 134% in value terms with the base oats and savory oats franchise registering 84% value growth and new launches this year picking up well. Those franchise have been growing from strength to strength on the back of increasing penetration and heightened focus on healthy snacking. Saffola Masala Oats now has a 94% market share in the flavored oats category. Coming to the launches this year, Saffola Honey has stayed ahead of internal expectation. The brand is just shy of a double-digit market share in key modern trade chains that has crossed 25% market share in e-commerce. Modern trade and e-commerce contributed to nearly 40% of the total honey market. We expect to touch revenue run rate of INR 100 crore in the coming year. Saffola Chyawan Amrut has started off on a moderate note. We have launched a TVC campaign in Q4, and we'll continue to invest in this franchise by tweaking some of the elements of the mix. Saffola Mealmaker Soya Chunks has started off extremely well in GT, in West Bengal, and we have extended to MT and e-com. We have launched Saffola Oodles, which is an interesting take on the instant noodles, except that it does not contain refined wheat flour or artificial preservatives and instead is the goodness of whole grain oats, making it a perfect snack time option for all. Our strategy on foods is to enter sizable categories with growth tailwinds that offers potential to build franchises with a quick scale and gain market share with a differentiated product. The existing health equity of the brand Saffola has allowed us to make a seamless foray into multiple categories this year, which has effectively expanded the brand's total addressable market or the TAM in foods by at least INR 5,000 crores. We are extremely confident of delivering INR 450 crore to INR 500 crore turnover in the food business this financial year. Within personal care, we observed a gradual revival in demand in Livon Serums portfolio, while male grooming and skin care portfolios have remained soft. We expect discretionary categories to remain under pressure in the current context. We intend to build these portfolios into growth engines, when the macro stabilize maybe in Q2. The Beardo franchise has been gradually graining traction so far. However, like in premium personal care, we remain cautious on the near-term outlook, but believe in the strong equity and potential of the brand from a medium-term perspective. We expect the business to touch an exit run rate close to INR 100 crores next this year unless the second COVID wave materially affects the business. Coming to international business, Bangladesh delivered another robust growth with a 20% constant currency growth with a non-coconut oil portfolio leading the growth. The newer launches in baby care, skin care and Parachute Naturale Shampoo range have also seen encouraging trends. The diversification portfolio to the extent of 40% contribution from non-Parachute CNO and the total addressable market expansion in personal care has set up this business for a strong sustainable profitable growth run in the future years. While the home and personal care category in Vietnam recovery on a year-on-year basis and the foods business continued its positive momentum, Southeast Asia business grew in double digits after 8 quarters. We have again focused on collecting the fundamentals in Vietnam, and we are confident that we'll be able to partially replicate the Bangladesh model of growth here. The MENA business rebounded to 62% growth on a weak base. The pace of recovery in the Middle East was faster than in Egypt. We are confident about delivering a steady growth in the business this year. The South Africa business grew 48% on the back of warrants in the health care categories and we'll be in a position to deliver growth this year. On the overall business, we hold our medium-term aspiration of delivering 8% to 10% underlying volume growth, domestic and double-digit constant currency growth in the international business. Over the past 15 months, we have made substantial progress in both sharper choice-making in our growth agenda and resource allocation, correcting some of our internal execution issues and substantially upping the execution and agility in the organization. We're also making significant progress in expanding our total addressable market by focusing on scale innovations in both India and Bangladesh and also in our digital transformation journey. Both of these will secure our future growth over the next 3 to 5 years. The near-term impact of the ongoing second wave is difficult to foresee at this time, particularly in the domestic business, although we are much better papered to tackle supply chain disruptions with our BCP processes, which is the hardware part. The impact on our members and the extended ecosystem is far higher this time around, which is the software part of the business. We were able to extend the Q4 momentum in the first 20, 22 days of April, but the last 10 days have been a little slow. Having said that, we had a very low April base. So we have clocked significant growth already in the quarter. A clearer picture will emerge sometime towards the second half of May. The situation in terms of case loads and the consequent disruption will be different across states as they experience a full cycle of rising, picking and pittering off. And we are -- we must have a differentiated approach in each area. Taking cognizance of the fact that the pandemic has severely hit the consuming class this time around, we believe the premium indulgent-based category that will be more affected this time than items of daily use. Over 90% of the Marico portfolio comprise daily use items, which could be relatively insulated in consumption terms. While prioritizing people safety will continue to drive availability of all these essential items, strictly in line with the local government SOPs. We expect the cost pressure to be transient and through our brands have exited considerable pricing path. We avoid taking pricing changes frequently and disrupting trade. In any case, we -- our pricing has been chasing input costs because of this continuous and unprecedented inflation, especially in edible oil. Also, we are conscious of the purchasing part of the consumers, which have been affected during this time. Copra prices has already come under control. It has already fallen 13% to 15% from its peak in April. Edible oil prices have been more supply and speculation-led as opposed to demand-led, and they expect it to cool down in the coming months. Since our REITs were based on global forecast that was estimating a correction in Q4, but instead it spiked up further, pricing interventions ended up lagging the inflation. However, once prices cool off as expected, margins will poke up. We will continue to choose sustained volume growth and franchise expansion over short-term margins since we are in midst of a great volume and market share growth momentum. After executing INR 150 crore plus cost savings in FY '21, we are chasing another aggressive target this year. However, extremely fair about the philosophy of only attacking the flab and not the muscles in the business with respect to cost control so that the long-term growth story is not impacted. While we will slowly go back to a medium-term margin of 19% to 20%, we are prepared to take a slight short-term hit in order to ensure that there is no interruption in this high velocity volume growth journey we are going through based on strong execution choice making and innovation. Having said that, operating margin will improve sequentially from hereon, and we believe it has bottomed out in the reported quarter. Last but not the least, I would like to thank all the Marico members and associates for exhibiting tremendous resilience and grid through this year. While the context has not changed for the better yet, we believe that with our fighting spirit and agility, together, we will effectively cope up with the current situation. The biggest comfort we feel is that the fundamentals of the business in both India and the key international market is on our sound footing. Thank you for your patient listening, and we will now take your questions.

[Operator Instructions] The first question is from the line of Avi Mehta from Macquarie.

Sir, while you've indicated that April has seen some impact. Just wanted to get a sense, are the initial trends, especially in terms of home -- in home consumption in terms of oils, the way we saw, is it similar to what we witnessed the first lockdown or is there a divergence versus that? And secondly, this weakness, is this any geographical tinge in terms of cities that we are witnessing? If you could kind of share that part, please?

So the weakness we are seeing is not in off-takes or consumption, it is more the supply chain disruption because as you know that each state is going for a sequential lockdown, and there are a lot of cases, the grocery opening hours are limited and which led to some supply chain issues. Also, some of the distributors, some of the people who are not well. So these are just some supply chain disruptions. So we are getting back on track. So we don't see any significant consumption. In fact, if you look at the trends on food and other items since 90% of our portfolio is on essentials, we are not seeing any consumption trends. So as I said that -- as you saw last year, in the beginning of April, there was, obviously, that time, of course, we were underprepared in terms of logistics and other things. We believe that gradually, things will get back into shape. And we will get back to our run rate sometime in May end and June. But things, obviously -- and this time, people -- and as you know that you need, in terms of deliveries or even distributor stock points to open, there are certain interruption some because of government SOP, sometimes because of the people themselves have been affected with COVID. So therefore, we are taking some time. As you know, we tried out a lot of interesting things last year in terms of telecalling and other. We have started scaling up those alternative options. And we believe that this thing should get back into shape. As of now, we have nothing to believe that there will be any consumption-related dip.

Okay. And sorry, the supply chain impact is essentially from a distributor and as well as from our sales end as well? Are we kind of curtailing...

We don't have any supply chain impact on our sales end. The issue that is happening is, as you know, in most of the states lot of time the grocery are -- grocery shops have been allowed to be opened for a limited period. And also, there's a very limited window for delivery. So these are the kind interruption. In certain states, there has been a little more tougher lockdown based on local government SOPs. So I think -- and I must realize that at the end of the day, today, the first priority of each of the government is to provide hospitals beds, oxygen. This supply of essentials and getting them streamlined is the secondary priority. So we are working with the local authorities, grew all the FMCG companies through CII and therefore, we will -- things will stabilize. But as far as our supply chain is concerned, our factories to depots and -- there is no issue on that. That's -- as I said, it has been BCP tested last year, and they are functioning very, very smoothly.

Okay, sir. Perfect. And sir, the second and the last question is essentially on the input costs. I mean you -- I missed that comment. You said input costs have moderated. If that is the case, is it -- you were indicating that gross margins will improve and move more towards the levels that we saw in the first 3 quarters of the year? Is that what you indicated? Or if you could -- if you haven't, if you could kind of share that? And a related question is, you have pointed towards moderation expected by June, July. If that were to play out as expected, is it fair to in turn kind of build in or expect you to reach the medium term target, please?

I think 2 things. Let me just -- let me break up copra and edible oil. And also there is other one which I didn't mention, the fact that the other unknown item is crude because crude has an impact on VAHO and crude has an impact on packaging. So let me take one item at a time. In the case of copra, as I said, that the drop which we are expecting has happened with a lag of 6 to 8 weeks, okay? So now we are back to what we are expecting to -- what -- the prices we were expecting in March. So when we are expecting a 7%, 8% down, it actually went up, but it has now corrected 15%. So we are back to what was the original estimate of the pricing as we spoke in the last earnings call. And therefore, with the kind of pricing we have taken on Parachute, we believe that slowly now, the margin will recover the margins. As far as edible oil is concerned, however, it's still high, the prices, although it's now going to need -- we don't expect to now -- the prices to increase from here. We have now taken around -- there has been 50% increase in Saffola pricing we have taken. We took 30% in H2, and we have taken another 15% to 20% now. Now going forward -- now again, as I said, this is something subject to -- because in the last 4 months, all the global forecasters have got it wrong. But we now expect that there is no fundamental major demand. It is a supply constraint, and it is some speculation that's happening in the international global market. Now we expect, however, things to -- should be pulling down in June, July. So as it happens, then obviously, we'll start picking up the margins there. And so to answer your question on the gross margin, that will keep on gradually improving as we move to Q2 and Q3. And we will obviously catch up the medium-term as we move towards the second half of the year.

Okay. And Q1 also it would move up though not to the same?

Yes, yes. Q1 will move up because as I said, but -- I think we have taken some price increases again this in April. And obviously, in copra, we have started seeing that decline happening. So the copra decline, what was -- what we expected in March has not happened in April. That's about it.

Avi, just to add one thing over here, while there will be sequential improvement, if you compare margins Y-o-Y next quarter, there, of course, we held in because last year, this was pretty high on account of rationalization of expenditure in quarter 1. So we have to see from a Q-on-Q perspective and not Y-o-Y perspective.

No, no. Correct. I was essentially saying that we'll move more closer to the levels that we saw in the first 3 quarters of the year. That...

No, no. First quarter, what Pawan said was a '20 -- very high operating margin because of a depressed top line and a very high -- there was a significant cost saving. For example, we are a 6% A&P. We had huge savings in fixed overheads, which you are not going to see in this quarter. So it will improve from Q4, and it will gradually go into the medium-term as we go into the second half of the year.

Next question is from the line of Percy Panthaki from IIFL.

Congrats on a great set of numbers. Saugata, you said that the copra is down 15%, 16% currently versus the peak. What I wanted to know is that how does the current price compared to the FY '21 average?

So I think it's slowly gearing towards the FY '20 average now.

FY '20 or FY '21?

FY -- sorry, FY '21 average, sorry.

FY '21, yes.

Okay. So the current price is close to the FY '21 average. And basically, therefore, your assumption is that the current price is also the price which will continue for the rest of the FY '22?

So I think there will be a drop going forward. And then it picks up. As you know, the way it behaves is that it keeps on going down until June, July, and then again, it picks up a little in the second half.

Sure, sure. But FY '22 average will be equal to...

Yes, yes, yes. So FY '22 average, the best case scenario broadly will be around flattish to slightly marginally inflationary. But it could be -- most likely it will be flattish kind of a thing.

Right. Secondly, I wanted to know, see, Saffola, you said you've taken 50% price increase. What is the corresponding input cost inflation in Saffola?

So I think with our current estimate, we have broadly made up most of it. We have checked some of it, but a majority of the increase has been absorbed.

So the oil's table has also moved up by about 50% is what you are saying?

Slightly more.

Okay. Okay. So, see, what happens if the oil tables move downwards because it's had such a sharp inflation. Let's say, it moves downwards by 20%, 25%, do you get to retain some of the margin benefits? Or it gets passed onto the consumer?

Yes. A little bit, obviously, we will. So what we do is normally we -- when we take a price increase, we -- when inflation is there, we have observed some of the cost push. When there is a deflation, we retained some of that. That's how we normally operate. Within the -- as you know now that we have a -- in a pricing model for both Parachute and Saffola, we operate within that.

And similarly, see for Parachute also, while the cost will remain more or less flat or marginal inflation Y-o-Y. Your current price, if it continues through the rest of FY '22, you will see an increase in the pricing, the final product pricing on a Y-o-Y basis, whereas the cost remains flat. So would I be correct in assuming that even Parachute should see a margin expansion in FY '22 versus '21?

No, you will see a margin expansion maybe versus Q4 definitely.

But where is the flaw in my math here?

See, the flaw basically -- I'll tell you what. If you look at the pricing, the way the commodity prices have increased, the commodity prices have increased in the second half. And then we took our pricing -- price increase has lagged your commodity price increase.

Right. But sir, what...

As we now move -- now what has happened, we have now got a price, which is a fair price.

Correct. But your current price is higher than the FY '21 average price. So unless you are...

So last year, if I do a Y-o-Y and we can take it offline, and I'm sure I'll be glad to spend time on it, but I will give you a construct. Y-on-Y, H1, the prices will be higher than last year, a little bit higher, while in H2, the commodity prices will be lower than last year.

Sure. Saugata, I don't want to get into details. The only context of this question is, I've spoken to a lot of investors. And the key concern that people have is on your margins. But as I see it, I mean, I might be mistaken, and you can correct me. But there doesn't seem to be any reason to believe that FY '22 EBITDA margins for the company as a whole will drop Y-o-Y.

Again, it also starts...

I think the overall margins for the current year is about 19.8%, operating margin. And the kind of inflation that we are seeing, although you're expecting the prices to correct, but then expecting 19.8% to 20% operating margin for FY '22 may not be realistic. And therefore, what we're suggesting is, at least we will maintain the basic threshold of 18% to 19%. At least we'll try and deliver 19%, but expecting a 20% operating margin, there are a lot of moving parts. And therefore, expecting 20% is not realistic. Then I would suggest that we should stay with about 19% guidance.

Okay, okay. Pawan, we'll take this offline. That's all from my side.

So Percy, just to add, I think as I reinforced the fact that we will keep on gradually moving up the margins. And in the second half, we will get into the -- that 19% to 20%, but it might not be the case immediately.

The next question is from the line of Vivek M from Jefferies.

A few questions. First on Saffola, 50% price hike, 2 things. One is, do you worry about any level of, let's say, down-trading in the context of the tough macro that you highlighted in the opening remarks? And the second bit is, what is the competition reaction, at least on the organized side? Have they also taken -- or let's say, that Saffola's price premium compared to some of the other organized players, is it kind of maintained or has it gone up?

Actually, Saffola's price -- Saffola pricing has been pretty competitive in the last -- because as you know, most of the other players have a cost-plus pricing model.

And they have been able to pass on everything, the entire inflation?

Yes, yes, yes, absolutely. So just to give you a context, I think -- let me tell you the typical Saffola consumer, unlike average edible oil consumer in India actually consumes around 2 to 3 liters. So the total incremental outlay, if I take the peak price of Saffola, will be around INR 180 a month. And if you look at the Saffola consumer profile, I don't think INR 180 a month will be very, very -- INR 180 to INR 190 will be very tough.

I see. So you do not worry about any potential down-trading therefore?

Not at all. I'll tell why also, also the fact is that the current situation there that we are back into sort of incremental home cooking actually. And if you look at the current Saffola trends in April, actually, it's extremely robust because we believe that in the -- and anyway, I guess when things normalize, I believe prices also will normalize.

And also just to add, Vivek, over there is, if you look at our relative price index, in fact, we have become competitive because most of other players work on a cost plus margins whereas our margins are farer. And therefore, our ability to absorb the cost push will be higher as compared to any other players. So therefore, we have been more competitive in the recent few months as compared to what we were in the past.

I see. Okay. That's useful.

Just to give you a testimonial that we had a 24% base last quarter, Q4, and we have delivered this growth of 17%. So already a 30% price hike was baked in, in Q4 already.

Sure, sure. The other thing on VAHO, this is the second quarter of very strong growth. Now I know there is a base effect, and the base effect has been there for a few -- in fact, several quarters or for a few years now. And your opening remarks this time around also are very -- you are very -- sounding very confident on the medium term. So can you just elaborate on what gives you that confidence? And when you look back, what could you have done better given that VAHO as a portfolio did not deliver to your expectations?

I think I've covered that multiple times on the VAHO issues. I think 2 things. One, we didn't participate in the bottom of pyramid. And number two, out of the 4 brands -- VAHO brands other than Shanti Amla, we had some issues which we have corrected. Now coming to -- so I think given that, and of course, lastly, I think the third thing we are doing is, as you know, there's been a significant fast thrust on distribution expansion, especially in rural. And we have -- as I told, we corrected. There are some communication mix pricing issues, which we have all corrected and all are back into. So this VAHO growth is a secular growth with all brands delivering double-digit growth. And if you look at this, I think we are, therefore, confident that we are in a position to deliver this 10% growth -- 10%-plus growth VAHO in the immediate coming medium-term quarters. So I think fundamentally, as I said, that we approach the business from all fundamentals, all the brand in terms of pricing, penetration, growth, equity, communication, all are in place. And in addition to that, I think there has been a tremendous focus on rural distribution increase of 25% every year for the next 2 years, which will also help because a lot of these are very strong VAHO markets, which are essentially in the North.

Okay. Sure, sure. And next year, INR 450 crores to INR 500 crores target for -- or, let's say, guidance for foods, do you have a number for, let's say, where do you see this business in 3 years from now?

I think by '24, we should be at least hitting -- we are aspiring for INR 1,000 crores, but we should be at least hitting INR 850 crores.

INR 850 crores in 3 years. Okay.

8-5-0, INR 850 crores by 2024.

2024. Okay, okay. And lastly, on soya chunks, a very nice question that you mentioned that you started with GT and then moving to MT or e-commerce. Just curious why this way and a lot of your launches have been first, let's say, e-commerce and then move to GT. So is there anything specific with soya chunks as a category?

No, no. So we prototyped it in West Bengal. And as you know, in West Bengal, we don't have a very strong GT and MT. So it's primarily a GT market. So we prototyped -- so West Bengal is the strongest market in soya chunks. A lot of soya consumption, chunk consumption happens there. So since we prototyped it, we prototyped in GT, now we are extending it to MT, e-com and plus we will now start extending into -- as we speak, we're extending into other parts of East.

Okay, okay. And like Honey, you have mentioned, let's say, INR 100 crores F '22. Is the -- because given that Soya Chunks is a much, much larger market, do you -- what do you expect from this segment in the next, let's say, 2, 3 years? Do you have any ...

For all others in our new food strategy, any business has to be hard aspiring in 3 years to hit at least INR 75 crores, INR 80 crores, if not INR 100 crores. So I think that's the aspiration, similar aspiration for soya. You are right, the soya market is around INR 900 crores, out of which the branded players at least occupy, the 3 big branded players, around INR 450 crores to INR 500 crores.

The next question is from the line of Harit from Investec.

My first question is on the hygiene opportunity. So last time, you were fairly opportunistic in grabbing certain revenues in the first wave through certain hygiene products. So just wondering how are you thinking about it this time around? Is that something you are going to look at? Or your focus is going to be on core and -- and core innovations?

So I think last time was tactical. I think we have now enough on our plate. And as I said, that this time, while the hardware is in place, I think for all companies, the people situation. So I don't -- we are focusing on the few things. And the -- I mean, the only thing is, obviously, if there are -- whatever inventory we have in hygiene, obviously, we are ensuring that everything gets liquidated.

Got it, got it. The second question is on direct distribution. In your release, you mentioned that now it's ahead of pre-COVID levels. So could you just give us a sense on -- a little bit of numbers on the direct distribution? And what you could look at from an expansion perspective over the next couple of years?

So I think we are focusing, as I said, on 3 areas, primarily -- first is rural. And I think to rural, we are converting -- we are increasing the number of stockists so that we cover it from indirect to direct from -- so that the quality of distribution improves and the range improves. As far as urban is concerned, our focus was entirely on chemist, cosmetic and food outlets. We had left the cosmetic outlets last year because of first there was COVID and the fact that discretionary was not doing well. We focused our entire energy on the chemist channel and food channel. So we'll continue to grow that. And therefore, we believe that our direct distribution will continue to increase every year. But again, the focus is only these 2, 3, we believe, in the rest of the places we are fairly okay. And we are not -- in urban, we are not focusing on marginal outlets, which are anyway indirectly served.

Okay. Got it, got it. And last question was on -- just a bookkeeping on the tax rate. So what's the expectation for where you will kind of end up in F '22 and F '23? This year has been a bit lower. So just wanted to get a sense.

Pawan, would you like to take that?

Sorry, could you repeat, Harit?

Yes, yes. Pawan, my question was on tax rate guidance for the next 2 years at a consolidated level?

Sure, sure. So you could take about 22%, 23% at a consolidated level, which currently -- currently it is running at 21% because what will happen is some of the technical units will go out. And therefore, retail will slightly move up.

So this is for F '22?

Yes, yes.

And would it move up again a little bit going forward 1 year as well?

For the next 3 to 4 years, we could keep it in the range of 22% to 24%?

The next question is from the line of Kunal Vora from BNP Paribas.

First is on the chemist channel. You mentioned that there is a sizable expansion of products. What would be the channel contribution to your sales? Is it temporary replacement channel? Or do you -- like due to pandemic or can it drive incremental growth?

No, no. So if you noticed, there are 2 things. One, if you look at our portfolio, which is our premium VAHO, things like skincare and our immunity products, which is Honey, Chyawanprash. I think have a skew in chemist channels. In addition to that, we also have a product called Bio Oil, Mediker and other products. So I think what happens -- what has happened now is that we now have a sizable portfolio and a critical mass of portfolio where we can make a difference to the chemists because then the chemist will also -- will give us a certain level of the fact that the Marico now has a critical mass of portfolio. So we are independent of, I think, the COVID. But yes, COVID was an accelerator and a catalyst and a very fact that today,chemists are open for a much longer hours than grocery stores. And our distribution or availability of these products are far higher this year compared to 2 years is obviously a distinct advantage. And we will continue to drive this because we believe that whether it is male grooming, skin care, value-added hair oils and our immunity range, especially Honey and Chyawanprash has a significant skew towards this channel.

Sure, sure, sir. Second is on -- in Bangladesh, your non-Parachute business is doing very well, almost 40% now. And you mentioned that you're looking at entering new categories. What are the new categories you're looking at? And do you see non-Parachute becoming larger than Parachute in couple of years?

When I talked about the new categories, I talked about these categories, which is we have expanded the Parachute. See, the entire strategy is to ensure that with your strong master brands, you have a very strong equity of your master brand, and we have a strong distribution. How do you extend this is to leverage the distribution and levels the master brand and expand the total addressable market. So we have gone into baby, we have gone into skin care and the shampoos. All these are delivering in line or ahead of our expectations. And yes, another 2, 3 years, there could be a situation where we will -- non-Parachute C&I business could move around 50 -- would become 50/50.

Sure, sure, sure. And lastly, can you share thoughts on PLI and food processing? You're ramping up your food business. Do you see PLI and food processing as an opportunity for you?

I think that we will -- I think that's something we will explore, but nothing to comment right now.

The next question is from the line of Tejash Shah from Spark Capital.

Sir, just one question from my side. Inventory days seems materially lower, in fact, lower in the last many years. So any insight there?

So as I had talked about in the previous calls that we significantly reduced distributor holding. And today -- the distributor building is today at -- maybe at 2015, '16 levels. In addition to that, we have rationalized 26% of the SKUs. And also with the automation we have done in supply chain or total holding, whether it's in the depot and the distributor, all that has been far significantly reduced. And we expect to maintain this in the following. Because one of the things we have learned last year is the magic of simplicity and reduction of complexity.

And also I'll add one point over there, Tejash. Given the kind of cost inflation that we have seen, we have not built significant portions that otherwise would have built at this point in time.

Sure. So my follow-up question was that only that considering the inflation that you spoke about, in the volume terms, we must be running one of the lowest inventory in the last many years?

Absolutely.

You are right. Depending on portfolio to portfolio, yes, at this point in time, it is on the lower side.

Okay. So should we -- going ahead, should we build this number as a new inventory base guidance?

So as I said, inventory base will have a component of both the rate and the volume. So while volumes will increase as we get good season month and good position, but we'll also get out composite of the -- because of the rate that we are expecting it to pull down. So at this point in time, you could take a slightly higher than what it is currently.

The next question is from the line of Latika Chopra from JPMorgan.

My -- I have one question of -- the e-commerce share your portfolio is at about 8%. Considering that the online channel will probably continue to maintain its share or rather even gain going forward, where do you see this share sitting down with your focus for select categories more here? And importantly, how does that influence the margin profile? How do margins in this channel stack up for you versus the general trade channel for like-to-like brand portfolio?

So I think let me address this. We believe that between e-commerce and D2C because, as you know, we have started a D2C business, plus Beardo also -- around the 30% of Beardo sales also go through D2C. So I think combining these 2, it could, by 2024, be 12% of our business. Anything between 11% to 12% or 10% to 12%, but it will be around that. Now coming to this margin issue. I think there are 2 things we are trying to do. We recently had a cost-to-serve and a net revenue management exercise across the organization. So 2 things, we have already executed, in fact, one is something which we executed around 15 months ago to prevent channel conflict. Even in our existing brands, we are now selling differentiated SKUs in modern trade and e-com as compared to GT so therefore -- so that there is more margin dilution to an extent. The second thing which we are trying to do is one of the index we now measure as a KPI for e-commerce is how much premiumization we are driving in e-commerce and modern trade where the percentage of noncore business has to be significantly higher. And over the next 3, 4 years, we will try and increase the noncore business in e-commerce. It's currently higher than, obviously, GT right now. But it's not high to the extent we would like to do over the next 3, 4 years, and we will substantially drive. And that part of the business is the higher GM business. So even if there is a higher-margin to be given long-term in e-commerce, a higher cost of sale across by selling a differentiated portfolio or a differentiated SKU within the existing core brands, we should be able to have a margin neutral. So we actually have a cost-to-serve exercise, which we review every year between each channel.

The next question is from the line of Shirish Pardeshi -- sorry, the next question is from the line of Abhijeet Kundu from Antique Stockbroking.

So my question was on Value Added Hair Oils as well as on Parachute Coconut Oil. In Value Added Hair Oil, you've said that increase in rural distribution has helped as well as you have been taking various initiatives. But just wanted to understand that, is it the case that both in Parachute Coconut Oil as well as in Value Added Hair Oil? Are rural markets see some kind of market share gains from smaller brands? Because in Value Added Hair Oil, you have gained about 200 bps market share. And Parachute Coconut Oil also has been doing pretty well all along. So is there a case that the smaller brands are losing out share there? So, yes, first question is that.

Yes. So I think you're absolutely right. I think see, although I must say that this year, the -- we try and took some time to stabilize because the first quarter the -- but now the data has got stabilized. So we believe that initially I think especially when COVID hit that some of the smaller brands, because of working capital, supply chain disruptions, they were unable to drive distribution. Additionally, the fact that brands which have a direct rural distribution have a competitive advantage because wholesale as a channel is -- has got disrupted due to COVID, due to GST and other factors. So I would think and also, there are a lot of organized big brands who are participating in the bottom of pyramid and Value Added Hair Oil. Initially, we were not, but now we are also participating. So I would think that the smaller brands are getting squeezed out there. And there is a sizable market share which the smaller brands have, and this share is definitely up for grabs.

Okay. And how much of that 200 bps market share gain would be due to Shanti Amla?

I think this year, all the brands, and that's why I said that if you look at the one thing that went wrong between 2017 and '19, if you look at the 2010 to 2017, where each and every year, we grew double digits. It was a -- reason was because, all the brands, there are 4 big brands, and sometimes there are some of the new brands, which were growing double digits. So this year, fortunately, 2 of the 4 brands have gone -- have gained significant market share. In addition to that, aloe vera is doing very well. And also the Ayurvedic hair-fall oil, which is sold in the South has also delivered double-digit growth. So it has been an all-around growth. If we have to grow double digits in VAHO, it can't be only due to Shanti Amla. While Shanti Amla has grown in double digits, all the other brands have also delivered double-digit growth this quarter.

Right. And any benefits from increase in geographies? I mean, if you have been able to penetrate relatively unpenetrated geographies for you, has there been a case for that? I mean, has that also helped?

So I think that benefit will go to first Shanti Amla because that is the most distributed brand and then onto Parachute in the South and West. So I think we obviously have a significant journey to cover in rural distribution in some of the states, especially in North India, we still are not best-in-class. And as you know, we have now taken an ambitious target of increasing direct distribution through stockists by 25% every year. And obviously, there will be a -- all those distribution gaps in some of these markets will be bricked. And I think we will get significant distribution-led growth because we believe that while we are good in weighted D in a lot of categories, I think there is significant numeric distribution opportunities in VAHO and maybe also in Parachute and also in food and some of the premium things in urban over the next 3, 4 years, which we're going to capitalize on. So distribution -- direct distribution in urban, in chemist, cosmetic and food as rural distribution is a big thrust area for the organization.

Next question is from the line of Shirish Pardeshi from Centrum Capital.

My heartiest congratulations for excellent volume growth. I have a couple of questions. The first question is on the distribution you just mentioned. A little elaborative manner, I would like to know. What is our current direct distribution? I assume that it is 1.2 million, 1.3 million, and against that, what is the food distribution because I would assume that there will be a common distribution point?

Yes, food distribution, 2 things. On food distribution, it's essentially a significant skew towards MT, e-com and urban outlets. So I think we will continue to -- I believe, food, you need to focus on depth and weighted D. We don't sell impulse food items. Even in Oodles which we have launched, it is priced higher than the common brands and other big, large brands in the category, the common price points. So I think we are reasonably happy that if you continue to -- for example, if I tomorrow reach 300,000, 400,000 direct reach in foods, we would have covered a significant part of the weighted D.

Yes. That's exactly the point which I was saying. If I look at the profile of your products, whether it is oats or even premium you are charging on honey. So is that -- I mean, from the brand P&L perspective, do you think this brand can stand out in own when you have a revenue target of INR 100 crore, and you will start generating money?

Yes. Oats, I think -- we have -- oats, we have good money. I think -- you see the thing is very simple. I think, obviously, in the initial years, there will be strategic funding because you need to have a certain advertising spend. But I think -- and all the good thing about foods is which scale you get a tremendous operating margin leverage. So I believe that the model which we are saying that entering categories and delivering INR 100 crore plus, and I think that is good enough for having a breakeven. In the case of oats, obviously, it took a little bit of time, breakeven happened because -- at around INR 150 crore to INR 160 crore mark.

Yes. Second question is on -- in your update, press release, you said that you've got a cost saving about INR 50 crore in the international business. So would you able to quantify what is the similar benefits you have got into the domestic business?

Around INR 150 crore.

Okay. And any target you would like to share with us at this time for FY '22?

No, no. I mean, we have a target. But while I said that we have an aggressive target, but it's fine. And I mean, I believe that -- and I gave one philosophy which we are following, that we will do everything which we can to reduce wastages and flab, but we will not do anything that cuts the muscle for long-term growth. So we will not cut it, we will not cut investing behind innovation, investing behind leadership capability, investing behind people, investing behind digital.

Okay. Just last question on VAHO part. I think you have done a very respectable, commendable job on Nihar Shanti Amla. And I think when I look at this, Nihar Shanti Amla, you had the issue, but now it is sorted off. Just more curious, what could be the sales quantum in terms of revenue contribution in the domestic business for Shanti Amla, say, 2 years before and now?

I don't want to get into individual components. I think, as I said, that in the entire VAHO growth, it's being now fueled by all the brands. I think -- and Shanti Amla has been delivering double-digit growth for most of the years. And so -- and now all the other brands are growing. So we don't want to get into individual contribution, please.

Would you be able to share at least into the Amla category, what would be its share in terms of volume?

Volume share is -- Pawan, it's -- what is the volume share latest?

Overall value total on volume...

Amla share, Amla volume share.

Amla would be -- we have not really gone public with that, Saugata. So if required, we can ...

No. You mean Amla category or market share? Was that the question?

Yes.

Market share volume, market share in Amla?

Yes.

That's I think about in the range of 40% plus.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.

Thanks a lot for listening on the call. To conclude, we have had a very strong quarter 4 performance and ended the year on a good note. However, given the unfortunate COVID resurgence, we are cautiously optimistic about the outlook for the immediate future, while our belief on medium-term prospects continue to remain strong. There are immediate cost pressures, which are transient in nature, and we have already started seeing correction in copra prices, but expect edible oil prices to cool off when the supply situation in the global marketing grows. However, given that our priority will be to maximize volume growth and expand market shares, we have to be a little patient on the recovery of margins and expect muted profitability in the next quarter. If you have any further queries, please feel free to reach out to our IR team, and we would be happy to address questions. That is it from our side. Please stay safe, and take care.

Yes. Just 1 sec, I think a clarification, the volume market share in Amla is 44%.

Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.