Marico Limited (531642) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Marico Limited Q3 FY '25 Earnings Call. We have with us the senior management of Marico represented by Mr. Saugata Gupta, MD and CEO; and Mr. Pawan Agrawal, CFO. [Operator Instructions] Please note that this conference is being recorded. 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 is not an institutional investor or analyst, but would like to ask question, please directly reach out to Marico's Investor Relations team. I now hand the conference over to Mr. Saugata Gupta for his opening comments. Thank you, and over to you, sir.

Yes. Hi, everyone, and all those who have joined the call and my best wishes to all of you for a very happy and prosperous 2025. I would like to begin by sharing a perspective on the operating environment during the quarter, followed by our performance and the strategic objectives going forward. The FMCG sector exhibited reasonably steady demand sentiment during the quarter. Retail and food inflation were at elevated levels, but showed some signs of easing in December. Urban demand remained stable yet soft on a sequential basis, whereas rural continued to witness improvement growing at 2x of urban on a year-on-year basis for the third consecutive quarter. Resultantly, HPC categories continued to perform packaged foods on a year-on-year basis. Continued government schemes, rise in MSPs and a favorable crop season boded well for the ongoing rural recovery. In urban, consumption sentiment remained reasonably stable amongst and healthy among the affluent and upper middle-class segments, while middle and bottom of pyramid segments appeared relatively subdued by inflation and slow wage growth. Pricing growth across categories was up sequentially as companies implemented pricing hikes to counter margin pressure from the sharp rise in commodity prices. Moving on to our performance. The India business posted a sequential uptick in underlying volume growth and a robust high-teens revenue growth. Offtake growth remained healthy with over 90% of the business gaining or sustaining market share. About 80% of the business either gaining on sustaining penetration, both on a MAT basis. From a channel perspective, alternate channels continued to drive growth and gain salience. The GT channel has been in prolonged sluggishness due to the evolving interchannel dynamics, conflict and shift in consumer behavior. While the share of alternate channels has been on the rise in Tier 1 markets, we believe GT will continue to be relevant and dominant channel, especially in Tier 2 markets and beyond. We will continue our focus on driving differential growth in our urban-centric and premium portfolios through the organized retail and e-commerce channels. Therefore, we will aim to deliver consistent and competitive growth in the medium term through a sharper and more targeted portfolio and [indiscernible] strategy in each channel. Delving into the domestic business, I will now touch upon the key trends in each of our categories. Parachute posted a resilient performance despite a steep input and pricing increases, absorbing a circa 1% volume impact due to ml-age reduction in one of the price point packs. The brand maintained its stronghold through market share and penetration gains. We have taken another round of price hikes towards the end of Q3. As forecast suggest copra prices to remain firm in the near term, we'll closely monitor consumption trends with this high pricing and the transient impact of inflation of price point packs in the near term, given the persistently inflationary market conditions, which are expected to improve soon. Saffola edible oil also demonstrated stability despite significant price hikes over the past few months, driven by the import duty hike. We expect the brand to remain steady unless there is significant volatility in vegetable oil prices. Value-added hair oils, while subdued recovered sequentially and maintained an upward trajectory in market share, excluding the bottom of pyramid segment where we are facing unreasonable competition, the portfolio delivered 3% growth, which is in line with overall BPC categories. We'll continue to reinforce our market leadership through strategically increasing ATL spends and focusing on growth in the mid- and premium segments by gradually improving rural sentiment -- that is likely to support consumption in this category. Food business scaled up to around INR 1,000 crores ARR in Q3, which was underpinned by broad-based growth in the core and the new franchises. You would recall in 2020, we had taken this aspiration of developing INR 1,000 crore food portfolio when we have finally reached there. Saffola Oats delivered double-digit growth and maintained its position as the #1 brand in the oats category. True Elements and Plix plant-based nutrition portfolio also scaled up well. Following the substantial expansion in gross margin last year, we expect gradual improvement in the profitability of the foods portfolio as we build scale in the medium term. The premium Personal Care portfolio performed well in line with expectations of the Digital First portfolio. Scaled ahead of expectations, reached INR 600 crore in ARR in Q3. Beardo is on track to deliver double-digit EBITDA margins, reinforcing the long-term focus towards driving consistent growth and improvement in profitability in the medium term. We maintain our aspirations to achieve double-digit EBITDA margin on Digital First portfolio by FY '27. The composite revenue share of Foods, Premium Personal Care, including Digital First brands in the domestic business stood higher at 21% in 9 months FY '25, despite significant pricing growth in the core portfolios. These businesses are now clocking a combined ARR of around INR 1,900 crores and represent a phenomenal shift in the growth trajectory and the potential of the India business in the future. This is a testament to the tremendous conviction capability building effort and strategic investments made over the past 4 years. Further, a notable improvement in profitability of these businesses over the last couple of years reinforces our focus on driving sustainable diversification in the medium term. The international business sustained its double-digit constant current growth momentum. The business has continued to chart a resilient top line and profitability performance, despite the impact of currency headwinds in key markets. Currency headwinds had a 2% impact on consolidated EBITDA this quarter. The Bangladesh business delivered a robust growth and continued to demonstrate its competitive moat even amidst the challenging macro environment. MENA delivered strong growth and aggressive market share gains across both the Gulf and Egypt markets. South Africa has been a consistent performer as well. Southeast Asia was muted due to a tepid consumption environment in Vietnam and geopolitical issues in Myanmar. The new country development or exports market have been scaling up healthily as well. We are confident of maintaining the strong double-digit constant currency growth trajectory in international markets, and gradually unlocking the margin upside to scale benefits in the medium term. To sum up both domestic and consolidated revenue growth, along with the underlying India volume growth, reached a 13-quarter high, amidst the challenging inflationary environment. The international business has also sustained its double-digit constant currency growth momentum. We're on track to achieve double-digit consolidated revenue growth for the full year. As a result, we are well positioned to meet our aspiration across most key performance metrics set at the start of the year, alongside our strategic diversification goals in both India and international markets. While input inflation has been higher than expected, this has put some transient pressure on profitability. As far as copra is concerned, it follows a 18 to 24 months cycle and we are nearing the end of the inflationary cycle. Prices are expected to cool down once the flood season resumes from early Q1 FY '26. However, the gains will come to us with some lag since we maintain some level of position at current levels as well. That being said, our ability to take pricing in Parachute, ongoing cost management initiatives and the scale-up of Foods and Digital First businesses in India, as well as MENA and South African international business enables us to contain the impact. We remain committed to achieving top quartile volume growth in the India business and double-digit consolidated revenue growth in the near and medium term and as well as double-digit constant currency growth in the international business. One of the things we have managed to do reasonably well is our ability to anticipate an opportunity or a threat and be ahead of the curve. You will recall, first, we called out and addressed the interchannel conflict in India as early as 2019, '20 as well as the GT stress and the need to support the distributor ROI 4 to 5 quarters ago, recognized on the early signs of stressing GT we chose to proactively invest and adopt a measured and structural approach to address the issues. With included actions such as segregating packs across channels, implementing a minimum operating price and elevating our strain on our partners by reducing working capital pressure. In addition, project Phase 2 has extended into 11 states now. We expect the results of our initiatives to revive GT growth to reflect in our performance over the coming quarters, while the improving consumption trends persist. Secondly, we are of the very few companies that continue to invest in brand building across input cost cycles given our strategic intent to continually strengthen the long-term equity of our franchises and accelerate diversification and we have resisted temptation to manage short-term margin by cutting A&P in a quarter. Thirdly, we anticipated the threat of D2C brands eating into incumbent players growth as early as 2020, which has happened in some of the developed markets, including U.S. Similarly, we identified the higher growth potential of food versus BPC, and we strongly believe that packaged foods over a next medium-term cycle has a higher run rate to growth than some of the BPC categories. We therefore initiated an ambition diversification agenda to aggressive organic and inorganic investments, which have been delivering impactful outcomes. We have also exhibited resilience and grip, which has led to our ability to tackle this slowdown by largely delivering what we have promised. And finally, our vision of being of the few legacy FMCG companies across the globe to successfully transform itself into a profitable consumer digital company is progressing reasonably well. This has been made possible by our unique M&A strategy, which is a win-win for both of us and the founders, and our learning agility and our ability to learn from them with humility and see founder's mentality within our leadership in the process over a 3-year period where they earn out. Last but not the least, sustainability remains a top priority and integral to our business operations. Our sustainably 2.0 framework is yielding positive progress across all key focus areas. We are confident that our dedication to creating shared value for all will drive long-term sustainable and differentiated book. With that, I will now close my comments. Thank you for patiently listening, and we'll now take all your questions.

[Operator Instructions] We have the first question from the line of Abneesh Roy from Nuvama.

Congrats on good set of numbers. My first question is on Plix and True Elements. So if you could tell us in terms of distribution scale up with respect to these 2 specific products, how is the scale up? And in the next 1-year, how much more can happen? In True Elements, competitive intensity, I think, is quite high. There are a lot of similar kind of companies in both legacy and start-ups also. So if you could discuss how things are on competitive intensity. And in terms of, say, profitability, how are things panning versus internal expectations?

Okay. So if you ask -- first, let me ask you the last question. I think the cash burn in the businesses Plix is profitable, and the burn rate in True Elements is extremely low. Now coming to the growth expectation. See, one of the things we believe in digital businesses is to have a sustainable profitable growth trajectory. Given a choice between 60% growth and high cash burn and 25%, 30% growth and having responsibly towards both capital utilization and managing profitable scale-up is the second choice we have taken. And therefore, as long as we deliver that kind of growth, we would be happy. Now I think as far as GT is concerned, one of our learning has been that a lot of so-called D2C or digital brands end up taking costly displays, beauty advisers, putting in all the 200, 300 SKUs and perhaps after sometimes offtake doesn't happen, and they have to take the stock back. So we have been, I think, doing a little more focused way. For example, in Beardo, we learned that you should only do the hero SKUs, which are 6 or 7 SKU. Now in food, obviously, the opportunity for GT is for higher. In the case of Plix, what we are doing also is that we have got some specialty SKUs like we have a smaller ACV. We have got a coconut powder, which is -- can be added to. So we are creating a portfolio for GT rather than having the same set of products. And also the other thing that happens that if you are running an e-comm or your own D2C significant discounts, and then you are not passing on in GT because GT is sold at MRP, those stocks don't sell. So therefore, we have now realized that you need to have significantly differentiated portfolio. I think you came to -- I think you talked about True Elements competition. I think there is enough, I think, opportunity and headroom for growth in the market. The way we look at it that between Saffola and True Elements, we will occupy different market categories and work together and grow. And there is enough opportunity and there is enough TAM in the categories because I think healthy eating or better-for-you products is something, which will actually grow in India. Plix, of course, has a huge headroom for growth in some of the formats or some of the places where it can move into. So therefore, we are very excited. We are extremely confident that Plix will hit a INR 500 crore number very soon. And I think having said that, we are not pushing the digital business to do obscene 70%, 80% growth and do a cash burn. That is something which we don't want to do. We believe in build-to-last and build these businesses, which are healthy and sustainable over the long term.

One follow-up on Plix. So INR 500 crores very soon. That very soon is FY '26 or '27? And second, when you had acquired Plix, clearly very differentiated portfolio and innovative company. Now what are the SKUs or formats which are working? And in terms of pricing, have you made more affordable because pricing at that time was definitely on the higher side. But with your scale and expansion and overall ability to price it lower, has the pricing become more affordable for the customer?

So I think we -- in GT, we are prototyping certain packs which have a lower MRP because we believe that I think lower outlay is important. I think, say, pricing and at the end of the day, a nutraceutical product, I think we are pretty okay. The question is, of course, that we don't want to -- we are not into the -- this one on doing too much discounting because that finally dilute the equity, it drives commoditization of the category. And ultimately, I think AOV, and we ensure that we have a healthy CM1, which is very, very important for a sustainability of digital businesses.

Understood. My last question is on the Parachute business. So double-digit price hike, have the other listed players who are also much smaller in coconut have they also taken similar pricing? Because I do see them being a bit more aggressive on promotions. And second, coming to the 3% volume growth, two subquestions here. One is, if you could elaborate if that 1% adverse impact on volume, will that continue in Q4 in terms of the pack size changed? And in terms of volume growth again 3%, again, rural, is it 2x of urban in this category for you?

No, I talked about rural being 2x and urban for the FMCG category. But specifically this one, for us, it's been a little more rural than urban. Now the second question you asked on the shrinkflation, yes, it will continue because anniversarization will only happen in Q2, Q3 because Q2, Q3, sometimes in Q2 and Q3 and -- so that will continue for a couple of quarters. But one of the things that could happen is that, as we said that we are perhaps on the end of the inflation cycle and when the deflation comes, we might want to neutralize the shrinkflation, but adding volumes back as and when the opportunities arises between Q2 and Q3 this year.

One follow-up was the last one from my side. So you did say that in FY '26, copra could correct. And that's a very fair observation given agri commodities behave like that normally, after sharp inflation, sharp deflation can happen. My question here is, would you be worried on that because one, price cuts could happen in FY '27 say -- starting FY '26, say, starting Q2, which means operating deleverage can happen in that part of business. Second is local sales also come back. So on these two aspects, what will be your thoughts, sir? I understand currently, no one can say [Foreign Language] but from a theoretical perspective, how would you fight the deflation issue, on the -- operating deleverage issue and the local sales coming back, how you will be able to fight those two?

So I think two things. One is, as you know, given the MSPs of copra, the downside is not very high, okay? Secondly, having withstood multiple cycles, I think we have refined our strategy, and we are not particularly concerned about that. I think if I look at the last cycle, we corrected ourselves within 1 quarter of the volume growth. So I don't think -- as I said that I think after continuing these cycles, we will not -- we, in the past, yes, I think in 2018 or something, I don't remember, 2 cycles, we have made some mistakes in terms of not taking proactive price hikes, proactive price drops. We also know how not to keep -- in terms of the stock covers and all that when the deflation offer. So I think we are far more refined in this one. And as you know that in terms of the smaller players broadly, I don't think even during the -- we are not seeing significant lack of activity or this one even in the inflationary cycle because some of the so-called organized players are also not making money and you refer to some promotions that some people are giving. But -- so I don't think the behavior has changed during inflation or deflation of some of the branded competition.

Also just to clarify, earlier, we were more conservative about copra prices in terms of taking the pricing correction because the dependence on profitability was far higher. Now given the structural levers that we have pulled in the last couple of years, where we have improved profitability on various fronts, here, we'll be more proactive in terms of passing on the benefits to protect the volume and consumer franchise. And therefore, we are not too worried about keep the deflation set in and set in rapidly where it will impact the volume. So we are far more confident at this point in time that we would be able to pass on the benefit of the consumers proactively and still deliver decent volume growth.

Actually, just to add to that, I think what we can promise in the next 3 to 5 years, we'll not discuss copra pricing in our analyst call.

The next question is from the line of Percy Panthaki from IIFL Securities.

Congrats on a good set of numbers. I just wanted to understand your Food business a little better now that it has gained some kind of scale. So could you just very roughly break up the total business in terms of percentage contribution of different segments, be it oats, honey or whatever else? And secondly, if you could give some idea on what kind of EBITDA margins this entire Food business as a whole is generating? And what kind of margins you would target over a 3- to 5-year kind of a period?

So I'll give you a broad macro flavor, Percy. I think if you look at it, obviously, the largest is the oats and the oats at the scale it delivers an EBITDA almost near the company average. So I think as you get scale, we get that, okay? And as you would recall, last year, we improved the gross margin by 800 basis points. And we are working towards capability building. Are we there fully? We are not there, but still we are 7 or 8 -- I mean 7 on 10 today. I think we believe that the crux to it is to crack the GT in Foods and towards that SETU -- one of the drivers of SETU also is to expand food outlets, of course, besides getting into chemist and cosmetic in urban. We think that while oats and the good thing is that even in the so-called food slowdown our core, which is oats and Masala Oats continued to give double-digit growth, so which means we have been able to expand penetration. And that's a penetration drive to expansion, which we are doing. And as the country becomes trying to get healthier options, as you know that I think one of the things in India, there's a huge this one to have better-for-you food, we believe that whether it's Masala Oats and a variant, which we have launched in Masala Millet, this will drive the core. As far as other things are concerned, which we believe can get scale, I think honey and soya has got some scale. Honey, we have done very well in OT. We need to do a better job in distribution. As I said that once we get the SETU thing right, over the next 6, 7, 9 months, we will get the next level of growth in Food. We think between Muesli and snacking, these are another opportunities. And snacking is a big, again, we are prototyping snacking and Muesli is something which we have also prototyping and it's also doing well. So between -- so these are -- so the way to look at it is that which are my next INR 100 crore opportunities and INR 200 crores opportunity. At INR 200 crores, we start doing -- we're making good profit. And the way to look at Foods is that I would rather grow the next doubling of foods by doing 3, 4 things big rather than getting into 8 things small. The moment I do 3, 4 things big and each one getting into INR 300 crores, INR 400 crores, and then you will get into that EBITDA. And the other thing about this is that the way to look at it, yes, Foods make slightly lower margin than Personal Care part of the business or the Parachute part of the business. Okay. Having said that, it makes much better marginal Saffola part of the business. So if I look at it another 2, 3 years, it will be a 50-50, and then it will move to Foods will dominate Saffola. Second thing is as long as the blended gross margin of our new portfolio, which is Digital plus Premium Personal Care and Foods, our objective is that the blended margin of the NPD -- or not the NPD, the diversified portfolio has to be higher than the margin of our core. And that is what we use as a metric every time.

And just to answer your question with respect to the breakup. In our own portfolio, oats continue to be the largest part. And we believe it will continue to remain larger at least for the next 1 or 2 years because the penetration is still low and there's significant headroom for growth, and we've been continuously delivering double-digit growth in oats. Then it is followed by True Elements, Plix and then Honey and Soya is scaling up fast.

Understood. Understood. And Saugata, when you said that the Foods portfolio is having a better margin than the Saffola portfolio, two subquestions within that. Did you mean that at current level? Or do you mean once it scales up over a few years; and secondly...

At current level, Saffola.

Did you mean it at a gross margin level or at EBITDA margin level?

So let me just clarify. First of all, at a gross margin level, my Foods portfolio is definitely far higher as compared to Edible Oil portfolio. As and when we get scale, as Saugata mentioned, for example, Masala Oats, it is now making almost company-level operating margins. So overall Foods operating margin will also be better than Edible Oil operating margin. But as we keep getting scale, it will only get better and better.

Understood. Understood. Secondly, just wanted to understand the interplay between your input cost inflation and pricing. So just sort of trying to wrap my head around or trying to work my own estimates for FY '26. So supposing if there is some amount of deflation in copra and you have to drop your price, that will affect the sales negatively, but it should affect the margins positively and vice-a-versa. So if there is still an inflation, maybe your top line will continue to be good, and the margins might be under pressure. But in either of these two cases, are you confident of delivering double-digit EBITDA growth Y-o-Y?

So as you rightly mentioned Percy that there are multiple or numerous dynamics at play. So it is very difficult at this stage to share a margin percentage, but still we will aim to hold the margin steady, while we'll focus on delivering double-digit revenue growth backed up by top quartile volume growth and deliver healthy profit growth. Now as the year progresses and probably, let's say, when we come up after the Q4 earnings call, we'll be in a better position to give you a better guidance for FY '26, but we are definitely committed for double-digit revenue growth, which definitely will have a good volume growth and a healthy profit growth.

The next question is from the line of Avi from Macquarie.

I just wanted to clarify on this -- on the Foods profitability a bit. So at the EBITDA level, the existing Foods plus Premium portfolio, which is 21% of our business, should be equal to company average right now or slightly less -- I'm sorry, I just wanted to kind of understand that. [indiscernible] I didn't see it in FY '27 or how do we see kind of progressing towards FY '27?

So currently, at a weighted average level, what Saugata mentioned is that we try and manage that the weighted average gross margin portfolio of the weighted average gross margin of this Food plus Digital portfolio has to be higher than the company gross margin. So that's one. That we definitely ensure. As far as Foods margin is concerned, Masala Oats has definitely reached EBITDA of company. However, if you look at smaller foods, which is Honey, Soya, et cetera, currently, these are in buildup stage. So as and when they reach about INR 150 crores to INR 200 crores, they'll start making very healthy margin. So that is what it is.

And the Digital will hit, again, double digits. So yes, I mean, over the next 3 to 5 years, the aim is to merge with the company margin. But that's...

Just to give you a color on the Digital business EBITDA, it has now moved to a very, very low burn. All Digital business put together; it will be low single digits. In fact, Beardo is likely to deliver double-digit EBITDA growth. And next year, as a total Digital business as a cohort, we definitely believe that will move to positive EBITDA margin. And in FY '27, we would strive for delivering double-digit EBITDA margins.

Okay. Perfectly clear. And sorry, a short-term question, just this transient profitability impact from higher copra and veg oils, what would it mean for -- as we see this year margins? Or does it mean like 70 to 90 basis points contraction in EBITDA or even higher? Is there a number that you could share?

See while we're hoping to deliver 20.5% margin for the full year, but there has been a higher-than-anticipated cost push in copra. And we have not passed on the entire hit to the consumers to protect the consumer, franchise, volume and prioritize market share gains. And as you know, during these times, we lap up market share gains. Additionally, the top line growth also has been higher. We have moved to mid-teens, and hopefully, we will be targeting a high teen growths in coming quarters. So which mathematically also impact the gross margin due to denominator effect. So as a result and mix of all this, we believe we should be able to hold about 20% operating margin for the year.

The next question is from the line of Arnab Mitra from Goldman Sachs.

Congratulations on a good performance in this tough environment. My first question actually was on Foods and Personal Digital buffer brands. Correct me I'm wrong, but it seems Plix has been a big positive surprise on both sides. So on the Foods part, my question was, is it been very ACV driven? Or how has been the progress in diversifying the portfolio outside ACV, which was I think the original thought also that the company had. And on the Personal Care side, that space seems extremely crowded, serums and that space. So how is Plix managing to grow there? Is it at a big loss? Any separate like strategy there that is working for you?

So I think two things. I think two things which are differentiated for Plix. If you look at it, Plix is essentially far more a D2C driven brand and therefore, given the higher AOVs, it's reasonably profitable and low cash burn. Now the diversification from ACV has started. And obviously, as you know, that in any nutraceutical brand, you have 5 platforms, which is basically weight management, heart care, diabetes, gut health, bone health and sleep. So we have gone into 1 or 2 of these, and we will obviously go into this one. And there is a diversification agenda. Having said that, I think it's very important to have a hero product and get scale on the hero product because that drives us to profitability. What we are going to do also, as I said, unlike some of the other companies, we are going to only take fewer skills and go into GT and we are actually experiencing a reasonably successful GT model, as an Plix is concerned, it's very early days. Now coming to Personal Care, I think, one, as I said, one is a business model which is different. We do much more the -- the second thing is if you look at it, it is all about hair and skin food. So Plix positions its Personal Care as hair and skin food as opposed to just say a basic something on beauty. So therefore, there is a distinctive positioning as far as Plix is concerned. And I think we are -- and also the products we -- obviously, one of the things which any of the digital brands have as an advantage as a part of the strategic -- this one as strategic partners, with Marico as strategic partner is access to Marico's supply chain capability, access to Marico's deep R&D capability, which also adds to the development and product in cost structure, which may be a standalone founder brand doesn't have.

Just one follow-up on this. So when you look at FY '26, further scaling up mix, would online and ACV itself have a lot of headroom for growth? Or would you need the new platforms toward GT work for growing again, maybe 30%, 40% on whatever you will do in FY '25?

No, it will be a mixture of both. But I think there is enough opportunity, as I said, that as far as -- see, if I look at it in India, the biggest 2 consumer needs is looking good, staying healthy and young. And I think Plix participating in both of them. And therefore, there's extreme tailwind, and I think there's significant capability. I think if you look at it, I believe that in terms of innovation -- in terms of high-velocity innovation and digital marketing capability, Plix will be best-in-class -- one of the best-in-class in India, and even I think will comparatively globally. The other thing we have started in Plix is that we have started the international business, and we are starting to sell in Middle East and U.S. and it's tracking well.

Got it. My second and last question was on VAHO where you mentioned a slight sequential improvement though the Y-o-Y number is still negative. But your confidence on this improving further, is it largely because of the base effect that you have a decline now in the base? Or are you actually seeing some traction in the initiatives we have taken; you've done above the line and other initiatives here. So any sense of how you think the recovery happens here in terms of the confidence on your side?

Arnab, it's a combination of both. And if you look at it, I think last time, we were very embarrassed about reporting a minus 9%, and we said that is it. I mean we don't -- we can't move beyond that in terms of decline. I think we have moved up. I think what we have done is two things. One is the part of the business where there is unreasonable competition, we said that let's not try to keep on doing BTL. We don't believe in BTL driving growth. We believe in ASP driving growth because we believe brand equity drives growth. Now -- and we are doing it independent of competitive action. And therefore, we have started investing behind mid and the premium part of the business. And therefore, as I said, that business grew 2%, 3%. We will continue to invest because otherwise, what happens is if I just track SOV and be very happy that I maintained SOV by reducing 40% ad spend, we are doing harm -- long-term harm to the category, which I don't want to do as the market leader.

[Operator Instructions] The next question is from the line of Karthik Chellappa from Indus Capital Advisors Hong Kong Limited.

I have two questions. The first one is on channel. So you have commented in your information update that modern trade and e-commerce, including quick commerce has been growing at high double-digit volume growth. Could you give us some context or perspective on what the volume growths are and how divergent they are between the two channels?

So I think quick commerce, obviously, is the biggest driver of growth and what we have realized that we need to have a differentiated portfolio in quick commerce, so that it -- and interestingly, even some of the digital brands are doing well in quick commerce. Now coming to modern trade, there is, yes, it's organized -- we will respond there has been a little bit of a slowdown in modern trade. Having said that, I think we're still growing double-digit in both marketplace e-commerce and modern trade. The growth in quick commerce has been 50% plus.

Got it. And over how many quarters do you think your GT growth will start to catch up with your company average growth at the domestic level? Because right now it's flattish and you're implementing a lot more initiatives. But once that starts to bear fruit, how many quarters in your estimate will it take for the growth to converge with the company average?

So, I think if you ask me over the next 3, 4 years, obviously, OT is going to go higher than GT. I think what we are trying to do is to get GT back on track and also get the GT, what I call the infrastructure stability, which is basically ensuring that our partners' ROI. One of the interesting things about the inflation is that if we are delivering double-digit revenue growth, it is actually positively improving the ROI of the -- our partner because we had sales deflation in the last 2 years. And so, I would say that GT -- we are expecting GT growth to marginally improve. Converging into the -- this one growth is unlikely to happen. I mean because -- and that is a case for all the -- I mean, in the entire sector. Having said that, I think if we can crack Premium Personal Care, chemist and beauty outlets and also Food, I think this will have an accelerated growth, especially in GT urban. SETU should deliver a higher growth in GT rural along with this. And the last thing is that we are also, which is a different thing, which is a digital brand. We should be in the next 2 years also having -- we should be able to crack a reasonable amount of GT, but we will not be -- as I said, that we are not going to be super ambitious on GT there because we believe that we need to double up and be specialist in 1 or 2 channels.

Got it. Last question from my side, sir. As far as value-added hair oil is concerned, although it's declining in 2% in value terms, is there any geographical disparity in that growth? Are there certain geographies, which have started showing positive growth? And if so, which ones would they be?

See it's mostly on Shanti in rural. As I said that we are facing unreasonable competition with disproportionately unsustainable BTL, which I don't want to compete with because we believe in long-term equity building and ATL. ATL -- in terms of ATL works far more better in long-term equity creation than BTL.

The next question is from the line of Bhavdeep Vora from Franklin Templeton. [Operator Instructions]

Sir my question was on the different channels. If you could describe the salience of different channels, so GT, MT and e-commerce in the domestic India business? And if you could comment a bit in terms of the profitability of various channels and working capital intensity. How would that be between the channels?

So basically alternate channels contribute about 30%. Then there is a CSG, which is for the defense personnel, that is about 6% to 7% and the balance is GT. Now we haven't really gone public with respect to channel-wise profitability. But yes, the profitability in GT is better than alternate channels. Having said that, we have taken a lot of measures to improve profitability on alternate channels, it is not very, very significantly different from GT. Now in terms of working capital intensity, of course, the receivables, et cetera is higher for our alternate channel, and that is why you would have seen that debtor days would have slightly increased. But over there, also, we are having a very tight control, and we believe that this will remain at this level where we have reported.

Just wanted to add that we believe that the role of alternate channel is to drive premiumization, upsizing and diversification. And therefore, one of the things we have been doing is that clearly identifying one is having different packs, especially in our core like Parachute and also identifying GT Advantage SKUs and MT, OT Advantage SKUs.

Okay. Okay. The second question was on Bangladesh. We have seen an acceleration in the constant currency revenue growth. So if you could comment on what's really happening in that market? And how do you see kind of the next year -- next financial year in terms of the expectations for revenue growth and profitability in that market?

So I think -- yes, just to give you a perspective, I think as we have mentioned it is on a slightly lower base because last year, quarter 3 was soft. But the way to look at it is that we should be hitting a double-digit constant currency growth this year also and next year also we'll aspire to deliver a double-digit constant currency growth.

The next question is from the line of Sheela Rathi from Morgan Stanley.

Saugata, my first question was on VAHO portfolio. I mean, you gave a very detailed explanation on how we are shaping up the Food business and what the trends are. But with respect to VAHO portfolio, and the competitive landscape seems to be very challenging for last many quarters or so. Is there a reset or a rethinking around -- rebuilding a portfolio here? Or is there any other -- any part of the portfolio which we can modify to you bring back the growth trends in this particular portfolio?

Okay. So I will give you a broad construct, which we did the reset last quarter, but this takes at least a couple of quarters to do this one. We have said that ultimately, we will do a reallocation of resources towards investing between -- in the mid and the premium part of the portfolio, we are not going to get into a [ dog fight ] at the bottom of pyramid by doing too much of BTL because that doesn't help because that can give you growth, which is unsustainable and unprofitable. And we don't want as an organization to do unprofitable and unsustainable growth because otherwise, I will get into tomorrow rice, pulses and other kinds of things, which we don't want to do in Foods also that's why we are having a far more value-added food, and we want to follow that. So you may see that reset happening, it takes 3, 4 quarters. And as I said, the other thing is that if, as a market leader, I don't invest behind growth as the category -- the category will not do well. Having said that, I think as a category, if I look at VAHO, it is performing as any other BPC category. All the BPC categories are growing low single digits, VAHO has been also growing low single digits, this negative value was coming because of the commoditization of the category, which happened in the bottom of pyramid, which we don't want to do, and that is a reset, now that reset takes time. But by the end of '26, you will see '25, '26 that reset happening, which will lead to higher value growth, higher value share gains and obviously, ensuring that we continue to invest behind long-term growth. And I think we need to do -- we need to invest behind hair fall and some of the other things. And by that time, we believe the consumption situation also will improve. See, when the consumption situation is not good and people downgrade or titrate, that also encourages bottom of pyramid consumption.

Understood. So what I understand is we will see more innovations coming here and we will focus less on the bottom of the pyramid. So today, what would be the share of that?

I would not say focus less, I will not play on BTL. BTL can be driver of a growth of an FMCG company.

And what would be the share of bottom of pyramid for us?

I don't want to get into it. We don't want to get into details, but it is -- obviously for Shanti it is used, the INR 10 and INR 20 pack.

Okay. If we look back, say, 3 years ago, the share has been coming down. Is that a right way to look at it?

We have not lost share in VAHO. We have not lost share in VAHO.

[indiscernible]

Yes, yes, yes. The share of the bottom of pyramid and what we want to do is we want to let it come down much more rapidly.

Understood. Understood. So 2026 is when we can see more trends emerging clearly on the VAHO portfolio.

Yes. Having said that, it will take time. I mean a reset requirement because we are doing it in the hard way. We are not doing tactically going to the wholesaler on the 30th of the month and selling. We are doing it in the hard way, which is building brand equity, investing behind it. It will take a couple of quarters, but we are confident it is the best way to do it.

That is one the reasons our value share gain has been higher as compared to volume share gain in VAHO.

Understood. And my second and final question is with respect to the Foods portfolio, you clearly called out oats is the large part outside Saffola. In terms of the other parts of the portfolio, how is the competitive intensity for us? Because a lot of players, like you also said in your opening remarks that we started our food journey very early as an opportunity. So how is the competitive landscape for us now? Because everyone wants to do food at this point of time.

So I think two things. One is, what is important is we have a very strong brand called Saffola. And I think that in terms of the equity of the brand and expanding into better-for-you opportunities, any day our Saffola brand carries far more equity and pull and that's okay. The second part of the thing is that, if you look at Foods, a lot of categories has extremely low in penetration compared to some of the personal care categories where penetration is almost saturated in India. Therefore, even there is 3 or 4 players participate, it is okay because that grows the category. And I believe that the runway for Foods in India, and especially for a healthy foods like Saffola, I think it's a 5-year, 10-year runway. So we are not -- I think we see going to the commoditization rules and discounting route is something which I think will not give us growth. Having said that, I think, as I said, that one of the challenges we are facing, and we must solve for it is how to create and drive expansion of distribution in what I call food-specific outlets. For example, in the South, there are a lot of these bakeries. In Mumbai, you have these dry food stores. So these are the kind of outlets we need to now have increased saliency, increased way. That is something which we should tackle in the next 1 year.

One follow-up here, Saugata. Fair to say that these categories are still the e-comm categories and not yet seen salience in GT per say, MT maybe there could be some pickup. But with respect to GT, are you seeing trends where these category products are available?

Absolutely. I think if you look at Oats and Masala Oats, it's a significant portion coming from GT. While we don't participate at least 60%, 70%, 60% of Muesli comes from GT. So therefore, GT is definitely a big category. Just that we have set up that distribution, as you know that, that is something which we would be -- we are there. But I think very much standalone modern trade is something which is a very, very high throughput food there, a lot of high throughput GT outlets are food. We are present and we need to do a better job and we will do it. So therefore, there is -- they are not -- and if you ask me in foods, if you look at some of the successful brands look at Epigamia, look at iD, look at other successful brands, even founder-driven brands or insurgent brands, they have been successful because they've gone into GT, you look at Viva. So it's not that food and personal care, I can still say you can create a INR 200 crore, INR 300 crore brand or a INR 500 crore brand using digital. Food, there is no way without getting into GT.

[Operator Instructions] As we have no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Thanks for listening on the call. To conclude, we have remained steadfast in pursuing our strategic objectives set out at the beginning of the year, both in India and international markets amidst the evolving demand and macroeconomic environment. Sustained investment towards the accelerated scale-up of our Foods and Premium Personal Care portfolio in India and ramp-up in MENA and South Africa and international is resulting in a visible shift in the revenue construct of the business, and we have also established an improving trend in profitability of this portfolio. While we are contending with a steeper inflationary commodity cycle than envisaged, which will have some transit impact in the near term, we will judiciously leverage the pricing power of our brands and stay the course on our stated aspirations. So that is it from our side. If you have any further queries, please feel free to reach out to our IR team, and they'll be happy to address. Thank you, and have a great evening.

Thank you. On behalf of Marico Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.