The commentary around rural recovery is gaining ground. What has been your reading with respect to how things are on the ground right now, especially on the rural front?
Saugata Gupta: Last year, it was a combination of two factors. Obviously, rural demand was stressed. The premium part of the portfolio continued to grow. Having said that, we also saw a little bit of moderation in urban growth towards the second half of the year. What we now see is a slight uptick in rural growth towards the end of the quarter. The second thing which also happened is, at least in our portfolio, there was a lot of deflation in pricing that happened, a combination of price drops we took on Parachute and Saffola, as well as significant shrinkflation that happened in the value-added hair oils portfolio.
This year, we have already started the quarter with a 6% increase in Parachute because of a slight input cost increase in copra. The second thing that has happened is, obviously, the anniversarisation of the shrinkflation and the Saffola price drop will happen sometime towards the quarter one end. Therefore, you would not see any pricing negative effect. In fact, there would be some inflation and improvement in the mix. If you take into account all that, we see a visibility of double-digit revenue growth.
With only 75% of the portfolio gaining market share versus 85% in the previous quarter, which segments or brands have been on the softer side?
Saugata Gupta: As we indicated, more than 75% of the portfolio have gained market share, the only place we have lost market share is in the bottom of the pyramid segment in value-added hair oils, where there has been significant competitive intensity. Otherwise, in most of the categories, we have gained market share. What is also heartening is that we have continued to grow in our core brands as well as food, Parachute and all and also the premium part of value-added hair oils, we have continued to gain market share. 100% of our portfolio also gained penetration or sustained or gained penetration during the quarter.
While the penetration has improved, your market share has been lost in a few of these segments. But given the volume uptick that you are talking about and the fact that pricing is going to be inflationary and not deflationary, what is the guidance on the margin front for FY25?
Saugata Gupta: Even last year, while we had volume pressure, we continued to invest at around 10%. We would like to keep it at that level. Secondly, as far as margin is concerned, we have had significant margin expansion last year. We definitely want to ensure that we grow margins in tandem with revenue. I do not think the absolute margin percentage margin will not, because we have already peaked this year. As long as the margin grows double-digit in line with the revenue, we should be happy.What exactly is the strategy to defend the bottom level of your market share? Do you have any plans how to go about it and take it back?
Saugata Gupta: We have a far bigger presence at the bottom of the pyramid in value-added hair oils compared to the premium part where our market share is low. I think our endeavour is to defend at the bottom of the pyramid but win at the premium end. Obviously, there is significant competitive intensity. We are hoping that the competitive intensity will decrease. The second thing that has happened in the last two years because of inflation is that there has been some kind of a down gradation that happened but we are now noticing for the last six months the premium or mass premium segments of the value-added hair oil is now recovering.What about the food and premium personal care category because that is now almost 20% of your revenue. Going forward, what kind of growth do you envisage? What could it become as the overall pie in the revenue share?
Saugata Gupta: This part of the business we are extremely focused on. We believe that this part of the business should grow 20% every year if we have to deliver a double-digit revenue growth and also the fact that we reduce our dependence on the commodity part of the portfolio where, as you know, the core there is a significant dependence on commodity which is volatile and that gives you stability as far as margins is concerned and also growth. Now, if you look at foods, we have grown 4x since FY21. We have also grown significantly in the digital business. But I think this year the most important thing about foods is that we did a reset and we have 800 bps of margin improvement behaviour in foods and therefore we are well-poised to now grow the category at 20% plus. I think digital, again, we have now got critical mass and we expect the digital business also to get into at least a double-digit EBITDA by FY27 with a 2x times growth and we believe that this business will contribute to, which is now 20%, over the next three years will be 25% of our overall portfolio in India.
Let us talk about your recovery in international business, Bangladesh in particular and the Middle East. How exactly are things faring there?
Saugata Gupta: Bangladesh has shown smart recovery, although there is inflation and there is stress in the economy, but I think overall situation is far better. We are extremely strong in Bangladesh. We have also got significant growth in the Middle East and Africa. Last quarter, because of the demand in the category being a little subdued, we did not get much growth in Vietnam. Having said that, we are reasonably on course to deliver double-digit constant currency growth in the international business.
Last question on the Beardo and the Plix portfolio as well. Where do you see it scaling up? Any internal targets?
Saugata Gupta: All I can tell you is that most of the startup brands are in the red. Beardo is one of the more profitable versions. Both Beardo and Plix have turned positive. Just Herbs also crossed Rs 100 crore ARR as we exited this year. All these three are poised to scale up well and we are also looking at not only scaling up but a scale-up which is sustainable and profitable because at the end of the day if digital business continues to contribute to a significant part of the overall portfolio, over the long term it has to start delivering double-digit EBITDA.