Marico Ltd (MARICO) Q4 FY23 Earnings Concall Transcript

Marico Ltd (NSE:MARICO) Q4 FY23 Earnings Concall dated May. 05, 2023.

Corporate Participants:

Saugata Gupta — Managing Director & Chief Executive Officer

Pawan Agrawal — Chief Financial Officer

Analysts:

Avi Mehta — Macquarie — Analyst

Vivek Maheshwari — Jefferies — Analyst

Percy Panthaki — IIFL Securities — Analyst

Kunal Vora — BNP Paribas — Analyst

Sheela Rathi — Morgan Stanley — Analyst

Akshen Thakkar — Fidelity — Analyst

Tejas Shah — Spark Capital — Analyst

Ajay Thakur — Anand Rathi — Analyst

Abhijeet Kundu — Antique Stock Broking — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Marico Limited Q4 FY ’23 Earnings Conference 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]

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 questions, 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.

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah. Hi, everyone, and good evening to all those who have joined the call, and hope all of you are doing fine. As FY ’23 has come to a close, I would like to reflect on the operating environment during the year, and the quarter gone by. After which, I shall touch upon our performance.

FY ’23 started with escalating geopolitical tensions in Ukraine, leading to steep inflation and interest rate hikes globally. In India, this led to climbing food and retail inflation, which adversely affected the overall consumption sentiment. However, over the course of the last six months to nine months, there has been moderation in key commodity prices and retail inflation levels, which has most likely brought about a gradual recovery in FMCG consumption.

Looking at FMCG volume trends in this period, we believe the prospects of a sustained recovery have strengthened. After five quarters of volume decline, the sector has posted volume growth. Urban consumption has been steady, while rural is also showing some convincing signs of having bottomed out. Foods continues to drive growth for the sector while HPC has also entered positive territory after an extended slowdown. As we move forward into the next year, we believe that subject to a near-normal monsoon prediction, the certainty of a moderating retail inflation, and less volatility in food prices bodes well for a sustained reversal in the sector.

Coming on how we fared in Q4, we are continuing to see a sequential uptick in domestic volume growth, and robust growth in our international business. If you look at our performance from a medium-term lens, we have delivered a 6% domestic volume growth on a four-year CAGR basis, while sector volumes have grown between 2% and 3% correspondingly.

Similar, even in our international business has delivered an 11% constant currency growth on a four-year CAGR basis, and in the last nine quarters, 10 quarters, has been consistently delivering double-digit except one quarter, which grew at 9%.

In terms of profitability, our gross margins have expanded both Y-o-Y, as well as sequentially, with moderation in input prices, and a more favorable portfolio mix in the domestic business. While we have passed on the benefits of lower input cost to the consumer, we have maintained A&P spend which has grown around [Phonetic] 8% on a four-year CAGR basis, which we believe drives long-term growth and brand equity.

Delving deeper into the India business, which I’ll touch upon the key trends in each of our categories and our strategy and outlook for the period ahead, Parachute had a strong quarter with a four-year volume CAGR at 6%, driven by a pickup in loose to branded conversion and penetration gains. As we envisaged in the last quarter, we have started to see healthier trends in the branded coconut oil market after stability in copra, and consumer prices were restored beginning December ’22. Parachute Rigids gained 70 bps in volume market share during the quarter. With copra prices likely to remain in a comfortable zone in the near term, we expect volume growth in FY ’24 to track in line with medium term aspirations.

The coconut oil market, the branded coconut oil and category in Q2 — quarter four turned back into positive, which is also a very good sign. Value Added Hair Oils delivered double-digit growth after subdued during the last five quarters. The category continues to be directionally lined with mass personal care categories, and we expect a gradual uptick in growth over the course of the year ahead. In fact, towards mid quarter, it started turning positive and even in March, we experienced positive category growth in Value Added Hair Oils.

Value growth in the VAHO portfolio was in mid-single digits on a four-year CAGR basis, lower than our medium-term aspirations, owing to the extended slowdown in rural, and also some of the other issues, which happened in terms of commoditization. While mid and premium segments continued to do fare better, with lower inflation and reduced proclivity of competition to commoditize the category, we expect the recovery in growth to be more broad based.

Saffola Edible Oil had a soft quarter, owing to a high volume base of in-home consumption last year. However, it continued to witness healthy offtake during the quarter. The brand has well delivered high-single-digit volume growth on a four-year CAGR basis, which is in line with our aspiration. With stability trends persisting in the global veg oil market, we expect the brand to be steady in the coming year.

The Foods business has delivered a high-teen growth during the quarter, and ended the year close to the INR600 crore revenue mark. Oats portfolio continues to anchor the growth, and maintain its strong leadership position with a 43% share. While honey and soya chunks have been scaling up well, some of our newer categories, namely mayonnaise, peanut butter, and Munchiez have been beginning to get traction. We expect to cross INR850 crores in top line in Foods in FY ’24. This would be underpinned by expected buoyancy in urban consumption while we maintain steadfast focus on market development, brand building, food GTM expansion, and sustained innovation to extend our addressable market in the value added packaged foods.

Premium Personal Care recovered smartly from the COVID lows with 40% growth this year. The portfolio closed just shy of the INR350 crore revenue milestone. And going forward, we aim to deliver a 20% plus growth consistently across the portfolio. And as you know that Premium Personal Care is a high margin portfolio. The Digital-first portfolio has been scaling up well in line our internal targets. The current portfolio is to forced to reach ARR of INR400 crores exit, ARR of INR400 crores next year, and this does not include any future acquisitions.

Moving to the international business. We have delivered another stellar quarter with each market playing its part, despite the macroeconomic situation and currency headwinds in some of the markets, which is reflective of the robust business models of our international franchises. Bangladesh has been resilient as ever amidst external challenges, which is testament to our portfolio strength, distribution power and consumer belief in our brands in the market, and of course, the quality of leadership. Newer portfolios of shampoo and baby care are getting helped along the core portfolios.

The Vietnam business further strengthened with both HPC and foods delivering healthy growth. The integration of recently-acquired brands in female personal care, Purite and Olive, has been completed. Vietnam delivered double-digit constant-currency growth as a market that presents a sizable opportunity in terms of the addressable market share, and top line pool. South Africa and NCD business also continued on its strong growth journey.

Looking ahead, I would like to draw your attention to Slide 14 of our earnings presentation. Firstly, domestic volume has stayed well ahead of the sector and is poised to maintain an improving trend in FY ’24, in line with the sector. Revenue growth will inch up as the year progresses as pricing comes into the base in the latter half of FY ’24. We expect steady growth in our core categories of coconut oil, Saffola Edible Oil and VAHO with inflation volatility subsiding and price stability prevailing.

Secondly, we have taken visible leaps in the diversification journey and the evolution of portfolio in the India business, which we began a few years ago, resulting in a healthy pace of growth. This is reflected in the share of revenues from newer portfolios comprising of Foods, Premium Personal Care and Digital-first, which has seen a shift from 11% in FY ’22 to about 15% in FY ’23 and is likely to move to 20% of our domestic business in FY ’24, which means we have added an incremental top line of about INR750 crores through these portfolios in a couple of years’ time.

With some of the Foods and Digital First business have attained a certain scale, we’ll continue to drive accelerated growth as indicated earlier and focus significantly on improving the profitability in tandem. Once the shift of profitability is achieved, we’ll reallocate some of the resources to the core to drive market share, while fortifying the long-term margin profile of the overall business. We have a track record of success in Oats as far as Foods is concerned, with the funding winter setting in in more sanity in the ecosystem, we’ll be able to improve profitability, leverage, far more synergies, while moving our Digital-first brands into their next leg of growth.

On M&A front, we shall be constantly scouting for businesses which have a right to win in their respective categories and are synergistic to the overall Marico strategy. We will make sharp choices and refrain from venturing into fragmented and commoditized categories, even if they give scale. Thirdly, in the international — believe we are present in a relatively unique mix of markets portfolio diversification efforts, further insulate us from any concentration risk and ensure consistent in performance. You are aware that in FY ’20, we had a concentration risk of our business on Bangladesh and within Bangladesh, a concentration risk of PCNO, and therefore, we have had significant diversification in our portfolio and reduced this concentration risk to a large extent. We have proven that despite black swan events, we have a robust and profitable business model, which enable us to avoid yo-yos and surprises in our international business.

Last but not the least, we have maintained an uptrend in gross margins over the last two years and we expect an uptick of another 200 bps to 250 bps Y-o-Y in FY ’24 keeping all factors constant, given the cooling-off in commodity inflation and portfolio mix normalizing favorably. As we have emphasized in the past, A&P investment will continue to be a key thrust for our growth as we believe that long-term brand building certainly is a much better choice over short-term profitability gains. Further, our focus on cost savings will continue and will be deployed to drive incremental growth. Owing to the above, we expect operating margins to move up by more than 100 bps year-on-year basis in FY ’24.

We believe that we are moving in the right direction along the core strategic areas of diversification, distribution, digital and diversity, and we are confident of delivering improvement across all the three parameters of volume, revenue, and earnings growth in FY ’24. We continue to make visible progress in our ESG program in each of our focus areas. Creating shared value for all remains the ingrained purpose of our business and it will allow us to drive superior long-term performance. We are committed to achieving net zero emissions in our domestic operation by 2030 and global operation by 2040. Our ESG and other initiatives continued to get recognized in the various awards we have won in the last one year.

With that, I will now close my comments. Thank you for your patient listening. And we’ll now take your questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Avi Mehta from Macquarie. Please go ahead.

Avi Mehta — Macquarie — Analyst

Hello, am I audible, sir?

Saugata Gupta — Managing Director & Chief Executive Officer

Yes.

Avi Mehta — Macquarie — Analyst

Yeah, hi, sir. Sir, I just wanted to kind of clarify on the margin expansion comment. With the input cost more or less stable now, would it be fair to see the gross margin expansion more front-ended and the flow-through will probably be dependent over time? How do you see this during the year kind of panning out, if you could give us some sense?

Pawan Agrawal — Chief Financial Officer

Yes, Avi. We believe that gross margin expansion should happen right from quarter one itself. Although, given the kind of environment that we’re operating in while currently the commodity table has been stable, we would rather say that should take it more from a full-year perspective that at least should expand by 200 basis points, 250 basis points. And given the new product agenda that we have, we would, of course, want to invest it back into some of the products. And therefore, from an operating margin perspective, we are saying at least we should expand by 100 basis points.

Avi Mehta — Macquarie — Analyst

Fair point, sir. Fair.

Saugata Gupta — Managing Director & Chief Executive Officer

Just to add, I think, other than commodity gains, as I said that now that our Food and Digital business have gone to scale, there will be a significant focus on improving their profitability.

Avi Mehta — Macquarie — Analyst

Okay. So that — okay, got it, sir. So that should be an additional kicker, if at all, and that is what will kind of take time to flow through as well. That could be it, a icing on the cake.

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah.

Avi Mehta — Macquarie — Analyst

Sir, the second bit was on the sales growth front. Now, I understand your comment on pricing headwinds, but with Parachute stabilizing and actually back on the growth path, Saffola offtakes improving, volume growth rate should normalize to the — toward kind of steady-state targets in the first half itself? It’s just the pricing headwind. Is that understanding correct, sir?

Saugata Gupta — Managing Director & Chief Executive Officer

No, I think, the best way to assume, that’s why I’m just saying that I am unwilling to give an idea of how will it pan from quarter to quarter because it’s — there is a base effect that it could be volatility. But what I can say is that the — we expect the volume growth for next year, which is rather this year, is to be better than what it was last year. And therefore, on a full year basis, both on volume growth, revenue and margins, we’ll be definitely better than what we delivered in this year.

Avi Mehta — Macquarie — Analyst

Got it, sir. Got it. Perfect, sir. I’ll come back in the queue with other questions. Thank you very much, sir.

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah.

Operator

Thank you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.

Vivek Maheshwari — Jefferies — Analyst

Hi, good evening, Saugata. Good evening, Pawan. A few questions. First on VAHO. If I look at the base for the next few quarters also remains slow. So does that mean that the base tailwind will help and the number for VAHO, at least in the foreseeable future, for the next three quarters or so, will be like in double digits?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I think the way to look at it, as I said, let’s not go from quarter-to-quarter because I think the best way to see is that, I think, it is a improving trend. And as I said, there are two factors. One, I think VAHO, as you know, has a significant rural contribution and given the fact there was stress in the rural consumption and the fact that there was two things, one was significant food and retail inflation and commoditization by competition. I think all the factors have become more favorable. So all I can say is that the VAHO, again, the number, which is there, which will improve. Number two, I believe that the other change that will happen in the Value Added Hair Oil market is that, as a result of this, also that last year, the slightly premium brands, which are a slightly higher, say, 1.3 to 2 RPI, our brands and come back, that sector was not performing well. I think that will start performing well and there will be a little more broad-based growth.

As a result, I think not only we’ll be witnessing value growth and I believe we will also continue to gain value share. Just to — as I said, just to reinforce that, while in Coconut Oil, we saw some growth categorized that the pricing got right, the inflation was is control, in Value Added Hair Oil also, towards the second half of the quarter, if I go a month basis and definitely by March, the category came back into growth.

Vivek Maheshwari — Jefferies — Analyst

Okay. And one follow-up. If I look at between third and fourth quarter, last year or the year before that also, the base was reasonably the same or there is no big disparity, but there is a big uptick in growth. Would you attribute most of this to the industry trend or there were some self-help measures which also helped you to have this kind of growth?

Saugata Gupta — Managing Director & Chief Executive Officer

No, no. So we have grown ahead of industry, obviously. As I said that, for a quarter basis, there was still a slight decline. I mean, it’s less than — I think it’s minus 1% — 0.7%, so it’s a slight decline. I think what has happened is, as I said that, two things have happened that I think relative competitive commoditization, intensity in the commoditized part of the category has changed. Number two, obviously, some of our initiatives to gain value share has started picking up. And I think also we see the rural consumption situation bottoming out. It’s a combination of external, internal, I would say.

Vivek Maheshwari — Jefferies — Analyst

Okay, got it. Second, Saugata, likewise, can you also comment on Saffola? I mean you have mentioned in your opening remarks, but can you just talk about your outlook as we head into the next year? I mean, this quarter was obviously, there have been multiple pressures. But how do you think this portfolio shapes up in F ’24?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I’ll tell you, first, talking of this quarter, obviously, the last year had first an Omicron-based January, where it was a peak of the Omicron and therefore, there was higher in-house — in-home consumption. Then, when the Ukraine thing happened, in anticipation of higher prices, I think in March, there was far more retail pickup of stocks. So it might not that growth which was there on the base was not necessarily offtake base, but also people stocking more in anticipation there’ll be significant inflation.

Now, again on Saffola, I will give a yearly position that if the things are stable and not volatile, we should be able to give the growth which is commensurate with our medium-term aspiration of mid — kind of a mid to high-single-digit growth kind of a thing is possible.

Vivek Maheshwari — Jefferies — Analyst

Okay. And two industry level questions, if I may. One is, your press release talks about the GT declined low single digit. If you take a — and of course, you have spoken about e-commerce and modern trade. If you take a medium-term view, do you think that is how the business — the GT channel will shape up or do you think GT will be an important one and will continue to grow, if you take five, seven years view?

Saugata Gupta — Managing Director & Chief Executive Officer

So I think even if a five, seven years, GT will be an important channel. So the reason there is a compression in GT is the combination of both things. One is that, obviously, if you look at last — compared to two years back, modern trade has done a smart recovery. In our case, as you see a lot of innovation, which we have done is Digital and Foods are very, very urban-centric and with a SKU in modern trade and e-com. And GT has a significant portion of rural, which underwent some consumption stress. So, I think slowly, I would say, GT will start recovering for the sector.

Now, I don’t know about — overall, GT, obviously, has performed if I look at the FMCG sector because the rural buyers are slightly lower performant compared to MT and e-com. But all I can say that it is going through a transformation and there is no substitute for direct rural distribution, which will continue to be a source of competitive advantage for FMCG players and it will have a significant, what I call, entry barrier for some of the place.

In B2C — for a lot of B2C players, they have, obviously, advantage and capability of digital marketing. But I think when they get scale, they move into GT compared to organized — they have to face organized players and that is where they have a — organized players have a significant competitive advantage. So in India, it will be an and growth. Maybe the GT model will keep on changing in terms of consolidation and the way we do business, there’s a transformation happening. But let me tell you, the neighborhood Kirana is very, very critical. They are here to stay. They are smarter than a lot of other people and they are smarter than what we think, and therefore, I think even if I look at it 2030 kind of a scenario, GT will still be the majority in India.

Vivek Maheshwari — Jefferies — Analyst

Got it. And last question on the industry. Given Nielsen FMCG volume growth what you had put out there, so HPC turning, let’s say, flat to positive, is a good thing, but at the same time, Foods is also accelerating. So is it a simple case of, Saugata, lower penetration in case of Foods and therefore, structurally story is far better or there is some cyclicality between the two because the per caps and penetrations of Foods has always been lower, but in the last decade also, there have been periods where HPC has done better than Foods and there have been periods where it had been vice versa. What do you think is happening between the two here?

Saugata Gupta — Managing Director & Chief Executive Officer

So let me tell you something. So there are two things. One is, Foods has a far more urban SKU and also a little bit of top-down modern trade e-com SKU. There is a significant, what I call, conversions from unbranded to branded growth in packaged foods because penetration is low. I think there are also some trends in terms of health, in terms of wellness, and also the fact that healthy snacking. And I think COVID aided us lot of in-home consumption and gave a lot of a fillip to the Foods category.

HPC has two issues going. One is the rural SKU is far more and rural is where — and HPC is far more secular across income classes and therefore, whenever there is high food inflation and consumption stress, HPC gets more impacted than Foods. The second thing is, some of the HPC categories, obviously, there is, what I call, higher penetration. As a result of this high penetration, a significant growth happens. Two factors, one, absolute population increase. Number two is premiumization. And therefore, whenever there is high inflation, obviously, the premiumization journey undergoes a shift to downgradazation and what we have seen.

Number three, I think the input cost pressure, which has happened in HPC because of crude and other things, has led to a lot of people managing, as you know, price points in HPC through shrinkflation. Now, what happens is that, the rural consumer, especially or the bottom of pyramid, they fix outlays. And therefore, whenever there is when you think that you have managed damage [Phonetic] and you will manage transaction, people actually adjust consumption. So I think it’s a combination of all this. And I believe that slowly HPC will come out of it. Having said that, the long term, perhaps, the headroom or the runway for Foods is slightly more than HPC.

Vivek Maheshwari — Jefferies — Analyst

Got it. Thank you very much. And I also want to thank you for incorporating some of the data points on Slide 14, very useful. Couple of data points are very useful from FY ’24 perspective. Thank you and all the best.

Operator

Thank you. The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead.

Percy Panthaki — IIFL Securities — Analyst

Hi, Saugata. Just again, wanted to do a deeper dive into the VAHO segment here. So I was looking at the four-year CAGRs here. Bajaj Consumer is close to flat. Dabur is a 1% four-year CAGR. You are at a 4% four-year CAGR in VAHO. So is there at all any kind of sort of pipeline or any kind of one-off that we need to be aware of? And if not, basically what has driven this? I mean, within VAHO, was one or two brands suppressed which has come back to full strength or what exactly is the story behind these numbers?

Saugata Gupta — Managing Director & Chief Executive Officer

So I think, as I said, that you have to look at two things. One is, if you look at we have been consistently gaining value share quarter after quarter. Number two, as I said that actually the value over a four-year period, I think there have been instances, especially at least in out of 2.5 years to 3 years. I mean, in the four year, there have been a COVID data also. So I think this number two instance, there has been, I think, till December or even November, there has been a significant competitive intensity at the bottom of the pyramid, where bottom of pyramid growths have happened. So this reason this value growth has also happened, as I said, is that we believe due to a combination of that let’s focus or rest intensity in the bottom of pyramid.

Number two is because of lower inflation leading to, I think, the some of the mid pyramid and the higher — and top of pyramid brands have started growing in the category. Okay. And there, our participation is far higher. Our focuses has been higher because we have been focusing on value share and that is the reason the value share has started growing. And as I said, and in Marico, we don’t normally — there is no adjustment that happens between primary and secondary. Normally, we keep broadly constant.

Percy Panthaki — IIFL Securities — Analyst

Right. So basically just to summarize what you’re saying is that, out of this differential between, let’s say, other players at zero to one and you at four, that 300 bps differential on four-year CAGR, mind you, it’s a CAGR, so that’s like a 12% or yeah, 12% point-to-point kind of a differential, that is mainly mix only it seems, rather difficult to believe that, Saugata?

Saugata Gupta — Managing Director & Chief Executive Officer

No, no, it’s not a mix. It’s a — it is a combination of — as I said, like the combination of — we have a broader participation strategy, okay, because if you see, the — we also have had innovations in this space because as you know, there is Aloe, we have just launched onion oil, we are now participating in mustard. So it’s a combination of core growing, it’s a combination, some of our new things growing and the fact that we participate across price points, we have had a broad-based growth.

And if you look at it, if — see, it could be in certain players, all the growth have either happened in price point packs or the bottom of pyramid and a decline in packs, which are of higher — either higher packs or higher RPI brands, so it’s a combination of all of that.

Percy Panthaki — IIFL Securities — Analyst

Okay. And…

Saugata Gupta — Managing Director & Chief Executive Officer

So, if you have to assure — I mean, there is — I mean, as I said, four-year primary will be equal to four-year secondary.

Percy Panthaki — IIFL Securities — Analyst

Yeah, yeah, that point I got. I’m not doubting you on that. I’m just trying to find out the underlying drivers like, is it Nihar Shanti Amla which has grown ahead, or is it these new aloe vera variants, etc., which have driven the growth?

Saugata Gupta — Managing Director & Chief Executive Officer

Okay, okay, Percy, listen. We have five big brands. Okay? So, we have Shanti, we have Jasmine, we have Hair & Care, we have Nihar Perfumed Coconut Oil, and we have Aloe. Okay? And now, if you look at it, these brands operate between 0.7% to 1.6% in RPI. Now, it could be, as I said, I’m reinforcing so that you will get a better color to it. If I grow all across these brands from a 0.7% to 1.6% RPI, versus somebody only growing at a lower RPI, and declining in higher RPI, this difference happens, no?

Percy Panthaki — IIFL Securities — Analyst

Right, right. So, I got the point that you’re gaining market share, and you are doing better at the premium end versus others. So, if you can just share as to what are the inputs you have put into the business, and what you’re doing differently versus competition that you are succeeding where others are not?

Saugata Gupta — Managing Director & Chief Executive Officer

No, no, I don’t — I mean, I think it’s about, I mean I can’t get into details. We have a plan. We have to execute it well, and I don’t think we are still happy with what we are doing. We have to do better.

Percy Panthaki — IIFL Securities — Analyst

Okay. Second question, Saugata, is on Foods. Just correct me, if I heard you wrongly, but I think you said that this year you are ending just shy of INR600 crore, right?

Saugata Gupta — Managing Director & Chief Executive Officer

Around INR600 crore, yes.

Percy Panthaki — IIFL Securities — Analyst

Okay. And you are targeting INR850 crore next year. So that’s like a 40% to 45% kind of value growth, which I think is higher than the kind of value growth you have done this year, and this year was a pride of — year of general price inflation. Next year, in fact Y-o-Y basis, the price inflation might not be much. So, you don’t get the kicker from that, and you have to deliver most of that 40%, 45% through volume. So, just wanted to understand what makes you confident of accelerating the volume growth to such a high level?

Saugata Gupta — Managing Director & Chief Executive Officer

Okay. First of all, let’s put a perspective. We ended FY ’20 at INR170 crore. We have reached INR600 crore in three years. I think it’s a significant amount, and I think, it is equal to a size of some of the small companies, and in fact, larger than some of the so called — some of the companies, which we have in food. Okay? Now, there has been a — if I look at the launches which are there, all the launches happened in quarter three and quarter four and a lot of them have not got scaled up.

Number two, we started the food GTM, which is, again, from quarter three, where we are expanding into actually 10,000 to 12,000 outlets with a separate sales force. So, it’s a combination of that, and I think whether we reach it’s INR840 crores or INR850 crores or INR860 crores, I think the question will be that we would have added INR700 crores, and you never know there could be some inorganic also.

Percy Panthaki — IIFL Securities — Analyst

Sure, sure. Got it, Saugata. That’s all from me. Thanks, and all the best.

Operator

Thank you. The next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.

Kunal Vora — BNP Paribas — Analyst

Yeah. Thanks for the opportunity. Wanted to understand about MT and e-com. Contribution has now almost gone up to 30%. You mentioned that GT will now recover. So, how do we see this mix going forward, MT and e-com will continue to increase or there could be some reversal? And, how do you see the higher contribution of MT and e-com in the medium to longer term, considering that there is a higher level of concentration and bargaining power of the buyers?

Saugata Gupta — Managing Director & Chief Executive Officer

No, no. So, I think it has also happened because of the kind of new launches we have done. If you look at Foods, for example, we have a significant skew towards MT and e-com. It is only now where we are expanding the GT. We hadn’t because as you know that our GT was not aligned to a lot of food outlets.

Number two is, if I look at it, also, some of the — especially the e-com growth was led by the tailwind. We believe because of our acquisition of some of the digital brands, our digital marketing, and e-com capabilities perhaps leading edge in the industry, and this year, MT also recovered, and also some of the brands like Saffola, and all have a natural this one. So, I would say two things. One, I think we need to do a better job in GT. I believe GT, obviously, has opportunities and I think GT, a lot of — as I said, the GT has suffered last year also because of two things. One is, the rural consumption game, and number two is, obviously urban what is happening is that, because of the growth in e-com, and modern trade, the GT distribution system is under stress, and it’s undergoing some transformation.

So, I think it would — so, I would think that — that’s why I said that, I think we need to perhaps get GT back into growth and I’m extremely confident that this year we will be growing in GT.

Kunal Vora — BNP Paribas — Analyst

And are you seeing a higher level of consolidation on the other, say, in the MT, and e-commerce and any impact on margins from that?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I think one thing as I said that, we have to continuously innovate, and you have to be a Number 1 and Number 2 player. Number two is, I think, obviously, the cost of sale in e-com and modern trade could be higher. And therefore, we have to continuously premiumize the portfolio. And thirdly, I talked about a significant focus on improving the profitability, or in terms of COGS, in COGS terms and other things in Foods as-well-as digital and that will neutralize this increase in cost of sale, which you are talking about.

Kunal Vora — BNP Paribas — Analyst

Okay, fine. Second and last question, if you can talk about the macro situation in Bangladesh. Couple of quarters back, there were certain problems, currency was depreciating, and also along with that, how is the mix of business changing, coconut grown — coconut, and how do you see the growth rate going forward?

Saugata Gupta — Managing Director & Chief Executive Officer

I think, whenever there is disruption and history has shown the strong gets stronger and the weak gets weaker. In Bangladesh, our relative strength is significant. I believe we are the top two, top three FMCG players in Bangladesh. On a relative sense, we are far more stronger in Bangladesh. And I think, just not brands or distribution or equity, I think we have an extremely strong leadership, and all other things we have done in the last five years, six years in the international business, is a methodical way, and we have now a playbook, which we’re now replicating across Vietnam and Middle East, the Bangladesh playbook.

Now, coming to Bangladesh macro situation, I think there is a combination of inflation which has moderated a bit because as you know, crude prices and overall vegetable prices and meat prices across the world have moderated to compare what it was peak — when the Ukraine issue started. The devaluation has happened, but again the devaluation, we believe that it’s — I think, we have learned to manage the devaluation.

And the third thing is that, obviously, we have continued our diversification journey. So today, the dependence on, if we look at coconut oil, dependent Parachute coconut oil, say four years, five years ago, it was 90%. It has moved now to 60%, or even, it will move back below 60. So%, we have done this. So, therefore there is a — and we have continued to invest even if the course of inflation.

Obviously, it’s a tough situation, but I think as far as the Bangladesh macros are concerned, I think we have learned to live with it, and I don’t think it’s deteriorating. I think whatever shock happened has happened, and I believe that there is a stable government and everything — the situation will be, I think — and the Bangladesh economy and the way it is run, I think it’s pretty, pretty, pretty, good. And therefore, we believe that the Bangladesh story, and the Bangladesh growth opportunity is very much intact.

Kunal Vora — BNP Paribas — Analyst

Okay. That’s very helpful. Thanks a lot.

Operator

Thank you. The next question is from the line of Sheela Rathi from Morgan Stanley. Please go ahead.

Sheela Rathi — Morgan Stanley — Analyst

Yeah, thanks for taking my questions. My question was partly answered, but let me take it up, again. With respect to the VAHO portfolio, Saugata, what I understand, based on your comments is that the growth has been much better broad based. We are kind of premiumizing the portfolio. Is it fair to believe that we are shifting away from rural towards more urban India?

And second is, what kind of NPDs we have had in this portfolio on a percentage basis, and is the distribution for the NPDs as deep as our existing portfolio?

Saugata Gupta — Managing Director & Chief Executive Officer

Okay. Firstly, I don’t think there is a shift from rural to urban. I think what I’m trying to say again is that, if you look at the VAHO growth, in the last, I mean, at least till December what happened, a significant portion of the VAHO growth was happening in price point packs at the INR10, INR20 and some of the brands like mustard and some of the other, what I call, price warrior brands in the space. Okay?

Now that — two things have changed. One is that, the first shift that happened was that, in November, December, so a lot of competition at least was not taking price increases in spite of a huge input cost, but I guess because of other pressures, competition was forced to take price increases. That led to some, what I — and also, what happened in this category is that, a lot of players other than us was, that converted a lot of ATL to BTL, and they were expanding on BTL.

Now that has got reversed. We continue to spend more on ATL. We believe in the long-term ATL story, and that’s why the growth in the other parts of the portfolio, and other than the price point packs has increased. Now coming to innovation, I think, our biggest one which we have launched in the last four years — four years, five years is aloe vera, which has crossed INR100 crores. We are just about taking onion oil to GT. We believe that our right to win versus a D2C brand, onion oil is a category, which is now accepted. It is reasonably salient, our right to win in terms of pricing, distribution, ability to execute in GT, is far higher than a D2C player.

We will also see some more launches. We have also now entered — we were earlier trying to compete in mustard or surfo in a very me-too product. We now have a differentiated product. And therefore, you will see far more — and you will see far more, maybe one or two more innovation in Value Added Hair Oil as we move down in this year.

So, I would say, it’s a combination of that and I don’t think there’s any urban buyers. Having said that, I think we will also see a premiumized portfolio slowly, which will come into place, and our focus, I think, we have a disproportionate share in modern trade and in e-com where, obviously, there are players, which have far higher than our premium offerings, which we did not play through our core franchise, but through some of our digital brands, for example.

Sheela Rathi — Morgan Stanley — Analyst

Understood. And just a follow-up here, some broad number you have. What would be the share of premium like portfolio now for us versus say, for five years ago?

Saugata Gupta — Managing Director & Chief Executive Officer

No, I don’t want to get into numbers, please.

Sheela Rathi — Morgan Stanley — Analyst

Okay. And my second and final question was with respect to the Food business. What would be the distribution reach for us currently and where do we aspire to take it, say, in the next 12 months or 24 months?

Saugata Gupta — Managing Director & Chief Executive Officer

Foods? You’re talking about Foods?

Sheela Rathi — Morgan Stanley — Analyst

Yes.

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah. So, I think, obviously, in terms of, I think, our availability in e-com, and modern trade is almost nearly there. Okay? Not so much for some of the new things like snacks and all which we are launching. As far as GT is concerned, we believe that we are first focusing on — now, if I look at masala oats, I think it reaches 1.8 lakh, no? 2 lakh outlets. So that’s — masala oats which is the more distributed brands.

Now what we are doing is, we believe honey and soya are the ones which will first get mass distributed and then we’ll see snacks. Having said that, there will be a part of our portfolio, which will not be an ATL-driven portfolio. So, we now have around 10,000 food GTM outlets, which are — a lot of them are open format, standalone outlets, which we will focus on and that number will slowly try to increase.

Now, you must realize that food has a lower self-life, therefore, supply chain, replenishment, the way you sell foods in terms of frequency of billing is completely different from our core portfolio, And that’s a capability we’re trying to capture. So, we are going about in a slightly more careful manner, so that we don’t want to scale up high and then fall flat in terms of not being able to manage shelf life and other things.

Sheela Rathi — Morgan Stanley — Analyst

Understood. And just one final point here is, on the new product launches side, should we expect new product launches more on the personal care side or on the food side going in F ’24?

Saugata Gupta — Managing Director & Chief Executive Officer

We would like to launch both. I think in the last three years, obviously, there has been much more discount on Foods. But you will see some definitely prototypes in the personal care side definitely, because we have a premiumization agenda. Our premium portfolio is doing well. I think most of them have gone back. They are higher than the pre-COVID levels, and therefore we are — you are going to see, I think compared to the last three years, where it has been far more food, you will see a much more balanced kind of a picture as far as innovation agenda is concerned.

Sheela Rathi — Morgan Stanley — Analyst

Thank you. Thank you very much.

Operator

Thank you. The next question is from the line of Akshen Thakkar from Fidelity. Please go ahead.

Akshen Thakkar — Fidelity — Analyst

Yeah, hi, Saugata. Congratulations on a good set of numbers. Just couple of questions. On VAHO, good to see value growth come back to double digits here. Just generally over the next two years to three years, not asking for a guidance, just generally how are you thinking about that business in terms of growth aspirations over there? If you could share from next year, great, but definitely over the next two to three years, what are your aspirations, what needs to happen for you to say it’s a good job? That’s question one. I had another question, but I’ll wait for this answer.

Saugata Gupta — Managing Director & Chief Executive Officer

So, I think if rural comes back, there is — I think our aspiration is to get into a double digits — again, double digits. And I think there will be a little more broad-based play. I believe that also there is now far more sanity in the category in terms of people growing brand through ATL and equity. So therefore, I think our aspiration, and we will, I think, there will be — significant focus area will be to hit double-digit growth in VAHO in the next three years.

Akshen Thakkar — Fidelity — Analyst

Okay, great. And then on edible oils, you know, there’s…

Saugata Gupta — Managing Director & Chief Executive Officer

But just one thing to add, please don’t hold us on every quarter. I mean, you have to look at it on a year-over-year basis.

Akshen Thakkar — Fidelity — Analyst

No, no. That’s why I said, as a broad three year — as a broad three-year guidance because it’s too volatile. I completely appreciate that.

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah. Yeah.

Akshen Thakkar — Fidelity — Analyst

On the edible oil business then, and that’s a little more tactical and near-term question. The raw material pricing has been very volatile. How are you managing it right now? There have been times where we focused on volume share, there have been times where we focused on margins. Where are you on the pendulum right now? And [Indecipherable] if I can peel the onion on your comments around value growth, is it more coming from edible oil, or is it more coming from coconut oil where there is a pricing headwind?

Saugata Gupta — Managing Director & Chief Executive Officer

No, no. So, see, at the end of the day, and I think the approach to Saffola is very clear that we will be continued to be competitive path on value to the consumer, subject to a threshold level of margin. I think we will not definitely go for volume growth, which are not sustainable. Now, we have had situations in the past during COVID times, but that was because it was a tactical opportunity.

But I think going forward, we’re absolutely clear that we will maintain a threshold level of margin. As I said that both the Saffola and the Food business, I think margin expansion and for Saffola, its protection of margin and in Food margin expansion. This will be, I think, our primary focus area.

Akshen Thakkar — Fidelity — Analyst

Okay, great. And last housekeeping question. Just on the employee cost side, there seems to be a large bump this quarter. Was there anything one-off that you’d like to call out or is this past course?

Saugata Gupta — Managing Director & Chief Executive Officer

Akshen, I think, for a fixed overhead line item, it is better to look at full-year numbers. And for the full year number, it’s growing at about 11%, which is a tad higher. There are two reasons for that. One, is the cost was not in the base for a couple of acquisition that we did, which is [Indecipherable] in Vietnam. And second, there were some one-off reversals of management incentive in the base year due to some non-achievement of individual targets. If you exclude them, then the growth will be about 7% to 8%, which is largely in line with industry averages.

Akshen Thakkar — Fidelity — Analyst

Okay, great. Thank you so much. And all the best for the next year.

Operator

Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead.

Tejas Shah — Spark Capital — Analyst

Hi. Thanks for the opportunity. And, Saugata, congrats on the extension. A couple of questions from my side. First on, debtor days, if you see, there is an expansion of debtor days and if I try to correlate with the commentary that you spoke about that modern trade and e-commerce have gained higher share, is this an outcome of that mix change? And then, if that’s the case, then, how should we see this trajectory going forward?

Pawan Agrawal — Chief Financial Officer

You’re right, Tejas. Some part of the increase in debtor days is a function of our contribution increasing from alternate channels. If you compare with last year same quarter, it’s about 3% to 4% high. So that’s structural, I would say. But apart from that, as you know in our business, there’s deflation, right. So, the revenue growth was not very, very healthy and therefore distributor had also ROI pressures.

So even in GT, we have sort of given some additional selective credit. So, that also has led to increase in debtor days, but that’s more temporary, and when the deflation gets into base and we start growing revenues in the second half of the year, credit extensions, of course, will come down and that will definitely — so I believe that going forward, you can expect there could be some reduction from quarter two onwards.

Tejas Shah — Spark Capital — Analyst

Sure. And in terms of private label strategy, we are seeing a lot of aggression from national chains now and modern trade. So, what’s your read on it? And Saugata briefly touched upon it that the correctives could be to gain market share, and this is one of the Top 3 in each category, but it won’t be possible across and especially with you pushing so many NPDs food GTM — sorry, MT and e-com, how do you think — how do you strategize for private label aggression from modern trade?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I think as I said that, if you look at modern trade globally that where are you vulnerable to private label, there are two things. One, depending on the category, for example, there are certain categories, which have a higher proclivity towards private label. The second thing is, I think fortunately we are Number 1 or Number 2 in more than 90% of the portfolio, usually the Number 3, Number 4 guy gets squeezed.

And the number three mantra for this is that, you shouldn’t make supernormal profits in a category. So, if you follow all this, I think you are less vulnerable, and you should continue to innovate. I think if you follow all this, you are — obviously, there is always a threat, but you can manage the threat so then it’s not as a significant impact.

Tejas Shah — Spark Capital — Analyst

Sure. And then last one, if I may. Saugata, for last almost four, five years for industry, we have seen that rural growth has been volatile. It has — if there is some bump up and then again we use the momentum as an industry, so what’s your read because if we step out of our sector, and we see some of the other categories in conjunction basket and otherwise, the rural distress is not as high as we are kind of registering in our sector. So, do you think the wallet share change is impacting us more than the consumption slowdown, or consumer slowdown that we haven’t had anything on the sector?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I think it’s a combination of two things. One, I would say that our usage or consumption is equal across population and income strata for most of the category. Okay? Secondly, most of the categories, especially in HPC are well penetrated. And thirdly, in a lot of categories, the opportunity exists for the consumer to downgrade, which might not be always.

In the case of other things — also the fourth thing is, lot of categories discretionary, it’s a question that brings you either a tad of joy or sometimes what happens you — it’s a tad of luxury you want. While these are items of daily consumption, which you might say that I can easily downgrade. So, to give you an example, I think as the thing opened up post-COVID, a lot of things like eating out, or traveling, all that have significantly increased and some with a vengeance. Now, after some time that will settle down.

So, I would think these are perhaps this one, and if I look at it in a case of certain categories, also there is a lot of unbranded people may move from branded to un-branded ones. Those opportunities don’t exist when you buy a two-wheeler or buy a refrigerator or go for a QSR. I mean you can downgrade, but there is a basic threshold thing there, no?

Tejas Shah — Spark Capital — Analyst

Fair point. Fair point. That’s all from my side.

Operator

Thank you. The next question is from the line of Ajay Thakur from Anand Rathi. Please go ahead.

Ajay Thakur — Anand Rathi — Analyst

Hi, sir. Thanks for taking my question. Just wanted to understand, in terms of the new competition coming in the Parachute space, the Coconut Oil space, how do we see them shaping up, given that they are kind of playing more of the pricing gain? And I believe in certain aspect, the category has some price sensitivity in that context.

Saugata Gupta — Managing Director & Chief Executive Officer

See, I think the best way to look at it how we are performing on market share, I think over the last three, four years, we haven’t lost market share. So I think that’s the best way to look at it, and we also have flankers.

Ajay Thakur — Anand Rathi — Analyst

Okay. But do you believe that, given that the size that they are like now and the kind of growth they are witnessing, they can be kind of a threat going forward to us in terms of the market share or we will have to start spending more behind the brand kind of [Indecipherable]?

Saugata Gupta — Managing Director & Chief Executive Officer

I will not be able to share what we want to do, but all I can say is that, you have to see that we will protect our market share. Whatever may happen, we will protect it, okay.

Ajay Thakur — Anand Rathi — Analyst

Secondly, well, I was also trying to understand in terms of the Edible Oil, given the fact that, right now, if I were to put across Saffola prices are kind of over-indexed versus some of the other blends, maybe something like a sunflower oil in the market. So do you — can that be kind of having some implication in terms of the volume growth aspiration for the current year for us?

Saugata Gupta — Managing Director & Chief Executive Officer

I guess, I said that I think we have to look at a long-term aspiration for driving a mid-single-digit kind of volume growth to a high-single-digit. And number two, we’ll keep a threshold on the profitability and we will not grow at any cost. I think as prices come down, the — what I call, people’s willingness to upgrade becomes higher because they don’t look at percentage, but absolute rupees and Saffola is a very, very strong brand.

Ajay Thakur — Anand Rathi — Analyst

Okay. Thanks. Thanks for that.

Operator

Thank you. The next question is from the line of Abhijeet Kundu from Antique Stock Broking. Please go ahead.

Abhijeet Kundu — Antique Stock Broking — Analyst

Yeah, hi. Thanks for the opportunity. My question was primarily on, you said that March was the — March, you were into a positive territory in terms of rural growth. So how do you — and you are saying that — you also said in one of the comments that you are seeing bottoming out of rural slowdown and improvement from there. Any — what you call it, any instances or anything that makes you so confident that, I mean, there is a bottoming out of rural slowdown? Any instances on that?

And secondly, in terms of geographies, Coconut Oil portfolio is more skewed towards South, East, West and the pinpoint anyways is not much, it’s more in North and it’s more in HSM. So, how are you and where would you extent your Value Added Hair Oil has some amount of exposure? So in terms of geographies, how have they panned out, in the sense that how was HSM panned out for you, how was [Technical Issues], so how — which geographies have done best, which geographies are now you think that it will improve? Some color on that in terms of geography in value added geography.

Saugata Gupta — Managing Director & Chief Executive Officer

I don’t know what gives you the idea that HSM is not doing well and South and West doing — if you look at Nielsen, I don’t think there is any such skew. Maybe some people have not done well there in HSM. But I don’t know about that. All I can say is that, what I mentioned about rural growth in VAHO is, that if I look at the decline, we have started improving quarter-on-quarter and we believe that in the quarter four, the drop was around only minus 0.7%. It was 3%, 4% decline, which was there in Q3, so it’s improved.

And even if you see Jan, Feb, March, it is improving. So, therefore, as I said that it’s not about — these numbers tell me that things have bottomed out. Now, if these numbers change, I can’t help it because I can’t really — it’s very difficult to predict because, ultimately, it also depend on how monsoon pans out. But as of now, that is the situation. And I don’t think there is this thing about this HSM or not is the problem and South and West doing well. I think the stress was reasonably everywhere.

Abhijeet Kundu — Antique Stock Broking — Analyst

Okay, understood. Understood, understood. So that stat basically, the number say that — H1 [Phonetic] number says that it’s — yeah and it’s…

Saugata Gupta — Managing Director & Chief Executive Officer

Slight improvement, it’s a gradual improvement. I don’t think it’s like — I mean, as I said that, it’s a gradual improvement and I think things should improve unless something happens on the monsoon. That’s all.

Abhijeet Kundu — Antique Stock Broking — Analyst

Okay. And the aspiration is that you should grow during the year or year or two in double digits in Value Added Hair Oils?

Saugata Gupta — Managing Director & Chief Executive Officer

Always want to have aspire go well.

Abhijeet Kundu — Antique Stock Broking — Analyst

Yeah. Thanks. Thanks, Saugata.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Pawan Agrawal — Chief Financial Officer

To conclude, while FY ’23 has been a year marked by challenging operating environment, the improving trajectory of volumes and profitability in the domestic business and the robust international business keeps us fairly optimistic of a better FY’ 24 than FY ’23 on both revenues and bottom line. The initial results of our diversification efforts in India and some of the overseas markets have been quite encouraging. We believe this sets us up for a sustainable and profitable growth in the medium and long term and in turn, create incremental value for all our stakeholders. If you have any further queries, please feel free to reach out to our IR team, and they’ll be happy to address them. Thank you.

Operator

[Operator Closing Remarks]