Marico Ltd (MARICO) Q1 FY23 Earnings Concall Transcript

Marico Ltd (NSE: MARICO) Q1 FY23 Earnings Concall dated Aug. 08, 2022

Corporate Participants:

Saugata Gupta — Managing Director & Chief Executive Officer

Pawan Agrawal — Chief Financial Officer

Analysts:

Abneesh Roy — Edelweiss Financial Services — Analyst

Percy Panthaki — IIFL — Analyst

Tejas Shah — Spark Capital — Analyst

Jaykumar Doshi — Kotak Securities — Analyst

Kunal Vora — BNP Paribas — Analyst

Vishal Punmiya — Nirmal Bang — Analyst

Trilok Agarwal — Dymon Asia — Analyst

Ajay Thakur — Anand Rathi Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Marico Limited’s Q1 FY ’23 Earnings Conference Call. We have with us from 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 would now like to hand the conference over to Mr. Saugata Gupta. Thank you, and over to you, sir.

Saugata Gupta — Managing Director & Chief Executive Officer

Yes, hi, good afternoon to all those of you who have joined the call. FY ’23 has started on a soft note for the FMCG sector in India, which continued to face some macro headwinds. Retail inflation has stayed above RBI’s target limit for six consecutive months now, thereby straining consumer wallets. With companies passing on the impact of rising input costs and currency depreciation, consumers are seeing downgrading and down-trading across various FMCG categories.

In this challenging context, domestic volume growth, volumes in Q1 were certainly well below our expectations. The performance is particularly dragged by Saffola oil, which posted a volume decline in the 20%s giving — given the high in-home consumption in the base and severe down-trading headwinds in the category, because of the absolute pricing of around INR230 per liter.

Ex-Saffola oil, domestic volumes were up marginally. One should appreciate that this quarter’s performance of various companies should also be looked in in view of the portfolio and the inflation present in the raw material basket. For example, we had a high base, because 30% of our portfolio is in-home consumption, which is Saffola and Saffola Foods and only 5% is out of home and discretionary, mainly male grooming and skin, so therefore we had disadvantage this quarter.

While the optical three-year volume CAGR does not measure up expectations either, we must acknowledge the material impact of Q normalization between Q4 and Q1 since the onset of pandemic. We had earlier mentioned this in the calls of FY ’21 and FY ’22 quarter one that quarter one FY ’20, which is the base year accounted for 30% plus of the FY ’20 annual revenue and compared to 26% to 27% which normally happens in Q1. Therefore, if you take a CAGR versus the average monthly run rate for the full year of FY ’20 and this is the way we are internally tracking our performance. The growth year CAGR comes to around 6%, which certainly provides a much better perspective on our performance over a three-year period.

Delving into India business, let me give you a flavor of the key trends in our categories and what is the strategy and outlook for the year ahead. In Parachute coconut oil, while use to branded conversion slowed because of the inflation, we have continued to lead the sector with market share gains. Other organized players have gained marginal market share or lost market share and the Parachute market share gains in both volume and value is the highest amongst all organized players in the CNO market.

As far as deep discounting is concerned, we plan to counter it tactically, as we always operate within a premium pricing band, which delivers consistent volume growth at healthy margins and are not deterred by players operating at negative gross margins. In addition to the 6% price cut taken last year, we have passed our incremental value to the extent of 2% towards the end of Q1 due to channel inventory, as well as in the depots and everywhere, there is a lag of around 60 days for price correction before we can expect the price discovery all India by the consumers, which will lead to better traction. So we are confident of delivering healthy volume growth in line with our medium-term aspirations thereafter as we go into Q2, going into Q3 and Q4.

In Saffola edible oil, in addition to the high base and a number of trade and supply chain issues, down-trading was most sharply evident in the super premium segment. While the overall ROCP category declined in volumes around 9% to 10%. There was a sharp skew within the sub segments as the base oil, which is the mass segment actually grew in the ‘30%s and the premium and the super premium oil declined in high-double digits. This clearly indicated the impact of the sharp increase in absolute outlay, affecting purchasing behavior in the category and stalling any potential upgradation to the super premium segment.

We could have chosen to recoup volumes by sacrificing margins, but we consciously did not chase growth at suboptimal gross margin. We will go for volumes once market conditions are less volatile and price stability is restored. That being said, in the near term, we expect volume trends to improve from quarter two and aim to deliver growth in H2 as the base normalizes. June had a slow quarter due to sharp base effect, given that our portfolio is highly skewed to in-home health and community categories, as opposed to discretionary out-of-home category. We expect growth to pick up gradually from Q2 and continue to launch share gains in oats and soya.

While the honey category has moderated visibly, we expect to grow as the base normalizes. In light of certain — we’d like to clarify that we have largely held our market shares in honey across channels, which stands at 22% to 23% income and close to double-digit in MT and a mid-single digit in GT. The overall share loss versus the last two quarters has been only 1%. We continue to maintain the superior proposition on the back of NMR tested purity. Just like pure coconut oil freezes during the winter, research proves that raw pure honey that undergoes crystallization in winter. And therefore we have started to run campaigns to educate the consumers that pure honey crystallizes.

Further, we are excited about the medium term prospects of True Elements, which has tremendous runway for growth, as a clean label brand in the rapidly growing breakfast and snacking category. We continue to hold our INR850 crore to INR1,000 crore revenue aspiration in June over the next couple of years. In value-added hair oils, we have delivered 5% pricing led growth while the volume was flat. We’ll continue to take calibrated price actions to pack size reductions, as well as MRPs increasing going forward as well. So just to again reinforce the fact that we have actually taken a 5% price increase in the last quarter and we intend to take more. We have not let up on our upward market share, since we strongly believe that category growth potential in line with the overall HPC demand.

If you look at segments within the VAHO category based on RPI, we are witnessing improving trends in the mid-tier of the category and there is downgrading from premium. We’re also focused on expanding our presence in the premium and super-premium segment, which is mainly represented by D2C plans. While there is heightened competitive intensity at the bottom of pyramid, we are defending on the leadership position, but not focusing on growing that segment disproportionately at the cost of margin. As we hope for a mass revival in consumption sentiment in H2. We’ll maintain our focus on premiumizing the innovation to drive double-digit value growth in the rest of the year.

Just like CNO our gains in VAHO was the highest compared to other organized players. Given that inflation doesn’t affect consumption patterns of upper-income segment, premium personal care has been growing smartly post COVID led disruption. Serums are growing ahead of pre-COVID levels and male grooming is steadily getting there. Beardo and Just Herbs are also meeting internal targets. Our digital brand portfolio is now around circa INR200 crores in annualized run rate, we are confident of crossing INR250 crores ARR in Q2 and thereafter adding INR50 crores to INR75 crore ARR every quarter till we reach a INR450 crore to INR500 crore mark in FY ’22.

Moving to international business, which has been a symbol of tremendous positivity and consistency, especially when we look at peers in the sector, having delivered constant currency growth for the sixth quarter in a row, we continued to channelize all our energies towards strengthening the underlying fundamentals of each of the businesses. The Bangladesh extended a good run with a healthy growth in costs, and accelerated ramp up in Hair Care and Baby Care portfolio, despite recent macro developments, we expect to be able to sustain the momentum and cope with it as we believe during such times the strong gets stronger and weak gets weaker depending on the position in each country and Bangladesh we have a very, very strong position.

Vietnam also delivered strong results as HPC category growth picked up and there are no visible signs of any inflation or any economic recession, which is currently robust. We’re also making visible and exciting gains — exciting attempts to broaden our play in the region, in MENA there is a sizable profit pool, which represents an attractive opportunity, we’re really investing to grow in the region. The South Africa and MENA [Phonetic] are also seeing healthy momentum building up as well.

Looking ahead, while the overall demand sentiment in India is yet to turn cheerful, we are enthused by the robust market share and penetration wins across our domestic portfolio which assures us of steady recovery once the macro headwinds subsides. With 50% of our raw material basket witnessing deflation, we are relatively less impacted by inflation while continue to have reasonable comfort on the profitability front without cutting A&P spend. We have delivered healthy margins even though the quantum of inflation on edible oil was 70% as compared to 20% to 30% other raw materials.

We’ve seen a visible recovery in gross margin over the last four quarters, but quarter two will be tricky as the benefits of falling edible oil prices will not flow-through as we are carrying higher cost inventory of vegetable oil, while we’ll pass on value to the consumers through pricing immediately ahead of our cost structure. While we delivered a strong EBITDA margin of 20.6% in the quarter, EBITDA margins will moderate in the following quarters since we want to invest for growth and especially at a time when the quarter three and quarter four where we have a very soft — softer volume base. However, after factoring in the quarterly generation in the sales mix in each of the cost line items, we are extremely confident of delivering 18% to 19% operating margin in FY ’23.

While we draw reasonable comfort on margins, we’ll pull out all stops to deliver healthy volume growth in rest of the year, especially in H2, given the base and given the fact that we also will accelerate some of the innovations in food and digital. We’ll continue to ramp fundamentally sound franchises in the domestic and international markets even in the face of transient external headwinds and push the four strategic levers of diversification, distribution, digital, and diversity which we believe will keep us on the path of sustainable double-digit revenue growth and profit growth over the medium term.

We also continue to make visible progress in our ESG program, creating shared value for all domains and invent [Phonetic] purpose for our business and will allow us to drive superior long-term performance. We are committed to achieving net zero emissions in our domestic operations by 2030 and global operation by 2040. We have recently released our focus area and goal for the next decade of action, which are detailed in the FY ’22 reports.

With that, I’ll now close my comments. Thank you for your patient listening and happy to [Technical Issues] Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss Financial Services. Please go ahead.

Abneesh Roy — Edelweiss Financial Services — Analyst

Yeah, thanks. My first question is on True Elements and your digital first brand. So in our Western breakfast, specifically Oats, you have both Saffola and True Elements, if you could tell us how the positioning will be? Second is, because liquidity has dried up in general for competition, rate hikes, IPOs not happening. Will it be fair to say that for your digital first brands Beardo, Just Herbs et cetera. The competitive intensity now with a much lower, so you will be much more confident of your three-year, five-year ambition plans here?

Saugata Gupta — Managing Director & Chief Executive Officer

Okay. First let me talk about True Elements. I think, yes, there is slight overlap, but if that their entire portfolio we are going to focus on two different price points. So if we are selling plain oats and masala oats, they will be focusing on steel cut oats and rolled outs, which is a premium variety of oats and a higher RPI. However, going forward, there is a huge journey to be had for True Elements. And we have carved out the spaces in which True Elements will operate and Saffola Foods will operate. And obviously as we scale up over the year, I mean, currently it is in slightly premium niche things that we will obviously try to expand the offering as far as True Elements is concerned.

Regarding your second question, you’re absolutely right. What has happened in the last 18 months was especially in the last 12 actually, 12 months to 18 months, post-COVID, when COVID started with all the money, the cap and the losses or the ASPs that was pumped into the digital business were actually unsustainable and therefore that hit [Speech Overlap].

Operator

Sir, sorry to interrupt. Sir, there is a slight audio break while you’re talking, may I rejoin your line, please.

Saugata Gupta — Managing Director & Chief Executive Officer

Okay.

Operator

Participants, please stay connected while we rejoin the management line back to the call.

Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.

Saugata Gupta — Managing Director & Chief Executive Officer

Yes, sorry, I think I was responding to the CAC question on cost. Yes, absolutely right, Abneesh, that last year, I mean there was a lot of cash burn happening and therefore the customer acquisition cost and the A process [Phonetic] in the digital world had shot up. Having said that, the money will now chase only quality brands or the quality businesses. Obviously there will be a huge amount and I think the cash burn, which was witnessed in the last 12 months will certainly slow down, for a strategic acquisition band which is supported by a strategic like Marico, it’s a completely — you’re absolutely right, it’s a source of competitive advantage and therefore we expect that the unit economics for leader brand in each of the category, which will substantially improved and the competitive intensity will go down.

Having said that, as I said, the money will still chase the quality businesses in each of the categories. So, to answer your question, Abneesh, advantage, yes. I think the other thing what has happened is, given that we have now a bouquet of digital brands, the cross learning that is happening. That has also helped us and also one thing you must realize that why each brand, the biggest might be Beardo, there are lot of shared opportunities not only of learning, but also shared costs. You should look at a business like a INR200 crore and INR250 crore business. So that also has an impact, positive impact in managing costs. Yes, so the fact that we want to add INR50 crores every quarter to the annualized run rate is something we are far more confident of today and able to do it in a correct way and not by blowing money.

Abneesh Roy — Edelweiss Financial Services — Analyst

Sir, thanks for that, sir, that was quite helpful. My last question is on Slide 7. So 96% market share gain, 93% portfolio penetration gains, are you referring to Nielsen in both the cases, and is the penetration number — product is upset of the 96% and it’s a commendable achievement. What you have not gained, for example, will it be largely Set Wet?

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah, so market share, yes, it is Set Wet and in serum in market share and in penetration one particular brand of VAHO. So it’s not a compare, it’s a 100% one brand which contributes to 7% kind of a thing, 6%, 7%, we have engaged here, we haven’t gained penetration.

Abneesh Roy — Edelweiss Financial Services — Analyst

And both are Nielsen number only, right?

Saugata Gupta — Managing Director & Chief Executive Officer

[Indecipherable] panel and one is a retail audit.

Abneesh Roy — Edelweiss Financial Services — Analyst

Sure. That’s all from my side. Thanks a lot.

Operator

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

Percy Panthaki — IIFL — Analyst

Hi, sir, first question is on the Foods portfolio. Why your three-year CAGR is quite healthy? The Y-o-Y growth of single-digit is rather surprising, especially given that the business is rather small in nature, larger companies like Nestle have grown 15% Y-o-Y. So, can you just give some kind of flavor as to why this is happening and how quickly this can turnaround going back to that 25%, 30% Y-o-Y growth that we would need to clock for us to achieve our targets?

Saugata Gupta — Managing Director & Chief Executive Officer

First I alluded, if you see our Foods portfolio, our portfolio is completely skewed towards [Indecipherable] and health and immunity. So therefore, we obviously had a significant advantage when you have the quarter one last year which was the Delta peak where people stayed at home and significant [Phonetic] consumption. So that is — if you look at, I don’t have a — while I don’t want to get into specific companies, all other food companies have a HoReCa sale, institutional sale, they have a out of home sale. So therefore, in our case, the out of home sale is zero. So therefore if you have an out of home or a HoReCa and other sale it balances, this one balances out and [Indecipherable] work extremely skewed 100% towards health and immunity.

If you look at the runrate, I don’t think there is anything much to be concerned about. And therefore if you will see, it will start picking up in Q2 and in Q3 and Q4 we have an aggressive innovation plan and therefore we should be over the next two years, as I said, we are extremely confident of hitting that INR850 crore to INR1,000 crore mark, so you will see the improvement gradually happening as we go to Q2, Q3 and Q4, and in Q3 and Q4 we have another round of aggressive innovation program ahead.

Percy Panthaki — IIFL — Analyst

And a related question, because in honey you said there is a 100 basis points market share loss. So this is on what base? I mean, your overall honey market share would be, what, 5%, 6%. So on that 100 basis points is a very big number?

Saugata Gupta — Managing Director & Chief Executive Officer

No, no, slightly higher. So just to give you a perspective, we have a 20% plus in income and a double digit in modern trade, and mid-to-high single digit in GT. As you know that Nielsen doesn’t capture e-comm separately, but I would say your weighted average number will be — so we have lost some share in modern trade and as I said, the weighted — the actual loss versus last quarter is 1%. So, if it was, say, suppose hypothetically 8%, it would be 7%.

Percy Panthaki — IIFL — Analyst

Understood. Coming to the overall gross margins for your company. Would you say that in the coming quarters, we should see better gross margins compared to what we have done this quarter, because there would be some amount of deflation that which is already visible, but which has not been fully captured in the Q1 results. Would that be a fair assessment?

Saugata Gupta — Managing Director & Chief Executive Officer

So, if you ask me, as I think I alluded to in my opening commentary that Q2 will be not because — simply because of the fact that as the vegetable oil table is going down rapidly, we have been starting to take quantitative price cuts in order to accelerate the volume recovery of Saffola, obviously we are giving that price discovery to the consumer immediately while we are holding some old high cost RM stock either in the form of raw materials or in the form of finished goods. So therefore, quarter two will be not, but quarter three, quarter four, the fact that if the vegetable oil stabilizes, copra is placed sideways and crude starts softening, you might see it, but quarter two certainly not. But the way we are playing it is very simple.

I mean as far as operating margins, with a 20.6% operating margin, we are banking it and therefore in the second half where we believe the consumption condition will be far more favorable than compared to Q1, we will actually invest to grow in second half.

Percy Panthaki — IIFL — Analyst

Understood, understood. So basically, you would still stick with your 18%, 19% EBITDA margin guidance, although Q1 has been higher because the ad spend will go up in the coming quarters, is that the right way to think?

Saugata Gupta — Managing Director & Chief Executive Officer

Yes. Also crude is the chopper in the pack, we don’t know what will happen on it or the inflection, still at end of the day, we — obviously we have to make — we are clear that second half is the time to actually maximize volume growth.

Percy Panthaki — IIFL — Analyst

Right. And just one data point. You mentioned that because of the Q4-Q1 seasonality change, the three-year CAGR comes to 6%, that is on value, right? If you can give us the domestic volume growth CAGR also on three-year please?

Pawan Agrawal — Chief Financial Officer

So it is present on all the sites. So this is on index volume growth, a lot of model value, so what we’ve done is, as volume level of Q2 are still normalization for FY ’20 and then we work out a caveat and the volume level will be somewhere between 5% to 6%.

Percy Panthaki — IIFL — Analyst

Okay, volume CAGR is 5% to 6% and would that be something that you would sort of aim to achieve for the remaining three quarters as well. The same kind of underlying trajectory?

Pawan Agrawal — Chief Financial Officer

That’s right. And just to add the — Percy, what we also do is, at our internal target also, we have moved that at a run rate level and that is why we sort of compare this number and this number becomes a variable product.

Percy Panthaki — IIFL — Analyst

Okay.

Saugata Gupta — Managing Director & Chief Executive Officer

As I clarify that, that particular year Q1 was 30%, but normally Q1 is 26% to 27%.

Percy Panthaki — IIFL — Analyst

Right, right. Got it, okay, that’s all from me. Thanks and all the best.

Operator

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

Tejas Shah — Spark Capital — Analyst

Saugata, a couple of questions on international business. First on Bangladesh, we are picking up news of going through economic turmoil, so any read through and how are we insulated if at all from the current slowdown there?

Saugata Gupta — Managing Director & Chief Executive Officer

Okay. So two things. First, I think I must commend the Bangladesh Government for actually taking proactive steps in managing the economy. Yes, there is a slight issue on inflation, there is a slight issue on depreciation, but given that the fact that we have taken proactive steps, I think the things will be very much in control. Secondly, I think our competitive position in Bangladesh is extremely good and therefore two things we are doing, we are ensuring that we are doubling up on things which are focus areas, where there are opportunity to gain market share, even if there is a little bit of a category slowdown, and therefore ensuring that we are focused on only some of the big thing, just like we are actually replicating the strategy we did in COVID here where we ensure that we double up on the core.

There are two, three innovations which are continuing to do well, how do we focus on agility and right costs to actually ensure that we don’t pass on this inflation to the consumer, but manage this and be much more strong comparatively. So what — I would say that we continue to be reasonably confident of delivering double-digit growth in Bangladesh, irrespective of the situation. And let me tell you, we are also confident that given the proactive steps that Bangladesh Government is taking, they are extreme — they’ll be still resilient in coping up with the situation.

Tejas Shah — Spark Capital — Analyst

Sure. And any pricing action aggressive, one which we’ll have to take in Bangladesh to protect margins and pass on the inflation?

Saugata Gupta — Managing Director & Chief Executive Officer

We are taking groundbreaking actions, because I said we are okay with it. Having said that, yes, I mean, because of the depreciation there will be some translation losses when we aggregate the P&L and the balance sheet, that we have to absorb.

Tejas Shah — Spark Capital — Analyst

Sure. And second part of our international strategy, which you had highlighted on earlier calls was to replicate Bangladesh success in Vietnam. So, any update on that?

Saugata Gupta — Managing Director & Chief Executive Officer

I think two things we have done. As I said, we continue to — there are four things which make a business go on a flywheel or a virtual cycle, which is getting the portfolio right, getting the go-to-market right, getting the cost structure, people and processes right. I think in Vietnam we have got all the four right. It’s going on right tandem. We are also gone into female grooming. We are just stepping into female grooming and expanding the total addressable market there.

We have started gaining share, so all the signs of Bangladesh in terms of replicating, having said that, obviously it will happen in a certainly different phase, because you must say that Bangladesh has a dominant position, the competitive situation is slightly different. We are extremely confident of continuously now driving double-digit growth in Vietnam in both top line and bottom line over the next subsequent quarters.

Tejas Shah — Spark Capital — Analyst

Sure. And then last one, if I may squeeze in on VAHO. Despite the popular expectation of opening up and people stepping out and mobility, going back to normal, VAHO as a category has not responded well. Any read through that despite all the other tailwinds being there for opening up as a driver. The category did not actually live up to the expectation that we had before COVID or around COVID?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I would — this is my take on HPC, if you really look at it, that part of the portfolio was the non-sticky hair oil and the premium part of the portfolio. So now that has got impacted actually by inflation this year, but where we are operating, we are fairly okay actually I would say. If you look at VAHO, we compare to other HPC categories, if we look at HPC we are actually minus 1%, I think this quarter in natural, broadly — and VAHO is broadly in line with that. So, I think there is no difference in other HPC categories and VAHO in terms of the Nielsen growth rates.

Tejas Shah — Spark Capital — Analyst

Sure. Sir, but versus other HPC categories, Saugata, we expected that some of these categories which are skin care, hair care, they will have some tailwind of opening up offices, schools opening up, so that did not surface, though we witnessed in some of the discretionary categories, staples categories has not — have not shown that kind of bounce back, that was the point actually.

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah, that is because I think you are right. But that is also because down gradation is happening now because of inflation. So we are seeing VAHO a significant down gradation from premium to — and also a lot of action is happening on the bottom of pyramid, competitive intensity in the bottom of pyramid. So the average as far is going down a bit, but having said that, I think we have a different take on it, just to give you, we want to focus on value share because we are under indexed in the premier. If you look at already the kind of — we’re starting to see market share gains in e-comm and modern trade on the super premium which is where honey and oil and others operate, and we had actually launched another offering in fact, last week called curry leaves there. I think we believe — and Jatta [Phonetic], all the three. We believe there is opportunity there and that market is, I think, insulated from all the inflation. Now that market is not picked up by Nielsen, by the way.

Tejas Shah — Spark Capital — Analyst

Okay. And this two markets will be what percentage of premium hair oil, GT and — sorry, MT and online?

Saugata Gupta — Managing Director & Chief Executive Officer

In the super premium, a significant amount, that is mostly, yeah. See, again, if you — I’m talking of beyond Almond and all the categories, this is Price Index of two three and all, which is honey and oil run rate. So they are significantly mostly Modern Trade, e-comm and beauty again, that’s it.

Tejas Shah — Spark Capital — Analyst

Okay. Thanks Saugata. That’s all from my side, and all the best.

Operator

Thank you. [Operator Instructions] The next question is from the line of Jaykumar Doshi from Kotak Securities. Please go ahead.

Jaykumar Doshi — Kotak Securities — Analyst

Yeah, hi, thanks for the opportunity. Yes, I want to understand the INR200 crore of digital first brands in the D2C side and you indicated INR250 crore next quarter and INR50 crore to INR75 crore incremental on a sequential basis thereafter, which means you’re expecting that to be INR400 crore plus next year this time for 1Q. So which brand in particular gives you confidence, at this point of time, if I’m understanding correctly, it’s primarily Beardo and maybe Just Herbs and Pure Sense and Coco Soul. So, is there any addition there or if you can sort of —

Saugata Gupta — Managing Director & Chief Executive Officer

So, we will continue to look at organic and inorganic offers, but you’re right, at this point in time, it is led by Beardo and Just Herbs is our number two.

Jaykumar Doshi — Kotak Securities — Analyst

Right. And this guidance of —

Saugata Gupta — Managing Director & Chief Executive Officer

These brands are not yet [Indecipherable].

Jaykumar Doshi — Kotak Securities — Analyst

Guidance of doubling, roughly doubling by 1Q FY ’24. It is also largely dependent on Beardo doing –?

Saugata Gupta — Managing Director & Chief Executive Officer

No, no, everybody, it has — as I said, it has to be, I think all the brands has to fire and go out a certain accelerate ’23 and as I said that we are — we will continue to look at inorganic opportunities in this phase.

Jaykumar Doshi — Kotak Securities — Analyst

Understood. That’s helpful. Second is, could you give us some color on how — what has been the response to your launch in onion hair oil category, as a market leader, Parachute is able to capitalize or gain market share from some of these D2C brands?

Saugata Gupta — Managing Director & Chief Executive Officer

Yeah. So I think it is going as per our action standards and other thing is, it has also perhaps forced the market leader to take a 30% price cut.

Jaykumar Doshi — Kotak Securities — Analyst

Understood. That’s it from my side. Thank you so much.

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. In Saffola how large would the hit be because of the high cost inventory in second quarter? And then typically, how many weeks or months inventory do you carry and will all the high cost inventory be used up in second quarter?

Saugata Gupta — Managing Director & Chief Executive Officer

So let me just explain to you this, you are having a sliding raw material table where you’re forced to take, say, multiple price increases almost, in fact, we have taken three price increases in less than two months. Drop — price drop, my apology, a price drop. As a result, what happens is that, you have to take a price drop in line with the market conditions, because that is how we can — at this time we have chosen that to get the volumes back.

So, as long as this settles, obviously any time there will be an inventory, if I want to get into it, a couple of weeks we’ll have inventory of RM, I’ll have a couple of weeks, although there is much more thinker than other brands. But this and what happens usually in modern trade and e-commerce, you immediately discount it to give the pricing to drive off-take.

So, as a result, what happens is that even with high cost of MG, high cost of RM, you deliver a — you give the consumer that price discovery. So that’s the reason I said that rapidly — volatile decline with these multiples, there is — it takes time for the margins to settle down and so that at this time we are ensuring that we get the volume recovery at our accelerated level, okay.

Kunal Vora — BNP Paribas — Analyst

Sure, thanks. So it will all get settled in second quarter, third quarter onwards it should be back to normal?

Saugata Gupta — Managing Director & Chief Executive Officer

Third quarter it should get settled, [Indecipherable] it’s very difficult, I’m the — I think I’m not an expert in trigonometry or in the field, but we expect — this is whatever is when — we say kind of an average of all the international forecasters and not that expert we’ll also get it from, but what we see is things stabilizing and we are taking pricing up and this time what we are doing is that, as I said that I’ve already banked at 20.7% EBITDA during a headwind time we chose not to do suboptimal margins and gain. This is a good time to get the right pricing and start the volume acceleration, which we believe should happen in the second half and [Indecipherable] is the time to get the price settled and the entire structure settled, and also get rid of all the high-priced stocks in the market.

Kunal Vora — BNP Paribas — Analyst

Sure. Thanks for that. Second and last question, you seem pretty confident about second half recovery. So I just wanted to get, try to get some sense on what’s driving that confidence, is it largely the base effect or you’re picking up recovery in consumption trends in the last few weeks?

Saugata Gupta — Managing Director & Chief Executive Officer

So, two things, one if you look — if you knock off Saffola, even from this quarter one, we grew by 1.4%, okay. Now that growth will — and so therefore if hypothetically Saffola had been flat, then the growth would have been 2%, 3%. And then what we are seeing, two things, one is of course base. Number two, I think as I said that food growth will get accelerated, some of the other Parachute, once we are getting the pricing right, I think the new prices, reduced prices will be settle down in the market by August end, September first week, because it takes around 60 days to settle down. A combination and this is one of the factors, it’s just not the only factor. And as I said, that we measure to run rate. So our run rate indicates that would be able to get the higher growth in the second half.

Kunal Vora — BNP Paribas — Analyst

Understood, that explains. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vishal from Nirmal Bang. Please go ahead.

Vishal Punmiya — Nirmal Bang — Analyst

Yeah, thank you for the opportunity. My question is on the edible oils portfolio. So we have mentioned that there is a visible downgrading from super premium to mass segment during the quarter. Personally, I thought the demand by the consumers of super premium edible oil would be rather inelastic and this premium consumers should be more loyal to the particular edible oil they consume, based on the kind of benefits that he or she derives. So how do we look at this moment, is it near-term or is there any other factor playing out apart from the higher prices or inflation?

Saugata Gupta — Managing Director & Chief Executive Officer

So if we look at — see the average — I’m sure the price of edible oil is — when I define super premium, super premium is — it’s not niche, it is still reasonably marked, because Saffola is a INR2,000 crore plus edible oil brand. So that is not niche like any — So, therefore, first of all, when I define super premium, it’s a relative term.

If you look at what exactly happened, one is, one year ago or I think 14 months to 16 months ago, I would say, between that and peak price of Saffola INR230 a liter, we have taken 67% to 70% price hike, which means actually a average household consuming Saffola which is 4 liters, 5 liters, there are of course health conscious households, which affordables, they pick 4 liters, it’s INR320 outlet, so two things happen, one, the upgradation stopped. Number two, in households where — was one of the oils, like Saffola has a share of requirement on SOR, that SOR redeemed.

The third thing as I said is, you must realize the third thing that happened, see, the 27% volume drop is not just a drop in off-take, if not to break up the drop in off-take, it’s a combination of three, four things. There is a drop in off-takes, there is a drop in STR, we chose not to do certain business in this quarter, where we were making suboptimal margins. So if I wanted to give a, roughly a number of off-take, the number would be more in the theme, the off-take drop is not 27%, in the 20%.

Vishal Punmiya — Nirmal Bang — Analyst

So, basically beyond near term with now prices kind of stable, coming down across your portfolio. So we do expect those consumers to revert back to their original brand of consumption, right?

Saugata Gupta — Managing Director & Chief Executive Officer

Likely what — how the growth of Saffola happened? The growth of Saffola happens, people upgrading to Saffola. Household using more Saffola, okay, because at the end of the day you must realize that the average Saffola user is a health conscious user. So the average consumption in a Saffola household is lower than other households, okay. Now what has completely stopped was that upgradation to Saffola and what — I think, what accelerated is both SOR and people down grading from Saffola.

Now, if you look at historically, the price rise of Saffola over the last 18 months, it rose from INR139 a liter to INR230 and I’m happy to, I think, one of the analyst team will be happy to share with you. If you look at price points and growth. I think that too, actually when it hits INR170, INR180 level, I think it is a price point. Also you must realize, the other thing that has happened right and [Indecipherable] in volume, traders stop stocking when the price keeps on coming down, because they also don’t want high priced stocks in their system. So there has been a significant loss also [Indecipherable] of Saffola that has happened in the last six months. Ever since the price is high in the last three months, where — there was this accelerated decline in the raw material prices happening and people have been dropping prices. So that’s why I said, don’t see as a mid INR20 decline or everything is an off-take driven thing. And I hope once the things stabilizes sometime towards Q3, we’ll be able to recover some of the SCR.

Vishal Punmiya — Nirmal Bang — Analyst

Understood. Thank you, sir. And best of luck for the future.

Operator

Thank you. [Operator Instructions] The next question is from the line of Trilok from Dymon Asia. Please go ahead.

Trilok Agarwal — Dymon Asia — Analyst

Yeah, hi, good afternoon, sir. Thanks for the opportunity. In the earlier question that you answered with regards to the food business, how should we think from a full-year perspective, what’s the kind of growth rate are you thinking on the food business? And this quarter, leaving aside, this quarter performance?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I think it will get into double-digit growth. And then the second half it will accelerate because as I said, there is innovation program and there is a [Indecipherable]. As I said, that if you have to look at that INR850 crore to INR1,000 crore over the 2024, we should be in striking distance of that sure.

Trilok Agarwal — Dymon Asia — Analyst

Understood. But just from when you say in the new innovation will drive from H2, are those kind of extension into categories that you already have or you completely new categories that you intend to enter, which will probably drive growth further?

Saugata Gupta — Managing Director & Chief Executive Officer

It could be a combination of both, and also as you know that we have launched, things like peanut butter, mayo and all which we have arranged a limited launch, that will scale up. The other growth will be that we are now started a to food GTM which we started in two, three cities, we are now extending it to more than 10 cities, specialized food GT, enterprise food business.

Trilok Agarwal — Dymon Asia — Analyst

Sure. Okay, thank you very much, sir. I’ll come back in queue if I have further questions.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ajay Thakur from Anand Rathi Securities. Please go ahead.

Ajay Thakur — Anand Rathi Securities — Analyst

Hi, thanks for taking my question. Just one thing I wanted to check on, we have come across that market, hair oil market actually is kind of declining and we are seeing a lot of intensity in terms of the competition going up with major players actually embarking on cross selling within the sub-segments. So if I were to look at it, Bajaj is expanding its portfolio, Bajaj Consumer Care is expanding its portfolio into, from the almond oil to more like the coconut oil and other segments. Similarly Dabur is also talking of expanding from Amla to maybe the other sub-segments. So, overall we are seeing the competitive intensity within the hair oil sub segment is rising in a market which is kind of declining. So in that context, wanted to check on your view, given the fact that we are the market leader, how do you see this competition impacting us and our growth trajectory within the hair oil pack?

Saugata Gupta — Managing Director & Chief Executive Officer

So, I’ll tell you two things, I think two or three things. First, I have been reinforcing this time and again and we believe that in VAHO we are — our market share gain was the highest amongst all other players. Just to give a perspective, a correct one for this one. If you look at HPC, while the FMCG’s fine was around 2%, 3%, in AMG ’22 as Nielsen, the HPC volume decline is the 6.4%, and actually VAHO declined in — and it’s not so high. So VAHO is actually flat. So that will tell you the story that the vision that can be built by, you know that that is getting built very high competitive intensity and declining category, I think it may not be always the right perception to take a five-year period and plot the VAHO category versus HPC categories, you will see a different picture.

Coming to the competitive intensity, show me from which year Marico has lost market share drastically?

Ajay Thakur — Anand Rathi Securities — Analyst

I take your point, sir, on that one.

Saugata Gupta — Managing Director & Chief Executive Officer

So, what happens and I’ll tell you why, because sometimes what happens is, with some players who are operating at the bottom of pyramid may take market share from small players. That’s fine. Our lever is to concentrate on value share because we are under indexed in the slightly PGM. And we’ll continue to focus on that while we’ll defend, but we will not — our strategy is not to put all our eggs in the BOP basket.

Ajay Thakur — Anand Rathi Securities — Analyst

Okay, I understand. Sir, another point that I wanted to just check on is, are we seeing a higher growth within the premium edible oil segment, sorry, premium oil segment, hair oil segment, given the fact that most of the players are trying to kind of enter the premium side. So, is there some kind of a higher growth that we are witnessing right now in the last maybe a year or so in the premium hair oil segment?

Saugata Gupta — Managing Director & Chief Executive Officer

Actually most players have the competitive intensity or so called activities in the bottom of pyramid. I don’t see any players. Yes, there has been activity in the digital side of the business, so this is through insurgent brands like, which are not the organized players, and that side of the market is growing. But if you look at people who pay in the premium side about the organized players, most of the brands are declining actually.

Ajay Thakur — Anand Rathi Securities — Analyst

Okay. Quite helpful. Thanks, sir.

Operator

Thank you. [Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.

Saugata Gupta — Managing Director & Chief Executive Officer

Thanks a lot for listening along the call. To conclude, the start of the year has not kicked off on an exciting note in the India business, almost a tough external environment. However, given the strong competitive positioning of our brands in respective category, we are confident that we’ll be delivering better than FMCG market growth in the quarters ahead. We are confident that international business will continue to stay ahead of the pack.

While there is uncertainty around group-led inflation, we draw comfort from the deflationary trend in other key raw materials, that will allow us to invest behind brand building and drive consumer experiences [Phonetic], while maintaining preferred margins for the year. If you have any further queries please feel free to reach out to our IR team and they will be happy to address the same.

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