Marico Ltd (MARICO) Q3 FY23 Earnings Concall Transcript

Marico Ltd (NSE: MARICO) Q3 FY23 Earnings Concall dated Feb. 03, 2023

Corporate Participants:

Saugata Gupta — Managing Director and Chief Executive Officer

Pawan Agrawal — Group Chief Financial Officer

Analysts:

Percy Panthaki — IIFL — Analyst

Avi Mehta — Macquarie — Analyst

Vivek Maheshwari — Jefferies — Analyst

Shirish Pardeshi — Centrum Broking — Analyst

Harit Kapoor — Investec — Analyst

Sheela Rathi — Morgan Stanley — Analyst

Vishal Punmiya — Yes Securities — Analyst

Amit Rustagi — UBS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Marico Limited Q3 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] Please note that this conference is being recorded.

Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts. And therefore, if there is anybody else who is not an institutional investor or analyst but would like to ask 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 and Chief Executive Officer

Yeah. Hi, everyone, and good evening to all of those of you who have joined the call. And I would firstly I like to wish all of you and your loved ones a wonderful and a happy 2023.

I will start off by giving you a flavor of the operating environment before delving into our performance during the quarter. After the FMCG sector grappled with the dampening effect of inflation for the better part of 2022, we believe that there are indications at the start of a gradual improvement in consumption trends, following the sequential moderation witnessed in commodity and retail inflation. CPI has come down from the levels of 7%-plus earlier to sub-6% in December 2022. We’ve also seen visible softening in prices of some key commodities from unprecedented levels brought about by the geo-political tensions and the supply chain constraints earlier during the year.

Amid this evolving context, FMCG sector recorded a marginal volume decline in December quarter, its lowest in the last five quarters. Amongst categories, food stayed on the growth path, while HPC recorded mid-single digit volume decline. Urban continue to grow in low-single digits, rural remain the weak link, although its trajectory appeared to improve. During inflation, our healthy rabi sowing season are indications of higher farm income all go well for rural growth prospects. Also increased budget allocations and this new initiatives announced in the Union Budget should provide the much needed impetus in this direction.

Coming to our performance in Q3, we are enthused by improving trends seen across most parameters. Top line growth was underpinned by 4% domestic volume growth and 8% constant currency growth in the international business. If not for the pack size reductions in value-added hair oils, volume growth would have been at 5%-plus. On a three-year CAGR basis, domestic volume grew by a steady 6%, which I believe is in the top quartile amongst all companies in the peer sector. And international business constant currency growth stood at a robust 11%.

In terms of profitability, gross margins seen an y-o-y and sequential expansion, owing to a stabilizing raw material and consumer pricing environment and a healthier broad mix in the India business. On a three-year CAGR basis, A&P spends were up 6% and we delivered an annual growth of 11%, which has validated our strategy to optimally invest in long-term brand building despite transient cost pressures along the way.

Moving into the India business, I will now take you to trends we are seeing in each of our categories and some color on the strategy and outlook for the period ahead. After seeing some sluggishness in the branded coconut oil over the last four quarters owing to the extended deflation in copra prices, we have seen a revival of volume growth in the month of December in Parachute Rigids. Loose to branded conversions picked up with copra prices firming up favorably in the off-season, and it is the first instance when we are able to establish the right pricing in the market at least by mid-December. As a result, the brand gained 30 bps in the volume market share during the quarter with copra prices expected to be range bound in the near term, we expect to clock volume growth in line with our medium term targets going forward.

Saffola Oil further its growth momentum with low teen volume growth, driven by stable trade inventory and consumer pricing. Overall, with the commodity prices softening, the revenue growth was subsequently lower. While the international vegetable oil complex needs to be absorbed in the near term, we will remain focused on balancing volume growth and profitability in a sustainable manner in the coming quarters.

In Foods, we remain on course to achieve the FY ’24 aspiration. The segment was led by superior growth momentum in the oats category, which grew at 20%, and maintain its strong leadership position in its category. Our newer offerings under Saffola and FITTIFY ranges continued to gain traction. During the quarter, we entered into the ready-to-eat space under our brand Saffola Munchiez with the launch of ragi chips and roasted makhana in multiple flavors.

Post-COVID, as people have become more health conscious, the industry has shifted for indulgent snacking to bill-fee snacking. Saffola Munchiez combines the power of healthier grains along with delightful flavor to provide better alternative in the healthy snacking category. We’ll continue to drive meaningful innovation in the foods over the next few quarters, and some of the innovation was to leverage the goodness of Shri Anna or millets, in line with the government’s focus on establish India as a global hub for millets.

In value-added hair oils, we were unable to tide over the weakness in rural consumption, which is witnessed in most mass personal care categories. On a three-year CAGR basis, however, value-added hair oils delivered a reasonable 7% value growth. We continue to see better traction in mid- and premium segments also, reflecting the 80 bps gain in value market share. After some degree of commoditization increased competitive activity in the bottom of pyramid segment, we are expecting better volume growth and market share gains now that there has been substantial price increase taken by other competitive brands.

With inflation easing and rural slowdown showing signs of bottoming out, we expect to see pickup in growth in line with other HPC categories. Premium Personal Care maintain its strong momentum and register a double-digit growth. We have seen a remarkable recovery in this portfolio since the pandemic and aim to deliver 20% growth consistently over the medium-term to drive lower penetration and a market-leading position in this category. But digital first portfolio is scaling up well in line with internal targets. As we [Technical Issues] these brands in the digital-first portfolio, we are also charting a sustainable path to profitability along the way.

Coming to our international business, we are able to continue a healthy momentum despite macroeconomic uncertainties and currency devaluation in some markets. The business at Myanmar, which declined due to forex-led challenges registered 11% constant currency growth. Bangladesh is witnessing some macro headwinds, though the severity is not any different compared to those in some of the emerging economies in Asia, Africa and Eastern Europe. However, we have been resilient even in the midst of a challenging macroeconomic environment, which goes to showcase our portfolio strength, distribution strength and consumer belief in our brands.

Our Vietnam business further strengthened with both HPC and Foods exhibiting continued growth. During the quarter, we also entered into female personal care in Vietnam by acquiring brands Purite and Oliv, which offer a range of premium and differentiated hair care and skin care products. We are upbeat about the growth prospects in Vietnam and look to significantly expand our play in the personal care category.

Our MENA and South Africa business have also displayed significant growth momentum, while the NCD business, which is a new country development, is also growing in line with internal aspirations.

Looking ahead, we are confident of maintaining an upward trajectory in volume and earnings growth in the quarters ahead on the back of stabilizing raw material and consumer pricing environment in the domestic business, coupled with consistent market share and penetration gains in our four categories, while we expect macro headwinds to gradually recede along the way. We believe that the worst of inflation and volatility is over. Moderating inflation and measures in the budget to enhance disposable income and spending will gradually reverse the flow and accelerate unbranded to branded conversions.

In Coconut Oil and Saffola Oils, pricing has taken some time to settle in and consumer pricing is now more stable and in line with the market. We also expect competitive pricing action which has taken place on a relatively lower inflation to reverse the commoditization in [Indecipherable] to a significant extent. The diversification journey to foods and digital first is progressing in line with expectations. Now that two of our brands are hitting critical mass, we are also focusing on improving cost structure of both foods and digital.

In International business, we are confident of continuing the double-digit growth trajectory as the business have been relatively more resilient despite external challenges in some of the markets. Gross margin should remain steady, and hereon with an upward potential, EBITDA margin should remain in the 18% to 19% range as we close FY ’23 and move above the threshold of 19%-plus next year. We continue to build fundamentally sound franchisees in the domestic and international markets and must progress along the four strategic areas of diversification, distribution, digital and diversity that shall enable us to deliver sustainable double-digit growth over the medium-term. We also continue to make credible progress in our ESG program in each of the focus area, creating shared value for all the [Indecipherable] of our business, and we allow us to drive superior long-term performance. We are committed to achieving net zero emissions in our domestic operations by 2030 and global operations by 2040.

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

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

Hi, Saugata. Just wanted to ask on VAHO segment. So we understand that there is an overall slowdown in the industry, but is there anything that you can do from your side to sort of improve the growth in VAHO? And if at all, when do we see the results of this coming through?

Saugata Gupta — Managing Director and Chief Executive Officer

So, firstly, I think, VAHO, if you see, largely mirror some of the mass segments in the HPC categories, I mean. Secondly, if you look at VAHO compared to other categories, it’s more rural and rural has seen some strength, and some of the markets, for example, in East or UP and all that, which are specific areas where we have seen this one. So, I believe two things are happening, people within the category are downgrading, and also maybe the unbranded to branded journey there is a reverse flow that is happening.

Now with two things that have happened, one is, the entire input costs, which have gone down and the inflation going down, I believe that this reverse journey will get corrected. Secondly, I think interestingly what has happened in the category is that, there has been significant activity or at the bottom of pyramid and where perhaps some players were not taking price increases. And there was perhaps operating with unsustainable margins. A lot of players have taken the price increase and therefore we believe that is good because that helps us to focus on, I think, investing behind the category in terms of ATL and actually growing the mid-segment.

We are focused on actually gaining value share [Technical Issues] between value share and volume share. And therefore, if some of the players, which was — see what was earlier happening was significant down — shift of money from ATL to BTL, that was witnessed by other competitive brands. I believe that will also change, that is good for the category because everybody then invest behind category growth. And I’m pretty confident that as we move towards the next two, three quarters, this growth will get — the decline will get reversed.

Percy Panthaki — IIFL — Analyst

Understood. Secondly on this launch of Munchiez, see the overall snacking category in India is huge, right. So unorganized, organized put together everything might be 100,000 crore or even more. So, just wanted to understand how you are looking at the opportunity size here for yourselves? Okay. You are absolutely right, I think it’s a vast segment. Having said that, I think we are offering a better-for-you healthy brand. We have learned one consumer insight, that the Indian consumer will not compromise on taste for health. And therefore we have actually managed to deliver a product with all the goodness of millets. And of course the fact that, in terms of other things like fat and other things which is far lower than other competitive brands a very tasty product. Obviously, it’s priced slightly higher. If we look at — we will now participate in line with our strength, which is modern trade e-commerce, and e-commerce again we are doing, what I call quick commerce, and a significant amount of food outlets. As you know, we are rapidly scaling up our food GTM in at least eight to 11 cities. And we now have a critical mass of any segment we are participating in which covers 50%-plus retail distribution of the premium part of any of the segments we participating in. So we were going slowly, I’m not giving any numbers. The product is beautiful and in Food if you ask me, if the product is good? If you can generate trials, automatically repeats and scale up happens? And I think we will go up gradually. I think the best thing we are doing is, we are coming, our products we deliver on taste. We are investing significantly behind distribution, and I believe we’ll get a multiplier effect on this. And as I said in overall foods, we are more or less on track to meet our aspirations. And what I noticed in back snacks is that, typically the INR10 price point is very, very important. I mean, even for premium products, even let’s say, for products where the rupees per kilo is higher than, let’s say the normal product in a industry. Just making that product available in a INR10 price point really drives the sales. So, I was just curious as to why you do not have a INR10 price point in these products yet?

Saugata Gupta — Managing Director and Chief Executive Officer

Well, I think various categories are actually vacated the price point. And I think, yes it takes, you take bold and courage to vacate that price point. If you look at noodles, that vacated that price point. If we look at the history of masala oats, we — in despite competition, I think we present in the price point of INR10 or INR12, we entered at INR15. But today, I have a INR300 crore business. So I think ultimately if you offer consumer value today, I don’t think that is an issue because at the end of the day, as I said, that if I have to invest behind a brand, I have to start with the GM that is sustainable. And therefore, given the fact that we have a superior product like millets in certain offering, I don’t think in INR10 you will never have made a sustainable margin in that.

Percy Panthaki — IIFL — Analyst

No. For ragi for example, which you have launched, I think it’s at a INR25 price point, if I’m not mistaken. Keeping the gross margin constant, I mean, country just reduced the grammage and make it available. The reason I’m asking is, the examples that you gave of maggi and oats and all that, they’re not exactly in the same category of back snacks. Back snacks, INR10 price point is probably one of the most selling price points?

Saugata Gupta — Managing Director and Chief Executive Officer

No, but at the same time, I don’t want to name brands, but there are brand which have operated higher and has got critical mass.

Percy Panthaki — IIFL — Analyst

Okay. Okay. Yeah, that’s it from my side, Saugata. Thanks very much.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead.

Avi Mehta — Macquarie — Analyst

Hi. Just had one clarification on the gross margin comment, where you said that you expect gross margin to remain steady. Now, is this — how should we — this is because you are expecting currency depreciation in international, which is what is the worry, because India margins are still what — we know much bigger that 45%-odd average that we used historically. So would love to understand the reason for this comment. Thank you.

Pawan Agrawal — Group Chief Financial Officer

Thanks, Avi, for this question. So what we’re essentially saying is that gross margin will remain steady, which means y-o-y, it will definitely improve. And therefore, there will be some upward bias as compared to where we are at this point in time. Our point to look at is that, we should be looking more from an operating margin standpoint because there’s multiple levers that we’ll be paying out. In operating margin standpoint, what we’re saying is, we will be maintaining 18% to 19% for the full year.

Avi Mehta — Macquarie — Analyst

Okay. Okay. So you’re essentially saying that it is sequentially is what you’re looking at, in that whatever that 41%-odd level that India is at, is what you’re essentially saying will sustain even in India. It’s not a mix — geographical mix that we are talking about over here, which is the reason for the consol number.

Pawan Agrawal — Group Chief Financial Officer

We don’t expect any further improvement in the international because the currency situation has not improved. And in fact, there is a translation hit that’s happening on the Bangladesh depreciation. So, whatever improvement will happen will largely happen on the India business side.

Avi Mehta — Macquarie — Analyst

Okay, okay, okay. That’s all from my side. Just wanted to clarify that. Thank you.

Pawan Agrawal — Group Chief Financial Officer

Thank you.

Operator

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

Vivek Maheshwari — Jefferies — Analyst

Hi, Saugata and Pawan. Two questions. My first question is a follow-up to what Percy asked. So, on the value-added hair oil side, is there a whitespace that you can target? Basically that portfolio has been, I mean, there were like four, five quarters where it grew double-digit, but for a long, long time, it has not — or it has barely grown. So what is your thought process on — is there a way out to gain market share more aggressively, whitespace that you can target or you just need to wait for the market to pick-up?

Saugata Gupta — Managing Director and Chief Executive Officer

So, firstly, I think the three-year CAGR is still 7%, which is healthy, if you see compared to any — our performance compared to any BPC category. I think three-year CAGR is good, yes, whereas one on last — as I attributed to two things. One is, there is a far more rural SKU in this category. Number two, within rural also, some of the markets in the country are witnessing a little more sluggishness and VAHO has a higher concentration in that. You are absolutely right, the two things we are doing is that, we are here — as you know we have continued to gain value market share, you will see more participation in mid and premium segment to drive that.

We are also, as I said, happy at the fact that there has been competition — price increases because that gives relief at the bottom of pyramid that — see, what was happening was that, you are maintaining a share of voice at lower spend. The overall category spend, this will help fund the [Phonetic] competition and others, convert money from BTL to ATL, because converting money to BTL and doing unsustainable margin is not good for the category. I think that change is happening, I believe. And therefore, that will also lead to overall better category saliency and driving the growth of the category.

As such, the other thing that has happened, which is specific to this category, unlike other categories, in HPC where there is only downgrading, a significant portion of the people have also moved back to loose mustard. And to me, with inflation going down, I believe a reversal is going to happen, and also increase in rural income. People want brands, people wanted aspirational brands. The only white space we have started doing is two things, one, we have now started picking onion oil in GT where we believe we have a better right to win in some of the so-called digital-first brands.

The second thing is, we’re also going to be a little more — exploring some of the players in the mustard area, because that’s an area which has given growth. So, both at the bottom of pyramid and at the mid and this one, you will see a little more this one, we are just waiting for the category to grow, there is no point investing. And as you know, we will also get significant gross margin play to invest, given that there will be decrease in the price input cost payments. So, we are waiting for some tailwinds to come to invest and gain that market share.

Vivek Maheshwari — Jefferies — Analyst

Got it. Got it. And Saugata, another — it’s an observation. I don’t know — correct me if I’m wrong, but if I leave aside your digital-first portfolio, organically speaking, it looks like that your energy is far more towards new launches on the food side and lesser on the personal care side. Is that observation correct?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no. I think it’s in line with the fact that, I think, GT, I’ll tell you, let me just give you the perspective. If you look at COVID, and this is a story from 2020, we believe that there was a significant move towards in-home consumption, okay? Now, if you look at the opportunity that was there to expand the total addressable market to Saffola, we actually never exit. And if you believe what the strategic funding to sales multiple, in food you can typically get scale. And therefore, in food, it is very important to quickly get scale because it also has an importance on cost leverage. So we are focusing on energies on that.

During that time, two also things happened. One, while there was growth in digital space, there was significant contraction in a lot of premium category in HPC. There was also contraction in value-added hair oil. So, therefore, when there are headwinds in the category trying to invest behind new products is not the perhaps the right strategy. We invested and put all our energies behind categories where there is a tailwind because that is not climbing up, that is going with the tide. Having said that, going forward, we shall see — I think in the next 12 months, we will see, I think, equal number of innovations also in this part of the business.

Vivek Maheshwari — Jefferies — Analyst

Okay. So that’s interesting. So, let’s say, you mentioned 12 months, so if we take up three, five years out, my impression is that, increasingly, Food still a smaller part, but increasingly the launches will be more on the food side and steady state, it will keep seeing expansion in its — in the mix from an overall portfolio standpoint. Is that a correct view?

Saugata Gupta — Managing Director and Chief Executive Officer

Not really. If you look at it, I think in Bangladesh, we have exhibited our ability to expand the total addressable market in Parachute Advansed. So, therefore, we have — so I don’t think we can’t do it. Similarly, I believe the Premium Personal Care, which is categories like Serum, male grooming which got impacted during COVID, or I think we just attributed to in VAHO, some of the things like onion oil and others. I think there is enough opportunity.

Having said that, I think the food part of the business and digital, yes, the new part of the business, it will continue to increase in contribution. I see in the next two, three years, it will get into mid-teens what I call the diversified part of the business, and it is in line with our overall strategy to diversify our portfolio. I think what is equally important is that the fact that, as I — I think alluded to during my opening remarks, having achieved scale, we are also looking at improving the margin structure of food and the profitability of digital brands, because that is also important, as because they will become perhaps a higher contribution to the overall portfolio.

Vivek Maheshwari — Jefferies — Analyst

Got it. And if I may — if I can add third question, if okay, on the digital brand side, so in the context of all that is happening to, let’s say, Internet franchisees or the profitability focus and all. Two parts to this question, one, are you looking aggressively to acquire more assets? Because you were the first one, or it is among the first one to take a shot at this opportunity when I don’t think there were that many competitors — or that many players who were thinking about it, number one.

And number two, in a scenario where there is a paucity of capital, isn’t that a good time for you to actually be more aggressive and gain shares, given that competition will, in a way, see a pullback in spending, etc, etc?

Saugata Gupta — Managing Director and Chief Executive Officer

So, we don’t want to make — see, I know it’s not — we want to ensure that we want to go with — we will look at acquisition. Having said that, I think we like basically brands that fulfill an unmet need that delivers good — I mean, that delivers on basic unit economics. And we like to work with founders who have a mentality of building to large versus building to sell. So, therefore, we will not acquire assets which have no potential just because it’s available cheap. And I believe that, again we will continue to look at assets which have growth potential, and I think there are perhaps assets in the market like that. And we will see some acquisition. But just because it’s cheap, I will not buy, because there is no point buying things cheap which have no value of future potential. And as I said, we not only look at the brands and the headroom for growth and the unit economics, we also like to work with founders who have a certain amount of, what I call, a cultural fit and — this one, mindset fit with us.

Vivek Maheshwari — Jefferies — Analyst

Got it. And on the second part, Saugata?

Saugata Gupta — Managing Director and Chief Executive Officer

What was the second part?

Vivek Maheshwari — Jefferies — Analyst

Sorry. What I meant was, basically in a cash crunch environment, do you think there is a case for you to at least whatever acquisitions you have done and your own — Marico’s own initiative, is there a case to be more aggressive to go after market shares or whatever build categories that the time and competition is under, let’s say stress [Speech Overlap].

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah. Having — you’re right, having said that, we also then — therefore the onus is also on us to accelerate the path to profitability journey. Because, see, if you look at it this way, that it is very important that now that food and digital business have a certain scale, we have to also look at profitability. Because at the end of the day, as I said that, while we don’t have — our businesses don’t have that much cash burn compared to lot of startup spaces in the digital space. But at the same time, we will look at market share, but at the same time we’re looking at both right now.

Vivek Maheshwari — Jefferies — Analyst

Right. Sorry, Saugata, my point was — I’m sorry, if I’m extending this a bit. But my only point is that, let’s say, you have already have — let’s say investment in Coco Soul for example, right, or Pure Sense. Is there not a sense in supporting those businesses and letting them go aggressively after market shares at the time when digital-first companies are under stress because of [Speech Overlap].

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah, obviously — obviously, but we will not do something which is unsustainable in the long-term. See, I will not do something to shore up short-term turnover, which is not sustainable, which doesn’t have — if the unit economics of the business is fundamentally not right, see for me, I don’t have to show valuation. So I’m not going to do something which is — I know in the future is not sustainable. So yes, I will continue to invest. I don’t have a cash crunch. Having said that, it will be equally prudent.

Vivek Maheshwari — Jefferies — Analyst

Got it, got it. All right. Thank you very much and wishing all the best.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah, hi. Good evening, and thanks for the opportunity.

Saugata Gupta — Managing Director and Chief Executive Officer

Hi.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah. So, just two questions. Just a little more depth, if you can provide. You said that you are going to relook the cost structure. Would you be able to help me understand what is the current gross margin or is there any aspiration that you will do, and what exactly we are trying to do? Are you going to relook the entire supply chain and channel how we distribute or it’s more on the — at the back end you will get yourself into manufacturing?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no, no. I think I’m just giving you a generic this one, I was not getting into specifics. All I said that these two businesses, we were driving growth. Having reached scale, I think it’s a good opportunity for both the digital and the food business to look at and improve profitability. That’s all.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. Okay. My second question is on PCNO, we have taken a few rounds of price changes. Is there any further price decline which has happened in this quarter?

Saugata Gupta — Managing Director and Chief Executive Officer

Not this quarter, but — I mean, as I said, that next year if there is, again, if some deflation is there, we will be taking prices up if necessary. But I don’t see right now, copra is range bound.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. No, the reason why I was talking to someone in the South, and he gave me classic reason that the loose versus pack, the difference is now almost INR14, INR15 per liter. So, maybe in that context, the relevance for the end consumer, and obviously I’m comparing this in the highly penetrated market, which is South. I mean, coconut is a very strong brand equity there. So that’s why I wanted to check with you that is there any such vibes you are getting on ground?

Saugata Gupta — Managing Director and Chief Executive Officer

So, we have a very robust pricing model. As you know also, we have a significant — our current pricing model indicates that the pricing is extremely right, and that’s what I alluded to during the opening remarks. But finally, we have got the pricing right, because as you know, there is a six to eight-week lead time for the price to be discovered in the market by the consumers because of all the stocks you have between factory, CNFA, distributor and retail. So, our pricing is absolutely right. That’s the reason we are seeing a bump up in volumes in Parachute, that’s the reason we are, despite so-called high inflation and rural stress, we are seeing an increase in market share in Parachute. And that gives us the confidence that we will be able to deliver the medium-term aspiration of Parachute volumes in the immediate term.

Shirish Pardeshi — Centrum Broking — Analyst

Sure. That’s helpful. Thank you, and all the best.

Operator

Thank you. [Operator Instructions] The next question is from the line of Harit from Investec. Please go ahead.

Harit Kapoor — Investec — Analyst

Yeah. Good evening. Am I audible?

Saugata Gupta — Managing Director and Chief Executive Officer

Yes, perfect.

Harit Kapoor — Investec — Analyst

Okay. Great. So, I just had just two-three questions. One was on Premium Personal Care, just wanted to understand, with Livon and Set Wet, it’s been a fairly volatile journey. And it seems like the brands are now kind of growing at a fairly good clip. I just wanted to get your sense how do you view these lines over the next two, three years, any learnings that you’ve got from a digital first portfolio that you see — you could apply to be, we have been applying to be [Speech Overlap].

Operator

Sorry to interrupt you, Mr. Harit. The audio is not coming clear from your line now. Please use handset.

Saugata Gupta — Managing Director and Chief Executive Officer

So, I’ve heard this, I think — okay, let me respond to this, and then — okay. So if you look at the Premium Personal Care portfolio, I think there is male grooming their serums and there is participation in Body Lotion skin care. Now, yes, I think it had a volatile journey because of certain reasons. But especially during COVID, so between ’20 and ’22, the entire category because it was discretionary and it was — some of it will linked to outdoor, the fact [Indecipherable]. So that I think has stabilized now. In the case of Livon or body lotion, we have crossed the pre-COVID benchmark in male grooming when aligned with almost the pre-COVID benchmark.

I think we now have a broad operating model. There is a significantly robust demand generation module and channel mix which is there. And we are pretty confident that in this part of the portfolio, we should be able to deliver 20%-plus, if not higher growth in the next two to three years. I think because we now have what I call kind of a model which is a repeatable model of growth which is now embedded into the system. Also, I think as we scale up our portfolio, as I have mentioned earlier in the past that, in the cosmetic and chemist are the channels, which we were under-leveraged. We have started our journey in terms of having a larger presence in cosmetic and chemist in the urban area, just like we have done in food. Food obviously has been a far higher and a more aggressive play as far as the food GTM is concerned.

And thirdly, you’re absolutely right, I think some of the learnings that I would believe that our expertise today in digital marketing or a digital cushion of our brand, given our experience in our digital brands. And therefore the learning that has come from them into the mothership, that has also helped in delivering the sustainable profitable growth in these brands.

Harit Kapoor — Investec — Analyst

Great. Great. The second question was on the international business. Maybe we can — maybe Pawan can help with that. I was — you see three quarters of pressure on the margins. Based on your outlook on how the impact of currency depreciation and some of the markets you play out, when do you see some of these pressures kind of alleviating, we’ll take a couple more quarters for it to kind of panel?

Pawan Agrawal — Group Chief Financial Officer

So it’s very difficult to sort of project currency trajectory. But last quarter depreciation happened, starting from quarter two. So at least we hope that till quarter one there’ll be some hit. And subsequent to that, there will be — that will be coming in the base. And largely it is on account of Bangladesh where we have seen a very, very sharp depreciation from the level of 85, 86 to about 105. And that is what is leading to two sort of it, one is, in a transaction hit, which is impacting the gross margin of the business over there. And secondly, when we translate that into at INR level, that is given the second level of it. And impacted overall level is approximately 2% to 3% of profitability that is getting diluted on account of this translation hit of Bangladesh currency.

Harit Kapoor — Investec — Analyst

Got it. Got it. And the last question was on slightly longer-term one on the margins at a consolidated level. It seems like there are — obviously one of the key focus is over a long-term is diversification. And in that structure, you have a growing foods portfolio, which is good — faster than the overall business, as well as a digital-first portfolio which is growing across in the overall business. Both these have inherently lower margins to start with at an EBITDA level. Is the best way to look at this business from a — at a consolidated level over a, say, three, four year perspective is, you’re happy to keep margins in a broad range and just strive for the revenue growth in food diversification, is that the playbook we should look for?

Pawan Agrawal — Group Chief Financial Officer

If we look at it, we are saying is that, by FY ’24, in Q3 it should be about INR850 crore to INR1,000 crore. And we’re also saying that digital-first brand is about INR450 crores to INR500 crores. If both these lands together, then the dilution in the food business will be made up more than what is required for the retail prices because gross margin of that is very, very high. So if we are able to land this together by FY ’24, we don’t think there is going to be any stress on the margin side.

Secondly also, in the foods, whichever products we’re coming up with, those definitely have margins which is better than the existing portfolio. Just to give you a sense, when we entered into oats, oats has a better margin than oil. When we entered into value-added foods, those food has the potential of having gross margin better than the oats. So whenever we are extending our portfolio, gross margin is only accretive. But from a portfolio perspective, of course foods margin is lower, but if both the portfolio of digital first and foods, we are able to achieve our aspiration. I don’t think that’s going to be a challenge from a margin standpoint.

Saugata Gupta — Managing Director and Chief Executive Officer

So, also I want to add to that, is that — if you look at the Premium Personal Care portfolio, which is also expected to grow at 20%-plus, that’s also high margin. So, if you look at — if I just want to address the question directly that there is no concern that a blended gross margin of a business will get diluted just because of food journey has got accelerated.

Pawan Agrawal — Group Chief Financial Officer

And having said that, we also have a task in terms of improving the gross margin in the foods also, which Saugata alluded about in the previous question. So therefore, if all the things land together, I don’t think there is going to be any stress on the gross margin at the portfolio level.

Harit Kapoor — Investec — Analyst

And then, how about that translating at an EBITDA margin level? I mean, my question is more from a slightly longer-term basis. Is the idea to drive sustainable kind of a revenue growth get the diversification going as you have so successfully over the last two years? And keep that EBITDA margin band in that 18% to 20% range, plus-minus something in the 19% numbers, is that the longer-term paybook or you keep driving operating leverage and still see an improvement there? Because at a standalone level, your overall margins are — you need to be lower than the international. My thesis was that, you could continue to see expand over a longer term, but just wanted to get your sense on how you’re thinking through it?

Pawan Agrawal — Group Chief Financial Officer

Harit, if you look at it from an operating margin standpoint, we used to guide about 17% to 18%, then you’ll get to about 18% to 19%. And as we speak, we believe that this year we should be ending anywhere between 18% to 19%. And having said that, if you ask me from a two to three-year perspective, is there a possibility of a further improvement in operating margin? Answer is actually yes, because there could be an improvement in the mix of the portfolio in the India business.

Secondly, also in International business, there are some territories where we expect that the margins can go further. So, if I were to take a view, two to three years out, yes, there is quite a possibility of operating margin going up further. But having said in the near term, we would rather focus more in terms of our volume growth and market share, and therefore if we have to invest more, to get that, we would do that and really not chase short-term margins, which could be, let’s say, in FY ’24 if I talk about, but two to three years out, definitely possible.

Saugata Gupta — Managing Director and Chief Executive Officer

See, I think, if you look at the International business specifically, there is a significant profit pool to be had in — especially Middle East and North Africa where we were marginal players, but we are now growing very aggressively. And therefore, while Bangladesh is maybe at a certain margin, but both in Vietnam and this one which our growth business is, I think there is enough opportunity. And as I explained earlier that ultimately once we get scale businesses in — they diversified the portfolio, the blended margin is no way going to be lower. And with economies of scale — so as you move from — I think someday, I mean, you will move from 19%-plus and then start moving ahead beyond that.

Harit Kapoor — Investec — Analyst

Very clear. Very clear, sir. Thank you so much. Yeah, that’s it.

Saugata Gupta — Managing Director and Chief Executive Officer

Thanks.

Operator

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 question. My first question was, Saugata, do we have any revision with respect to our food business target, say, over the next three years? What would that number be now?

Saugata Gupta — Managing Director and Chief Executive Officer

No. I mean, I’ve given the FY ’24 aspiration, we are going on track, it’s fine.

Sheela Rathi — Morgan Stanley — Analyst

By FY ’26, is there a number?

Pawan Agrawal — Group Chief Financial Officer

No, no. So, Sheila, we first want to reach FY ’24 target of INR850 crores to INR1,000 crores [Phonetic]. And from there on, we recalibrate FY ’26, FY ’27.

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah.

Sheela Rathi — Morgan Stanley — Analyst

All right. Sir, second question again was in the digital first brand. I actually came across a Beardo store at Ahmedabad Airport, and it was very interesting to see the kind of SKUs which have been brought up there. So, is there any other incremental plan with respect to the physical expansion of the Beardo stores and also the other digital brands?

Saugata Gupta — Managing Director and Chief Executive Officer

So, I think, as far as the Beardo store is concerned in Ahmedabad Airport, it’s a prototype, it’s a quick haircut as an idea and for you to also experience the brand, because we are merchandising some of the products out there. It’s still in the prototype stage. We are looking at various prototypes to expand, because the way we look at Beardo, it stands for a certain cult. It’s the Harley-Davidson of male grooming, that’s how about the brand stands for. And therefore, just as the way the journey of that brand happened in our own small way, because we are no way that big, we’re a very small brand. We will basically chart the path for it.

As far as the other brands are concerned, which is Just Herbs and all, we are prototyping — each of the brand is prototyping with beauty advisors in GT. Some of the — in some outlets and some markets, one or two markets, we will see if that model works well, we will expand that model.

Sheela Rathi — Morgan Stanley — Analyst

Understood. And my third and final question was, this particular quarter, what percentage of the portfolio gain market share, just an aggregate number here?

Saugata Gupta — Managing Director and Chief Executive Officer

Most of the brands gained market share. There was nothing — none of the big brands lost market share.

Sheela Rathi — Morgan Stanley — Analyst

Understood. Thank you.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vishal Punmiya from Yes Securities. Please go ahead.

Vishal Punmiya — Yes Securities — Analyst

Yeah, thank you. Just two questions. Firstly, on other income this quarter, any specific reason for a sharp jump from INR22 crores to INR40 crores?

Pawan Agrawal — Group Chief Financial Officer

There are largely two reasons. One is, with the rising interest rates, the yields on the surplus has improved by about 230 basis points. So because of that, the investment income has gone up. And secondly, there is FX depreciation gain on the receivables on the balance sheet. So these are largely two reasons because of which other income has moved from INR22 crores to INR40 crores.

Vishal Punmiya — Yes Securities — Analyst

Understood. And secondly, just a data point, if you can also share the value-added hair oils volume market share for this particular quarter, you have shared the value share in the PPT, but if you can also share the volume market share?

Saugata Gupta — Managing Director and Chief Executive Officer

So, as you know, the last two years we have moved to our internal and external KPIs on value. The reason is, as I said, that in our objective was to bridge the gap between value share and volume share, and therefore that’s the only KPI we measure.

Vishal Punmiya — Yes Securities — Analyst

Okay. But we wouldn’t have lost any share in terms of volume, right, this particular quarter?

Saugata Gupta — Managing Director and Chief Executive Officer

We haven’t.

Vishal Punmiya — Yes Securities — Analyst

Okay. Okay, thanks. And just lastly on this, the new launch, the Saffola Munchiez, I noticed that the manufacturer is also a player — a very active player in the market, has its own brand for that particular product. And they are also becoming very aggressive in the FMCG space. So, how do we kind of basically set areas of distribution for this particular product? Because they have a very similar product, while that product might not have millets in it, but it’s a very similar looking product that they have?

Saugata Gupta — Managing Director and Chief Executive Officer

See, by that logic, let me tell you all three key players manufacture their own brands. Ultimately, I’m delivering a product under the Saffola brand name. I will not invest still I get critical mass in my own manufacturing, so it doesn’t bother us. And that happens in all categories. If you look at some of the other food products, whether it’s honey, whether it’s — so they would be mayonnaise, for example, the guy who manufacture mayonnaise also manufacture for another player. So it’s a standard practice, operating practice in the entire global FMCG world. So we have our own quality system. We have our own IPR, and therefore it’s fine.

Vishal Punmiya — Yes Securities — Analyst

Okay. So, there is no parameter as such in terms of online or offline reach, whether it’s e-com or whether it’s general trade, for this kind of setup, right?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no. I’m getting somebody to do as a third-party, that’s why. Absolutely there’s nothing to do with this one. So I’m — I mean, I don’t know whether which brand you are referring to, but whoever is manufacturing is manufacturing as a third-party, that’s about it.

Vishal Punmiya — Yes Securities — Analyst

Understood. Understood. Thank you, and best of luck.

Saugata Gupta — Managing Director and Chief Executive Officer

Thanks.

Operator

Thank you. The next question is from the line of Amit Rustagi from UBS. Please go ahead.

Amit Rustagi — UBS — Analyst

Yeah. Thanks for giving me an opportunity. And so, team, I would like to know that you have mentioned rural recovery, I think, several times in your opening remarks. So, have we seen any incremental data points in last one month, apart from the budget which support our thesis on rural recovery? And if you have to measure some pointers for the next three to six months, what should be those pointers on that? If you can help us with your thought process on this.

Saugata Gupta — Managing Director and Chief Executive Officer

Okay. So I think the first thing which we’re looking at is, if you look at the last six months, every month there was a sort of a sequential decline month-on-month which has got arrested. Okay? So, therefore, all we are saying is, the worst is over. Now, if I look at some of external factors, if you look at it, one is overall inflation, as you know that whenever there is high inflation, especially food inflation, people tend to titrate or downgrade on FMCG. So, I believe that we are coming out of that worst high level of inflation.

Secondly, I think the rabi crops is okay. The government is committed to investing behind rural infrastructure. So, if I look at these indicators should indicate some kind of a recovery. I’m not saying it’s going to be a hockey stick, it going to be a gradual recovery. But what I believe just like I’m saying, the worst of commodity inflation and volatility is over. Of course, in today’s world, you can’t say anything because of any black swan can happen anytime. All trends point towards a better gradual recovery.

Amit Rustagi — UBS — Analyst

Okay. And apart from the inflation cooling off, do you see any trends we support higher income for the rural people?

Saugata Gupta — Managing Director and Chief Executive Officer

I think the agricultural yield and also the fact that there is a significant — going to be significant if you look at the budget, the government continues to invest significantly behind infrastructure, also in rural. So, I think, these are all positive signs. So, it’s very difficult to say that when will the recovery, what is the extent of recovery. But I think, if I look at it, the positive drivers outnumber the negative drivers as far as consumption is concerned.

Amit Rustagi — UBS — Analyst

Okay, sir. Got it. Thanks a lot, and wish you all the best.

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 — Group Chief Financial Officer

So, to conclude, the sequential improvement in domestic volume growth and earnings delivery so far this year is encouraging. With emerging green shoots on the demand front, we expect a stable growth in core, and we continue to drive accelerated growth in food, premium personal care and digital first portfolio. In fact the business has remained robust in a challenging environment and we are very confident of maintaining a healthy growth trajectory.

Going ahead, we will ensure that we optimally invest and stay focused on execution and aim to keep inching up the pace of growth in volume, top line and profit in the quarters ahead. If you have any further queries, please feel free to reach out to IR team and they’ll be happy to address the same. That is it from our side. Please stay safe and take care.

Operator

[Operator Closing Remarks]

Marico Ltd  ( ?????? : MARICO)
Q3 2023 Earnings Conference Call
Feb. 03, 2023, 7:45 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good day, and welcome to Marico Limited Q3 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] Please note that this conference is being recorded.

Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts. And therefore, if there is anybody else who is not an institutional investor or analyst but would like to ask 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 and Chief Executive Officer

Yeah. Hi, everyone, and good evening to all of those of you who have joined the call. And I would firstly I like to wish all of you and your loved ones a wonderful and a happy 2023.

I will start off by giving you a flavor of the operating environment before delving into our performance during the quarter. After the FMCG sector grappled with the dampening effect of inflation for the better part of 2022, we believe that there are indications at the start of a gradual improvement in consumption trends, following the sequential moderation witnessed in commodity and retail inflation. CPI has come down from the levels of 7%-plus earlier to sub-6% in December 2022. We’ve also seen visible softening in prices of some key commodities from unprecedented levels brought about by the geo-political tensions and the supply chain constraints earlier during the year.

Amid this evolving context, FMCG sector recorded a marginal volume decline in December quarter, its lowest in the last five quarters. Amongst categories, food stayed on the growth path, while HPC recorded mid-single digit volume decline. Urban continue to grow in low-single digits, rural remain the weak link, although its trajectory appeared to improve. During inflation, our healthy rabi sowing season are indications of higher farm income all go well for rural growth prospects. Also increased budget allocations and this new initiatives announced in the Union Budget should provide the much needed impetus in this direction.

Coming to our performance in Q3, we are enthused by improving trends seen across most parameters. Top line growth was underpinned by 4% domestic volume growth and 8% constant currency growth in the international business. If not for the pack size reductions in value-added hair oils, volume growth would have been at 5%-plus. On a three-year CAGR basis, domestic volume grew by a steady 6%, which I believe is in the top quartile amongst all companies in the peer sector. And international business constant currency growth stood at a robust 11%.

In terms of profitability, gross margins seen an y-o-y and sequential expansion, owing to a stabilizing raw material and consumer pricing environment and a healthier broad mix in the India business. On a three-year CAGR basis, A&P spends were up 6% and we delivered an annual growth of 11%, which has validated our strategy to optimally invest in long-term brand building despite transient cost pressures along the way.

Moving into the India business, I will now take you to trends we are seeing in each of our categories and some color on the strategy and outlook for the period ahead. After seeing some sluggishness in the branded coconut oil over the last four quarters owing to the extended deflation in copra prices, we have seen a revival of volume growth in the month of December in Parachute Rigids. Loose to branded conversions picked up with copra prices firming up favorably in the off-season, and it is the first instance when we are able to establish the right pricing in the market at least by mid-December. As a result, the brand gained 30 bps in the volume market share during the quarter with copra prices expected to be range bound in the near term, we expect to clock volume growth in line with our medium term targets going forward.

Saffola Oil further its growth momentum with low teen volume growth, driven by stable trade inventory and consumer pricing. Overall, with the commodity prices softening, the revenue growth was subsequently lower. While the international vegetable oil complex needs to be absorbed in the near term, we will remain focused on balancing volume growth and profitability in a sustainable manner in the coming quarters.

In Foods, we remain on course to achieve the FY ’24 aspiration. The segment was led by superior growth momentum in the oats category, which grew at 20%, and maintain its strong leadership position in its category. Our newer offerings under Saffola and FITTIFY ranges continued to gain traction. During the quarter, we entered into the ready-to-eat space under our brand Saffola Munchiez with the launch of ragi chips and roasted makhana in multiple flavors.

Post-COVID, as people have become more health conscious, the industry has shifted for indulgent snacking to bill-fee snacking. Saffola Munchiez combines the power of healthier grains along with delightful flavor to provide better alternative in the healthy snacking category. We’ll continue to drive meaningful innovation in the foods over the next few quarters, and some of the innovation was to leverage the goodness of Shri Anna or millets, in line with the government’s focus on establish India as a global hub for millets.

In value-added hair oils, we were unable to tide over the weakness in rural consumption, which is witnessed in most mass personal care categories. On a three-year CAGR basis, however, value-added hair oils delivered a reasonable 7% value growth. We continue to see better traction in mid- and premium segments also, reflecting the 80 bps gain in value market share. After some degree of commoditization increased competitive activity in the bottom of pyramid segment, we are expecting better volume growth and market share gains now that there has been substantial price increase taken by other competitive brands.

With inflation easing and rural slowdown showing signs of bottoming out, we expect to see pickup in growth in line with other HPC categories. Premium Personal Care maintain its strong momentum and register a double-digit growth. We have seen a remarkable recovery in this portfolio since the pandemic and aim to deliver 20% growth consistently over the medium-term to drive lower penetration and a market-leading position in this category. But digital first portfolio is scaling up well in line with internal targets. As we [Technical Issues] these brands in the digital-first portfolio, we are also charting a sustainable path to profitability along the way.

Coming to our international business, we are able to continue a healthy momentum despite macroeconomic uncertainties and currency devaluation in some markets. The business at Myanmar, which declined due to forex-led challenges registered 11% constant currency growth. Bangladesh is witnessing some macro headwinds, though the severity is not any different compared to those in some of the emerging economies in Asia, Africa and Eastern Europe. However, we have been resilient even in the midst of a challenging macroeconomic environment, which goes to showcase our portfolio strength, distribution strength and consumer belief in our brands.

Our Vietnam business further strengthened with both HPC and Foods exhibiting continued growth. During the quarter, we also entered into female personal care in Vietnam by acquiring brands Purite and Oliv, which offer a range of premium and differentiated hair care and skin care products. We are upbeat about the growth prospects in Vietnam and look to significantly expand our play in the personal care category.

Our MENA and South Africa business have also displayed significant growth momentum, while the NCD business, which is a new country development, is also growing in line with internal aspirations.

Looking ahead, we are confident of maintaining an upward trajectory in volume and earnings growth in the quarters ahead on the back of stabilizing raw material and consumer pricing environment in the domestic business, coupled with consistent market share and penetration gains in our four categories, while we expect macro headwinds to gradually recede along the way. We believe that the worst of inflation and volatility is over. Moderating inflation and measures in the budget to enhance disposable income and spending will gradually reverse the flow and accelerate unbranded to branded conversions.

In Coconut Oil and Saffola Oils, pricing has taken some time to settle in and consumer pricing is now more stable and in line with the market. We also expect competitive pricing action which has taken place on a relatively lower inflation to reverse the commoditization in [Indecipherable] to a significant extent. The diversification journey to foods and digital first is progressing in line with expectations. Now that two of our brands are hitting critical mass, we are also focusing on improving cost structure of both foods and digital.

In International business, we are confident of continuing the double-digit growth trajectory as the business have been relatively more resilient despite external challenges in some of the markets. Gross margin should remain steady, and hereon with an upward potential, EBITDA margin should remain in the 18% to 19% range as we close FY ’23 and move above the threshold of 19%-plus next year. We continue to build fundamentally sound franchisees in the domestic and international markets and must progress along the four strategic areas of diversification, distribution, digital and diversity that shall enable us to deliver sustainable double-digit growth over the medium-term. We also continue to make credible progress in our ESG program in each of the focus area, creating shared value for all the [Indecipherable] of our business, and we allow us to drive superior long-term performance. We are committed to achieving net zero emissions in our domestic operations by 2030 and global operations by 2040.

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

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

Hi, Saugata. Just wanted to ask on VAHO segment. So we understand that there is an overall slowdown in the industry, but is there anything that you can do from your side to sort of improve the growth in VAHO? And if at all, when do we see the results of this coming through?

Saugata Gupta — Managing Director and Chief Executive Officer

So, firstly, I think, VAHO, if you see, largely mirror some of the mass segments in the HPC categories, I mean. Secondly, if you look at VAHO compared to other categories, it’s more rural and rural has seen some strength, and some of the markets, for example, in East or UP and all that, which are specific areas where we have seen this one. So, I believe two things are happening, people within the category are downgrading, and also maybe the unbranded to branded journey there is a reverse flow that is happening.

Now with two things that have happened, one is, the entire input costs, which have gone down and the inflation going down, I believe that this reverse journey will get corrected. Secondly, I think interestingly what has happened in the category is that, there has been significant activity or at the bottom of pyramid and where perhaps some players were not taking price increases. And there was perhaps operating with unsustainable margins. A lot of players have taken the price increase and therefore we believe that is good because that helps us to focus on, I think, investing behind the category in terms of ATL and actually growing the mid-segment.

We are focused on actually gaining value share [Technical Issues] between value share and volume share. And therefore, if some of the players, which was — see what was earlier happening was significant down — shift of money from ATL to BTL, that was witnessed by other competitive brands. I believe that will also change, that is good for the category because everybody then invest behind category growth. And I’m pretty confident that as we move towards the next two, three quarters, this growth will get — the decline will get reversed.

Percy Panthaki — IIFL — Analyst

Understood. Secondly on this launch of Munchiez, see the overall snacking category in India is huge, right. So unorganized, organized put together everything might be 100,000 crore or even more. So, just wanted to understand how you are looking at the opportunity size here for yourselves? Okay. You are absolutely right, I think it’s a vast segment. Having said that, I think we are offering a better-for-you healthy brand. We have learned one consumer insight, that the Indian consumer will not compromise on taste for health. And therefore we have actually managed to deliver a product with all the goodness of millets. And of course the fact that, in terms of other things like fat and other things which is far lower than other competitive brands a very tasty product. Obviously, it’s priced slightly higher. If we look at — we will now participate in line with our strength, which is modern trade e-commerce, and e-commerce again we are doing, what I call quick commerce, and a significant amount of food outlets. As you know, we are rapidly scaling up our food GTM in at least eight to 11 cities. And we now have a critical mass of any segment we are participating in which covers 50%-plus retail distribution of the premium part of any of the segments we participating in. So we were going slowly, I’m not giving any numbers. The product is beautiful and in Food if you ask me, if the product is good? If you can generate trials, automatically repeats and scale up happens? And I think we will go up gradually. I think the best thing we are doing is, we are coming, our products we deliver on taste. We are investing significantly behind distribution, and I believe we’ll get a multiplier effect on this. And as I said in overall foods, we are more or less on track to meet our aspirations. And what I noticed in back snacks is that, typically the INR10 price point is very, very important. I mean, even for premium products, even let’s say, for products where the rupees per kilo is higher than, let’s say the normal product in a industry. Just making that product available in a INR10 price point really drives the sales. So, I was just curious as to why you do not have a INR10 price point in these products yet?

Saugata Gupta — Managing Director and Chief Executive Officer

Well, I think various categories are actually vacated the price point. And I think, yes it takes, you take bold and courage to vacate that price point. If you look at noodles, that vacated that price point. If we look at the history of masala oats, we — in despite competition, I think we present in the price point of INR10 or INR12, we entered at INR15. But today, I have a INR300 crore business. So I think ultimately if you offer consumer value today, I don’t think that is an issue because at the end of the day, as I said, that if I have to invest behind a brand, I have to start with the GM that is sustainable. And therefore, given the fact that we have a superior product like millets in certain offering, I don’t think in INR10 you will never have made a sustainable margin in that.

Percy Panthaki — IIFL — Analyst

No. For ragi for example, which you have launched, I think it’s at a INR25 price point, if I’m not mistaken. Keeping the gross margin constant, I mean, country just reduced the grammage and make it available. The reason I’m asking is, the examples that you gave of maggi and oats and all that, they’re not exactly in the same category of back snacks. Back snacks, INR10 price point is probably one of the most selling price points?

Saugata Gupta — Managing Director and Chief Executive Officer

No, but at the same time, I don’t want to name brands, but there are brand which have operated higher and has got critical mass.

Percy Panthaki — IIFL — Analyst

Okay. Okay. Yeah, that’s it from my side, Saugata. Thanks very much.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead.

Avi Mehta — Macquarie — Analyst

Hi. Just had one clarification on the gross margin comment, where you said that you expect gross margin to remain steady. Now, is this — how should we — this is because you are expecting currency depreciation in international, which is what is the worry, because India margins are still what — we know much bigger that 45%-odd average that we used historically. So would love to understand the reason for this comment. Thank you.

Pawan Agrawal — Group Chief Financial Officer

Thanks, Avi, for this question. So what we’re essentially saying is that gross margin will remain steady, which means y-o-y, it will definitely improve. And therefore, there will be some upward bias as compared to where we are at this point in time. Our point to look at is that, we should be looking more from an operating margin standpoint because there’s multiple levers that we’ll be paying out. In operating margin standpoint, what we’re saying is, we will be maintaining 18% to 19% for the full year.

Avi Mehta — Macquarie — Analyst

Okay. Okay. So you’re essentially saying that it is sequentially is what you’re looking at, in that whatever that 41%-odd level that India is at, is what you’re essentially saying will sustain even in India. It’s not a mix — geographical mix that we are talking about over here, which is the reason for the consol number.

Pawan Agrawal — Group Chief Financial Officer

We don’t expect any further improvement in the international because the currency situation has not improved. And in fact, there is a translation hit that’s happening on the Bangladesh depreciation. So, whatever improvement will happen will largely happen on the India business side.

Avi Mehta — Macquarie — Analyst

Okay, okay, okay. That’s all from my side. Just wanted to clarify that. Thank you.

Pawan Agrawal — Group Chief Financial Officer

Thank you.

Operator

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

Vivek Maheshwari — Jefferies — Analyst

Hi, Saugata and Pawan. Two questions. My first question is a follow-up to what Percy asked. So, on the value-added hair oil side, is there a whitespace that you can target? Basically that portfolio has been, I mean, there were like four, five quarters where it grew double-digit, but for a long, long time, it has not — or it has barely grown. So what is your thought process on — is there a way out to gain market share more aggressively, whitespace that you can target or you just need to wait for the market to pick-up?

Saugata Gupta — Managing Director and Chief Executive Officer

So, firstly, I think the three-year CAGR is still 7%, which is healthy, if you see compared to any — our performance compared to any BPC category. I think three-year CAGR is good, yes, whereas one on last — as I attributed to two things. One is, there is a far more rural SKU in this category. Number two, within rural also, some of the markets in the country are witnessing a little more sluggishness and VAHO has a higher concentration in that. You are absolutely right, the two things we are doing is that, we are here — as you know we have continued to gain value market share, you will see more participation in mid and premium segment to drive that.

We are also, as I said, happy at the fact that there has been competition — price increases because that gives relief at the bottom of pyramid that — see, what was happening was that, you are maintaining a share of voice at lower spend. The overall category spend, this will help fund the [Phonetic] competition and others, convert money from BTL to ATL, because converting money to BTL and doing unsustainable margin is not good for the category. I think that change is happening, I believe. And therefore, that will also lead to overall better category saliency and driving the growth of the category.

As such, the other thing that has happened, which is specific to this category, unlike other categories, in HPC where there is only downgrading, a significant portion of the people have also moved back to loose mustard. And to me, with inflation going down, I believe a reversal is going to happen, and also increase in rural income. People want brands, people wanted aspirational brands. The only white space we have started doing is two things, one, we have now started picking onion oil in GT where we believe we have a better right to win in some of the so-called digital-first brands.

The second thing is, we’re also going to be a little more — exploring some of the players in the mustard area, because that’s an area which has given growth. So, both at the bottom of pyramid and at the mid and this one, you will see a little more this one, we are just waiting for the category to grow, there is no point investing. And as you know, we will also get significant gross margin play to invest, given that there will be decrease in the price input cost payments. So, we are waiting for some tailwinds to come to invest and gain that market share.

Vivek Maheshwari — Jefferies — Analyst

Got it. Got it. And Saugata, another — it’s an observation. I don’t know — correct me if I’m wrong, but if I leave aside your digital-first portfolio, organically speaking, it looks like that your energy is far more towards new launches on the food side and lesser on the personal care side. Is that observation correct?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no. I think it’s in line with the fact that, I think, GT, I’ll tell you, let me just give you the perspective. If you look at COVID, and this is a story from 2020, we believe that there was a significant move towards in-home consumption, okay? Now, if you look at the opportunity that was there to expand the total addressable market to Saffola, we actually never exit. And if you believe what the strategic funding to sales multiple, in food you can typically get scale. And therefore, in food, it is very important to quickly get scale because it also has an importance on cost leverage. So we are focusing on energies on that.

During that time, two also things happened. One, while there was growth in digital space, there was significant contraction in a lot of premium category in HPC. There was also contraction in value-added hair oil. So, therefore, when there are headwinds in the category trying to invest behind new products is not the perhaps the right strategy. We invested and put all our energies behind categories where there is a tailwind because that is not climbing up, that is going with the tide. Having said that, going forward, we shall see — I think in the next 12 months, we will see, I think, equal number of innovations also in this part of the business.

Vivek Maheshwari — Jefferies — Analyst

Okay. So that’s interesting. So, let’s say, you mentioned 12 months, so if we take up three, five years out, my impression is that, increasingly, Food still a smaller part, but increasingly the launches will be more on the food side and steady state, it will keep seeing expansion in its — in the mix from an overall portfolio standpoint. Is that a correct view?

Saugata Gupta — Managing Director and Chief Executive Officer

Not really. If you look at it, I think in Bangladesh, we have exhibited our ability to expand the total addressable market in Parachute Advansed. So, therefore, we have — so I don’t think we can’t do it. Similarly, I believe the Premium Personal Care, which is categories like Serum, male grooming which got impacted during COVID, or I think we just attributed to in VAHO, some of the things like onion oil and others. I think there is enough opportunity.

Having said that, I think the food part of the business and digital, yes, the new part of the business, it will continue to increase in contribution. I see in the next two, three years, it will get into mid-teens what I call the diversified part of the business, and it is in line with our overall strategy to diversify our portfolio. I think what is equally important is that the fact that, as I — I think alluded to during my opening remarks, having achieved scale, we are also looking at improving the margin structure of food and the profitability of digital brands, because that is also important, as because they will become perhaps a higher contribution to the overall portfolio.

Vivek Maheshwari — Jefferies — Analyst

Got it. And if I may — if I can add third question, if okay, on the digital brand side, so in the context of all that is happening to, let’s say, Internet franchisees or the profitability focus and all. Two parts to this question, one, are you looking aggressively to acquire more assets? Because you were the first one, or it is among the first one to take a shot at this opportunity when I don’t think there were that many competitors — or that many players who were thinking about it, number one.

And number two, in a scenario where there is a paucity of capital, isn’t that a good time for you to actually be more aggressive and gain shares, given that competition will, in a way, see a pullback in spending, etc, etc?

Saugata Gupta — Managing Director and Chief Executive Officer

So, we don’t want to make — see, I know it’s not — we want to ensure that we want to go with — we will look at acquisition. Having said that, I think we like basically brands that fulfill an unmet need that delivers good — I mean, that delivers on basic unit economics. And we like to work with founders who have a mentality of building to large versus building to sell. So, therefore, we will not acquire assets which have no potential just because it’s available cheap. And I believe that, again we will continue to look at assets which have growth potential, and I think there are perhaps assets in the market like that. And we will see some acquisition. But just because it’s cheap, I will not buy, because there is no point buying things cheap which have no value of future potential. And as I said, we not only look at the brands and the headroom for growth and the unit economics, we also like to work with founders who have a certain amount of, what I call, a cultural fit and — this one, mindset fit with us.

Vivek Maheshwari — Jefferies — Analyst

Got it. And on the second part, Saugata?

Saugata Gupta — Managing Director and Chief Executive Officer

What was the second part?

Vivek Maheshwari — Jefferies — Analyst

Sorry. What I meant was, basically in a cash crunch environment, do you think there is a case for you to at least whatever acquisitions you have done and your own — Marico’s own initiative, is there a case to be more aggressive to go after market shares or whatever build categories that the time and competition is under, let’s say stress [Speech Overlap].

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah. Having — you’re right, having said that, we also then — therefore the onus is also on us to accelerate the path to profitability journey. Because, see, if you look at it this way, that it is very important that now that food and digital business have a certain scale, we have to also look at profitability. Because at the end of the day, as I said that, while we don’t have — our businesses don’t have that much cash burn compared to lot of startup spaces in the digital space. But at the same time, we will look at market share, but at the same time we’re looking at both right now.

Vivek Maheshwari — Jefferies — Analyst

Right. Sorry, Saugata, my point was — I’m sorry, if I’m extending this a bit. But my only point is that, let’s say, you have already have — let’s say investment in Coco Soul for example, right, or Pure Sense. Is there not a sense in supporting those businesses and letting them go aggressively after market shares at the time when digital-first companies are under stress because of [Speech Overlap].

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah, obviously — obviously, but we will not do something which is unsustainable in the long-term. See, I will not do something to shore up short-term turnover, which is not sustainable, which doesn’t have — if the unit economics of the business is fundamentally not right, see for me, I don’t have to show valuation. So I’m not going to do something which is — I know in the future is not sustainable. So yes, I will continue to invest. I don’t have a cash crunch. Having said that, it will be equally prudent.

Vivek Maheshwari — Jefferies — Analyst

Got it, got it. All right. Thank you very much and wishing all the best.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah, hi. Good evening, and thanks for the opportunity.

Saugata Gupta — Managing Director and Chief Executive Officer

Hi.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah. So, just two questions. Just a little more depth, if you can provide. You said that you are going to relook the cost structure. Would you be able to help me understand what is the current gross margin or is there any aspiration that you will do, and what exactly we are trying to do? Are you going to relook the entire supply chain and channel how we distribute or it’s more on the — at the back end you will get yourself into manufacturing?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no, no. I think I’m just giving you a generic this one, I was not getting into specifics. All I said that these two businesses, we were driving growth. Having reached scale, I think it’s a good opportunity for both the digital and the food business to look at and improve profitability. That’s all.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. Okay. My second question is on PCNO, we have taken a few rounds of price changes. Is there any further price decline which has happened in this quarter?

Saugata Gupta — Managing Director and Chief Executive Officer

Not this quarter, but — I mean, as I said, that next year if there is, again, if some deflation is there, we will be taking prices up if necessary. But I don’t see right now, copra is range bound.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. No, the reason why I was talking to someone in the South, and he gave me classic reason that the loose versus pack, the difference is now almost INR14, INR15 per liter. So, maybe in that context, the relevance for the end consumer, and obviously I’m comparing this in the highly penetrated market, which is South. I mean, coconut is a very strong brand equity there. So that’s why I wanted to check with you that is there any such vibes you are getting on ground?

Saugata Gupta — Managing Director and Chief Executive Officer

So, we have a very robust pricing model. As you know also, we have a significant — our current pricing model indicates that the pricing is extremely right, and that’s what I alluded to during the opening remarks. But finally, we have got the pricing right, because as you know, there is a six to eight-week lead time for the price to be discovered in the market by the consumers because of all the stocks you have between factory, CNFA, distributor and retail. So, our pricing is absolutely right. That’s the reason we are seeing a bump up in volumes in Parachute, that’s the reason we are, despite so-called high inflation and rural stress, we are seeing an increase in market share in Parachute. And that gives us the confidence that we will be able to deliver the medium-term aspiration of Parachute volumes in the immediate term.

Shirish Pardeshi — Centrum Broking — Analyst

Sure. That’s helpful. Thank you, and all the best.

Operator

Thank you. [Operator Instructions] The next question is from the line of Harit from Investec. Please go ahead.

Harit Kapoor — Investec — Analyst

Yeah. Good evening. Am I audible?

Saugata Gupta — Managing Director and Chief Executive Officer

Yes, perfect.

Harit Kapoor — Investec — Analyst

Okay. Great. So, I just had just two-three questions. One was on Premium Personal Care, just wanted to understand, with Livon and Set Wet, it’s been a fairly volatile journey. And it seems like the brands are now kind of growing at a fairly good clip. I just wanted to get your sense how do you view these lines over the next two, three years, any learnings that you’ve got from a digital first portfolio that you see — you could apply to be, we have been applying to be [Speech Overlap].

Operator

Sorry to interrupt you, Mr. Harit. The audio is not coming clear from your line now. Please use handset.

Saugata Gupta — Managing Director and Chief Executive Officer

So, I’ve heard this, I think — okay, let me respond to this, and then — okay. So if you look at the Premium Personal Care portfolio, I think there is male grooming their serums and there is participation in Body Lotion skin care. Now, yes, I think it had a volatile journey because of certain reasons. But especially during COVID, so between ’20 and ’22, the entire category because it was discretionary and it was — some of it will linked to outdoor, the fact [Indecipherable]. So that I think has stabilized now. In the case of Livon or body lotion, we have crossed the pre-COVID benchmark in male grooming when aligned with almost the pre-COVID benchmark.

I think we now have a broad operating model. There is a significantly robust demand generation module and channel mix which is there. And we are pretty confident that in this part of the portfolio, we should be able to deliver 20%-plus, if not higher growth in the next two to three years. I think because we now have what I call kind of a model which is a repeatable model of growth which is now embedded into the system. Also, I think as we scale up our portfolio, as I have mentioned earlier in the past that, in the cosmetic and chemist are the channels, which we were under-leveraged. We have started our journey in terms of having a larger presence in cosmetic and chemist in the urban area, just like we have done in food. Food obviously has been a far higher and a more aggressive play as far as the food GTM is concerned.

And thirdly, you’re absolutely right, I think some of the learnings that I would believe that our expertise today in digital marketing or a digital cushion of our brand, given our experience in our digital brands. And therefore the learning that has come from them into the mothership, that has also helped in delivering the sustainable profitable growth in these brands.

Harit Kapoor — Investec — Analyst

Great. Great. The second question was on the international business. Maybe we can — maybe Pawan can help with that. I was — you see three quarters of pressure on the margins. Based on your outlook on how the impact of currency depreciation and some of the markets you play out, when do you see some of these pressures kind of alleviating, we’ll take a couple more quarters for it to kind of panel?

Pawan Agrawal — Group Chief Financial Officer

So it’s very difficult to sort of project currency trajectory. But last quarter depreciation happened, starting from quarter two. So at least we hope that till quarter one there’ll be some hit. And subsequent to that, there will be — that will be coming in the base. And largely it is on account of Bangladesh where we have seen a very, very sharp depreciation from the level of 85, 86 to about 105. And that is what is leading to two sort of it, one is, in a transaction hit, which is impacting the gross margin of the business over there. And secondly, when we translate that into at INR level, that is given the second level of it. And impacted overall level is approximately 2% to 3% of profitability that is getting diluted on account of this translation hit of Bangladesh currency.

Harit Kapoor — Investec — Analyst

Got it. Got it. And the last question was on slightly longer-term one on the margins at a consolidated level. It seems like there are — obviously one of the key focus is over a long-term is diversification. And in that structure, you have a growing foods portfolio, which is good — faster than the overall business, as well as a digital-first portfolio which is growing across in the overall business. Both these have inherently lower margins to start with at an EBITDA level. Is the best way to look at this business from a — at a consolidated level over a, say, three, four year perspective is, you’re happy to keep margins in a broad range and just strive for the revenue growth in food diversification, is that the playbook we should look for?

Pawan Agrawal — Group Chief Financial Officer

If we look at it, we are saying is that, by FY ’24, in Q3 it should be about INR850 crore to INR1,000 crore. And we’re also saying that digital-first brand is about INR450 crores to INR500 crores. If both these lands together, then the dilution in the food business will be made up more than what is required for the retail prices because gross margin of that is very, very high. So if we are able to land this together by FY ’24, we don’t think there is going to be any stress on the margin side.

Secondly also, in the foods, whichever products we’re coming up with, those definitely have margins which is better than the existing portfolio. Just to give you a sense, when we entered into oats, oats has a better margin than oil. When we entered into value-added foods, those food has the potential of having gross margin better than the oats. So whenever we are extending our portfolio, gross margin is only accretive. But from a portfolio perspective, of course foods margin is lower, but if both the portfolio of digital first and foods, we are able to achieve our aspiration. I don’t think that’s going to be a challenge from a margin standpoint.

Saugata Gupta — Managing Director and Chief Executive Officer

So, also I want to add to that, is that — if you look at the Premium Personal Care portfolio, which is also expected to grow at 20%-plus, that’s also high margin. So, if you look at — if I just want to address the question directly that there is no concern that a blended gross margin of a business will get diluted just because of food journey has got accelerated.

Pawan Agrawal — Group Chief Financial Officer

And having said that, we also have a task in terms of improving the gross margin in the foods also, which Saugata alluded about in the previous question. So therefore, if all the things land together, I don’t think there is going to be any stress on the gross margin at the portfolio level.

Harit Kapoor — Investec — Analyst

And then, how about that translating at an EBITDA margin level? I mean, my question is more from a slightly longer-term basis. Is the idea to drive sustainable kind of a revenue growth get the diversification going as you have so successfully over the last two years? And keep that EBITDA margin band in that 18% to 20% range, plus-minus something in the 19% numbers, is that the longer-term paybook or you keep driving operating leverage and still see an improvement there? Because at a standalone level, your overall margins are — you need to be lower than the international. My thesis was that, you could continue to see expand over a longer term, but just wanted to get your sense on how you’re thinking through it?

Pawan Agrawal — Group Chief Financial Officer

Harit, if you look at it from an operating margin standpoint, we used to guide about 17% to 18%, then you’ll get to about 18% to 19%. And as we speak, we believe that this year we should be ending anywhere between 18% to 19%. And having said that, if you ask me from a two to three-year perspective, is there a possibility of a further improvement in operating margin? Answer is actually yes, because there could be an improvement in the mix of the portfolio in the India business.

Secondly, also in International business, there are some territories where we expect that the margins can go further. So, if I were to take a view, two to three years out, yes, there is quite a possibility of operating margin going up further. But having said in the near term, we would rather focus more in terms of our volume growth and market share, and therefore if we have to invest more, to get that, we would do that and really not chase short-term margins, which could be, let’s say, in FY ’24 if I talk about, but two to three years out, definitely possible.

Saugata Gupta — Managing Director and Chief Executive Officer

See, I think, if you look at the International business specifically, there is a significant profit pool to be had in — especially Middle East and North Africa where we were marginal players, but we are now growing very aggressively. And therefore, while Bangladesh is maybe at a certain margin, but both in Vietnam and this one which our growth business is, I think there is enough opportunity. And as I explained earlier that ultimately once we get scale businesses in — they diversified the portfolio, the blended margin is no way going to be lower. And with economies of scale — so as you move from — I think someday, I mean, you will move from 19%-plus and then start moving ahead beyond that.

Harit Kapoor — Investec — Analyst

Very clear. Very clear, sir. Thank you so much. Yeah, that’s it.

Saugata Gupta — Managing Director and Chief Executive Officer

Thanks.

Operator

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 question. My first question was, Saugata, do we have any revision with respect to our food business target, say, over the next three years? What would that number be now?

Saugata Gupta — Managing Director and Chief Executive Officer

No. I mean, I’ve given the FY ’24 aspiration, we are going on track, it’s fine.

Sheela Rathi — Morgan Stanley — Analyst

By FY ’26, is there a number?

Pawan Agrawal — Group Chief Financial Officer

No, no. So, Sheila, we first want to reach FY ’24 target of INR850 crores to INR1,000 crores [Phonetic]. And from there on, we recalibrate FY ’26, FY ’27.

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah.

Sheela Rathi — Morgan Stanley — Analyst

All right. Sir, second question again was in the digital first brand. I actually came across a Beardo store at Ahmedabad Airport, and it was very interesting to see the kind of SKUs which have been brought up there. So, is there any other incremental plan with respect to the physical expansion of the Beardo stores and also the other digital brands?

Saugata Gupta — Managing Director and Chief Executive Officer

So, I think, as far as the Beardo store is concerned in Ahmedabad Airport, it’s a prototype, it’s a quick haircut as an idea and for you to also experience the brand, because we are merchandising some of the products out there. It’s still in the prototype stage. We are looking at various prototypes to expand, because the way we look at Beardo, it stands for a certain cult. It’s the Harley-Davidson of male grooming, that’s how about the brand stands for. And therefore, just as the way the journey of that brand happened in our own small way, because we are no way that big, we’re a very small brand. We will basically chart the path for it.

As far as the other brands are concerned, which is Just Herbs and all, we are prototyping — each of the brand is prototyping with beauty advisors in GT. Some of the — in some outlets and some markets, one or two markets, we will see if that model works well, we will expand that model.

Sheela Rathi — Morgan Stanley — Analyst

Understood. And my third and final question was, this particular quarter, what percentage of the portfolio gain market share, just an aggregate number here?

Saugata Gupta — Managing Director and Chief Executive Officer

Most of the brands gained market share. There was nothing — none of the big brands lost market share.

Sheela Rathi — Morgan Stanley — Analyst

Understood. Thank you.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vishal Punmiya from Yes Securities. Please go ahead.

Vishal Punmiya — Yes Securities — Analyst

Yeah, thank you. Just two questions. Firstly, on other income this quarter, any specific reason for a sharp jump from INR22 crores to INR40 crores?

Pawan Agrawal — Group Chief Financial Officer

There are largely two reasons. One is, with the rising interest rates, the yields on the surplus has improved by about 230 basis points. So because of that, the investment income has gone up. And secondly, there is FX depreciation gain on the receivables on the balance sheet. So these are largely two reasons because of which other income has moved from INR22 crores to INR40 crores.

Vishal Punmiya — Yes Securities — Analyst

Understood. And secondly, just a data point, if you can also share the value-added hair oils volume market share for this particular quarter, you have shared the value share in the PPT, but if you can also share the volume market share?

Saugata Gupta — Managing Director and Chief Executive Officer

So, as you know, the last two years we have moved to our internal and external KPIs on value. The reason is, as I said, that in our objective was to bridge the gap between value share and volume share, and therefore that’s the only KPI we measure.

Vishal Punmiya — Yes Securities — Analyst

Okay. But we wouldn’t have lost any share in terms of volume, right, this particular quarter?

Saugata Gupta — Managing Director and Chief Executive Officer

We haven’t.

Vishal Punmiya — Yes Securities — Analyst

Okay. Okay, thanks. And just lastly on this, the new launch, the Saffola Munchiez, I noticed that the manufacturer is also a player — a very active player in the market, has its own brand for that particular product. And they are also becoming very aggressive in the FMCG space. So, how do we kind of basically set areas of distribution for this particular product? Because they have a very similar product, while that product might not have millets in it, but it’s a very similar looking product that they have?

Saugata Gupta — Managing Director and Chief Executive Officer

See, by that logic, let me tell you all three key players manufacture their own brands. Ultimately, I’m delivering a product under the Saffola brand name. I will not invest still I get critical mass in my own manufacturing, so it doesn’t bother us. And that happens in all categories. If you look at some of the other food products, whether it’s honey, whether it’s — so they would be mayonnaise, for example, the guy who manufacture mayonnaise also manufacture for another player. So it’s a standard practice, operating practice in the entire global FMCG world. So we have our own quality system. We have our own IPR, and therefore it’s fine.

Vishal Punmiya — Yes Securities — Analyst

Okay. So, there is no parameter as such in terms of online or offline reach, whether it’s e-com or whether it’s general trade, for this kind of setup, right?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no. I’m getting somebody to do as a third-party, that’s why. Absolutely there’s nothing to do with this one. So I’m — I mean, I don’t know whether which brand you are referring to, but whoever is manufacturing is manufacturing as a third-party, that’s about it.

Vishal Punmiya — Yes Securities — Analyst

Understood. Understood. Thank you, and best of luck.

Saugata Gupta — Managing Director and Chief Executive Officer

Thanks.

Operator

Thank you. The next question is from the line of Amit Rustagi from UBS. Please go ahead.

Amit Rustagi — UBS — Analyst

Yeah. Thanks for giving me an opportunity. And so, team, I would like to know that you have mentioned rural recovery, I think, several times in your opening remarks. So, have we seen any incremental data points in last one month, apart from the budget which support our thesis on rural recovery? And if you have to measure some pointers for the next three to six months, what should be those pointers on that? If you can help us with your thought process on this.

Saugata Gupta — Managing Director and Chief Executive Officer

Okay. So I think the first thing which we’re looking at is, if you look at the last six months, every month there was a sort of a sequential decline month-on-month which has got arrested. Okay? So, therefore, all we are saying is, the worst is over. Now, if I look at some of external factors, if you look at it, one is overall inflation, as you know that whenever there is high inflation, especially food inflation, people tend to titrate or downgrade on FMCG. So, I believe that we are coming out of that worst high level of inflation.

Secondly, I think the rabi crops is okay. The government is committed to investing behind rural infrastructure. So, if I look at these indicators should indicate some kind of a recovery. I’m not saying it’s going to be a hockey stick, it going to be a gradual recovery. But what I believe just like I’m saying, the worst of commodity inflation and volatility is over. Of course, in today’s world, you can’t say anything because of any black swan can happen anytime. All trends point towards a better gradual recovery.

Amit Rustagi — UBS — Analyst

Okay. And apart from the inflation cooling off, do you see any trends we support higher income for the rural people?

Saugata Gupta — Managing Director and Chief Executive Officer

I think the agricultural yield and also the fact that there is a significant — going to be significant if you look at the budget, the government continues to invest significantly behind infrastructure, also in rural. So, I think, these are all positive signs. So, it’s very difficult to say that when will the recovery, what is the extent of recovery. But I think, if I look at it, the positive drivers outnumber the negative drivers as far as consumption is concerned.

Amit Rustagi — UBS — Analyst

Okay, sir. Got it. Thanks a lot, and wish you all the best.

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 — Group Chief Financial Officer

So, to conclude, the sequential improvement in domestic volume growth and earnings delivery so far this year is encouraging. With emerging green shoots on the demand front, we expect a stable growth in core, and we continue to drive accelerated growth in food, premium personal care and digital first portfolio. In fact the business has remained robust in a challenging environment and we are very confident of maintaining a healthy growth trajectory.

Going ahead, we will ensure that we optimally invest and stay focused on execution and aim to keep inching up the pace of growth in volume, top line and profit in the quarters ahead. If you have any further queries, please feel free to reach out to IR team and they’ll be happy to address the same. That is it from our side. Please stay safe and take care.

Operator

[Operator Closing Remarks]

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good day, and welcome to Marico Limited Q3 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] Please note that this conference is being recorded.

Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts. And therefore, if there is anybody else who is not an institutional investor or analyst but would like to ask 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 and Chief Executive Officer

Yeah. Hi, everyone, and good evening to all of those of you who have joined the call. And I would firstly I like to wish all of you and your loved ones a wonderful and a happy 2023.

I will start off by giving you a flavor of the operating environment before delving into our performance during the quarter. After the FMCG sector grappled with the dampening effect of inflation for the better part of 2022, we believe that there are indications at the start of a gradual improvement in consumption trends, following the sequential moderation witnessed in commodity and retail inflation. CPI has come down from the levels of 7%-plus earlier to sub-6% in December 2022. We’ve also seen visible softening in prices of some key commodities from unprecedented levels brought about by the geo-political tensions and the supply chain constraints earlier during the year.

Amid this evolving context, FMCG sector recorded a marginal volume decline in December quarter, its lowest in the last five quarters. Amongst categories, food stayed on the growth path, while HPC recorded mid-single digit volume decline. Urban continue to grow in low-single digits, rural remain the weak link, although its trajectory appeared to improve. During inflation, our healthy rabi sowing season are indications of higher farm income all go well for rural growth prospects. Also increased budget allocations and this new initiatives announced in the Union Budget should provide the much needed impetus in this direction.

Coming to our performance in Q3, we are enthused by improving trends seen across most parameters. Top line growth was underpinned by 4% domestic volume growth and 8% constant currency growth in the international business. If not for the pack size reductions in value-added hair oils, volume growth would have been at 5%-plus. On a three-year CAGR basis, domestic volume grew by a steady 6%, which I believe is in the top quartile amongst all companies in the peer sector. And international business constant currency growth stood at a robust 11%.

In terms of profitability, gross margins seen an y-o-y and sequential expansion, owing to a stabilizing raw material and consumer pricing environment and a healthier broad mix in the India business. On a three-year CAGR basis, A&P spends were up 6% and we delivered an annual growth of 11%, which has validated our strategy to optimally invest in long-term brand building despite transient cost pressures along the way.

Moving into the India business, I will now take you to trends we are seeing in each of our categories and some color on the strategy and outlook for the period ahead. After seeing some sluggishness in the branded coconut oil over the last four quarters owing to the extended deflation in copra prices, we have seen a revival of volume growth in the month of December in Parachute Rigids. Loose to branded conversions picked up with copra prices firming up favorably in the off-season, and it is the first instance when we are able to establish the right pricing in the market at least by mid-December. As a result, the brand gained 30 bps in the volume market share during the quarter with copra prices expected to be range bound in the near term, we expect to clock volume growth in line with our medium term targets going forward.

Saffola Oil further its growth momentum with low teen volume growth, driven by stable trade inventory and consumer pricing. Overall, with the commodity prices softening, the revenue growth was subsequently lower. While the international vegetable oil complex needs to be absorbed in the near term, we will remain focused on balancing volume growth and profitability in a sustainable manner in the coming quarters.

In Foods, we remain on course to achieve the FY ’24 aspiration. The segment was led by superior growth momentum in the oats category, which grew at 20%, and maintain its strong leadership position in its category. Our newer offerings under Saffola and FITTIFY ranges continued to gain traction. During the quarter, we entered into the ready-to-eat space under our brand Saffola Munchiez with the launch of ragi chips and roasted makhana in multiple flavors.

Post-COVID, as people have become more health conscious, the industry has shifted for indulgent snacking to bill-fee snacking. Saffola Munchiez combines the power of healthier grains along with delightful flavor to provide better alternative in the healthy snacking category. We’ll continue to drive meaningful innovation in the foods over the next few quarters, and some of the innovation was to leverage the goodness of Shri Anna or millets, in line with the government’s focus on establish India as a global hub for millets.

In value-added hair oils, we were unable to tide over the weakness in rural consumption, which is witnessed in most mass personal care categories. On a three-year CAGR basis, however, value-added hair oils delivered a reasonable 7% value growth. We continue to see better traction in mid- and premium segments also, reflecting the 80 bps gain in value market share. After some degree of commoditization increased competitive activity in the bottom of pyramid segment, we are expecting better volume growth and market share gains now that there has been substantial price increase taken by other competitive brands.

With inflation easing and rural slowdown showing signs of bottoming out, we expect to see pickup in growth in line with other HPC categories. Premium Personal Care maintain its strong momentum and register a double-digit growth. We have seen a remarkable recovery in this portfolio since the pandemic and aim to deliver 20% growth consistently over the medium-term to drive lower penetration and a market-leading position in this category. But digital first portfolio is scaling up well in line with internal targets. As we [Technical Issues] these brands in the digital-first portfolio, we are also charting a sustainable path to profitability along the way.

Coming to our international business, we are able to continue a healthy momentum despite macroeconomic uncertainties and currency devaluation in some markets. The business at Myanmar, which declined due to forex-led challenges registered 11% constant currency growth. Bangladesh is witnessing some macro headwinds, though the severity is not any different compared to those in some of the emerging economies in Asia, Africa and Eastern Europe. However, we have been resilient even in the midst of a challenging macroeconomic environment, which goes to showcase our portfolio strength, distribution strength and consumer belief in our brands.

Our Vietnam business further strengthened with both HPC and Foods exhibiting continued growth. During the quarter, we also entered into female personal care in Vietnam by acquiring brands Purite and Oliv, which offer a range of premium and differentiated hair care and skin care products. We are upbeat about the growth prospects in Vietnam and look to significantly expand our play in the personal care category.

Our MENA and South Africa business have also displayed significant growth momentum, while the NCD business, which is a new country development, is also growing in line with internal aspirations.

Looking ahead, we are confident of maintaining an upward trajectory in volume and earnings growth in the quarters ahead on the back of stabilizing raw material and consumer pricing environment in the domestic business, coupled with consistent market share and penetration gains in our four categories, while we expect macro headwinds to gradually recede along the way. We believe that the worst of inflation and volatility is over. Moderating inflation and measures in the budget to enhance disposable income and spending will gradually reverse the flow and accelerate unbranded to branded conversions.

In Coconut Oil and Saffola Oils, pricing has taken some time to settle in and consumer pricing is now more stable and in line with the market. We also expect competitive pricing action which has taken place on a relatively lower inflation to reverse the commoditization in [Indecipherable] to a significant extent. The diversification journey to foods and digital first is progressing in line with expectations. Now that two of our brands are hitting critical mass, we are also focusing on improving cost structure of both foods and digital.

In International business, we are confident of continuing the double-digit growth trajectory as the business have been relatively more resilient despite external challenges in some of the markets. Gross margin should remain steady, and hereon with an upward potential, EBITDA margin should remain in the 18% to 19% range as we close FY ’23 and move above the threshold of 19%-plus next year. We continue to build fundamentally sound franchisees in the domestic and international markets and must progress along the four strategic areas of diversification, distribution, digital and diversity that shall enable us to deliver sustainable double-digit growth over the medium-term. We also continue to make credible progress in our ESG program in each of the focus area, creating shared value for all the [Indecipherable] of our business, and we allow us to drive superior long-term performance. We are committed to achieving net zero emissions in our domestic operations by 2030 and global operations by 2040.

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

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

Hi, Saugata. Just wanted to ask on VAHO segment. So we understand that there is an overall slowdown in the industry, but is there anything that you can do from your side to sort of improve the growth in VAHO? And if at all, when do we see the results of this coming through?

Saugata Gupta — Managing Director and Chief Executive Officer

So, firstly, I think, VAHO, if you see, largely mirror some of the mass segments in the HPC categories, I mean. Secondly, if you look at VAHO compared to other categories, it’s more rural and rural has seen some strength, and some of the markets, for example, in East or UP and all that, which are specific areas where we have seen this one. So, I believe two things are happening, people within the category are downgrading, and also maybe the unbranded to branded journey there is a reverse flow that is happening.

Now with two things that have happened, one is, the entire input costs, which have gone down and the inflation going down, I believe that this reverse journey will get corrected. Secondly, I think interestingly what has happened in the category is that, there has been significant activity or at the bottom of pyramid and where perhaps some players were not taking price increases. And there was perhaps operating with unsustainable margins. A lot of players have taken the price increase and therefore we believe that is good because that helps us to focus on, I think, investing behind the category in terms of ATL and actually growing the mid-segment.

We are focused on actually gaining value share [Technical Issues] between value share and volume share. And therefore, if some of the players, which was — see what was earlier happening was significant down — shift of money from ATL to BTL, that was witnessed by other competitive brands. I believe that will also change, that is good for the category because everybody then invest behind category growth. And I’m pretty confident that as we move towards the next two, three quarters, this growth will get — the decline will get reversed.

Percy Panthaki — IIFL — Analyst

Understood. Secondly on this launch of Munchiez, see the overall snacking category in India is huge, right. So unorganized, organized put together everything might be 100,000 crore or even more. So, just wanted to understand how you are looking at the opportunity size here for yourselves? Okay. You are absolutely right, I think it’s a vast segment. Having said that, I think we are offering a better-for-you healthy brand. We have learned one consumer insight, that the Indian consumer will not compromise on taste for health. And therefore we have actually managed to deliver a product with all the goodness of millets. And of course the fact that, in terms of other things like fat and other things which is far lower than other competitive brands a very tasty product. Obviously, it’s priced slightly higher. If we look at — we will now participate in line with our strength, which is modern trade e-commerce, and e-commerce again we are doing, what I call quick commerce, and a significant amount of food outlets. As you know, we are rapidly scaling up our food GTM in at least eight to 11 cities. And we now have a critical mass of any segment we are participating in which covers 50%-plus retail distribution of the premium part of any of the segments we participating in. So we were going slowly, I’m not giving any numbers. The product is beautiful and in Food if you ask me, if the product is good? If you can generate trials, automatically repeats and scale up happens? And I think we will go up gradually. I think the best thing we are doing is, we are coming, our products we deliver on taste. We are investing significantly behind distribution, and I believe we’ll get a multiplier effect on this. And as I said in overall foods, we are more or less on track to meet our aspirations. And what I noticed in back snacks is that, typically the INR10 price point is very, very important. I mean, even for premium products, even let’s say, for products where the rupees per kilo is higher than, let’s say the normal product in a industry. Just making that product available in a INR10 price point really drives the sales. So, I was just curious as to why you do not have a INR10 price point in these products yet?

Saugata Gupta — Managing Director and Chief Executive Officer

Well, I think various categories are actually vacated the price point. And I think, yes it takes, you take bold and courage to vacate that price point. If you look at noodles, that vacated that price point. If we look at the history of masala oats, we — in despite competition, I think we present in the price point of INR10 or INR12, we entered at INR15. But today, I have a INR300 crore business. So I think ultimately if you offer consumer value today, I don’t think that is an issue because at the end of the day, as I said, that if I have to invest behind a brand, I have to start with the GM that is sustainable. And therefore, given the fact that we have a superior product like millets in certain offering, I don’t think in INR10 you will never have made a sustainable margin in that.

Percy Panthaki — IIFL — Analyst

No. For ragi for example, which you have launched, I think it’s at a INR25 price point, if I’m not mistaken. Keeping the gross margin constant, I mean, country just reduced the grammage and make it available. The reason I’m asking is, the examples that you gave of maggi and oats and all that, they’re not exactly in the same category of back snacks. Back snacks, INR10 price point is probably one of the most selling price points?

Saugata Gupta — Managing Director and Chief Executive Officer

No, but at the same time, I don’t want to name brands, but there are brand which have operated higher and has got critical mass.

Percy Panthaki — IIFL — Analyst

Okay. Okay. Yeah, that’s it from my side, Saugata. Thanks very much.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead.

Avi Mehta — Macquarie — Analyst

Hi. Just had one clarification on the gross margin comment, where you said that you expect gross margin to remain steady. Now, is this — how should we — this is because you are expecting currency depreciation in international, which is what is the worry, because India margins are still what — we know much bigger that 45%-odd average that we used historically. So would love to understand the reason for this comment. Thank you.

Pawan Agrawal — Group Chief Financial Officer

Thanks, Avi, for this question. So what we’re essentially saying is that gross margin will remain steady, which means y-o-y, it will definitely improve. And therefore, there will be some upward bias as compared to where we are at this point in time. Our point to look at is that, we should be looking more from an operating margin standpoint because there’s multiple levers that we’ll be paying out. In operating margin standpoint, what we’re saying is, we will be maintaining 18% to 19% for the full year.

Avi Mehta — Macquarie — Analyst

Okay. Okay. So you’re essentially saying that it is sequentially is what you’re looking at, in that whatever that 41%-odd level that India is at, is what you’re essentially saying will sustain even in India. It’s not a mix — geographical mix that we are talking about over here, which is the reason for the consol number.

Pawan Agrawal — Group Chief Financial Officer

We don’t expect any further improvement in the international because the currency situation has not improved. And in fact, there is a translation hit that’s happening on the Bangladesh depreciation. So, whatever improvement will happen will largely happen on the India business side.

Avi Mehta — Macquarie — Analyst

Okay, okay, okay. That’s all from my side. Just wanted to clarify that. Thank you.

Pawan Agrawal — Group Chief Financial Officer

Thank you.

Operator

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

Vivek Maheshwari — Jefferies — Analyst

Hi, Saugata and Pawan. Two questions. My first question is a follow-up to what Percy asked. So, on the value-added hair oil side, is there a whitespace that you can target? Basically that portfolio has been, I mean, there were like four, five quarters where it grew double-digit, but for a long, long time, it has not — or it has barely grown. So what is your thought process on — is there a way out to gain market share more aggressively, whitespace that you can target or you just need to wait for the market to pick-up?

Saugata Gupta — Managing Director and Chief Executive Officer

So, firstly, I think the three-year CAGR is still 7%, which is healthy, if you see compared to any — our performance compared to any BPC category. I think three-year CAGR is good, yes, whereas one on last — as I attributed to two things. One is, there is a far more rural SKU in this category. Number two, within rural also, some of the markets in the country are witnessing a little more sluggishness and VAHO has a higher concentration in that. You are absolutely right, the two things we are doing is that, we are here — as you know we have continued to gain value market share, you will see more participation in mid and premium segment to drive that.

We are also, as I said, happy at the fact that there has been competition — price increases because that gives relief at the bottom of pyramid that — see, what was happening was that, you are maintaining a share of voice at lower spend. The overall category spend, this will help fund the [Phonetic] competition and others, convert money from BTL to ATL, because converting money to BTL and doing unsustainable margin is not good for the category. I think that change is happening, I believe. And therefore, that will also lead to overall better category saliency and driving the growth of the category.

As such, the other thing that has happened, which is specific to this category, unlike other categories, in HPC where there is only downgrading, a significant portion of the people have also moved back to loose mustard. And to me, with inflation going down, I believe a reversal is going to happen, and also increase in rural income. People want brands, people wanted aspirational brands. The only white space we have started doing is two things, one, we have now started picking onion oil in GT where we believe we have a better right to win in some of the so-called digital-first brands.

The second thing is, we’re also going to be a little more — exploring some of the players in the mustard area, because that’s an area which has given growth. So, both at the bottom of pyramid and at the mid and this one, you will see a little more this one, we are just waiting for the category to grow, there is no point investing. And as you know, we will also get significant gross margin play to invest, given that there will be decrease in the price input cost payments. So, we are waiting for some tailwinds to come to invest and gain that market share.

Vivek Maheshwari — Jefferies — Analyst

Got it. Got it. And Saugata, another — it’s an observation. I don’t know — correct me if I’m wrong, but if I leave aside your digital-first portfolio, organically speaking, it looks like that your energy is far more towards new launches on the food side and lesser on the personal care side. Is that observation correct?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no. I think it’s in line with the fact that, I think, GT, I’ll tell you, let me just give you the perspective. If you look at COVID, and this is a story from 2020, we believe that there was a significant move towards in-home consumption, okay? Now, if you look at the opportunity that was there to expand the total addressable market to Saffola, we actually never exit. And if you believe what the strategic funding to sales multiple, in food you can typically get scale. And therefore, in food, it is very important to quickly get scale because it also has an importance on cost leverage. So we are focusing on energies on that.

During that time, two also things happened. One, while there was growth in digital space, there was significant contraction in a lot of premium category in HPC. There was also contraction in value-added hair oil. So, therefore, when there are headwinds in the category trying to invest behind new products is not the perhaps the right strategy. We invested and put all our energies behind categories where there is a tailwind because that is not climbing up, that is going with the tide. Having said that, going forward, we shall see — I think in the next 12 months, we will see, I think, equal number of innovations also in this part of the business.

Vivek Maheshwari — Jefferies — Analyst

Okay. So that’s interesting. So, let’s say, you mentioned 12 months, so if we take up three, five years out, my impression is that, increasingly, Food still a smaller part, but increasingly the launches will be more on the food side and steady state, it will keep seeing expansion in its — in the mix from an overall portfolio standpoint. Is that a correct view?

Saugata Gupta — Managing Director and Chief Executive Officer

Not really. If you look at it, I think in Bangladesh, we have exhibited our ability to expand the total addressable market in Parachute Advansed. So, therefore, we have — so I don’t think we can’t do it. Similarly, I believe the Premium Personal Care, which is categories like Serum, male grooming which got impacted during COVID, or I think we just attributed to in VAHO, some of the things like onion oil and others. I think there is enough opportunity.

Having said that, I think the food part of the business and digital, yes, the new part of the business, it will continue to increase in contribution. I see in the next two, three years, it will get into mid-teens what I call the diversified part of the business, and it is in line with our overall strategy to diversify our portfolio. I think what is equally important is that the fact that, as I — I think alluded to during my opening remarks, having achieved scale, we are also looking at improving the margin structure of food and the profitability of digital brands, because that is also important, as because they will become perhaps a higher contribution to the overall portfolio.

Vivek Maheshwari — Jefferies — Analyst

Got it. And if I may — if I can add third question, if okay, on the digital brand side, so in the context of all that is happening to, let’s say, Internet franchisees or the profitability focus and all. Two parts to this question, one, are you looking aggressively to acquire more assets? Because you were the first one, or it is among the first one to take a shot at this opportunity when I don’t think there were that many competitors — or that many players who were thinking about it, number one.

And number two, in a scenario where there is a paucity of capital, isn’t that a good time for you to actually be more aggressive and gain shares, given that competition will, in a way, see a pullback in spending, etc, etc?

Saugata Gupta — Managing Director and Chief Executive Officer

So, we don’t want to make — see, I know it’s not — we want to ensure that we want to go with — we will look at acquisition. Having said that, I think we like basically brands that fulfill an unmet need that delivers good — I mean, that delivers on basic unit economics. And we like to work with founders who have a mentality of building to large versus building to sell. So, therefore, we will not acquire assets which have no potential just because it’s available cheap. And I believe that, again we will continue to look at assets which have growth potential, and I think there are perhaps assets in the market like that. And we will see some acquisition. But just because it’s cheap, I will not buy, because there is no point buying things cheap which have no value of future potential. And as I said, we not only look at the brands and the headroom for growth and the unit economics, we also like to work with founders who have a certain amount of, what I call, a cultural fit and — this one, mindset fit with us.

Vivek Maheshwari — Jefferies — Analyst

Got it. And on the second part, Saugata?

Saugata Gupta — Managing Director and Chief Executive Officer

What was the second part?

Vivek Maheshwari — Jefferies — Analyst

Sorry. What I meant was, basically in a cash crunch environment, do you think there is a case for you to at least whatever acquisitions you have done and your own — Marico’s own initiative, is there a case to be more aggressive to go after market shares or whatever build categories that the time and competition is under, let’s say stress [Speech Overlap].

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah. Having — you’re right, having said that, we also then — therefore the onus is also on us to accelerate the path to profitability journey. Because, see, if you look at it this way, that it is very important that now that food and digital business have a certain scale, we have to also look at profitability. Because at the end of the day, as I said that, while we don’t have — our businesses don’t have that much cash burn compared to lot of startup spaces in the digital space. But at the same time, we will look at market share, but at the same time we’re looking at both right now.

Vivek Maheshwari — Jefferies — Analyst

Right. Sorry, Saugata, my point was — I’m sorry, if I’m extending this a bit. But my only point is that, let’s say, you have already have — let’s say investment in Coco Soul for example, right, or Pure Sense. Is there not a sense in supporting those businesses and letting them go aggressively after market shares at the time when digital-first companies are under stress because of [Speech Overlap].

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah, obviously — obviously, but we will not do something which is unsustainable in the long-term. See, I will not do something to shore up short-term turnover, which is not sustainable, which doesn’t have — if the unit economics of the business is fundamentally not right, see for me, I don’t have to show valuation. So I’m not going to do something which is — I know in the future is not sustainable. So yes, I will continue to invest. I don’t have a cash crunch. Having said that, it will be equally prudent.

Vivek Maheshwari — Jefferies — Analyst

Got it, got it. All right. Thank you very much and wishing all the best.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah, hi. Good evening, and thanks for the opportunity.

Saugata Gupta — Managing Director and Chief Executive Officer

Hi.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah. So, just two questions. Just a little more depth, if you can provide. You said that you are going to relook the cost structure. Would you be able to help me understand what is the current gross margin or is there any aspiration that you will do, and what exactly we are trying to do? Are you going to relook the entire supply chain and channel how we distribute or it’s more on the — at the back end you will get yourself into manufacturing?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no, no. I think I’m just giving you a generic this one, I was not getting into specifics. All I said that these two businesses, we were driving growth. Having reached scale, I think it’s a good opportunity for both the digital and the food business to look at and improve profitability. That’s all.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. Okay. My second question is on PCNO, we have taken a few rounds of price changes. Is there any further price decline which has happened in this quarter?

Saugata Gupta — Managing Director and Chief Executive Officer

Not this quarter, but — I mean, as I said, that next year if there is, again, if some deflation is there, we will be taking prices up if necessary. But I don’t see right now, copra is range bound.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. No, the reason why I was talking to someone in the South, and he gave me classic reason that the loose versus pack, the difference is now almost INR14, INR15 per liter. So, maybe in that context, the relevance for the end consumer, and obviously I’m comparing this in the highly penetrated market, which is South. I mean, coconut is a very strong brand equity there. So that’s why I wanted to check with you that is there any such vibes you are getting on ground?

Saugata Gupta — Managing Director and Chief Executive Officer

So, we have a very robust pricing model. As you know also, we have a significant — our current pricing model indicates that the pricing is extremely right, and that’s what I alluded to during the opening remarks. But finally, we have got the pricing right, because as you know, there is a six to eight-week lead time for the price to be discovered in the market by the consumers because of all the stocks you have between factory, CNFA, distributor and retail. So, our pricing is absolutely right. That’s the reason we are seeing a bump up in volumes in Parachute, that’s the reason we are, despite so-called high inflation and rural stress, we are seeing an increase in market share in Parachute. And that gives us the confidence that we will be able to deliver the medium-term aspiration of Parachute volumes in the immediate term.

Shirish Pardeshi — Centrum Broking — Analyst

Sure. That’s helpful. Thank you, and all the best.

Operator

Thank you. [Operator Instructions] The next question is from the line of Harit from Investec. Please go ahead.

Harit Kapoor — Investec — Analyst

Yeah. Good evening. Am I audible?

Saugata Gupta — Managing Director and Chief Executive Officer

Yes, perfect.

Harit Kapoor — Investec — Analyst

Okay. Great. So, I just had just two-three questions. One was on Premium Personal Care, just wanted to understand, with Livon and Set Wet, it’s been a fairly volatile journey. And it seems like the brands are now kind of growing at a fairly good clip. I just wanted to get your sense how do you view these lines over the next two, three years, any learnings that you’ve got from a digital first portfolio that you see — you could apply to be, we have been applying to be [Speech Overlap].

Operator

Sorry to interrupt you, Mr. Harit. The audio is not coming clear from your line now. Please use handset.

Saugata Gupta — Managing Director and Chief Executive Officer

So, I’ve heard this, I think — okay, let me respond to this, and then — okay. So if you look at the Premium Personal Care portfolio, I think there is male grooming their serums and there is participation in Body Lotion skin care. Now, yes, I think it had a volatile journey because of certain reasons. But especially during COVID, so between ’20 and ’22, the entire category because it was discretionary and it was — some of it will linked to outdoor, the fact [Indecipherable]. So that I think has stabilized now. In the case of Livon or body lotion, we have crossed the pre-COVID benchmark in male grooming when aligned with almost the pre-COVID benchmark.

I think we now have a broad operating model. There is a significantly robust demand generation module and channel mix which is there. And we are pretty confident that in this part of the portfolio, we should be able to deliver 20%-plus, if not higher growth in the next two to three years. I think because we now have what I call kind of a model which is a repeatable model of growth which is now embedded into the system. Also, I think as we scale up our portfolio, as I have mentioned earlier in the past that, in the cosmetic and chemist are the channels, which we were under-leveraged. We have started our journey in terms of having a larger presence in cosmetic and chemist in the urban area, just like we have done in food. Food obviously has been a far higher and a more aggressive play as far as the food GTM is concerned.

And thirdly, you’re absolutely right, I think some of the learnings that I would believe that our expertise today in digital marketing or a digital cushion of our brand, given our experience in our digital brands. And therefore the learning that has come from them into the mothership, that has also helped in delivering the sustainable profitable growth in these brands.

Harit Kapoor — Investec — Analyst

Great. Great. The second question was on the international business. Maybe we can — maybe Pawan can help with that. I was — you see three quarters of pressure on the margins. Based on your outlook on how the impact of currency depreciation and some of the markets you play out, when do you see some of these pressures kind of alleviating, we’ll take a couple more quarters for it to kind of panel?

Pawan Agrawal — Group Chief Financial Officer

So it’s very difficult to sort of project currency trajectory. But last quarter depreciation happened, starting from quarter two. So at least we hope that till quarter one there’ll be some hit. And subsequent to that, there will be — that will be coming in the base. And largely it is on account of Bangladesh where we have seen a very, very sharp depreciation from the level of 85, 86 to about 105. And that is what is leading to two sort of it, one is, in a transaction hit, which is impacting the gross margin of the business over there. And secondly, when we translate that into at INR level, that is given the second level of it. And impacted overall level is approximately 2% to 3% of profitability that is getting diluted on account of this translation hit of Bangladesh currency.

Harit Kapoor — Investec — Analyst

Got it. Got it. And the last question was on slightly longer-term one on the margins at a consolidated level. It seems like there are — obviously one of the key focus is over a long-term is diversification. And in that structure, you have a growing foods portfolio, which is good — faster than the overall business, as well as a digital-first portfolio which is growing across in the overall business. Both these have inherently lower margins to start with at an EBITDA level. Is the best way to look at this business from a — at a consolidated level over a, say, three, four year perspective is, you’re happy to keep margins in a broad range and just strive for the revenue growth in food diversification, is that the playbook we should look for?

Pawan Agrawal — Group Chief Financial Officer

If we look at it, we are saying is that, by FY ’24, in Q3 it should be about INR850 crore to INR1,000 crore. And we’re also saying that digital-first brand is about INR450 crores to INR500 crores. If both these lands together, then the dilution in the food business will be made up more than what is required for the retail prices because gross margin of that is very, very high. So if we are able to land this together by FY ’24, we don’t think there is going to be any stress on the margin side.

Secondly also, in the foods, whichever products we’re coming up with, those definitely have margins which is better than the existing portfolio. Just to give you a sense, when we entered into oats, oats has a better margin than oil. When we entered into value-added foods, those food has the potential of having gross margin better than the oats. So whenever we are extending our portfolio, gross margin is only accretive. But from a portfolio perspective, of course foods margin is lower, but if both the portfolio of digital first and foods, we are able to achieve our aspiration. I don’t think that’s going to be a challenge from a margin standpoint.

Saugata Gupta — Managing Director and Chief Executive Officer

So, also I want to add to that, is that — if you look at the Premium Personal Care portfolio, which is also expected to grow at 20%-plus, that’s also high margin. So, if you look at — if I just want to address the question directly that there is no concern that a blended gross margin of a business will get diluted just because of food journey has got accelerated.

Pawan Agrawal — Group Chief Financial Officer

And having said that, we also have a task in terms of improving the gross margin in the foods also, which Saugata alluded about in the previous question. So therefore, if all the things land together, I don’t think there is going to be any stress on the gross margin at the portfolio level.

Harit Kapoor — Investec — Analyst

And then, how about that translating at an EBITDA margin level? I mean, my question is more from a slightly longer-term basis. Is the idea to drive sustainable kind of a revenue growth get the diversification going as you have so successfully over the last two years? And keep that EBITDA margin band in that 18% to 20% range, plus-minus something in the 19% numbers, is that the longer-term paybook or you keep driving operating leverage and still see an improvement there? Because at a standalone level, your overall margins are — you need to be lower than the international. My thesis was that, you could continue to see expand over a longer term, but just wanted to get your sense on how you’re thinking through it?

Pawan Agrawal — Group Chief Financial Officer

Harit, if you look at it from an operating margin standpoint, we used to guide about 17% to 18%, then you’ll get to about 18% to 19%. And as we speak, we believe that this year we should be ending anywhere between 18% to 19%. And having said that, if you ask me from a two to three-year perspective, is there a possibility of a further improvement in operating margin? Answer is actually yes, because there could be an improvement in the mix of the portfolio in the India business.

Secondly, also in International business, there are some territories where we expect that the margins can go further. So, if I were to take a view, two to three years out, yes, there is quite a possibility of operating margin going up further. But having said in the near term, we would rather focus more in terms of our volume growth and market share, and therefore if we have to invest more, to get that, we would do that and really not chase short-term margins, which could be, let’s say, in FY ’24 if I talk about, but two to three years out, definitely possible.

Saugata Gupta — Managing Director and Chief Executive Officer

See, I think, if you look at the International business specifically, there is a significant profit pool to be had in — especially Middle East and North Africa where we were marginal players, but we are now growing very aggressively. And therefore, while Bangladesh is maybe at a certain margin, but both in Vietnam and this one which our growth business is, I think there is enough opportunity. And as I explained earlier that ultimately once we get scale businesses in — they diversified the portfolio, the blended margin is no way going to be lower. And with economies of scale — so as you move from — I think someday, I mean, you will move from 19%-plus and then start moving ahead beyond that.

Harit Kapoor — Investec — Analyst

Very clear. Very clear, sir. Thank you so much. Yeah, that’s it.

Saugata Gupta — Managing Director and Chief Executive Officer

Thanks.

Operator

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 question. My first question was, Saugata, do we have any revision with respect to our food business target, say, over the next three years? What would that number be now?

Saugata Gupta — Managing Director and Chief Executive Officer

No. I mean, I’ve given the FY ’24 aspiration, we are going on track, it’s fine.

Sheela Rathi — Morgan Stanley — Analyst

By FY ’26, is there a number?

Pawan Agrawal — Group Chief Financial Officer

No, no. So, Sheila, we first want to reach FY ’24 target of INR850 crores to INR1,000 crores [Phonetic]. And from there on, we recalibrate FY ’26, FY ’27.

Saugata Gupta — Managing Director and Chief Executive Officer

Yeah.

Sheela Rathi — Morgan Stanley — Analyst

All right. Sir, second question again was in the digital first brand. I actually came across a Beardo store at Ahmedabad Airport, and it was very interesting to see the kind of SKUs which have been brought up there. So, is there any other incremental plan with respect to the physical expansion of the Beardo stores and also the other digital brands?

Saugata Gupta — Managing Director and Chief Executive Officer

So, I think, as far as the Beardo store is concerned in Ahmedabad Airport, it’s a prototype, it’s a quick haircut as an idea and for you to also experience the brand, because we are merchandising some of the products out there. It’s still in the prototype stage. We are looking at various prototypes to expand, because the way we look at Beardo, it stands for a certain cult. It’s the Harley-Davidson of male grooming, that’s how about the brand stands for. And therefore, just as the way the journey of that brand happened in our own small way, because we are no way that big, we’re a very small brand. We will basically chart the path for it.

As far as the other brands are concerned, which is Just Herbs and all, we are prototyping — each of the brand is prototyping with beauty advisors in GT. Some of the — in some outlets and some markets, one or two markets, we will see if that model works well, we will expand that model.

Sheela Rathi — Morgan Stanley — Analyst

Understood. And my third and final question was, this particular quarter, what percentage of the portfolio gain market share, just an aggregate number here?

Saugata Gupta — Managing Director and Chief Executive Officer

Most of the brands gained market share. There was nothing — none of the big brands lost market share.

Sheela Rathi — Morgan Stanley — Analyst

Understood. Thank you.

Saugata Gupta — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vishal Punmiya from Yes Securities. Please go ahead.

Vishal Punmiya — Yes Securities — Analyst

Yeah, thank you. Just two questions. Firstly, on other income this quarter, any specific reason for a sharp jump from INR22 crores to INR40 crores?

Pawan Agrawal — Group Chief Financial Officer

There are largely two reasons. One is, with the rising interest rates, the yields on the surplus has improved by about 230 basis points. So because of that, the investment income has gone up. And secondly, there is FX depreciation gain on the receivables on the balance sheet. So these are largely two reasons because of which other income has moved from INR22 crores to INR40 crores.

Vishal Punmiya — Yes Securities — Analyst

Understood. And secondly, just a data point, if you can also share the value-added hair oils volume market share for this particular quarter, you have shared the value share in the PPT, but if you can also share the volume market share?

Saugata Gupta — Managing Director and Chief Executive Officer

So, as you know, the last two years we have moved to our internal and external KPIs on value. The reason is, as I said, that in our objective was to bridge the gap between value share and volume share, and therefore that’s the only KPI we measure.

Vishal Punmiya — Yes Securities — Analyst

Okay. But we wouldn’t have lost any share in terms of volume, right, this particular quarter?

Saugata Gupta — Managing Director and Chief Executive Officer

We haven’t.

Vishal Punmiya — Yes Securities — Analyst

Okay. Okay, thanks. And just lastly on this, the new launch, the Saffola Munchiez, I noticed that the manufacturer is also a player — a very active player in the market, has its own brand for that particular product. And they are also becoming very aggressive in the FMCG space. So, how do we kind of basically set areas of distribution for this particular product? Because they have a very similar product, while that product might not have millets in it, but it’s a very similar looking product that they have?

Saugata Gupta — Managing Director and Chief Executive Officer

See, by that logic, let me tell you all three key players manufacture their own brands. Ultimately, I’m delivering a product under the Saffola brand name. I will not invest still I get critical mass in my own manufacturing, so it doesn’t bother us. And that happens in all categories. If you look at some of the other food products, whether it’s honey, whether it’s — so they would be mayonnaise, for example, the guy who manufacture mayonnaise also manufacture for another player. So it’s a standard practice, operating practice in the entire global FMCG world. So we have our own quality system. We have our own IPR, and therefore it’s fine.

Vishal Punmiya — Yes Securities — Analyst

Okay. So, there is no parameter as such in terms of online or offline reach, whether it’s e-com or whether it’s general trade, for this kind of setup, right?

Saugata Gupta — Managing Director and Chief Executive Officer

No, no. I’m getting somebody to do as a third-party, that’s why. Absolutely there’s nothing to do with this one. So I’m — I mean, I don’t know whether which brand you are referring to, but whoever is manufacturing is manufacturing as a third-party, that’s about it.

Vishal Punmiya — Yes Securities — Analyst

Understood. Understood. Thank you, and best of luck.

Saugata Gupta — Managing Director and Chief Executive Officer

Thanks.

Operator

Thank you. The next question is from the line of Amit Rustagi from UBS. Please go ahead.

Amit Rustagi — UBS — Analyst

Yeah. Thanks for giving me an opportunity. And so, team, I would like to know that you have mentioned rural recovery, I think, several times in your opening remarks. So, have we seen any incremental data points in last one month, apart from the budget which support our thesis on rural recovery? And if you have to measure some pointers for the next three to six months, what should be those pointers on that? If you can help us with your thought process on this.

Saugata Gupta — Managing Director and Chief Executive Officer

Okay. So I think the first thing which we’re looking at is, if you look at the last six months, every month there was a sort of a sequential decline month-on-month which has got arrested. Okay? So, therefore, all we are saying is, the worst is over. Now, if I look at some of external factors, if you look at it, one is overall inflation, as you know that whenever there is high inflation, especially food inflation, people tend to titrate or downgrade on FMCG. So, I believe that we are coming out of that worst high level of inflation.

Secondly, I think the rabi crops is okay. The government is committed to investing behind rural infrastructure. So, if I look at these indicators should indicate some kind of a recovery. I’m not saying it’s going to be a hockey stick, it going to be a gradual recovery. But what I believe just like I’m saying, the worst of commodity inflation and volatility is over. Of course, in today’s world, you can’t say anything because of any black swan can happen anytime. All trends point towards a better gradual recovery.

Amit Rustagi — UBS — Analyst

Okay. And apart from the inflation cooling off, do you see any trends we support higher income for the rural people?

Saugata Gupta — Managing Director and Chief Executive Officer

I think the agricultural yield and also the fact that there is a significant — going to be significant if you look at the budget, the government continues to invest significantly behind infrastructure, also in rural. So, I think, these are all positive signs. So, it’s very difficult to say that when will the recovery, what is the extent of recovery. But I think, if I look at it, the positive drivers outnumber the negative drivers as far as consumption is concerned.

Amit Rustagi — UBS — Analyst

Okay, sir. Got it. Thanks a lot, and wish you all the best.

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 — Group Chief Financial Officer

So, to conclude, the sequential improvement in domestic volume growth and earnings delivery so far this year is encouraging. With emerging green shoots on the demand front, we expect a stable growth in core, and we continue to drive accelerated growth in food, premium personal care and digital first portfolio. In fact the business has remained robust in a challenging environment and we are very confident of maintaining a healthy growth trajectory.

Going ahead, we will ensure that we optimally invest and stay focused on execution and aim to keep inching up the pace of growth in volume, top line and profit in the quarters ahead. If you have any further queries, please feel free to reach out to IR team and they’ll be happy to address the same. That is it from our side. Please stay safe and take care.

Operator

[Operator Closing Remarks]