Sundrop Brands Ltd (NSE: SUNDROP) Q3 2026 Earnings Call dated Feb. 13, 2026
Corporate Participants:
Nitish Bajaj — Group Managing Director
Asheesh Kumar Sharma — Chief Executive Officer And Executive Director
Ajay Thakur — Anand Rathi Share & Stock Brokers Limited
Analysts:
Bimal — Analyst
Deep Gandhi — Analyst
Kavin Gandhi — Analyst
Naitik — Analyst
Shirish — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to The Sandrop Brands Limited Q3FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ajay Thakur from Anandraathi. Thank you. Over to you sir.
Ajay Thakur — Anand Rathi Share & Stock Brokers Limited
Hi everyone. Good afternoon. I welcome you all to the third quarter and nine months earning conference call for Sundrop Brands. From the management team, we have with us Mr. Nitish Bajaj, Group Managing Director, Mr. Ashish Kumar Sharma, CEO and Executive Director and Mr. KPN Srinivas, CFO. Without wasting much of our time, I shall hand over the call to Mr. Nitish Bajaj for his opening comment which will be followed by Q and a session. Over to you sir.
Nitish Bajaj — Group Managing Director
Thank you so much Ajay. Good afternoon all the members of our community who are on the call. Very happy to be with all of you and sharing our Q3 update. I assume you have all got the presentation which was loaded. I will keep referring to the slide numbers as I talk through through the presentation I am starting with slide number three where I am quickly recapping the vision and mission we had set for Sundrop Brands. As an organization we continue to be in the path of delivering joyful food experiences to the evolving modern consumer. Of course, through launching innovative, delicious and convenient food solutions.
And you will see a lot of innovations which have come in the last few months as we have embarked on a new journey for Sundrop Brands. Moving on to slide number four. Again a quick recap of why this platform is very attractive for all of us who are associated with the business. First and foremost, we have built it now as a scaled platform because we have two big organizations embedded in this platform already which gives this business platform a strong opportunity to grow and grow profitably and efficiently. What this platform has innately built in is our presence in very high growth and high margin categories.
And we are actually expanding that growth and margin as we continue on the journey for profitability. Second is we have built in a very strong renewed focus driven through advertising, communication, brand building and innovation on the core portfolio. So we have taken very strategic calls on which portfolios we will invest on and we continue to do that with a great precision in our journey for profitable growth. Third, which we’ll also take you through. And we have talked that as a Strategy we are increasing our growth in fast growing alternate channels and those are reflecting very strongly in our business performance.
Fourth point, which is our extremely high focus on very capital efficient way of building the business. So we are now very strongly focused on taking strategic calls on putting our investments where we can drive high ROI for the business and that results in improved performance on EBITDA and PAT margins in the longer term. And last of course, which is the thesis of this platform, we will beyond organic growth, keep looking externally for external opportunities to build this business inorganically as well. This platform I am moving on to slide number five is a combination of three big brands.
Act two, which is in the business of popcorn and ready to eat and ready to cook snacks. We have Sundrop which is dominantly a Staples portfolio led by edible oils. But we are looking to expand this portfolio into cereal snacks and oats kind of promises which also I’ll take you through. Third is of course the Del Monte franchise which is a very large global brand innately trusted by the consumers for high quality products, which is into culinary, which is into Italian, which is into packaged foods. So fairly wide and broad portfolio which gives us a foothold in the large packaged food industry.
Coming to Q3 results on slide number six, we have continued our strong growth momentum in quarter three as well. a consolidated level, we are growing at 10% on revenue. Our B2B growth which is innately built into the Del Monte business and B2B is about 40% of Del Monte revenue continues to be strong at 9% growth. I talked about alternate channels. Our E commerce growth remains very strong at 31% growth in quarter three as well. We are continuing to invest strongly for growth. So our advertising investments are reflecting ahead of current growth of 22%. What is very important for us to look at is how we have done on margins and how we have done on EBITDA and I will explain these numbers as I come in the end.
But at an overall level, our focus on driving margin expansion continues and we are seeing sequential improvement in our margin expansion. At end of quarter three, we have had about a 330 basis points improvement in our gross margins dominantly driven by foods business within Sundrop and Del Monte. We of course also has an edible oil business and an olive oil business in Del Monte. That business, because of the commodity cycle where we are seeing inflation, especially in edible oil segment has been more at a protect absolute margin strategy rather than a percentage margin. So our gross margin expansion is dominantly coming out of our foods business and as an outcome of that we have seen an 80% growth in our consolidated EBITDA at end of quarter three.
Same numbers when I contrast on slide number seven to our YTD results. Growth identical at about 10%. B2B growth a shade higher at about 12%. E commerce growth again shade higher at about 39%. Advertising investments again shared higher at about 37%. Gross margin I talked about is improving sequentially. So while our Q3 improvement is about 330 basis points. a YTD level, our margin improvement was about 230 basis points. EBITDA again is improving sequentially. So YTD growth is about 40, while Q3 growth was in specific at about 80. So very strong numbers both at the Q3 and YTD levels.
Just moving on to slide number 8. If I just break them down between Sundrop and Del Monte. Sundrop accounts for almost 57% of the group turnover now growing at 10% on YTD basis, 11% on Q3 basis. Last year growth was 5%. So it has accelerated the growth momentum. And you will see that in numbers. Del monte, which is 43% of business growing. YTD and quarter three both had 8%, a shade lower than FY25 growth of 13%. But that is dominantly explained by olive oil business, where commodity prices have actually gone down and we have gone the pricing, given the pricing benefit to consumers, which is leading to a value decline.
But we have very strong volume growth in the business, which means that as a sustained business outcome, even Del Monte growth should be longer term, much better than what you are seeing right now. Moving on to slide number nine. And this is more about portfolio calls which we had taken. We had said our focus of investments will be on the packaged foods business dominantly. And we are staying true to that path. We are investing specifically on popcorn business under Act 2. We are investing on peanut butter business again under Sundrop. In Del Monte, we are making investments on our culinary business, which is spreads and ketchups and mayo, and also on the Italian range.
So very sharp calls on which portfolio to invest. And we are consequently, as an outcome of that investment seeing over a longer term trajectory, significant improvement in the saliency of our core categories, which today stand at about 61%. Our business significantly up versus what we were about three years back. Moving on to slide number 10. And this is very important reflection of how our business has shaped on the categories where we invest. So first is overall, if you look at most categories, with the exception of spreads, are growing on volumes very hearty to see that even Sundrop oil where we had said we will do a volume protection as a root and managing the business there has actually started to reflect volume growth in a quarter.
Historically we are still at about flat volume at a YTD basis. But in quarter three we have seen business coming to a 5% volume growth outside of oil. If I look at popcorn, strong double digit growth of 12% on volume, 18% on value. Culinary which is a mix of ketchup, mayo and spreads. Business both value and volume growing at about 10%. Italian business, which is about 80% of the business is olive oil. Olive oil and about. Sorry, 70% is olive oil and 30% is pasta. Volume growth very strong at 16% with olive oil actually growing on volume by close to 34% and pasta growing at about 7 odd percentage.
But on value growth, this business is declining purely because olive oil has seen a sharp correction in consumer prices as a category led by of course the decline in the prices of olive oil at the commodity side. So the price benefit has been passed on to consumer which is resulting in a value decline in the shorter term spread. Business does remain a level of concern for us. But if I contrast it with ITD performance which I’ll show in next slide, we are starting to see improvement. But this is still a journey and we still need to do lot more on this side and we stay committed via investments to get this business also on a growth path in the period ahead.
Same performance at a YTD level. Popcorn business growing at 17% on volume. Culinary value culinary business growing at 11% in value. Staples I talked about oil business was growing sharper on value because price was high. Was let’s say price increases happened last year September when the duty was introduced. So quarter three value benefit did come down. But we have seen a growth and recovery in volume in quarter three. At the overall level we are about minus 1% on volume on staples. Italian business again very similar performance at a YT level and spreads as I talked about sequentially improving though still a lot of work needs to be done in that area.
Getting into some greater details on each of these businesses. Popcorn business is a combination of ready to cook at home, which is hot and fresh popcorn that is growing at about 8%. And that business is business through which we entered into the popcorn category many years back and is still continuing to grow and has been our flagship part of the business. Ready to eat, which we started scaling up more in last four to five years, is continuing to grow very, very strongly and that is driving the out of home consumption of this category in an accessible price point formats.
And that market is very very large because then it directly competes with snacks business. And that business continues to grow at 36% and that is driving our long term growth potential of this category because it’s making the category more accessible at points where historically we were not there. In addition to these business this growth we are also doing well on Nacho’s business which is sitting embedded in our Act 2 franchise. We are also seeing expansion of this business in in alternate channels which is modern trade and E commerce which actually help both sides. One gaining new penetration which comes a lot through GT and alternate channels which actually help us gain share from competition where we did have some challenges but we are now doing very strongly, very happy to say that we are number one player in both RTE and RTC formats.
Both ready to cook and ready to eat format. We are by far the dominant player in this market. We also have increased our innovation quotient and we launched about six products in this year. Each of them have been well established into now channels and will be the growth driver for us in future premium staples. As a business I am on slide number 13. That business is growing in value strongly because commodity prices had seen inflation. It has also come back to volume growth in quarter three. Our thrust here is purely on one. We want to increase accessibility of our brand.
So we are working on a price point led strategy. When I’m saying price point led strategy we are not saying we are diluting margins. We are actually looking at some attractive price points at which we can sell packs to consumers. So our strategy is slightly shifting. We were historically playing in line with commodity by increasing the prices. We have now started to play between grammage and price to make sure that our price point remains more stable and more attractive for consumer. And that strategy we have largely started in Q3 is starting to show immediate outcomes and that’s why our volumes is reflecting.
In addition to that we are also starting to get into expanding our other staple franchise. So we are specifically working on building our Oats business. That business sits identical on the Sundrop franchisee of Sundrop Heart franchisee of Good Heart Health. And that business we are specifically building in E commerce and modern trade channel and is now reflecting growth of 200% plus in these channels. Moving on to slide number 14 which is on our spreads and dips business. Peanut butter. I did talk about that. This business is under pressure. Primarily we have seen erosion in share in modern trade and E commerce.
Two factors we have faced specifically Here one is our innovation pace was weaker. We were lagging in versus competition on pace of innovation. Market started shifting towards high protein based offering while Sundrop as a brand was positioned more on strength and immunity for the family. So we did lose out because we did not have relevant innovation for high protein lead consumption in this category. Over last nine months we have worked really hard to get innovation where we could bridge our gap versus competition. So in the last three to four months we have launched about seven SKUs in this portfolio, four of which are in the high protein area.
So we have launched specific product where we can take on to competitive pressure in the modern trade and E commerce channel. In addition to that we are also seeing in standalone modern trade a lot of shift happening on attractive price points to compete with those segments. Also we have brought in select variants where we are offering competitive price points to consumer and that that also is going to help us regain our share. One more thing which we did is we enhanced our beyond of course building continuing to build our investments on mass media, influencer marketing, digital marketing.
We also enhanced our investments on performance marketing in E Commerce channel. And E Commerce Channel which now contributes sizably close to 25% of the business here is starting to deliver strong growth of 34% on a YTD basis. So we are seeing green shoots of investment already in one channel. While of course as our innovations get listed and distributed widely across the modern trade and alternate channels, we will see further growth expansion coming through those networks in the period ahead. Moving on to slide number 15, culinary which is a mix of ketchup and mayo as a business doing very well on the back of growth in both B2B and also in organized retail.
So we are seeing very strong growth both in spreads and in ketchup and also in mayo and spreads in B2B side as well as organized modern trade side. And that is driving very strong growth for this business. That is a strategy we will continue to do on. We will continue to make sure that we invest on discoverability and visibility of our offering in modern trade in food services and E commerce channel to expand the growth Italian business. I’m moving on to slide number 16. I did talk about softening of olive oil commodity prices. We did pass on the benefit over quarter one to quarter three sequentially and because of which we are seeing a value decline in this business.
But the price correction has also stimulated very strong volume growth. We are growing at 34% on YTD basis and that’s a very good sign for a longer term Trajectory of this business. We do expect the commodity prices to remain stable in this and hence we also expect our growth momentum on this business to continue and turn value positive in the period ahead. Pasta, which is again I talked about on YTD basis, is growing growing at about 10%. This growth is also driven both on organized modern trade and E commerce on the back of increased marketing investments.
Moving on to slide number 17 on E Commerce business, if you look at YTD basis, we are growing at about 39%. This growth is fueled by Quick Commerce which is growing close to 50%. So there is a sequentially much better performance on Quick Commerce as a channel and that is helping us expand business in a big way. What we are also starting to do is we are starting to leverage this channel to build our future categories. So a lot of investment is also going on. Innovation, new launches and expanding our footprint in emerging categories of oats and breakfast cedar which could potentially create some future heroes for us for larger distribution expansion.
Because we do have a network which is ready to take this into general trade. Overall brand spends and we have state we have been talking that we will as a business increase our marketing investments. We will drive growth and you would see that our investment momentum is continuing. We started that journey largely from November last year. If you would recall, we had started expanding our investments from quarter three of last year. So while on a YTD basis our overall investment growth is close to 37% even in quarter three we are growing at about 22% on our marketing investment.
So media and also performance marketing investments driving E commerce business, they remain strong and they are helping us drive acceleration within the channel of E Commerce as also our acceleration of growth momentum in other channels which is in the traditional trade space. One big journey which we talked about in last quarter which is around Salesforce automation that is very critical for us to improve our productivity and improve our distribution metrics and also help us build very strong ecosystem for innovation expansion is to get our Salesforce system automated. This journey we started in quarter one and as we can see we have already got almost about 58% of our network which we cover through a dedicated field force on a mobile interface.
So we do get today for these about 250 odd thousand, 220 odd thousand outlets. We get full KPI visibility of what is the product we are distributing, what kind of frequencies people are buying and that would become a very important and critical data for also to look at synergies of business with Del Monte where we already have an SFA in place. So that’s what’s going on in good speed. We expect to close this entire coverage of 375,000 outlets on our mobile app by end of this financial year. Margin improvement and this is very critical because largely our growth is fully funded through expansion of margins in the bay where we are investing more on brand building but we are also creating constant tapul for being able to invest higher in the business.
Work has been going on both internally through our own team and also using external partners. We did talk about that in the last meeting. That has helped us expand both on the material margin side as also on the other expenses which are primarily in the area of manufacturing and logistic costs and we have seen sequential improvements. So while at a YTD level we are seeing overall improvement of let’s say close to 230 basis points, at a quarter three level that number is close to 330 basis points and a fairly healthy mix between material cost which is adding about 230 basis point improvement and manufacturing and other logistics costs which is also giving another 100 basis points improvement.
Moving on to slide number 21 and this is around making sure that we continue to bring innovative delicious offerings for our consumers. We have expanded our innovation phase. We have launched 70 plus new products across the franchise of Act 2, Sundrop and Del Monte and within if I and our metrics is anything which is Launched in last 24 months we are seeing our innovations are today contributing close to about 55 crore of our sales which is close to 5% of our sales. So we are now starting to see innovation also playing a very strong leverage in our growth trajectory and this momentum and journey will continue going forward.
Moving on to slide number 22 I’ll not spend too much of time because these are consolidated results but they are not comparable because quarter three last year does not include Del Monte in this. Similarly on slide 23 again there are numbers on YTD basis. I will again not spend time here because they do not include the Del Monte numbers of last year. I will move straight to slide number 24 and these are comparable numbers and Del Monte last year’s number are included for like to like comparison. So some of the key things which I would want to highlight we have talked about that at an EBITDA level we have improved about 80% so we have seen strong improvement in our EBITDA margins.
Some of the call outs I would want to make which are important for us to understand employee expenses here do not include the ESOP charges. ESOP is a non Cash expense. We have rolled it out as a five year grant. The grant, the way the structure is is front loaded in provisioning and allocation but also as an outcome it is a very strongly outcome based grant and a very high percentage of this grant is linked to performance and performance milestones are year three and year five. So while we continue to see allocation to the P and linked to the grant which is being made upfront, the real encashment of this grant or vesting of this grant will happen linked to strong performance milestones at end of year three and year five, a larger part of it.
And that’s why it’s important to look at our employee expenses net of this ESOP grant. That expense is growing at about 12% and of course we are creating some structures which are important for us to grow business and that’s leading to a marginally higher employee expense growth in shorter term. But if you look at other expenses which is where Our manufacturing logistics, SG&A expenses beyond just the employee expenses, those we have been able to control very well and they are only seeing an increase of 2%. And as an outcome of that we are seeing improvement in both gross margins which is a mix of material cost and other expenses going into manufacturing as also overall ebitda.
One more call out is we have taken some of the one time costs which have gone towards projects which are advisory service kind of project for improving margins and that expense was higher in Q2 we had shared with you. I’ll again recap the YTD number in quarter three. Most of these projects have been concluded and hence it’s not a large expense going forward and it is already reduced to 2.7 crore in quarter three and that is also taken out from this calculation. Even if I were to include that expense we are still growing our EBITDA in a very strong and healthy way at an overall level.
So that’s in nutshell as an outcome of this our profit if I look at before e stop and one time expenses, post depreciation etc. Is still continuing to grow very strongly at 190%. Moving on to YTD figures again the call out is ESOP expenses are removed from the employee expenses. Project expenses which were loaded more in quarter two came down significantly in quarter three and will be negligible in quarter four. They have been excluded as one time expense. In other expenses again a very similar trajectory you would see at a YTD level strong growth in EBITDA margin which is of close to 40% after excluding the one offs at an EBITDA level and at the PBT level again the growth of close to 239% important point is quarter three margins are higher both at an EBITDA level and also at a PPT level.
So we are sequentially continuing to improve performance of the business. Moving on to last slide slide number 26. This is just to sum up the thesis of this platform. We do have very strong brands which cater to our which help us deliver our vision of catering to the choices of a modern evolving consumer base. We do have very strong consumer trends which are supporting the growth and consumption of packaged food. The industry which we operate in. Our brands innately sit in high growth and high margin categories. We do have leadership position in some. We do also have a challenger position in some where we are seeing in both of these focus categories we are seeing a significant headroom for growth either through penetration, expansion or through share gain or a combination of both.
And to deliver that we continue to invest heavily and that is driving us help and accelerate our business growth while retaining the innate code of making sure that we make capital efficient investments going forward. And there is complementarity of businesses between Sundrop and Del Monte. We have talked about it. As a quick update, we are now increasingly start to leverage some of the complementarities and results of that should start coming in in period ahead. One or two call outs we can talk about. We have looked at CFA consolidation. We did one set of that in quarter three and quarter four in two of our CFAs.
And we will go forward to consolidate more of our backends wherever we can to bring complementarity. We are also starting to leverage strength of B2B for Centrop and the strength of B2C for Del Monte using alternate strengths of the two companies. And overall, you are aware this business is backed with a very strong management which have proven credentials to drive growth, profitability and value creation. Very happy to conclude my address and look forward to your questions. Thank you so much. Ajay, back to you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bimal an investor. Please proceed.
Bimal
Yeah, good afternoon.
Nitish Bajaj
Good afternoon.
Bimal
Yeah, good. Happy to see you are on the path of progress. Now one cause for worry is that 4700 BC is now taken over by Mariko, which is the popcorn segment, which is our biggest and most promising. So I mean, how are we planning to, I mean face this channel expansion is actually institutional. We are not there. Even last management I had highlighted that we should look at institutional in big way because that is a totally untapped market and they will come, come into. And if we don’t enter, they will definitely enter. So I mean, how are we looking to safeguard our market share from 4700 BC? Sure, that is the first concern.
I mean, I am a shareholder for eight to 10 years and it was quite a disappointing journey. I hope new management will take it forward and the good points of this company, these products will help us to grow and create shareholder value.
Nitish Bajaj
Sure. Thank you. Vimal. Vimal, Should I answer it?
Bimal
Yeah, yeah. No, no, only on this.
Nitish Bajaj
Thank you, Vimal, for staying invested with us on the business overall. You’re right that yes, we have a new competition and competition in a category which is yet to, let’s say has a huge penetration opportunity. Growth is.
Bimal
And they have more coverage also. I mean retail coverage is much higher.
Nitish Bajaj
Sure, sure. Yeah. So see the way we look at competition. See competition also spurs growth of categories so many a times. Competition is also a good sign because it one gets more out of you and second, it also gets more out of consumers. So I would also see competition also to help us drive penetration on this category. Inherently, what is strength for us? If you look at some of the things which are very strong for our business, we do have a very strong standalone reach. But we also through the wholesale channel go much deeper and wider.
In the popcorn category, we hold a very strong price point of 10 rupees. And we have a very strong efficient back end which supports the price point of 10 rupees. And that is one of the modes in this business. Very difficult for all the players to bring. Coming to specific, you are right, Marico per se has distribution strength, but they will also have to build their strengths a lot in the back end if they have to compete with us in a business. Second point you made was on the institutional side. On the institutional side, 4700 BC is dominantly present in PVR through the cards.
What you consume on the counter is not 4700 BC. That is actually PVR’s own brand and business. I don’t think that business is being accessed by Maricor. That business remains a PVR’s own business in my understanding. But that aside, institution is an opportunity we are alive to this we are now starting to work with rbt.
Bimal
No, sorry to interrupt. Just by institution I meant ORCA and education and you know, all these call centers and GCCs coming up. You can be present in there.
Nitish Bajaj
Yes, I was coming to that on the Rimmel. Through our Horeka network, which is embedded with Del Monte, we are starting to work at looking at some of the institutional opportunities in this area. So you will see in the period ahead work coming on in the area of institution leveraging the network of Del Monte. So that is in our plan. So we will work to expand in this area overall on the competitive intensity. We have already said for us it is a very, very important growth driver. We have enhanced our marketing investment. We have a strong headroom for growing penetration in this category as also distribution in this category.
We are continuing to invest solidly and I would say almost like 40% of our marketing investments go directly on Popcorn business in Sundrop side. That will continue and we are expanding our investment. So we are very well committed and focused to make sure that we accelerate the growth of this business and continue to drive the penetration of Popcorn in our country and hence deliver a much larger shareholder value.
Bimal
Yeah. So sir, don’t take it as a negative this thing, but see what has happened. Our spread business also, we were the pioneers and then now competition is so same way. It should not happen with Popcorn, which is our, you can say crown jewel, you know. So that’s why that’s the concern. I mean, I’m still very positive on the company, but as a shareholder, it’s our duty to just bring certain concerns to your attention.
Nitish Bajaj
Yeah. Thank you. Iman. We are, we are alive to this new challenge and you are already seeing our investment. We will of course ensure that our innovation pipeline, our way of addressing and reaching customers and making sure that they stay invested with us on the brand. And this brand continues to be the most loved brand for Popcorn will be our key ethos going forward. We will not let any stone unturned to make sure that this business does not get compromised. Our endeavor is to actually grow this business much faster in the period ahead. So we will stay committed to that.
Bimal
Thank you. Thank you.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press Star and one to ask a question. The next question is from the line of Kiran Gandhi from Jagrocap. Please proceed.
Nitish Bajaj
Kiran, you could be a little louder.
operator
We shall move on to the next participant. Before we take the next question, we would like to remind participants that you may press Star and one to ask a question. The next question is from the line of deep Gandhi from I thought pms. Please proceed.
Deep Gandhi
Yeah hi sir, am I audible?
Nitish Bajaj
Yes.
Deep Gandhi
So first question is on the ready to eat side. I mean if you can help us understand the breakup between the smaller pack and large pack in terms of revenue and also if you can explain us, I mean what is the lowest pack size we have within the smaller packs and what would be the largest pack size we have within our ready to eat portfolio?
Nitish Bajaj
Yes, so I’ll request Ashish to answer this.
Asheesh Kumar Sharma
So on the RTE side we largely have big and small pack as you said and the split at the top line would be closer to about 70 30. We have about small pack 10 rupee business which will be about 70% of the business and and 30% would be on the large pack business. So that’s the first part of your question.
Nitish Bajaj
Sorry, if you could address the second question again and what, what would be.
Deep Gandhi
The starting pack size in the large packet and what would be the largest pack within the large pack size?
Asheesh Kumar Sharma
So the large pack. So we have, we count the 5 rupee and 10 as the small pack. Anything which is above that which is in the price points of 25, 30, 40 and up to 60 rupees are our large packs. So the biggest pack that we have is a 60 rupee price point. Right. But large part of our business in that straddles between 25 and 35 rupee price points.
Nitish Bajaj
Sudeep net debt 70% is in the small pack which is dominantly Ruby 10 dominantly rupees 10 rupee 5 is possibly only about 5% of our overall business or lesser. And big packs is about 30% of our business which have price points ranging from 20 rupees to 60 rupees.
Deep Gandhi
Sure. I mean how say next two to three years down the line do you see this mix changing significantly or do you think this will broadly remain stable?
Asheesh Kumar Sharma
Yeah deep. So there are two parts to it. One, is the mix likely to change? Yes, the mix will change in the favor of big packs going forward because as the E commerce and other channels develop they are primarily more bigger pack consumers buying efficiently and quickly. So that contribution will change. However, to increase penetration we will continue to drive our 10 rupees by one virtually getting the numeric distribution and a reach for active franchise in more towns and more outlets. The answer to the question that will the mix change? Yes. But will it change significantly? Not in the nearer term.
Nearer term there will be an improvement of few percentage points every year that’s how it will progress as we go forward on this.
Deep Gandhi
And coming on to the distribution sides, I mean if I see the number last two, three years, our distribution outlet reach has remain broadly flat at 5 lakh outlets. Right. So going ahead, I mean how do we think of scaling our distribution and why this number, I mean has not been changing much significantly and what we are doing to increase our outlet reach significantly in the future.
Asheesh Kumar Sharma
Okay. So again that will say see the outlet reach is also a function where you need to build demand at the front end as you expand distribution. So if you look at the Act 2, it was primarily led by the Act 2 instant in home consumption. Hot and fresh 10 rupee over the years. This year specifically. Flag, you must have heard that we have invested significantly in the salesforce automation in terms of mapping our stores and coverage. Once that task is complete, we are going to look at productivity enhancement to improve our coverage further versus death directly adding feet on street to increase it further.
That’s one second we had talked about. In between that with the increased media investments we are looking at indirect coverage through wholesalers. And the third which is happening is that there are moving wholesalers which largely distribute the RTE on the back of that also with them we are riding on increasing the indirect distribution. So while there will be improvement in direct coverage. Right. That will be at a slower pace. But overall reach of Act 2 will continue to grow at a good pace coming in the coming years also.
Deep Gandhi
Sure. So any number you have in mind next two to three years, five lakh outlet. What is the vision which the company has set to take this number to?
Nitish Bajaj
So let me step in here deep. As Ashish mentioned, right now we are focused on productivity of our field force. We do have a salesforce automation tool being developed which is bringing entire network into productivity. Through that we are also going to get a handle of how many wholesalers we directly deal with and what kind of indirect distribution we can reach out through this exercise we expect to complete by, as I talked about by by end of this financial year. But let’s say get a deep down understanding of the productivity ROI of our coverage. We will have an answer by September of 26.
That is a point when we will pivot to say what number we really want to chase. Because we are very focused on making sure that we do an ROI embedded in the principle of coverage expansion. It is always more efficient to do it through a wholesale or indirect channel at a particular turnover of an outlet. But if, let’s say we do find that our lowest denominator of the outlets are also giving us a thousand odd rupee business. I can directly expand my coverage. So allow us a time of about six to nine months where we get a full clarity of throughput from our smallest of outlets based on which we will pivot to a strategy of how much numerically we want to expand directly versus how much we want to continue via indirect channel.
At this point of time, management hasn’t put a number yet because we don’t have a very strong handle of our per outlet productivity at the lowest denominator level. Lowest denominator level.
Deep Gandhi
Just one last question if I can ask before I join the queue. So I mean we’ve broadly set a target to double our top line in next three to four years. I think in the last few calls we’ve been talking about that aspiration. But this year, if I see, I mean our growth, I think year to date versus the growth in the foods portfolio is around 8 to 10%. I mean we want to reach to that target in next three years. The ask rate is much higher than what we are growing currently. So I mean, if you can help us understand how are we thinking about it and specifically, I mean if you have modeled it to this extent, that how much of this 3000 crores number we will reach through the volume expansion in our core categories and how much will be through distribution expansion which we are trying to do in Del Monte, through getting an entry in general trade.
So that will be helpful, thank you.
Nitish Bajaj
Sure. So you’re right, we are a little softer versus our growth ambition of doubling the business. Doubling the business will require a CAGR of close to 15%. We are currently sitting at about 10% growth. But you also need to see that we started our investment journey largely from quarter three of last year. And sequentially we have been moving our momentum up. It is a journey for us to build the scale and size for sure. And we are committed to say that we will expand our growth rate going forward. Referring to a question on how much volume and value broadly I would say the split of volume needs to be because if you look at the country as a whole, we are seeing in most categories where we operate in volume expansion of close to 6 to 8%.
So in our context, if we want to gain share and stay ahead of category each on volume side, we need to outperform at least by 3 to 4% versus the categories. So if categories are operating at 6 to 8, we will need to come to more like 9 to 10% on volume growth and balance to come from Value. That’s the way I will. So I will say 2 3rd to come from volume and 1 3rd to come from value expansion in the mix. As we see more premiumization happening. And if let’s say there is a slowdown in the volume side, this may become one is to one as well which is 5050 which is seven and a half on volume and to 7.5 in value.
So shorter term trajectory will pivot more around volume growth. But as we get into forward years beyond year three I would say it will trigger traverse towards more and equal value and volume growth.
Deep Gandhi
I’ll join back to you. Thank you.
operator
Thank you. Before we take the next question we would like to remind participants that you may press Star and one to ask a question. The next question is from the line of Kavin Gandhi from Cabgro Capital. Please receive.
Kavin Gandhi
Hello. Hello. Thank you sir for taking the question. I actually dropped out from a few earlier. Sir, my question was more on the gross margin. To reach 9 to 10% you will have to have a gross margin of almost 40 to 45%. And even though we have actually seen a growth of 220 brip it is still around 37%. So how do you see that? So basically how do you see the roadmap of gross margins expanding? Yes, that was my first question. And second question sir, as a CPI to track the company, do you focus more on the value growth, on the volume growth? Because there are three, four categories.
So how do you see that as a KPI to that?
Nitish Bajaj
Sure. So let me first answer your question on the margin side we define two particular margins in our own way of numbers. So I’ll explain to that. One is what we call as a material margin which is purely our realization net of raw material and packaging material costs. And that number needs to be close to 40% for us. And then we define what we call as a gross margin which is material cost less, manufacturing cost less, freight through which we reach the product to our end consumer or distributor. That number today will be close to 24% for us.
So our material margins will be close to 40. Our gross margins which is material minus manufacturing and freight will be close to 24. To get to a double digit ambition, we will need to expand this by at least 3 to 4 percentage points. That’s the way we will look at it. And we are in this year. Let’s say we have already expanded our gross margins by close to 230 basis points which we shared with you. We need to do another journey of close to another 3 to 4% on this over the trajectory of next 3 to 4 years to get to a over the trajectory of next three years to get to a double digit kind of margins in the business.
In addition to this gross margin expansion, we also want to stay committed to invest and hence we also want to invest on brand building going forward. Which means from a ratios point of view, while we will improve margin, you will also see ratios of marketing investment either staying stable or marginally increasing. We do not expect our marketing or media investment as a percentage to business to go down. What you will also see going down is our fixed costs which is our people cost and other SGND cost which today stand close to 14%. Those two also come down by another three odd percentage points in next three years.
So broadly I would say look at the journey as expanding margin by 3% and reducing costs especially on the SG and a side by another 3% but see marketing expansion of 1 to 2% as our journey going forward. That was first question second question you had asked me on the is the KPI around value growth or volume growth at immediate term? I did explain our focus is more on driving volume growth. We do have fairly large well distributed distributed business in Sundrop where intrinsically there is a strong headroom for category expansion and we are focused there on value growth.
On volume growth we also have some pivots in our business of Del Monte where there is an opportunity for value growth as well and that’s why in the short term trajectory we are looking at a volume growth close to 2/3 and value growth close to 1/3 of our total growth trajectory. Longer term we would say it may become one is to one on value and volume which is what I had explained in my earlier comment. I hope this answers your question.
Kavin Gandhi
One last question which I just wanted to present sir, recently promoted has increased by 4.99%. So basically since it was an off market to know the seller of the transaction and also why the promoter needed to leave the entire holding for 33% because that has actually impacted the price of like 30% decline since last two months. So just wanted an explanation in your.
Nitish Bajaj
View on the same okay, so I’ll tell you the first answer to the first question. Del Monte Pacific was the shareholder which has exited or let’s say reduced their shareholding from 15 to 10 and that shareholding has been increased by promoters. So Cagtech, which is Cagtel increased their shareholding by taking the shareholding part shareholding close to 5% of Del Monte Pacific and Del Monte Pacific had also in their announcement talked about bringing it down further by another 5% which also will be taken by in let’s say post this financial year in the next at the bottom of next financial year.
So that’s one. And second I think on the second question on why they had to lean I would say it’s more an internal call at the investor side on how they want to fund their proceeds. So it’s not something which I directly influence or have a control on. Okay for nothing.
Asheesh Kumar Sharma
Just one more addition to what Nitish has said about volume and value growth especially on the actu side which we mentioned that almost 55 to 60% of business is in 10 rupee price point. You will always be looking at value growth because there we don’t tinker with price point but grammages. So tonnage can be at times little deceptive. Value growth is a better reflection of the health of our business because the unit growth syncs with the value growth there. So we are committed to acquiring new consumers and growing our business with them. But that’s just a price point game that we play especially in the GT market.
Nitish Bajaj
Yeah, I think you are right. So Ashish, thank you for correcting. In some places instead of value we use the term value or volume we use the term unit growth especially in our 10 rupee price point which is a large part of our business. Unit growth is the key metrics we go for.
Kavin Gandhi
That was helpful.
operator
Thank you. The next question is from the line of Naitik from Ohm Portfolio. Please receive.
Naitik
Hey, thank you for the opportunity. In the spread business two things. One is what is the availability of. The protein based peanut butter that we’ve launched and how are we priced there vis a vis competition? I mean have we priced ourselves a tad lower to the competition or what is the strategy there as far as the protein PB is concerned?
Asheesh Kumar Sharma
Yeah Nidhi, so you’re right. So when we looked at the peanut butter portfolio we said we need to do a premiumization work and that had to be created on basis of two important consumer needs and differentiation. One we have to give a better protein content in per served basis and second also continuously make peanut butter more delicious. So if you look at the product that we talked about is a dark chocolate high protein peanut butter which we are seeing a very good. So it’s good on it’s improved taste with dark chocolate and it has also got high protein.
Now as far as the pricing to end consumer is concerned it is little a tad lower than competition because we are a late entry. But from our Portfolio perspective, the average selling price is higher which will also add a growth in top line as well as do a margin expansion for our portfolio. But since we are a later entrant challenger in the initial phase to improve our trials, we have kept it a little tad lower than the competition.
Naitik
Okay. And here would you here the competition for you are all these new age players. Because whenever I open a Blinkit or a Swiggy, all I see is very new names. They are not marquee legacy names.
Asheesh Kumar Sharma
Yeah. So actually in the chocolate, if you look at the dark chocolate high protein peanut butter segment. Right. The real competitor for us is MyFitness, MyFitness and Pandola and they are both new age players. And as you see if you know in the question earlier we were very strong in GT in peanut butter and in modern trade. What was happening was it was a table spread. The new age players did better than us in E commerce. And having said that, in the last one year we have significantly focused on E commerce and quick commerce and also now launching products which are good for the channel.
And you will see that’s the reason our growth rates are now coming back on peanut butter in this channel. Both improving in terms of unit margin and average selling price.
Naitik
So how are we also aggressively pushing these products in the traditional channels of MT and gt? Well, or we are still focused on the QC or other the E commerce category for at least.
Asheesh Kumar Sharma
Yeah. And I think one of the decisions that we have taken. Right. Which is that there will be some innovations which we will first scale up in E commerce and quick commerce because our ability to invest and generate demand locally on a platform is much higher. So what happens is once it builds traction and the matrix that we monitor for ourselves is listing daily run rate of pieces and the number of dark stores that we are covering. Right. Once we start getting repeat from there and have created consumer awareness locally because that’s easy to scale and test, having a good formula on it, we move to modern trade and then we move to general trade.
General trade requires a mass media support beyond a point. Right. So that is how our innovation journey from now on will continue. You will see innovation much larger in E commerce. Scaling up to this and then to gta.
Naitik
Right. And coming back to Staples
Nitish Bajaj
just to complete this on high protein. Right now the focus will be E commerce in a big way and select modern trade.
Naitik
Sure. Thanks. One last quick question on the Staples. What’s our longer term strategy there? Do we intend to be in this. Segment for let’s say over a three to five Year, period, if not lesser than that.
Nitish Bajaj
Yes. So Staples is a contributor to our margins and it also gives us a scale and size in the business and hence we intend to continue. That’s first. Second, we have said for immediate term we want to ensure that whatever volume decline and margin erosion we were seeing in Staples, we take care of that through our optimal investments on business. Very strong, clear, sharply defined strategy to protect our core and we stop this leaky bucket. This we have been able to achieve fairly strongly, I would say in the last few months.
We are also going to experiment and we have talked about that also on some brand building models. And that is another area which you will see coming live in the next three to six months in an isolated regional media geography. On seeing can we build some platforms for growth based on those successes is when we will take a future call on whether we want to invest for growth or we want to be more in a protect volume and protect margin pace.
Naitik
Sure. Thank you so much, sir.
operator
Thank you. We take this as the last question. The next question is from the line of Shrish from Motilal Oswal. Please repeat.
Shirish
Hi Nitish Ashish. Thank you for the opportunity. If I look back last three to four quarters, we are there and we have, we have revised the entire product price architecture. So in your reference of 10% volume growth, like if we need to have a right to win in the category price, product structure and distribution scale because we are not spreading too thin, which are the categories you are betting next two to three years in terms of product development and in terms of right to win.
Nitish Bajaj
Yes, our biggest bet and I’ll try to give you also an order of this or priority. Our biggest bet is popcorn business and the entire active franchise. Our second biggest bet would be Italian franchise which is sitting under Del Monte portfolio because that’s where the premiumness and the entire value of that Del Monte brand in a big way. Third will be our ketchups and mayo and spreads business again under Del Monte. And fourth will be peanut butter. These are four key categories where we will stay invested in a big way to drive our growth. And this will be a mix of innovation, media, distribution, expansion.
All of these divers playing concurrently on each of these categories. Beyond these four categories, we also have an intent to identify and build some future heroes because we are eventually building a large, sustainable, scalable, high growth oriented business. So while we drive growth in these business in the next three to five years, we also want to create one or two levers for future growth. Those categories could fit between something in oil if our experiment succeeds, a category like breakfast cereal, a category like oats where Sundrop franchise is. And also categories like fruit drinks or packaged foods within the Del Monte franchise.
But for the immediate term of next three odd years, you will see our big investments focused on the top four categories.
Shirish
Okay, and when we say that this 10% volume growth, which specific I mean you did allude saying that popcorn has a right to grow to more than 10% because you are a category leader. But then what are the new form or what are the new things which we will launch?
Nitish Bajaj
So popcorn even today, if you look at our volume growth is close to about 16, 18% kind of volume value volume growth. Volume growth is about 12% value growth. Volume put together is about 18% between RTE and RTC. Microwave is something which we will see expansion going forward. And that’s an area which let’s say was little lagging for us. We are trying to bring that stronger expansion of Popcorn ready to eat will come a lot more in the form of flavors and pack sizes. The way the quick commerce platform is expanding, we are seeing big sizes and new flavors as a very key driver of growth.
Historically active franchise was let’s say more mass strategy and more Indian palate which means we had flavors like hot and spicy, spicy pudina, butter, cheese kind of flavors. But we are also seeing with the emergence of younger consumption audience who is very open to trying new westernized tastes. We will see in popcorn franchise lot more flavor expansions and pack sizes driving the growth. In addition to of course the distribution, distribution led growth in GT where price point of 10 rupee will play a big role. And that also today is dominantly butter. But we will expand that into other flavors in the GT space.
If you look at mayo ketchup kind of categories, there is a lot of headroom there for us to grow on again newer flavors especially in the spread area. So spread market is lot more expanded into newer flavors. Our strength today is more in the area of corn, ketchup and core mayo. When I say core mayo, which is the eggless mayo which is let’s say standard variant. We do need to expand a lot more in value added spreads in the culinary portfolio which is where the expansion will happen. Italian if I look at as a franchise again, pasta is one area where anyway the category is expanding.
We were missing out presence in some of the places like macaroni segment which is very large in the country. We will look to expand that in olive oils. Again we are very strong in pomace. But we wanted to also Build a franchise in extra virgin and extra light oils. So those will see expansion going forward. Peanut butter we have already talked about a very clear path of our growth is via expanding the franchise to high protein offerings and also some new innovations which we will share when we are ready with those. But we are doing a very healthy mix of great tasting and better for you high protein variants.
So our innovation pipeline is looking at taste and better for you concurrently. And we already have some of unique products like peanut butter jelly which gives the protein and also gives a great taste and easy spreadability. So you will see innovations on that side on that business as well.
Shirish
Yeah, that’s really helpful. One last question. Assume that we achieve 10% plus volume growth. What kind of margin? Because you will see the operating leverage also kicking in. So what kind of margin expansion in terms of gross margin expansion and EBITDA margin we can expect in 2728.
Nitish Bajaj
So I have talked about over next three to four years we would want to expand margin by 3 to 4% and also bring cost down by 3 odd percent. So that’s the way you should look at our trajectory of saying equal work on margin and cost. And I’m saying cost as I’m saying costs which sit below the margin which is typically SG and A. We are not going to cut marketing. Marketing will remain at possibly at a 6% odd level for our P and L. That’s the way we are looking at marketing to be. So you should see, you should see scaled expansion of our margin getting to double digit within next two to three years I would say.
Shirish
Okay. All right. Thank you and all the best.
Nitish Bajaj
Thank you.
operator
Thank you. Due to time constraints, that was the last question. I would now like to hand the conference over to the management for the closing comments. Over to you sir.
Nitish Bajaj
Sure. Thank you so much and thank you for all the participants for being there. Once again to reiterate, we are committed to grow our business profitably, efficiently and making sure our roes on investments we make stay capital efficient and we continue to deliver to the expectations of our stakeholders both and also of course continue to delight our consumers with new and innovative offerings going ahead. Thank you so much and wishing all the best to all of you being here.
operator
Thank you on behalf of Anandra team. That concludes this conference. Thank you for joining us and you may now disconnect your line.