India's leading fast-moving consumer goods company Marico Limited anticipates a significant boost in urban consumer demand, particularly for packaged food products, following recent reductions in goods and services tax rates. This optimistic outlook comes despite the company facing challenges from input cost inflation and tax-related disruptions in the recent quarter.
Stable Demand Outlook Despite Quarterly Challenges
According to Saugata Gupta, Managing Director and Chief Executive Officer of Marico, the demand situation is expected to stabilize moving forward. The company reported a consolidated net profit of ₹420 crore for the quarter, showing a marginal decline from ₹423 crore in the same period last year.
Gupta emphasized that government policies have ensured steady and consistent rural demand, while the GST benefits, especially in food categories, will primarily benefit urban areas. This combination creates a stable overall demand environment for the FMCG major going forward.
Financial Performance and Market Trends
Marico's consolidated revenue from operations demonstrated strong growth, increasing by 31% year-on-year to reach ₹3,482 crore. The company's India business specifically showed impressive performance with revenues of ₹2,667 crore, representing a 35% increase that was aided by strategic price hikes in core portfolios.
However, the company faced margin pressures with EBITDA margin contracting by 350 basis points to ₹560 crore, despite a 7% year-on-year growth in EBITDA. The gross margin shrank significantly by approximately 810 basis points compared to the same quarter last year, reflecting the impact of elevated input costs.
Market researcher NielsenIQ reported that India's FMCG sector experienced a 5.4% year-on-year volume growth during the September quarter, though this represented a sequential moderation due to disruptions related to the transition to new GST rates.
GST Benefits and Input Cost Pressures
The company implemented significant changes following the GST rationalization, with 30% of Marico's India portfolio seeing price reductions. Gupta noted that the sector faced disruption from around September 4 to the first 10 days of October, but conditions have now normalized with more stable volumes.
Among the key input cost challenges, copra prices emerged as a major concern, recording a 113% year-on-year increase. As a key raw material for Marico's flagship Parachute coconut oil portfolio, which contributes 36% of the company's India revenue, this necessitated a 60% price hike in Parachute products over the past year.
Gupta provided some relief, stating that copra prices have already declined by 16% from their peak and are expected to improve further by March. This cooling trend could potentially lead to price benefits being passed on to consumers.
Growth Strategy and Market Position
Analysts have recognized Marico's strong quarterly performance despite the challenging environment. Manoj Menon of ICICI Securities noted that even with substantial price increases in coconut oils, volumes remained resilient, demonstrating the strength of Marico's brands.
The company's Project Setu, an initiative to expand direct distribution launched in FY25, has supported market share gains across over 90% of the portfolio. Marico has been actively diversifying its portfolio beyond its traditional edible and hair oil products.
Their food portfolio now includes brands like Saffola Oats and True Elements muesli, while the premium personal care segment features Beardo, Just Herbs, and Plix—a plant-based nutrition brand acquired in 2023.
Looking ahead, Gupta confirmed that Marico will continue to explore both organic and inorganic growth opportunities, positioning itself as a strategic investor of choice for founders building sustainable businesses.
