We have to work on justifying Saffola’s price premium: Saugata Gupta, Marico

We are pretty confident that in H2, we should be able to get 5-6% volume growth, Saugata Gupta, MD & CEO , Marico Limited, tells ET Now.

Edited excerpts:

The high single digit volume growth in Parachute continues but Saffola has disappointed this time around, growing only 2% and that too on a flat base. What hurt the brand in Q3?

Saffola has been a problem for us in terms of two things; a) as we said, primarily the kind of consumers that get attracted to Saffola are gradually using less oil in terms of consumption because they are adapting a healthy way of life; b) Our rate of innovation in the super premium end has been low and c) justification for Saffola’s price premium is something which we have to work on.

However, we are pretty confident that in H2, we should be able to get 5-6% volume growth. It is still a work in progress and we hope that we should be able to slowly crawl back into 8% to 10% growth over the next couple of quarters.

So, there is still some work to be done on Saffola. Now, we are just addressing the overall volume growth. I also want to say that 5% growth has happened because there has been a coconut oil portfolio where we compete with some of the local brands and some of the unbranded players in some of the markets. There was some volatility in copra prices and therefore that led to some kind of share loss there. That is one of the reasons that has contributed to that 5% growth as against the expected 7% to 8%.

You are expecting a 15% to 20% cut in copra prices during flood season after already seeing a fall of about 20% last year. Does that make a case for cutting prices?

We will see. We do have a pretty robust pricing model depending on the point where we would definitely pass on value to the consumer through promotions. A permanent price cut is something which we might think of as long as the input cost reduction is stable.

Should we expect more margin expansion?

As I said, our primary objective is to drive volume growth and market share, invest on new products and overall, we will be happy to deliver 18% plus operating margin. Even if we do not take a permanent price reduction in Parachute, if there is a significant reduction in copra prices, we will pass on the value to the consumer.

So you have chalked out a plan to expand further in the food segment as well. When can we expect launches and in what categories?

We believe that we should be able to cross the Rs 200-crore mark in food. Some of the things which are showing early signs and which may have premium niche. They are not mass but they are showing reasonable amount of traction. The Coco Soul virgin coconut oil portfolio is looking good. We are in the process of launching the food range, which includes soups, protein shakes, healthy tea which is green tea, green coffee and we are also in the process of launching some other Indian breakfast options.

Given the growth of modern trade, e-com given the consumer trends and given the success of some of the entrepreneur driven brands, this has significant opportunity. We will continue to invest behind these brands, get a critical mass and then look at perhaps some of the mass opportunities in foods.

You have a 8% to 10% overall volume target, but 5% to 7% in Parachute and Saffola, which are your mainstays. How do you see the product mix change going ahead?

Obviously it depends on when the core will come down. It is very critical that the new part of the portfolio continues to have a 15% to 20% growth. They are currently delivering at that rate and I am pretty confident that given the pipeline, we should be able to improve the execution capability as well as the uniqueness of the innovation so that the other part of the portfolio continues to grow.

It is very important that the core continues to grow at a certain rate. The reduction of dependence should not be due to the fact that there is a reduction in volumes.