Fast-Moving Consumer Goods (FMCG) major Marico Ltd is aiming to become a consumer digital company. Saugata Gupta, Managing Director and Chief Operating Officer of Marico Ltd spoke to businessline on the growth in digital-first brands, impact of quick commerce, expansion in the international market and the use of AI in product development.
How has the slowdown impacted the Fast-Moving Consumer Goods (FMCG) companies in urban areas?
Over the last two or three years, food inflation has impacted consumption. Downgrading has happened, in some cases, the real wages (middle and lower middle class) have not significantly increased. The situation will gradually improve, because the two drivers of low consumption are always inflation, and sometimes real income.
However, there are D2C brands that have been nibbling at growth and the bottom of the pyramid, small players who had gone out of action during the coronavirus because of supply chain working capital have returned. The tax break that has happened will give a flip to consumption not just FMCG. Within FMCG, it will go into packaged food, beauty and personal care, not necessarily staples, the down trading will stop, so it’s a combination of all things.
Marico, in the last quarter we delivered a 15 per cent revenue growth because our food and our digital brands are firing, so at the top end, there is no consumption squeeze at all, and a lot of D2C brands cater to that segment of the population.
There is criticism that traditional FMCG players are not innovating fast enough, whereas the smaller D2C companies see opportunities and fill the gaps. Is that a fair criticism or do the FMCG players find it easier to go and acquire?
The traditional FMCG business model is based on a repeatable model of running mass markets and mass distribution. The D2C brands are in a mode of thinking big. Not that everybody thinks big, there are a lot of people who think incremental. What I call a quick experiment, starts small, either fail fast or scale up fast.
When we started our digital business, we took a majority stake and let the founders run it. We have been running Beardo for four years, but we have kept it outside the system because it is different. It requires a different business model and different sets of people. What we do is coexist. We have the humility to accept that we can’t run it, therefore we let the founders run it for three years and learn the business.
D2C brands, the moment they come into general trade and get into the market to compete with incumbents, we have far better capability. That is the reason I don’t think you will see many D2C players scaling, therefore the route to IPO versus to the strategic exit, I think it will now move towards much more exit to strategic.
In the FMCG industry, many multinationals think the Indian arm contributes significantly to the global valuation. Therefore, they may have been a little more margin-focused, which creates pressure on the others.
What is the growth in the digital-first brands? Are they profitable?
Beardo is double-digit every time. Plix is turning profitable.
Beardo is the first one we did. and the other two, the cash burn is less. They are all in Rs. 100 crores plus. I mean, Beardo is Rs. 200 crores plus and should be the next after Plix to go into the Rs. 500 crore journey. The overall digital portfolio will be delivering double-digits in the next three years.
We are a house of digital brands, the cost synergies are higher than any standalone founder-driven brand.
Do you want to put Marico to come a digital FMCG player, predominantly?
Not predominantly. One thing we wanted to do is to be more successful, there are very few incumbent companies who have been successful consumer digital company.
We have a robust international business, which was earlier with Saffola and Parachute oil but we have far more vectors of growth
International business contributes to more than 26 per cent of the revenue for Marico. What geographies is the company looking to expand?
We are focused, we have five big hubs. One is South Asia — Bangladesh, Nepal and Sri Lanka, the second hub is South Asia — Vietnam and Malaysia. We have a presence in South Africa. We are looking at East Africa and now wetting our feet in the USA because digital brands are trending in the USA.
How is the company leveraging AI?
We are using AI in manufacturing digital brands, packaging, and creative materials that are now designed by AI. We are using AI to predict what product to develop, trend spotting using AI in the supply chain, and forecasting.
We are using AI in predictive analytics. In order for AI to succeed in an organisation to be top-notch digital savvy, we are spending 30 per cent on digital.
Published on February 24, 2025
