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Interview
 
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“We are a boringly consistent company”
Saugata Gupta, CEO, Marico, Consumer Products Group
Issue Date - 08/12/2011
 
B&E: Recently there was a profit warning from your side to the investors. What were the reasons?
Saugata Gupta (SG): First let me clarify that it was not a profit warning but a guidance. We believed that with inputs costs having doubled, our earnings growth will not be in line with the expectations on the stock from analysts and the market and therefore we gave out a guidance. And we continue to stand by it. We are saying that over the immediate time horizon, given the kind of cost structure and input costs, and the fact that we have chosen to grow consumer franchises and get more consumers on board, along with volume growth, perhaps, the earnings growth will be a little muted in the immediate and near term.

B&E: Are you contemplating any price hike on any of your products given the inflationary pressure?
SG: We haven’t taken any price hike in the past 6-7 months. But as I said, if the need arises, we will go for it, but it will be very marginal in nature. We don’t foresee that in the immediate term, unless there’s more inflationary push, so no major price hikes.

B&E: Are you looking at any tweaks in the production chain to manage costs, due to the price pressures?
SG: We are obviously concerned about cost management, but at the same time, we’re not sacrificing in terms of investments, innovation and talent. Like any other company we will continue to explore opportunities for cost management.

B&E: You have gone ahead to explore new business opportunities in the personal care and food space, so any new product launches we can expect?
SG: We just recently diversified into the skincare category with Parachute Advanced, so its too early to talk about the category. We also have men’s grooming products in most of our international markets. It’s a category that is growing. We have launched a couple of new categories this year, so we are focusing on investing and growing these categories. In the food space too, we have got into the Oats space with Saffola (we are already the number three player), and are also test marketing a savoury oat. So as I said, we have enough on our plate, we believe in focus, investing in one or two products/ categories, and focus on growing them rather than going into multiple categories. At the end of the day if you have to create a strong franchise you have to focus on investing in fewer ones, rather than entering every space. Health foods is one category where we see a lot of growth opportunity. Our Oats product is available mostly in modern trade nationally and retails in the southern markets. And we are still in the process of further scaling it up.

 
B&E: You have forayed into international markets quite aggressively, how is the business doing for you? Any plans to enter more markets globally?
SG: Our internal business is currently contributing 23% of our top line and we will continue to focus on emerging markets, where there is long-term potential for growth and significant population with low penetration of categories. That will be our international business strategy. When it comes to acquiring more companies, our strategy is that as we grow (nationally and internationally), our growth will be a mixture of organic and inorganic and, as and when opportunities come, we will explore. In India, opportunities for acquisitions are much lower, and also the price earning multiples of earning is on the higher side compared to international markets, where more opportunities can be found. Also, in most international markets, we don’t have a presence and inorganic gives you a mass and a foothold to start.

B&E: How is Marico looking to grow its international and India business, and what kind of growth potential do you foresee from your businesses?
SG: We have three pillars of growth right now, which are: India business, international consumer business, and Kaya Skin Clinics. Each of these businesses have excellent growth potential going forward. As far as Kaya is concerned, we have had a very successful integration of our acquisition of “Derma Rx” in Singapore. In India as you know, we have initiated a series of steps to make it profitable. We have witnessed 2-3 quarters of both sequential and quarter-on-quarter same-store growth. So it’s getting back on track and we hope in the immediate future it will turn profitable.

B&E: The FMCG space is a very exciting space to be in, so what’s your strategy to tap the new emerging opportunities in this category? Can we expect any major announcements from you stable?
SG: We are a boringly consistent organisation, which believes in sustainable and profitable growth. If you look at our 5-years growth rate – both top line and bottom line – both are above 20%. That says a lot about our business philosophy and mantra. We believe that we want to continue to invest behind building consumer franchises and concentrate on volume growth, while maintaining sustainable margins. We believe that in all the emerging markets that we operate in, maintaining and growing our consumer franchise is a more strategic thing to do in the long run than change for no reason.
          

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