Digital-First Brands To Turn 'Meaningfully' Profitable By 2027, Says Marico CEO
The company is targeting double-digit Ebitda margin for its digital-first brands in the next three years.
Marico Ltd.'s portfolio of digital-first brands will turn "meaningfully profitable" in three years' time, according to Managing Director and Chief Executive Officer Saugata Gupta.
The portfolio currently comprises acquired brands including Beardo, True Elements, Just Herbs and Plix as well as two organic brands—Pure Sense and Coco Soul—in both food and personal care categories.
These brands clocked Rs 400 crore in annual run rate on exit basis in the third quarter of FY24. Marico aims to drive 20% of domestic business from the digital-first portfolio of food and premium personal care put together.
The company is also looking to improve profitability in these businesses with rising scale and does not expect a significant impact on overall Ebitda margin with a scale-up here, as most products are gross margin-accretive.
"The biggest improvement in D2C business has been in terms of the burn rate... the entire diversified portfolio of both food and digital will become meaningfully profitable by 2027," Gupta told NDTV Profit on Tuesday.
The company is targeting double-digit Ebitda margin for its digital-first brands in the next three years.
Men’s grooming brand Beardo, which was acquired by Marico in 2017, is already operationally profitable, said Gupta. Premium personal care brand, Just Herbs and health food brand, True Elements, will achieve Ebitda break-even next year, he said. Gupta also expects the plant-based nutrition brand, Plix, to generate Rs 200 crore revenue in FY25. The margin from Plix is higher than the overall foods category.
In FY24, Marico is now expecting foods business to clock revenue of Rs 750 crore versus an earlier guidance of Rs 850 crore. The company is targeting an organic top line growth rate of over 20% for overall foods next year.
The packaged consumer goods maker reported a decline in revenue growth and a volume growth of just 2% in the October-December quarter.
The company expects to deliver positive top line growth in Q4 as price cuts in its core brands, Parachute and Saffola, normalises. The growth will further accelerate to double digits in FY25 as price cuts, revenue growth and modest inflation in copra also helps. However, volume growth will be gradual as rural demand recovery is not happening on anticipated lines.
Gupta expects volume growth to be in mid-single digits in Q1 of FY25.
Marico has also guided for a 450-500 bps gross margin expansion on FY23 level, aided by input cost tailwinds, premiumisation and increased margin in the food and digital business; while operating margin expansion would be capped by 250 basis points to 21%, due to higher advertising spends.