Based on my limited understanding, it takes many years for any brand to become a household name and result in sizable sales and profit. ITC has been struggling for a long while even after deploying large sums of money. I think it’s going to be a long haul.
Disc: Holding a tracking position.
Hi, yes it is liquid detergent 
. According to GCPL’s latest AR, it is India’s largest selling liquid detergent. I also see it in all kinara shops of our locality during this winter.
Since childhood I see it being used in our home for Woolen and Delicate garments. Around 2008 Godrej planned to promote it as a daily-use premium detergent, but it seems that it still is having the same value proposition.
Hi everyone…
I have been holding Marico for over 5 yrs now.
Some quick observations-
Current Pain points-
Competitive intensity from Dabur in coconut hair oils, Adani in cooking oils.
General slowdown in FMCG consumption leading to a slowdown in value added hair oils. ( where the competition is otherwise not as stiff and Marico is head and shoulders above everyone else; courtesy- hair and care, parachute jasmine, livon, Nihar amla, nihar mustard, parachute ayurvedic , parachute aloe vera etc etc etc )
Current positives-
Saffola oats doing well. Saffola oil…doing a descent job ( nothing exceptional though )
Soft RM prices leading to all time high kind of margins.
Descent scale up in Livon, Set Wet range.
Promising Bangladesh business.
Imagine a scenario where the consumption patterns revive and Marico goes back to 4-6 % kind of volume growth…I think this is very much possible( infact should start happening from q4 onwards ). This kind of volume growth would ensure that the bottom line keeps growing at 14-17 % kind of levels.
I have not discounted any meaningful kick from Beardo, other new launches, Possible acquisitions etc.
Disc: invested.
Views are bound to be biased.
Poor results from Marico.
Unless consumption revives or they are able to launch a block buster product, growth seems unlikely.
But with today’s 5% fall valuation have got into interesting territory.
When growth resumes, PE expansion to 40+ from current 34 is given considering high RoCE and healthy cashflows.
At a time when the hul giant’s personal care category degrew, it is but likely that Marico would follow suit as it’s maximum revenue is from personal care… home care is what made HUL outperform…so Marico performed in line with consumer sentiments…these are times to gain market share, increase operating efficiencies and invest in brands…and for investors like me these are times to get to a more meaningful position as prices fall. Disclosure: one of top holdings so views will be biased. This is not a buy/sell recommendation
Will below impact Marico?
“The Budget memorandum also omitted the entry of edible oil from the custom duty. It said that effective rate on certain edible oils is redundant as these goods are covered in certain other entries with lower or equal applicable rates”
One view point on why Marico will not deliver good growth as done in past for coming years as well as failure on capital allocation, do not agree fully but can surely sense mgmt commentary and struggle in recent calls…Invested
There are some inconsistencies in that Marcellus report…nevertheless since this thread is about Marico, will focus only on that.
Marico is unlikely to grow revenues in healthy double digit range, the base case needs to be 9-11% over the medium term with PAT growing in the range of 13-15%. While the company has been working hard on beefing up the product portfolio and broadening the distribution footprint, their largest businesses - Parachute, VAHO and Saffola put together are unlikely to grow in healthy double digits. They are either the market leader or #2 in a category that is growing in single digits.
Due to their efficiency and operating leverage coming in from advertising spends, PAT growth may print 2-4% higher than the revenue growth rate. Though management keeps speaking about ASP being targeted at a % of sales, one can see over the past 7-8 years how operating leverage has been playing out by spreading ASP over a wider base of revenue. This trend can be seen in other consumer stories as well since it takes a bare minimum ASP spend to keep a national level brand relevant. As revenue scales over time, ASP does not have to scale proportionately.
So if this is a story where one can expect 13-15% PAT growth over the medium term at a healthy ROCE of 40% with minimal longevity risk, what valuation does one pay for it?
Marcellus appears to have a 20% threshold for PAT growth over the medium to long term which is why they say they have exited this. That they expected a 20% PAT growth by itself is a surprise in the first place, guilty of simple extrapolation maybe? The 10 year record does show a 19% earnings growth after all. But if one had bought this at a 45 PE assuming an 18-20% PAT growth, that is 3 years of almost zero stock return, the quality of the business has not deteriorated though the near term earnings visibility has.
Valuations matter for this very reason, most high quality businesses will go through a 2-3 year period where business momentum slows down below historical averages. In such a period one is hit with lower PAT growth and a lower PE multiple at the same time. If this can happen to a business like Marico which ticks all the right boxes, this can happen to most businesses. Which is why not overpaying is one way of doing things in investing.
Disclosure: Invested for own portfolio and customer portfolios, buy transactions in the past 30 days. May add more based on market conditions and specific portfolio construct. I am a SEBI registered IA.
Not to post any negative on anyone however whenever any fund manager speaks I believe we have to take it with pinch of salt. Saurabh always advocate many strategies like long term buy and hold, coffee can investing , buy and hold forever etc. However for his PMS, he may or may not follow his own strategy. This is evident in the case of Marico. I am not sure when Marcellus invested in Marico. Marcellus started PMS in 2018.Even if we assume they bought the counter in 2018, they have exited within short period of time. I dont think Marico as a business has changed drastically in last two years. It is very apt to recall Nassim Taleb’s comment " Don’t tell me what you “think” show me your portfolio" . Having said that I still enjoy reading Saurabh’s article.
In my personal opinion, companies like Marico, Godrej consumer or for that matter most victorious FMCG companies over the time created new segments around their core to successfully drive the additional sale. The process of building a sustainable consumer product is easier said than done, It requires years of patience, persistence and meticulous execution. Unless Marico add another segment or find new avenues for growth, stock might languish and test the patience of investor. Given the history of the company I believe, in the long run Marico will successfully navigate the slow down and find new avenue to grow. After all, we all undergo cycle of ups and downs.
Very good observation about Marcellus.
I am holding this stock since 2004. Marico has successfully navigated this journey through 15 years.
I like this company as they focus on health and wellness. This will only grow, though growth will be lead by new innovations and mature categories will stagnate.
But now size is not on their side when 100 cr sale will make a difference.
I expect 6-8 Q of stagnation. But that is what long term investment is all about.
Govt Increased the copra price by 410rs will it effect much marico in terms of margin
Personally I don’t think it will have too much impact as in percentage terms it translates vto around 4-5 percent and currently the prices are at lows and not a peak.
Company has seen worst prices in past and managed itvwell so
Just bought Suffola Oats and got 2 packs of green tea along with it. I’ve been consuming green tea from past 3-4 years and have tasted various brands and was now regularly having Indian Organic’s tea as it was better than other brands.
Firstly i would talk of the product: The product is premium and has three different types of flavors in it, all of them are very good. I’ve also found out that the pouches can be re used and it’ll gimme a better experience than Indian Organic’s Green tea upto 3 times (haven’t reused it for the 4th time yet)
Pricing: When I saw on the back of the package its for 50 Rs and there are only 3 pouches inside, which is comparatively on the expensive side. It can be considered that are green tea consumers price sensitive? Will they be ready to pay a premium for a better product and health?
Mr. Mariwala has said it in his interviews that he shall only get into businesses where he can be a market leader, how he gets there with HUL and Tata already in the business for long is to be seen.
Disclosure: Invested
Hey you have already answered your question…with HUL and Tata already in Tea but still for green tea you used organic india 
so in functional teas like a flavoured green, being a market leader is possible for new entrants in India. Thanks
Marico results today…Anyone would like to share their thoughts?
Found this summary useful .
Marico’s results, clarity on business strategy was way ahead of my expectations. While all analyst media community mentioned 50% drop in profits, they forgot to mention that same Q last year there was a 188 cr tax credit. Sans this credit, the profits fell 3-4% I believe, which is excellent performance in such scenario.
Moreover, the confidence and clarity of management on focus areas and actionables is commendable. They made it very clear - That did not launch sanitizer as a tactical play but health, hygiene and nutrition will be a strategic play going ahead. The nimbleness with which they launched yet another product “Veggie Clean” is a result of acquiring and working with start ups which enables you to bring down the turnaround time and act nimbly. They learnt it well.
Now, all these new products and strategy will be success or not, that’s another story, will they result in a multibagger - ask the proclaimed seniors or Marcellus
For me, the management is working in right direction, with right intention and vigour - and as long as that is happening, I see growth and success ahead.
Disc: Hold Marico in portfolio, this is not a buy sell advice. These are just my thoughts & interpretation on business and I can be totally wrong
Brilliant!! Thank you so much for sharing.Interesting that they are working with startups for Veggie clean. The tax credit part from previous quarter i had overlooked. Than you for drawing attention to it. Much appreciated. I am invested in the company too.
Now, all these new products and strategy will be success or not, that’s another story, will they result in a multibagger - ask the proclaimed seniors or Marcellus
On asking Marcellus, May be the answer is clear from their actions. News is that they’ve dropped Marico from their Consistent Compounders portfolio
Disclosure: Holding Marico and will maintain allocation in my PF.
