excellence

Dear Shareholders,

It is with great pleasure that I share my thoughts with you as a part of your Company’s fifth Integrated Annual Report for the financial year 2022-23.

The World Health Organization (WHO) has recently declared that COVID-19 is no longer a global health emergency. This has certainly brought a collective sense of relief to all considering the heavy toll inflicted on humanity since the onset of the pandemic about three years ago. While the pandemic fades into the past, it has brought about some perceivably lasting shifts in consumer behaviour, such as heightened consciousness towards health and immunity, increased adoption of the digital medium and preference for purpose-driven or sustainable brands, among others. The rapid scale up of several Digital-first brands in recent years is evidence of the growing trend of premiumisation across beauty and personal care categories. In addition, the increased nuclearisation of households and wider participation of women in the workforce, especially in urban India, and the growing need to balance convenience with health considerations, presents immense growth potential for healthy packaged foods both in ready-to-eat and readyto- cook formats.

Over the years, we have followed the mantra of ‘Consumer First’ and always ensured agile and purpose-led transformation of our brands with a sharp focus on evolving consumption trends and adapting to rapid changes in technology to drive business growth across our markets.

FY23 – Year of resilience amidst unpredictability

FY23 started with escalating geopolitical tensions leading to volatile commodity prices amidst an already subdued demand environment. In India, we witnessed similar instances of spiralling rise in food and retail inflation, which adversely affected the overall consumption sentiment. However, over the course of the last six to nine months, there has been moderation in key commodity prices and retail inflation levels, which seems to have triggered a gradual recovery in FMCG consumption. Looking at FMCG volume trends in this period, we believe the prospects of a sustained recovery have strengthened. After five quarters of volume decline, the sector has posted volume growth. Despite inflationary headwinds, India’s urban consumption continues to be steady, while rural consumption is also demonstrating convincing signs of having bottomed out. Foods continues to drive growth for the sector, while Home and Personal Care (HPC) has also entered positive territory after an extended slowdown. As we move forward into the next year, we believe that subject to a near-normal monsoon prediction, government stimulus, the certainty of a moderating retail inflation and lower volatility in crude prices bodes well for a sustained reversal in the sector.

Amidst the difficult and unpredictable times during the year, your Company was able to weather the challenges and post a resilient performance as we prioritized on strengthening our core portfolio while driving accelerated growth from the newer categories. After a modest first half, Parachute Coconut Oil recovered strongly in the second half of the year as the steadying of copra prices aided the resumption of loose to branded conversion in the category. The Value-Added Hair Oils portfolio mirrored the softer growth trajectory of broader HPC categories; however, we consolidated our market share through renewed focus on the mid and premium segments. Saffola Edible Oils fortified its market positioning and penetration gains amidst a volatile edible oil environment. Our Foods play leverages Saffola’s strong, yet underleveraged, brand equity and offers ‘better for you’ differentiated food products in categories where Saffola has a right-to-win. Currently, our Foods portfolio is broadly present across breakfast, in-between meals, healthy snacking, immunity, and plant-based protein segments. During the year, Oats portfolio anchored the growth while the Honey and Soya chunks portfolio gained scale. Our newer launches address the growing trend of convenience among urban milieu with rising preference towards ready-to-cook and ready-to-eat offerings. Going forward, we aspire to cross H 850 Crores in revenues in the Foods portfolio next year as we maintain steadfast focus on market development, brand building, supply chain excellence, distribution expansion and product innovation.

The Premium Personal Care portfolios of Serums and Male Grooming delivered a remarkable recovery from the Covid-lows as mobility resumed back to normal levels. Given the competitive strength of our brands, Livon and Set Wet, we are poised to capitalize on the category’s growth potential and aim to deliver 20%+ growth consistently. We are also delighted with the performance of our Digital-First portfolio, led by Beardo and Just Herbs. With their differentiated offerings and growing digital presence, we aim to achieve an exit run-rate of H 400 Crores next year in this portfolio.

Our International portfolio has delivered a healthy performance across all the regions despite macroeconomic challenges in some of the geographies. Over the years, we have strengthened our brands, expanded our portfolio, minimized our concentration risks and focussed on executional capabilities in each of our key markets. Bangladesh continued its healthy performance as both core and newer portfolios drove growth. In Vietnam, our existing categories of male grooming and foods reported robust growth. Furthermore, our organic expansion into female personal care along with the acquisition of the brands, Purité De Provence and Ôliv, has added another growth lever for the business. MENA and South Africa also continue to register impressive growths. With strong fundamentals in place across each of the markets, we are confident that the international business will continue to thrive going forward.

While we navigated through a volatile input cost environment in the last year, we expect to maintain an upward trend in gross margins in the year ahead given the relatively stable and moderating trends over the last few months of the year. We will continue to adequately invest in brand building of our franchises, as we believe that continuous sustainable brand building efforts leads to long-term value creation. We also constantly pursue cost optimization avenues to curb any inefficiencies in operations through our institutionalized cost management programme.

Sustainability – From profits to purpose

At Marico, we view our entire business operations through the lens of sustainability and have always strived to uphold the ideals of People, Planet and Profit. Our approach based on conscious capitalism has been one of the guiding pillars of Marico towards being a responsible business organization. Post successful completion of our inaugural Sustainability targets, we have begun our journey on the Sustainability 2.0 framework with encouraging progress across each of the eight broad themes elucidated by our Chairman in his letter. Consumers, nowadays, are increasingly becoming conscious of their buying decisions having an impact on the society. Partners and vendors are willing to collaborate with companies that are also keeping the interests of the society in mind while doing business, while investors also prefer businesses that are creating both financial and social capital. We continue to make strides in this direction by nurturing Responsible Brands and furthering our commitment to Sustainable Sourcing. While our brands endeavour to offer best-inclass products, they also have a clear and meaningful purpose at the core that goes beyond traditional business objectives. Our flagship brands, Parachute and Nihar, have not only forged a strong connection with their consumers but also consistently driven positive outcomes for the community through the ‘Parachute Kalpavriksha’ and ‘Nihar Shanti Pathshala Funshala’ programmes. Through our Responsible Sourcing framework, Samyut, anchored on three pivotal themes of environmental stewardship, ethical responsibilities and social empowerment, we imbibe our supply-chain partners into Marico’s philosophy and purpose of creating sustainable impact across its value chain.

Way Forward - Reimagining the Future

Marico, as an organization, has always adapted to the changing environment and upcoming trends in the industry. Over the years, we have been constantly reinventing ourselves to stay relevant to our end-consumers and their evolving habits. Notably, amidst black swan events and heightened external volatility in recent years, we have strengthened our processes and product portfolio to be more resilient and future-ready. Last year, we had touched upon our strategy playbook focused on Diversification, Distribution, Digital and Diversity, internally dubbed as ‘4Ds’, which shall enable a sustainable growth trajectory over the medium term.

Diversification of business has been our core focus in both our domestic and international markets and has been instrumental in driving healthy growth in recent years. While we continue our efforts towards strengthening and premiumisation of our core categories, there has been a shift in the revenue share of the newer portfolios of Foods, Premium Personal Care and Digital-First shift from ~8% in FY20 to about ~15% in FY23, which is likely to move up to ~20% next year. In addition to driving accelerated growth in the new categories of our domestic business, we are also countering portfolio concentration risk in Bangladesh and driving broad-based growth across geographies in our international portfolio. Leveraging our R&D capabilities, our diversification journey in the medium-term will aim to create a portfolio for the future, which has saliency in lower penetrated categories with a large growth headroom, where we have a veritable right to win and can drive penetration and market share gains. We will not enter a category just to play, but will play to win, thereby leading to sustainable outcomes in our business.

Distribution is another significant enabler for Marico’s future readiness and accelerated growth. Over the past year, we have witnessed a slowdown in General Trade dragged by consumption stress in rural India and the lower and middle-income strata in urban areas. Correspondingly, consumers, especially in the urban segment, are increasingly veering towards the alternate channels of modern trade and e-commerce. We continue to strengthen our presence on alternate channels through trusted partnerships, channel-focused product strategy and customer engagement. Given the depth of the Indian market, we believe there is significant headroom for traditional and alternate channels to co-exist and grow harmoniously, and your Company is investing towards building an omni-channel, agile and data-driven distribution strategy. To dial in on the diverse Indian market, characterized by intricate demographic patterns and varying consumption habits, our Sales 3.0 framework emphasises on strengthening our micro-market focus and execution with enhanced agility. We continue to widen our stockist network as we expand our rural direct reach, thereby building a source of long-term competitive advantage. As the portfolio evolves suitably, we are enhancing our presence in chemists, cosmetics and specialty foods outlets in urban regions. A dedicated Foods Go-To-Market is one of our strategic priorities, which focuses on top specialty foods stores and aims to deliver accelerated growth in our Foods business through wider range availability, in-store execution and effective shopper engagement. The Foods GTM has already expanded our reach to 20+ cities and aims to strengthen our network and distribution reach.

Building digital capabilities and automation is a strategic growth imperative for us to thrive in the digital era and seize new opportunities in an increasingly data-driven and customer-centric market. We continue to make visible strides in our digital transformation journey through investments in advanced data analytics, thereby leveraging AI and ML technologies to streamline supply chain operations, improve customer engagement and optimize advertisement campaigns. We are also deploying several capabilitybuilding initiatives to enhance digital competencies within the organization.

Finally, yet importantly, we remain committed to cultivating a workplace that values diversity and fosters social inclusivity, thereby building organizational resilience. Localization of talent in our overseas units and promoting thought and gender diversity serve as fundamental building blocks towards perpetuating an innovation mindset. The diverse composition of the Board and senior leadership team brings forth varied perspectives and certainly enhances the quality of our decision making. The recently instituted Inclusion & Diversity (I&D) Council aims to enable policies and processes to incorporate the needs of diverse individuals and facilitate our evolving culture. We strongly believe that amidst these times of constant disruption, access to diverse talent acts as a key differentiator and provides a competitive edge over the long term.

We are confident that we are on a fundamentally right path of driving profitable, competitive and sustainable growth with a consistent focus on innovation to build businesses for the future.

As we look forward to turning the leaf over to a new chapter of growth for your Company, I want to express my deepest gratitude to our entire leadership team and all our members for their unwavering commitment to Marico. I also want to express my heartfelt thanks to our shareholders for their continued faith, support and confidence in Marico.

Warm regards,