In terms of the two big spaces which is foods and digital PPC, there are subcategories. Do you think that you are already in all the subcategories that you want to be or are there some categories of interest which are still unoccupied by you?
No, no, so the trends might emerge. So we are constantly looking at trends. See, if you look at our history of digital and food is because we believe that our core has a certain amount of penetration and if we have to consistently grow in double digits, w e need to diversify. So we will look at trends and adjacent trends that something picks up we believe that it is something worth picking up, we will do that. So we are continuously looking at, what we need to do is our mix of countries into category we need to have a majority of our portfolios as a tailwind as opposed to headwind. And that's the formula which we are looking at.
It seems like obviously you've done three fairly quickly. I just wanted to get your sense of the market. Is there a more motivated kind of seller or a more motivated founder there now, with a more rational multiple environment here?
I would look at it that we are a strategic partner of choice in terms of our ability to partner the founder into realizing his dreams and participating jointly. And therefore, if you ask me, we have continued to make these at far more rational valuations. I read about something happened yesterday also. So, secondly, I would think that we have the synergy which we provide in terms of a bouquet of service s, whether it relates to cost, to procurement, or even say digital media buying, when we buy say through Meta or Google in terms of all the brands including Marico core brands, access to modern trade, access to GT , those are the things which are mutually beneficial for both the founders and us in terms of having this model. This model is unique and this model can only work if culturally the organization is tuned to this model, which is leaving the founders some space and because we have a significant empowered culture in our organization.
On the digital-first playbook. India and Vietnam has really played up well for us. Now what's structural difference in Indonesia and how could this alter the unit economics? Is it on the consumer behavior or the platform?
No, no, I just gave you a hypothetical example that if there is a e-com I'm it's not that I'm saying I'm going into Indonesia. I said that it was response to the question that can the Vietnam thing be replicated in other countries? I talked about that see a traditional GTM obviously has a lot of entry barriers. A digital ecosystem has less entry barriers, you can experiment in a country and entry into a country. So I gave it as a hypothetical example.
With this acquisition are we the largest digital-first FMCG company in India? And also, like do you have any aspiration of digital brand salience like for 2030? Like overall, how much of our business will be from digital?
Yes, we want to be a scale player which is profitable and admired and as I said transforming ourselves from a incumbent as well as having some place in some of the international markets.
Just wanted to check on popcorn. There is a very large player in popcorn in the mass market. Now this is in the gourmet format. Any plans to eventually get into those markets so that one-stop shop thought process that you had, if somebody wants to think of popcorn, they want to think about Marico?
So if I look at it, Masala Oats, which is priced at INR18 rupees is available in 2.5 lakh outlets and we do have our INR10, INR20 popcorn in 4700BC which is available.
What kind of acquisitions are we looking for in the future, like say three to four years down the line? And one more question on 4700BC brand, like how are we planning to scale this premium brand, considering our premium our major distribution channels are through GT?
It's too premature to comment on future acquisitions. I have indicated already we could look at something but we can't be specific. As far as 4700BC is concerned, I said GT is an accelerator for Marico. As you know most of our brands in terms of we have been significantly over-indexed even in our core on modern trade and OT. We have been developing these channels, and anyway these brands are run independently , and they have strong opportunity. And the if you look at quick commerce or e-com or modern, I mean, they are going to grow. GT is just a synergy with Marico that further accelerates. That's about it.
Vietnam is around 20%-25% of international business and around 5%-6% of the console. Is there a thought process that over the next five years, the 2030 targets you have given, you want Vietnam to be even more salience within the international? And any chance that this anti-aging, hydration, and anti-acne, at some stage you will bring some of these into your other markets, even Bangladesh, India also?
So, there are two things we have been doing in the international business: reducing concentration risk in terms of country as well as portfolio. If you look at the share of the premium business has been going up drastically, and we are participating in premium personal care categories like shampoo, baby, and body care successfully across multiple markets. Vietnam is a stable economy with high growth opportunities, significant amount of internet penetration. We believe that the organized trade, which is e-commerce plus modern trade contribution, will be ahead of India in the next couple of years, including e -commerce which is very big, including social commerce using TikTok. And therefore, we want obviously to invest in this country and continue to do tuck-ins because we have created capability. Yes, you are right, we can think of looking at it, but even there are opportunities to now have a e -commerce or a digital play in adjacent countries of Southeast Asia also with this portfolio. See, this product is also inspired by K-Beauty and we also have a similar portfolio like a Kaya in India. So, therefore, there is obvious chance of replicating and cross-learning in terms of chassis and product formulation. And as you know, K-Beauty is also quite a trend in India.
On the 2030 target. If I see those targets over the next 4 years work out to 3 to 3.5 for 4,700 Cosmix, and Candid. Now the size of these three are pretty small when I compare to your other acquisitions and even say, Marico's overall sales. Because when I see the kind of scale-up you have done in Beardo 5x and Plix 6x, of course the time periods are different? But from a 4-year perspective, taking a INR100 crores brand or a INR140 crores brand 3x -- is this quite conservative? Are you seeing some challenges here?
See, culturally as a company, we first do and then say as opposed to saying and doing. And therefore, this is a base case. When I talked about Beardo, I would have given you a much lower number and similarly for Plix. This is something which is a base case which will beat our acquisition assumptions. Obviously, in the case of Beardo and Plix, it has overtaken those assumptions by a mile. But these are the starting assumptions and you will see. And especially 4700BC, which has a INR24,000 crore s TAM, you're absolutely right Abneesh that we can do much better. But we have to get the thing right and get into a profitable sustainable growth cycle, which is very, very critical.
When I see Plix and when I see Cosmix, they seem fairly adjacent in terms of product portfolio. So Plix is basically nutraceuticals, hair and skin food. Was there a thought process that we can do plant protein, plant functional foods even in Plix because Cosmix the size is INR100 crores? Build versus buy, I wanted to understand that better.
Okay. So if you look at Plix today, the center of gravity has moved into a beauty and personal care because, you know, hair and skin food. And even in nutraceuticals, it is a slightly fun brand, fun and vibrancy if you look at the way the branding and colors are. What Cosmix does is, there is a serious movement and we needed a offering towards the vegan, vegetarian , and serious nutrition and wellbeing. So you will see the divergence between the positioning of the brands. And therefore, Cosmix will focus on nutraceuticals and getting into spaces like, you know, other nutraceutical spaces which are there, which I have been talking about. It could be gut he alth, it could be sleep, it could be stress, it could be, you know, different. And you will see that coming. For example, it could be even more and you must realize in India today, a significant portion of the population with high, purchasing power wants vegetarian and vegan options. And vegan is a big trend at the top of pyramid. So therefore Cosmix is going to be specialized because we realized that if the center of gravity of Plix has moved to a lot to hair and skin food and personal care, we need a brand in this space. The approach has been very simple: plot all the adjacencies which have significant runway for growth and en sure that there is a brand that fits snugly into that position.
Given your targets are almost the same for all three, 3 to 3.5 broadly, given the kind of success Plix has seen 6x within 2 years or 3 years, will it be fair to say that the most conservative target is for Cosmix out of these three?
I would think 4700BC because of the different vectors of growth.
The first question was regarding the Indian acquisitions. Both the brands that you bought, 4700BC and Cosmix, they derive fairly high revenue from the key product: popcorn is about 75% and protein powders is about 95%, which of course established these brands with a high consumer recall? How do you think about the other emerging parts of these brands to scale up and salience to look like? Perhaps you could share some color on how this journey happened for Plix and Beardo, any learnings from there?
There are two-three things. One is as you move first you need to have a certain core and a hero SKU. Even in the case of Beardo, for example, we looked at one issue that suppose beards becomes a fad. And within 2 years we started the diversification process in terms of getting into things which are adjacent, which are profitable, and which is in line with the brand equity. As you know, Beardo is the so -called Harley-Davidson of male grooming. Now Cosmix, while it started with plant protein powder, it has already gone into protein bars. Tomorrow there are enough opportunities in other nutraceutical spaces and you will see some of the launches, it has also got a pancake mix, and you will see some of the launches that are coming very soon. What we want to do is a one -stop shop for people who believe in vegetarian, plant and vegan across nutraceuticals. For example, hypothetically some people don't like fish oil in nutraceuticals like Omega-3. Can I give them an option? I mean so and therefor e there would be some similar approach which we will follow. Now similarly for as far as 470 0BC is concerned, we have already gone into nachos, there are pop chips this and that opportunity is huge. In fact, humongous, which is there in 470 0BC and also the good thing about 4700BC is the because of the institutional clientele across premium passengers of a lot of foreign airlines, Air India, as we ll as things like Vande Bharat. We are getting a opportunity to do a lot of forced trials like what Paper Boat did with Indigo. So that opportunity and this is with a very premium set of audienc e. And we want to participate in significant areas of gourmet snacking as an option. And you will see that playing out , we have looked at the innovation cycle when we acquired these brands, over the next 12 months. And the other interesting thing that which will aid the journey of 4700 BC is the manufacturing capability and the supply chain capability of Marico. As you know, food gross margins are slightly lower compared to premium personal care and therefore cost stru ctures, sourcing, manufacturing and that is where the entire Marico weight can give a significant competitive advantage.
On 4700 BC, if possible to share any color on what could be the potential margin levels at a scaled-up level or what you have say by FY30 since you've talked about a revenue target, because I'm not sure if this brand is EBITDA positive.
So as of now, it is an EBITDA bleed. And hopefully in the next 12 to 18 months, we are targeting to become EBITDA positive. And that is one of the reasons we're not looking at making it 6x, 7x because we believe in scaling up profitably. So therefore in the next three years when we are talking about 3.5x, we are also equally mindful about the fact that we have to make it EBITDA positive in the next as I said 12 to 18 months and then of course move into at least mid-to-high single-digit EBITDA in the next three years. So that's how we are looking at this business. Of course, other two businesses are definitely at a much higher profitability scale at this point itself.
I'm looking at Slide 27, in which you have given the EBITDA margins for the digital-first PPC business, but can you also give some idea on EBITDA margins for the food business, please, over the same timelines?
So, when we talk about foods from a diversification standpoint, it includes the core foods portfolio as well, which is Saffola Masala Oats plus honey, soya, etc., where depending on what scale we are talking about, for example Masala Oats is already making company operating margin. So once those different portfolios reach a scale of INR200 to INR250 crores, we believe that it has a potential of making double -digit operating margin and as it scales further can of course reach to company operating margin. Why we are calling out digital -first PPC brand separately? Because these are newer businesses and there we had committed that we will move to about double-digit operating margin by FY27, which we have a fairly good visibility about and of course over the next three to four years we can move to teens EBITDA margin.
By FY30 would we be able to do the similar kind of margins in foods as we are having a target for digital-first PPC?
Yes, in fact, blended margin of foods could be higher.
Just wanted to understand your framework for selecting which companies to acquire. How do you go about it and second part to that question is that do you think you would need any more acquisitions over the next three to four years, or now more or less you think that your portfolio is complete?
Definitely not in the next three weeks because my team needs rest and relaxation, they have been very busy. But we will look into tuck -ins and maybe very few spaces. But more or less at least the food chessboard is complete. Now there could be opportunities in mass foods. As I said, obviously globally, say in Vietnam or Middle East if there is play, yes. And maybe again tuck -in opportunities in personal care but yes, we have done a majority of it. We also wanted to hurry it because of two things , we don't want the FOMO premium to set in, we don't like paying 6x, 7x, in multiples. And secondly, once you have all the three, it's much more easier to synergize and get the cost advantages. Like say for example can Cosmix, True Elements, and 4700BC and Saffola have a common food GTM? Those are the kind of synergies we now have critical mass to do. So coming back to your first question, what we look at, we have already cherry-picked broadly the categories. Then we look at the business. We now have a complete analytics playbook on quality of revenue, quality of the founders, the kind of the headroom for top -line growth, headroom for bottom-line growth, synergies with Marico. So we look at these and, for example for every company we have chosen, we have also de-selected certain things at the same point in time. So it starts with the category we want to get into and then looks at the companies. And things where we are not adjacency or are not a no right to win, say for example, I can't win in pet care. If something in yogurt or ice creams is available, I can't because I don't have a right to win it is not an adjacency, I will not get into it.
Is there any incremental investment you need to make in team scale-up also, as you've rapidly kind of expanded into new categories, new businesses, new brands? I know that some of these basis milestone will still be with you in terms of old founders, but do you see that investment required in terms of team, people, etc., as well?
So, we are doing some centralized capability, it could be helping on so to give an give an analogy, can we have people who learn from these businesses and take up these businesses? Because what we do is, 1 year before the we take over we start, implanting people. We have a central team that helps in, I can give you analogy just like operating partners in PE help, we have people who are providing that service. I spend personally a lot of time in these digital businesses, because I believe this is high growth, and there is a centralized team of people which are centers of excellence from a Marico to help. And obviously in that we are also, shaping up our own capability of doing high velocity supply chain because all the things which are things like supply chain, things like, content all these capabilities which we are also building, starting to build in-house.
If you look at your past playbook, we emphasize more on retaining the founders' DNA. Now how do you prevent the cultural frictions while still enforcing Marico's operational discipline and the governance standards?
Obviously we have a point of view on the portfolio, we have point of view on the governance, the regulatory, the quality reputation. We learn with the founders, and if you notice, We have been also entrepreneurial. And if you look at Beardo, Beardo we integrated 100% we bought in 2020. We still the mojo and the secret sauce of Beardo we have been able to preserve. And therefore, those three years as a learning, you know, for all of us to understand the unique thing. Obviously as I said these four -five things which is capital, the allocation of capital, portfolio, you know, compliance, GMP, those are non-negotiable.
On prioritizing adjacencies like expansion within the existing categories or entering completely into new verticals. Now what are the strategic filters that determine the move on the adjacency versus white spaces and also on the expansion spree?
It's the headroom for growth and a right to win. At the same time, we believe in focus and therefore at if you look at all the brands which are acquiring, they have significant amount of hero SKUs or proven SKUs. We don't believe in spraying and praying. Ev en we have been prudent enough into going into GT, we have a broad playbook into GT that only if there is a scale and have a limited amount of SKUs. So it's a broad but you must realize the good thing we have is that the business model allows us to continuously experiment. So we keep on experimenting, you start small, either scale up or drop fast.
How do you determine this white space and what is the timeframe that you generally take up to determine these white spaces?
See, it is a continuous process because there's lot of social listening. In today's world, as I said that it is a very high velocity innovation. Just to give you an example, a innovation cycle can be 60 to 90 days in these digital brands. In Marico, it can be anything between 8 to 12 months. So it's a very, very compressed, low I mean, we don't have MOQs in this, you just put in, experiment with one partner in quick commerce or in e -commerce, see if it works or in D2C. There are action standards whether it respects to repeats, trials, the kind of reviews you get and determine that within 90 days or 120 days you scale up or you drop.
Just wanted to understand and dissect between the CAC and the LTV evolving in the competitive intensity. Is the incremental growth coming more on the relative early safe growth or is it more on the expansion spree?
See if you notice most of our businesses including Plix and Cosmix has a significant D2C play, which has therefore high amount of repeat users and a loyal users in D2C base and a profitable D2C play. Now obviously food is a far more, flirtatious category based on taste and far more experimental category, that doesn't have a D2C play. But our LTV by CAC and repeat rate for both these businesses where there is high D2C is pretty high and best in class.
How will this improve the margins and the earnings momentum?
We have done a Beardo which now makes double -digit EBITDA. There are enough areason cost, there is ACOS, improving ROAS, there are net revenue management -- there are multiple levers in play to drive the margin.
I want to understand the thought process around management bandwidth. So far it has been creep acquisition where the founders have stayed with us and sort of helped grow the brands. Now as we sort of gain 100% ownership of some of the brands, how are we getting prepared for the management transition?
So we have only integrated so far Just Herbs, Plix, and True Elements. We have obviously leaders managing those businesses. There is still a time away, including some of the brands which we have just acquired three years to go. And as and when we have an evolv ing digital business structure and we are to ensure that we have dedicated people already helping these businesses grow and therefore there is no separate or it's almost runs as a as I call Marico 2.0 Engine 2. So therefore, there is no overlap of management bandwidth, perhaps the only overlap is me and some of the one or two Excom members, but hardly any management there they're dedicated people looking into these businesses.
The last question pertains to quick commerce. So I want to understand like the channel salience for our domestic revenue and also for the 22% of the portfolio where we have the food and digital-first brands.
So in the core, it's 5%. These ones obviously is higher depending on some of the brands. But as I said that ultimately some of the brands have a very strong D2C also.
Wanted to just understand the real penetration opportunity. For a long period of time, we had seen Saffola Oil's distribution was just limited to metros and then probably went into Tier 1. While in the next few years, these new brands can have a scale-up opportunity in metros, how do you see the opportunity for these brands scaling up beyond metro Tier 1 over the next three to five years?
If you look at the contribution of organized trade in the current, amongst the TG these brands operate, it will be more than 50%. If you look at some of the metros today, e-comm plus modern trade itself is reaching 40% plus in some of the top metros. So I don't see the need for penetrating right now. There is enough opportunity in the premium and focus is important . Profitability is important. One of the reasons as you know that Saffola hasn't penetrated is because of pricing. Having said that, we would get into some GT but having our SKUs and price points which are different. For example, I mean, in popcorn there could be a hypothetically INR10, INR20 price point which exists and you can use GT for that.
If you see the current founders, they have done a great job in scaling up this business and then now anchoring and partnering with Marico to take this further. The synergies of Marico we do understand. But the kind of investments that will be required, will this have any bearing except for the other two which are profitable, will this have any bearing on the margin profiles in the near to medium term over the next few years for Marico in any sorts?
We have indicated the sustainable margins for both the brands. And see, at the end of the day if the unit economics is right, you don't need to do it. And as I said in fact the margins for the rest of the brands will improve. And if you look at the two case studies which were put in the presentation, which is Plix and Beardo, there has been a significant improvement in the margins. Because don't underestimate the power of common buying, the Marico procurement, Marico supply chain, and Marico manufacturing.
We have developed this playbook behind these acquisitions, you know, referring to digital-first consumers and rapid innovation cycles, premium positioning. Now could we see that eventually these will reshape how Marico builds and scales brands within its core portfolio? So do you see some elements of this model being embedded into legacy brands as well, where it seems that the growth is somewhat tapering?
Yes, we can get inspiration from premiumizing some of the hair oils or serums, for example, and participating far more aggressively. Obviously in the premium part of both hair oils and serums there are digital brands , and therefore this learning can be transplanted into we participating in those much more aggressively. And as I said , in Vietnam, since the market is still nascent and it is maturing, we have already started two brands as an example. One is while our X-Men will continue to play in the mass, a super premium digital brand, a premium digital brand called Astroman. Similarly in the case of shampoo and female grooming and other adjacent categories like wash, deo, and all, we have used the brand called Lashe, which is a hair and skin food brand which we are experimenting with it. So therefore the core also has digital opportunities and we believe that capability will he lp us in participating in that. If you look at already things like, we are doing cold-pressed oils or we have premiumizing serums, we have premiumizing hair oils. That journey has already started and that has happened, because of both inspiration, capability building and learning from the digital businesses.
Since we have been acquiring brands recently, so like are we sort of lacking organic growth opportunities?
If you look at it, we believe that always these acquisitions are a kind of an accelerator. It can't be what I call an escape button for not doing organic growth. And if you look at some of our organic volume growths, we continue to be reasonably good. And I don't think it's a question of organic growth opportunities. Having said that, in any portfolio if you see you're participating higher penetrated categories, if you have high growth ambitions , and we do have high growth ambitions of doubling in five years, which translates to a CAGR of anything between 13% and 14%, you need diversif ication. So it's a combination. A lot of food has actually been organic, the diversification like if you look at the oats journey, if you look at the honey journey, soya journey. So it's a combination of organic and inorganic. And the reason we have acquired in inorganic in digital is that , that business model is something which is very difficult to build organically. Because the organizational capability and gearing is towards and therefore sometimes you can accelerate by doing this. And we have been extremely prudent in capital allocation and the valuations have been one of the best in the industry.