Marico's Saffola ready to shed low-margin volumes

MUMBAI: Marico Ltd is willing to sacrifice volumes in the lower-margin end of its Saffola edible oil business to improve profitability, as the maker of fast moving consumer goods shifts its focus towards premium products such as cold-pressed oils.

The strategy marks a deliberate move away from chasing volumes in a category exposed to volatile input costs and intense price competition. Marico expects the shift to reset the business's profitability over the next few quarters.

“We have taken a conscious call to say that we shall forego and sacrifice volumes at the bottom end, which is a low margin end of our business. We believe in the next 2-3 quarters there'll be a complete reset that will actually help in the overall long-term structural profitability of this franchise,” Marico managing director and chief executive officer Saugata Gupta told Mint.

The company plans to direct more investments towards its foods portfolio than edible oils, but is not abandoning premiumization in the latter. “We are investing behind cold pressed oils, which is a long-term trend like protein,” Gupta said.

Saffola edible oils reported 6% revenue growth in the July-September quarter, despite a high-single-digit decline in volumes, according to Marico's second-quarter results for fiscal year 2027 (Q2FY27).

The shift comes against a challenging backdrop for the industry. India is among the world's largest consumers and importers of edible oils, with annual per capita consumption of about 20 kg and total demand of around 26 million tonnes. Imports meet roughly 57-60% of domestic requirements.

In September, the government cut import duties on crude edible oils, primarily to lower cooking oil prices and contain food inflation.

Core brands and new bets

Marico's consolidated revenue from operations rose 12.9% year-on-year to ₹3,897 crore in the July-September quarter, the company announced after market hours on Monday. Earnings before interest, tax, depreciation and amortization (Ebitda) increased 27% to ₹709 crore, its fastest growth in 50 quarters. Ebitda margin expanded 200 basis points to 18.2%.

Marico shares rose more than 8% on Tuesday on the National Stock Exchange following the results.

Beyond edible oils, Marico is stepping up investments in almond oil and shampoo, which Gupta identified as two key bets within its core portfolio.

“Almond oil and shampoo are the two big bets as far as the core is concerned, and we're going to invest significantly behind these categories,” he said. Marico expects its shampoo portfolio to cross ₹400-500 crore in the near term.

“There is a case for disruption in almond oil category. It will take time, but we will stay invested in it,” Gupta said.

The company is targeting an annualized revenue run rate of more than ₹100 crore for its almond oil portfolio by FY28, with a medium-term ambition of building it into a ₹200-250 crore business by FY30.

Costs remain a risk

Gupta said domestic demand remained resilient during the quarter, although the company was keeping a close watch on the broader consumption environment. “Demand for the industry has been so far steady, but we need to be watchful,” he said.

Marico's growth is now being driven by multiple businesses and product segments, Gupta said, pointing to its core portfolio, premiumization, diversification and international operations.

“I think we now have multiple vectors of growth which are firing, whether it's core or the premiumization of the core, the diversification part of the business and international business,” he said.

The company has had to navigate successive cost shocks in recent years. In 2025, copra, a key raw material, touched a multi-decade high of about ₹20,000 per quintal. More recently, the company faced higher fuel and packaging costs amid the US-Iran war.

“Since 2020, we have been facing black swan events every year or so. I think coping with adversity is baked into our way of running the business,” Gupta said. He said Marico had managed these challenges better than its competitors.

Analysts remain positive on the company's growth prospects.

“Marico delivered another quarter of double-digit volume growth, and we expect this momentum to sustain, led by volume gains in the Parachute portfolio, a structural shift in VAHO (value added hair oils) towards mid and premium segments, profitable scaling of foods biz, premium personal care and digital first offerings, and a SETU 2.0 led distribution ramp-up,” analysts at InCred Equities said in a 3 November report.