Marico's best volume growth in quarters isn't luck; Abneesh Roy on what's really driving it

Marico just posted its strongest volume growth in several quarters, and the FMCG sector as a whole is showing signs of a genuine turnaround. According to Abneesh Roy, MD (Research) at Nuvama Institutional Equities, this isn't a low-base illusion, it's a real, sustained recovery with room to run for at least a couple more quarters.

Not a base effect, a real recovery

Roy is bullish on FMCG broadly, even as he flags weakness ahead for Avenue Supermart after its business update missed street expectations. Marico, he notes, has long been a consistent performer, typically ranking among the top tier for volume growth. The current strength isn't a statistical illusion from a weak year-ago comparison, the sector-wide recovery actually began in the fourth quarter and has carried into the first quarter of this year.

Roy expects that momentum to hold for roughly two more quarters. Improved GST compliance and ongoing price hikes are also supporting the numbers, and he doesn't anticipate FMCG companies cutting prices anytime soon, though paints and adhesives could see some relief on that front.

What about El Niño?

A natural concern for FMCG investors is the potential impact of El Niño on rural demand later in the year. But Roy says a decade of historical data doesn't show a strong correlation between El Niño years and FMCG volume growth, even for a bellwether like Hindustan Unilever. His reasoning: headline rainfall figures can be deceptive. A "normal" national average can mask serious regional extremes — flooding in some areas offsetting drought in others, and neither extreme is actually good for demand. Yet even in past El Niño years, FMCG volumes have held up reasonably well.

Marico's copra cost turnaround

The real story for Marico lies in its raw material costs. Copra prices — a key input for the company's Parachute coconut oil brand, have fallen roughly 45% from their peak, though they remain above historical averages. Roy believes Marico is close to a meaningful margin inflection point.

For the first quarter, Nuvama expects around 18% consolidated EBITDA growth alongside 21% revenue growth, numbers that reflect just how close the company already is to a full recovery. What makes this especially notable: Marico raised prices by nearly 60% over the course of a year to offset severe copra inflation, an increase Roy says is virtually unmatched globally in the consumer space. Despite that steep hike, Parachute's volumes held flat rather than collapsing, a sign, in Roy's view, of strong execution.

A rare bright spot in FMCG

Looking ahead, Roy expects raw material costs across Marico's basket to remain deflationary for the next two to three quarters, with copra prices now stable after their sharp correction. Other inputs like packaging and select food-related raw materials saw a temporary spike tied to geopolitical tensions in the Middle East, but Roy notes India is now sourcing crude oil below pre-crisis levels thanks to alternative suppliers such as Russia. He expects the broader FMCG raw material basket to return to pre-crisis pricing within a month or two.

For Marico specifically, Roy expects high-teens EBITDA growth to continue — a notable feat given the company is simultaneously ramping up advertising spend more aggressively than most FMCG peers. That combination of rising ad investment and expanding margins, he says, makes Marico something of an outlier in the current consumer goods landscape.