Marico hasn’t had the best volume growth luck in quarters; Abnish Roy is what really drives him

Marico just posted its strongest volume growth in several quarters, and the entire FMCG sector is showing signs of a real turnaround. According to Abneesh Roy, MD (Research), Nuwama Institutional Equities, this is not a low-based illusion, it is a real, sustainable recovery that has room to run for at least a few more quarters.

Not a base effect, real recovery

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

Roy expects that momentum to hold for about two more quarters. Improved GST compliance and ongoing price hikes are also supporting the numbers, and FMCG companies are not expected to cut prices anytime soon, though paints and adhesives may see some relief on that front.

What about El Nino?

A natural concern for FMCG investors is the potential impact of El Nino on rural demand later in the year. But Roy says a decade of historical data does not show a strong correlation between El Nino years and FMCG volume growth, even for bellwethers like Hindustan Unilever. Their reasoning: Headline rainfall figures can be misleading. A “normal” national average can mask severe regional extremes—floods in some areas offset droughts in others, and neither extreme is actually good for demand. Yet even in past El Nino years, FMCG volumes have held up reasonably well.

Maricona copra price turnaround

The real story for Marico lies in its raw material costs. Prices of copra — a key input for the company’s Parachute Coconut Oil brand — have fallen about 45% from their peak, though they remain above historical averages. Roy believes Merico is nearing a meaningful margin inflection point.

For the first quarter, Nuwama expects consolidated EBITDA growth of around 18% along with 21% revenue growth, numbers that show how close the company is already to a full recovery. What makes this particularly remarkable: Marico raised prices by about 60% over the course of a year to offset severe copra inflation, a customer space that Roy says is virtually unmatched globally. Despite such sharp growth, Parachute’s volume remained flat rather than collapsing, a sign of strong execution in Roy’s view.

A rare bright spot in FMCG

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

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