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Zydus Wellness in Q2 saw broad-based growth. The company, which recently acquired Naturelle India, said it continues to remain open to inorganic growth opportunities. In an interaction, Zydus Wellness CEO Tarun Arora told businessline the company is not stopping with this acquisition but it is in no hurry and will continue willprioritise first scaling up the Naturelle business. Arora spoke on a range of topics including urban slowdown and channel shift toward quick commerce in urban regions. Excerpts :
What is your view on the urban consumption slowdown ? What kind of growth rates are you targeting ?
Urban consumption is under pressure as consumers are making alternative spending choices and there is a shift in purchasing behaviour. Additionally, food inflation is surging. What might make it worse for traditional trade is that consumers are moving towards new age channels and newer platforms. Many FMCG companies, such as ours have been well prepared for this and have managed the shift well. Meanwhile, rural consumption has improved, but not enough to cover up for urban consumption gap.
Fortunately for us, we have been able to execute well.Q4 last year was very good. Q1 and Q2 have also been strong. Despite all these challenges,we have a single minded focus that willhelp us grow ahead of the market growth rates and maintain a profitable profile despite the inflationary pressures.We have seen broad-based growth across multiple segments of personal care as well as in food & nutrition.
The top-end of the market has been growing at a fast pace and companies have been focusing strongly on premiumisation. Also, is there an impact of new age brands eating into the established brand’s market share?
Over the last 2-3 years, most FMCG companies have focused on strengthening their premium play. We typically operate at a premium to most of our competitors. I think while premium play is important, it is not sufficient to grow the business in the current environment. As far as new age brands are concerned, they have been able to better capitalize on premiumization versus the established FMCG companies. But I think the current market environment is beyond that and even insurgent brands are under a little bit more pressure than a few years ago. Of course, there are opportunities and some of these new spaces will have tailwinds.
How has the online channel, especially quick commerce growing for you ?
In the last quarter, the overall online channel has contributed about 11-12 per cent to our sales. Quick commerce is growing at a disproportionate pace of 60-70 per cent while the overall online channel is growing at 25-30 per cent for us. Organized trade, which includes modern trade, is more than 20 per cent. We have been bolstering our supply chain infrastructure to service the new age channels including quick commerce.We service quick commerce channel directly to engage consumers better.
The company has been bullish on inorganic growth strategies. Are you seeing some interesting opportunities in recent times?
We have just acquired Naturell. While we are not stopping there, we are also not in a hurry for more acquisitions. For the last couple of years, we have been interacting with several potential acquisition targets and then zeroed in on this.Though downtime is a good time for such transactions, we are not driven by that. We are driven by more medium to long term focusbesides the strategic fit. Currently our bigger priority is to scale up Naturell. It has been growing at 20 per cent year on year andwe want to maintain that growth momentum while ramping up portfolio penetration.
How will you scale up the Naturell business ?
Healthy snacking is aspace which is going to continue to build up in this country.Within this, there would also be various new formatsthat will become increasingly relevant for the consumers. And that’s why we believe this is the right format for us to ride on and build further.Naturell also has offerings in chips and cookies with the protein proposition.Going forward, wewill see where we can take itbut we will bet big on urban demand and strengthen its online play.
How has the personal care segment performed ?
Over the years, Nycil, which is a category leading brand phas performed well and increased in market sharesince we acquired it. Everyuth Naturals also continues to outpace category growth and has registered strong performance.Our key differentiation is our understanding of the consumer’s needs and our products are very clearly built to deliver what we claim. We are also in sub segments where the brand is a category builder rather than a competition fighter. So we constantly look at newer propositions and new formats that meet the consumer needs.
How’s the dairy and spreads business under Nutralite performing ? Any future launches on the cards ?
Nutralite Ghee and butterhave become a sizable portfolio for us. We’ve also launched cheese this year for the food services spaces spacMayonnaise, again, is doing rather well, I would say, especially in food services. So overall, the dairy and spreads portfolio hasgrown significantly and is consistently performing for us, whether it’s food services or retail. In fact, wehave also launched a plant based fat spreadas a digital only brand considering the consumers’ increasing consciousness about the plant based products.
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