Just a brief Highlights of the call
- Demand and Inflation: The company is seeing demand pressure, especially in rural and lower-income urban markets, due to rising costs and inflation. Optimism for medium to long-term improvement was expressed, with technology like Salesforce Automation being used to drive sales growth. The expectation is that the second half of the year will be better than the first, with sustained operating margins.
- Competition and Market Share: There’s increased competition due to lower raw material prices, especially from smaller players, leading to heightened competitiveness and market share losses for major players including Prataap Snacks.
- Namkeen Category and Portfolio Performance: Namkeen has shown strong growth due to consistent efforts, aiming to increase its revenue contribution from 16% to 20-23% in the coming years. Other product categories have not shown significant performance changes. Namkeen has a slightly lower gross margin but compensates with lower freight costs due to better weight-to-volume ratio.
- Distribution and Growth Strategies: The company is expanding its reach, particularly in the Namkeen category, and aims to grow distribution by 5-7% annually. Changes in distribution are largely complete, minimizing disruptions.
- Ads and Marketing Spend: Currently, marketing spend is around 1.25% of overall revenue. There are plans to increase this next year for brand building, but for this year, it will remain in the same range.
- Margin Goals and Cost Optimization: Prataap Snacks is targeting double-digit EBITDA margin next year, having seen margin improvement over the last three quarters. Cost optimization measures include reduced sales channel costs and improved productivity in production.
- Capacity Utilization and New Facilities: Utilization is around 60-62%, with no significant change in product category contribution compared to last year. The J&K plant is expected to be operational by January 2024, and a Rajkot expansion is also planned. The company is cautious about a rapid ramp-up to 80% utilization, considering sales growth as a factor.
- Market Conditions and Future Outlook: No significant improvements in the rural market were noted around Diwali. The company reflects on its approach since the IPO, acknowledging challenges during COVID-19 and the need to adapt its product offerings. Plans are in place to cater to more urban environments with new products and categories.
- Regional Markets and Expansion: The company is focusing on the South India market, developing specific products for this region, as it’s a late entrant there. Revenue from East and South India is growing, with most revenue still coming from the West and North markets
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