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Good evening, ladies and gentlemen, and welcome to the Zydus Wellness Q3 FY '23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhuwania from ICICI Securities. Thank you, and over to you, sir.
Thank you, Reema, Good evening, everyone. It's our pleasure at ISEC to host Q3 FY '23 Results Conference Call for Zydus Wellness Limited. From the management, we have Dr. Sharvil Patel, Chairman, Mr. Tarun Arora, Chief Executive Officer; Mr. Ganesh Nayak, Director; and Mr. Umesh Parikh, who is the CFO.
I would like to hand it over to Mr. Tarun Arora for his opening remarks, and then post that, we can open the Q&A. Thank you.
Thank you, Karan. Good evening, and welcome to the post-results teleconference of Zydus Wellness Limited for quarter 3 FY 2022, '23. Like Karan mentioned, we have with us Dr. Sharvil Patel, Chairman; Mr. Ganesh Nayak, Director; and Mr. Umesh Parikh, our CFO.
Business operating environment continues to remain challenging for FMCG industry as a whole while rural demand, in particular, remained sluggish during the quarter 3 of financial year 2023. In this tough environment, we continue to drive leadership across our brand portfolio with all brands with the exception of Complan at 5-year high market shares. We continue to demonstrate pricing power across our portfolio without any impact on our competitiveness. Inflation has moderated across key imports except that of milk, which remained at an elevated level even during the flush season. To mitigate the impact of inflation, the company has already taken appropriate price increases, which will fully get reflected in the quarter 4 of this financial year. We have seen gross margins for non-milk-based products going up over 200 basis points sequentially, while there was a drop in gross margins of Complan due to milk inflation. At an overall level, the gross margins are up by 60 basis points sequentially. Taking a queue from cooling down of global milk prices, we expect milk prices in India to have peaked and should be absorbed at an annualized level. With further actions in place and better product mix, the margins will progressively improve and get closer to last year for quarter 4 on Y-o-Y basis. In line with the FMCG industry growth, the company has registered net sales growth of 7.3% on a consolidated basis during the quarter 3.
Let me take you through the highlights of consolidated financial performance of quarter 3 financial year '22, '23. During the third quarter of the financial year, our net sales grew by 7.3% to INR 4,130 million. Our total income from operations grew by 7.1% to INR 4,156 million. Our other expenses grew by 17.4%, which was largely due to increase in cost of fuel like coal and husk, and also the statutory revision in the wage rate in the Northeastern belt where some of our manufacturing facilities are located and increase in manufacturing activities in preparation for the season.
EBITDA degrew by 12.7% year-on-year basis to INR 282 million. PBT before exceptional items degrew by 15.0% year-on-year to INR 193 million. Reported net profit was down by 16.1% year-on-year to INR 196 million.
With that, let me share some of the highlights of the operations for the quarter gone by. We continued our thrust on marketing initiatives to grow the categories and increase market share of our brands during the quarter. To narrate a few, on Glucon-D front, quarter 3 being a nonseasonal quarter for Glucon-D, has limited contribution to the business. The glucose powder category has grown by 8.2%. Glucon-D brand continues to maintain its #1 position with a market share of 59.9% as per MAT December 2022 report of Nielsen, which is an increase of 161 basis points over the same period last year.
On the Complan front, the health food drinks category continued to witness slowdown and has degrown in low single digits at MAT level. However, with right interventions in place, now Complan brand has registered a low single-digit growth for the quarter gone by. The health food drink category has degrown by 2.3% at MAT level. The Complan market share stood at 4.5% in the category as per MAT December 2022 report of Nielsen.
On the sweeteners front, Sugar Free brand posted a revival in offtakes with a 10% growth during the quarter, indicating a turnaround on the consumer front. Sugar Free Green continued to build on digital platforms with special campaigns during T20 World Cup with Sugarlite -- while Sugarlite looks to expand aggressively in its white space markets with TV plus multimedia approach of print for outdoor and digital. The continuous focus on new portfolio of Sugar Free Green and Sugarlite have led them to now contribute 13% of total sweeteners portfolio. The sugar substitute category has registered a flat growth of MAT 11 -- at MAT 11. The Sugar Free brand continues to maintain its leadership with a market share of over 95.8% as per MAT December '22 report of IQVIA.
On the personal care front, Everyuth brand continued consistent performance, delivering a double-digit growth on a 3-year CAGR basis and building market share. Brand was supported by TV and digital campaigns across its core portfolio of face scrub and body lotion range. The face scrub category has registered a growth of 6.3% at MAT level. Everyuth scrub continues to maintain its leadership position with market share of 41.8% in the facial scrub category, which is an increase of 160 basis points over the same period last year as per MAT December 2022 report of Nielsen. The peel-off category has registered a growth of 7% at MAT level. Everyuth peel-off has maintained its #1 position with a market share of 78.4% in the peel off, which is an increase of 22 basis points over the same period last year as per MAT December 2022 report of Nielsen. Everyuth brand is at #5 position with a market share of 6.4% at overall facial cleansing segment as per MAT December 2022 report of Nielsen. The prickly heat powder category has registered a growth of 13% at MAT level. Nycil has maintained its #1 position with a market share of 35.1% in the prickly heat powder category, which is an increase of 121 basis points over the same period last year as per MAT December 2022 report of Nielsen.
On the dairy and spreads category front, Nutralite brand continued to deliver double-digit growth in both retail and professional segments for the quarter gone by. Nutralite DoodhShakti Probiotic Butter Spread has -- was supported with digital and print media to drive awareness. While quarter 3, there is a seasonally low quarter -- low-value quarter, both in terms of revenue and EBITDA for us, the coming 2 quarters will have high sales for -- of the seasonal portfolio for which we have readied our manufacturing and supply chain network to ensure smooth and on-time supplies. We have taken another round of price increase across our portfolio by the end of third quarter. We expect that better mix coupled with appropriate price increases will help us to mitigate the inflationary impact on business. Thank you, and we will now start the Q&A session. Over to the coordinator of Q&A.
[Operator Instructions] We take the first question from the line of Kapil Jagasia from Nuvama Wealth Research.
Sir, my first question is on Everyuth, like both scrubs and peel-offs have shown market share gain this quarter after a long time, I guess. So could you elaborate on where we are gaining these market shares from? And should we expect further gains in the coming quarters?
So I think Everyuth -- for Everyuth, both scrub and peel-off, which form the bulk of our business, we have seen gain in market share, especially over the last 5 to 6 quarters. And I think over the last 3 years, our market shares have jumped substantially here. The gains have largely come by growing the category, we being the largest player in this segment. And I think our endeavor is to grow the segment. By doing that, if some market share also comes, but our focus is to grow both scrubs and peel-offs and play a larger name in the overall facial cleansing.
Okay. Sir, my next question is on Glucon-D, like how the second summer season has panned out for Glucon-D, as I guess, even the winter was delayed this time?
So this is -- we have invested on Glucon-D second season. We have not seen substantial lift as we would have expected, and therefore, the Glucon-D numbers are muted and lower than what we would have expected. But I think it will be a long haul. There is a legacy of the brand, which it sells in a way. We have still committed and we'll continue to build the second season, but I think it will take longer. It's not going to be one season play. So it's been lower this year than we would have liked to.
Okay. And so in terms of Complan, how has it performed internationally, like how much it contributes now to the revenues currently the international business? And you had mentioned earlier about the target of INR 100 crore revenue. So is that still on track?
So our international business this year, especially in last couple of quarters has been impacted, especially on Complan because of supply issues in New Zealand in particular and demonetization in Nigeria, which is our largest market. So it's delayed our movement in that direction, and we think we'll -- now everything is sorted, we have seen our supplies because we had to change the third-party supplier. Now that is back on track. And I think our demand also is back on Nigeria. So it will probably be about a couple of quarters behind that, but we should be on track otherwise.
We've also -- for INR 100 crores, we are also using Bangladesh, too, where we are setting up our third party and our subsidiary has been put, that should help us push faster on that and also built to a larger level as we aspire to build our international business.
So on this YTD FY '23 basis, what would be the contribution from international business? Like I guess it's 3.4...
About 3%.
Okay. And sir, could you help us with the volume growth for the quarter?
It's a flat number on volume.
Our next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.
Sir, in the initial comment you mentioned that you have taken price increase in the back end of third quarter. So what is the price increase you took in the quarter 3? And what is the cumulative price increase for year-period price increase you have taken into your portfolio?
So year-to-date, before this last price increase, we were about 7% plus. About 7.2%. We have now starting for quarter 4, end of quarter 3, we have taken about 6.5% price increase. We expect at least substantial part, about 2/3 at least to flow into this quarter itself, hopefully, given there is a pipeline also, but that's what we've done.
Okay. So that is what will help you to take your margins to the level of Q4 last year, along with the mix what you are expecting, right?
Absolutely. Absolutely. That's what we are banking upon to do. And we are working also on various cost management thing. So put together, we are hopeful that should help us get closer to our last year numbers by end of the quarter.
My second question is on Complan. What is the contribution from lower unit packs for Complan now and since you have launched, how the contribution has improved? And whether it is helping you to penetrate a bit into the rural markets or the towns because that is what the strategy completed is focusing [indiscernible] for us, how it is helping us?
So every player will have a different strategy. But just to answer, I think the category Nielsen reports about 26% or 27% share of sachets in the category. For us, this number Nielsen reports about 4% to 5%. So we are behind the category, but we also want to participate in a more value -- higher-value consumers as we build our business. And we believe because of our superiors nutrition, that should help us build it in right direction. We have focused also on, but it's not that we are not participating, we are participating, but it will take some time to build rather than only discounting.
And the other thing we have done is, we are focusing on building nutritional differentiation in our communication and working on distribution expansion and some organized channels to drive our market shares, some of which does not get reported like e-commerce does not get reported in Nielsen numbers.
Sir, my last... Yes.
If I can just comment also. I think the strategy for Complan will never be to go into the low price architecture kind of product. But as a defense, we will do that. But our plan is to grow the high-value and high-volume products for Complan. And that is something that we will focus on because of the better science of the product...
Okay. Okay. Got you point. And my last question is on the Sugar Free. This quarter, we have seen growth recovery. So what has helped for the recovery in the Sugar Free brand? And whether this will sustain in the quarters ahead?
So I think we've been working on Sugar Free for largely driving -- getting new consumers, largely led by more on the Sugar Free Green. I think you've seen recruitment of some new consumers that is reported by outdoor panel and some of it through the offtake growth that we've seen through Nielsen that some of the new consumers are coming on board, and we hope this will sustain. So it's early days because the category was in a limbo. We've seen some improvement in the optics. We would want to keep building on this and see how it pans out as we move forward.
Our next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, after the price increase, have we now taken care of the entire RM inflation or there is some more to go?
So most of it has been absorbed. To my mind, I think all products except for the milk, which is early Complan, which will also get managed by the mix as we go forward in the next few quarters.
So the 9-month or 270 or 300-basis-point loss in gross margin will recoup it with this price increase?
Yes, we believe so. There is a good chance that it should be able to cover. We'll see how the product mix also pans out exactly, but this is our plan.
Okay. You mentioned that there is 0% volume growth in quarter 3. When it comes to 9 months, is the volume growth closer to 5%?
It's more than that. We have at a YTD level, 13.3% sales growth, of which about 7% is value growth and remaining would come from volume.
Okay. last year, that is the first 9 months, you had some supply challenges with respect to the seasonal product. Is that addressed?
We do not have any constraint on supplies.
Okay. And my last question is on the other expenses side, if you could give some color on the increase in other expenses on the 9 months basis?
Yes, it's largely led by the wage revision rate for our plant in the Northeastern belt. And also, there are husk and other fuel cost increases in our -- one of the facilities in Uttar Pradesh.
So the wage revision will be in the HR cost or is it in the other expense?
For extended labor charges, so it forms part of the other expenses. So it's workman, not the payroll.
Okay. So will stay, right? The limited cost has to stay?
Yes. That becomes a minimum wage in that plant, and it will stay. We have taken steps to address this through other ways, but this will stay. This will become the profit.
And lastly, I was seeking your comment on the long-term gross EBITDA margin number that you had shared 2 quarters back of about plus 20%, 21%, maybe at times 22%. Where are we on that journey?
So I think I have addressed in the last couple of meetings calls as well, it will take us at least a couple of years before we can reach that number because the main reason being the inflation is extremely steep which effects not just the cost structures, but also the demand. And therefore, even the operating leverage also becomes that much harder. So I think instead of trying to balance everything together or get everything together, I think we should give it a 2 years time frame, by which we should be looking at hitting our 20% EBITDA operating margin numbers that we are targeting.
The inventory in the system for seasonal products because yours is quarter 1 and quarter 2 heavy, now will -- quarter 4 and quarter 1, so we'll head into quarter 4 main season. Inventory in the system, is it normal, excess? Is it...
Inventory in the system is as such normal, except that, during the flush season when the milk price is a little lower, we try and inventorize the SMP over our Complan product. So otherwise it used to be in a normal range.
No, I think little...
[indiscernible] that part of time. If I just want to add seasonal products go up at the season time, but it's in sync with the sales plan. So otherwise -- so they will look lower in the lower sales period. Otherwise, there's no unplanned or unexpected increase in [indiscernible].
But it will start talking for Glucon-D and Nycil in this quarter, right?
Yes. We start building up further.
We start building for the seasonal products, and therefore, they go up.
So there is no abnormality in the system as of now?
No, there is no abnormality in the system. It is in line with the sales growth that we have.
All the best to the team.
[Operator Instructions] Our next question is from the line of Varun Singh from ICICI Securities.
Sir, how much would be distribution improvement compared to last year, our distribution reach?
So our direct distribution has gone up from INR 5-odd lakhs a year back to about INR 6.1 plus, INR 6.1 lakh. And total availability in down trade as reported by Nielsen has crossed 2.5 million outlets.
Okay. Okay. And this number would be how much in last -- same quarter last year, 2.5 million total reach?
I think same quarter will not be comparable because one has to look at a longer period of time. But we have tracked -- it was about 1.8 million in 2019. So we have seen step-by-step this number from 2019 to now 1.8 million has come to $2.5 million in terms of total reach as reported by Nielsen.
Okay. Okay. So actually -- okay, so what I was trying to understand is, given that there has been a decent improvement in our efforts to enhance the product availability to do distribution by increasing distribution reach, and 7% price hike are flat. I mean, why we think that volume growth has been flat?
So I think you should look at -- and therefore, these things play over a longer period of time. So if you look at YTDR, growth rate is 13.3%. In a very muted market, it is about 6%-plus volume growth, and our market shares are at a 5-year high, which means that despite our significant premium pricing across our portfolio, we are able to grow our market shares ahead of competition, which is a proof point of the fact that our actions are working. I think if the market opens up, the demand pulls up, I think you will see a disproportionate also coming in our favor. So it's just not one quarter, but I think YTD will reflect this whole impact of our actions.
Yes. Right. Understood. Understood. But if we have to explain for the current quarter, how should we read the flat volume growth number?
I think couple of categories, while they are very small, like Glucon-D and Nycil, we have seen reduction in numbers. Now these things, they are immaterial from an annualized basis, but for the quarter, we just pulled down growth which may come from other products, and therefore, it is hard to look at them only on a quarterly basis. That's how the numbers play out. So couple of other orders also, which may not have come. So but -- I think it's reflecting -- reflection of the overall demand situation in the market that we see. But I think annualized YTD will reflect our picture of how we are doing on this.
Right, right. Understood, sir. And sir, gross margins, we said that we should be able to be at a similar level compared to same quarter last year. So is this number possible given that there is continued inflation in milk prices?
We are quite hopeful. We are working on that. We made a plan for that, and let's see if we can get our way through, but that's really what our work -- our plan is.
Understood, sir. And sir, my last question is on Complan. So we -- in the presentation, you mentioned that the intensity of market share loss, that has come down significantly. So how -- what are the reasoning that you attribute for this reduction in the intensity of market share loss? And when should we accept this to start growing? And I mean, also if you can talk about the category at large?
So I think I can quickly tell you that the category has been reporting for several quarters now a negative growth, which is not fully explainable, but it's a fact that the market category has not grown. Some far actions seemed to have given us positive results last quarter where we've seen a positive turnaround, both in market shares and our growth levels. We have to just sustain, now going forward, ahead of the category. 2 or 3 actions that have really worked for us is that we have been very disciplined in our focus on communicating to the consumers on the benefits of Complan, we are focused on distribution expansion, and we've also managed to respond to the market pressures of -- while the competition had reduced prices dramatically, we've been able to balance without coming in exact matching that, but some price points on the pouches that we launched at 450 grams, which was matching some of those -- I mean, competing at the right price points, which has helped us.
We also try to play the sachets, but that's a small play, and I don't think that's shifting anything. But largely, I think a concerted action in the right direction, like I explained, distribution, right brand promotions and packed price architecture is really helping us hold on. So largely, as of now, in this negative environment, we would rather play Complan for hold and grow other market shares rather than just try to play an aggressive game here.
Understood. Understood. And you also might have mentioned that we are building a different nutrition [indiscernible] in Complan, and we shall start communicating the same to customers. So how are you thinking about the spend of resources? So aggressive, moderate, super aggressive, I mean how are you thinking about advertisement spend?
So I think what we're doing is what -- in the post-results, we have focused on Complan overall growth, which is not just the physical growth that we stood for, but also rounded growth with a stronger memory and concentration. That's one thing we focused and that communication is happening. And the second thing that we have clearly differentiated is, superior protein presence versus the other products in the market. Between these communications, I think there is an improved traction on the value that Complan provides to consumers. And I think that is an ongoing exercise, and that's hopefully, some of the results are being attributed to, and we'll see if it continues to build in this direction.
Our next question is from the line of Disha Sheth from Anvil Shares.
Sir, can you give us how much category contributes to our sales, like how much is Complan, Glucon-D? And what is the margin contribution as a proportion of the margin? Like if you can give a ballpark?
I am sorry, we don't share these number.
And even in the proportion of sales?
Not really.
Okay. And sir, when you said the gross margins can be same as last Q4 FY '22, and in this Q3, the quarter gone by, the gross margins were around like 43.5%. And as we say, last Q4, it was 50%. So we are expecting quarter-over-quarter 7% increase in gross margin because of the price hike and the volume growth that we are expecting?
That will be held by the price hikes as well as the product mix.
Correct. So we are expecting a 7% jump in gross margins over a Complan, that is what we are planning to....
That's what we're working towards, and the thing that we should come fairly close to it as the right words we'll use, we believe we can do that. We have a plan in place and we should be able to get there.
Yes. And secondly, sir, with the primary sales going for the season, Q4, what kind of -- since in Q3, we had a flat volume growth because of seasonality, what kind of volume growth are we thinking for this coming quarter?
So I think over the next few quarters, we don't give our quarter-by-quarter guidance, but I can tell you that our plan is to drive volume growth over next 4 quarters about high-single digits, at least, if not more, depending upon how the demand situation sets up. And also -- that's how we work towards, but there's no specific numbers.
We are trying for that, yes. And plus, price increase of 7% YTD plus 6% which we took at the end of Q3. So that will be 13% plus the high single. So we are looking at the 20% value growth overall for or....
Not really. The 7% was taken last year similar time. So I don't think we can take. That's become a base going forward.
Okay. Sir, you said 7% YTD, right?
Yes, 7% YTD because it was taken in quarter 4 last year.
Okay. Okay. 6% okay. Sir, and going forward over the next 3 years, with us getting to more research, I mean, PhDs and everything and our distribution network going very strong, you can achieve -- when can we achieve the 20% margin, if I have not missed that question?
So yes, this was addressed earlier, but let me just repeat. I think given the inflation and the demand situation, I think it will take us at least couple of years before we can get to those numbers. I think, right now, we are managing this 200 basis of what the current situation is.
We'll take a next question from the line of Keshav Garg from Counter Cyclical PMS.
I wanted to understand what is the net debt as of 31st December 2022?
Net debt as of December '22 is INR 250 crores.
Okay, sir. And sir, in your judgment, when will the company turn net debt free?
By end of next financial year and much before that even. Maybe next quarters -- next 4 to 5 quarters we should be able to -- we hope to get there.
Sir, if we see that on a market capital sales basis, this is probably the lowest level that our stock is trading. And since demand is also subdued and the margins are also under pressure and valuations also are on the lower side resultantly, so this might be an ideal time to do a share buyback and reduce the number of shares permanently. So what are your thoughts on the same?
So we will take your suggestion and share with the Board. It's going to be a call they would select.
Right, sir. And sir, are you seeing any kind of, overall basis, if we talk? Any improvement in demand on a quarter-on-quarter basis in this 2023 year that we are in right now?
We are quite hopeful that demand will improve. There are several places where we have seen green shoots, but I think let it shape up. I think that's the time we will have to share. We do hear from several experts that it is improving, but let it fully shape up.
Sir, and lastly, sir, the whole portfolio that we acquired few years back, so we are continuing with all the brands and all the verticals that we bought over. Sir, is there no plan to rationalize the same and maybe sell some of the noncore brands in which we are not the market leaders? And maybe it makes sense to focus our management bandwidth and efforts on the focused brands, which -- wherein we are already the market leader?
So I think we don't believe there is -- we have any management bandwidth challenge. All the brands, with the exception of Complan, is a market leader. And we've been able to converge also one of the byproducts subbrand, Sampriti also under Nutralite umbrella and therefore, it has become larger and more meaningful.
On Complan, we've already talked about it. It's a little bit longer haul. We're looking at hold and build. So it may take some time, but we do believe there is good potential to build that as well. So right now, there is no specific case in front of the management and Board to rationalize. There is a fair number of opportunities for the business to look at building up sizable Zydus Wellness for future.
Our next question is from the line of [indiscernible] Bhatia from Anand Rathi.
Just wanted to know when can we see stabilization in the Complan market share and the revival in the growth?
So I think we've already seen -- at the MAT level, of course, it is practically stable over last quarter, but on a month-to-month level, we've seen over the last 4, 5 months what was actually going down last 5 months, we've seen an increase, and that's why we are positive about it. We've also seen a growth internally for the quarter on Complan, while Nielsen continues to report negative growth for the category. So I think it's early days. The biggest challenge for us to deal with this is that category has been degrowing. And the only source of growth for the category has been low unit price packs, which we underparticipate given the profit pools being lower in that part of the market.
So I think we remain conservative in our approach and hope to remain positive growth, but not aggressive growth. I think we'll build step by step and focus more on hold at this stage in Complan rather than take a very aggressive stance on it at this stage, till things stabilize.
Okay. Okay, sir. And also, I wanted to know the outlook on the volume growth given that there has been like a flat growth in Q3 and really weak rural demand, so needed a little bit more outlook on the volume numbers?
So I think growth are actually one -- there is a lot of debate on growth. Generally, I think the market is muted, and it's not a larger question mark any which ways. For us and for anyone, I think given the volatility of the overall situation and the category-wise play, I think it may be better to look at our YTD numbers or moving averages to see our growth, which gives you a better perspective given this volatile situation. So for us, 9 months, 13.3% and a volume growth of about 6.5-plus percent makes us feel more confident. We are hopeful that we'll have this momentum over the next 3 to 4 quarters as well unless the demand moves up substantially.
Our next question is from the line of Mayur Parkeria from Wealth Managers.
Am i audible and clear?
Yes, you are audible.
Hello?
Management team, you can hear your Parker, right?
Yes, we can.
Okay. Two questions from a little longer perspective. First, you partly try to address that, but I wanted a little more longish view there. Post our acquisition of the new portfolio the full year and COVID took place then there has been rise in inflationary situation. Some -- you also had mentioned earlier in the presentation and the comments that some down trading has been happening. Supply chains have been -- so in a lot of, I will say, market intervening in a certain ways, but in a steady state, no, what do you think probably would be a reasonable gross margin to expect given product mix on an annualized basis over the next 2, 3 years, assuming a steady state what do you think could be a good gross margin we could expect?
So I think it's a tough point to handle because we don't want to give you a very specific answer. But what I can tell you is, given the inflation, one is always responding to inflation given there is a demand volatility, which comes along with it. Assuming that the price has stabilized, I'm not even saying go down, but even if they stabilize at the current level, we expect 3% to 4% improvement in our annualized gross margins. But that's really our plan. And with the right product mix, we can do that. But I think I don't want to commit too much because -- or get too aggressive on this.
The right answer also for this is that [indiscernible] obviously, that we have back into our original gross margins, which was 50-plus. And ideally, with the portfolio we have, our aim is to grow profitably. And if you only improve EBITDA margin, it has to only be led by gross margin expansion and the right product mix. So that will mean that we will have to grow our gross margins, if we want to achieve that number. So that's definitely the plan to continuously improve the gross margins once we see some stabilization on inflation.
Yes. Absolutely.
So sir, there is some break in the voice, but did I hear you right that you said go back to 50% plus gross margin, right? This is what you said?
Absolutely. That's what he said.
Okay. And second question was also similarly little -- I think given the product mix, we are category leaders in some and most of our products, and we are creating also a demand in certain -- in most of the products, the health food and all.
So given that situation, do you believe that -- also on the -- when of market has been muted, we have delivered 6.5% volume growth. Do you believe that over a 3-, 4-year period, we could easily -- we could do volume growth of double digits on a compounded basis given the product -- the strength which we have and the efforts which we are doing on the description, do we believe that on a -- one can go down based on market muted, rural not doing well or something? But do you believe that we are -- we can do double-digit volume growth on a 3-, 4-year basis in a steady-state market, given the product mix?
In a steady state market. So we are looking at growing double digits over next 3 to 4 years in a steady-state market. And our focus remains on volume-led growth because if 5 out of 6 brands are actually -- we are market leaders. So our task is really to grow penetration and increase consumption. And that will happen when you get new consumers, drive volume-led growths and get new consumers in. So our belief is -- and our actions are also in place to drive a double-digit growth, largely led by volumes, and therefore, we are in that thing. But again, the inflation plays a role in terms of balancing some of these factors.
And which products should actually drive this kind of double-digit at an overall level? Just as a qualitative basis, which you believe is a more potential compared to the any other ones?
I think across our portfolio, there are opportunities for each of the brand to contribute to this double-digit, we believe. There is a good reason for each one of them. We also work from both restaging, renovation of our existing portfolio or addition, wherever we see there is reason to attract new consumers around extensions. So each of them -- each of these brands have possibilities of -- not -- these possibilities have a good potential to get the double-digit growth opportunity.
Okay. So last maybe technical question, last one from my side. In the sweetener and in the Nutralite segment, and also maybe I don't know if Everyuth presents that opportunity, do we have a B2B business proposition? And if so, what would be the share? And how do we see that?
So we have a B2B business on 2 fronts. Actually, one of them should not be the CST. While the transactions are B2B, but it's actually a branded consumer play. The real B2B business is food service, which caters to the food operators. And we service them. Nutralite, as a brand, has a substantial portion of that business. More than 60% of that brand serves that consumer for food service. Sugar Free also participates in this business, both from back-end kitchen usage as well as for some of the Cafes and QSRs buying the sachets around it. So we do see a good opportunity, and we're building our portfolio to have a more meaningful play in that part of the business and drive our growth.
And does Everyuth present the situation for [indiscernible] the way it is organized, situations are growing up in price inflation, the consumer is ready to spend on like -- do you see that as a play or no, you will want to build in a B2C over there?
So we remain B2C on Everyuth. We will explore, but we are not organized yet on B2B play on Everyuth. We'll explore going forward as there is some good value opportunity there on B2B.
The next question is a follow-up from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, I have just 2 follow-ups. One, when you were initially giving your commentary on the Sugar Free portfolio, I could register overall sugar-free, how much did it grow for us in the 9 months?
So we don't share internal numbers. From an optic point of view, at MAT, it is just...
Because see, what you mentioned, Sugar Free substitute was flat growth and then you said Sugarlite and Sugar Green is 12% of the category. So what the category growth had been?
So the category has had a flat for a MAT level, while last quarter, normally, we don't share quarterly numbers from optic, but just to give you our sense of things are turning around, we shared that last quarter the offtake growth has been positive. That's really what we reported. At our MAT level, however, it is still flat because it was declining earlier as reported by IQVIA, and now it is seeing a positive movement.
And 9 months?
MAT level is what we have. That's how we report on...
But 9 months is also negative -- 9 months is negative and quarter 3 is flat?
No, no. 12 months -- sorry, 12 months MAT level 12 months flat.
12 months. Okay.
Last quarter, it was positive. And when we say -- when we shared 13%, it was showing that, in the overall sweeteners, the Sugarlite and Sugar Free Green have contributed to a 13%, which is the new products, which is helping us recruit new consumers in the sweeteners portfolio.
Okay. And sir, on the taxation side, what will be the taxation for '24 and -- '23 is 0, '24 and '25?
'24 is also likely to be 0 and up to '25, '25 maybe 0 or maybe some marginal increases in tax.
Our next question is from the line of Kapil Jagasia from Nuvana Wealth.
[indiscernible].
Kapil, I'm sorry, can you switch to handset mode and speak? We can't hear you at all.
Now it is better?
A little better. Please go ahead.
Sir, this is just a follow-up from previous participant. Regarding this down-trading from rural markets, how are we here right now? Has the down-trading resolved? Or you have seen further down-trading this quarter. So just some color on this?
So I think down trading as -- I think while the whole category is all multiple categories see down trading, we have seen some of these are positive for us, for example, in Everyuth any sachet sales really good for us so far. I think the Complan, it's -- the growth is largely coming from LUPs, in which our participation is relatively less. But overall category is showing a negative 2% growth.
Okay. Sir, this would be specific to only Complan, like Glucon-D, no downgrading seen in rural markets?
Not yet.
Okay. And just one bookkeeping question from my side, reason for decline in employee expansion this quarter?
So largely on -- one largest impact -- largest reason being that our Sitarganj facility that we had stopped at the end of quarter 1, I think that some of those benefits are fully accrued and captured in this and [indiscernible] there. But those are nonmaterial in nature. I think it's largely the...
I think also, Kapil, down trading is on the category. We didn't say down trading on Complan, the whole category, the structure is changed along...
Okay. So just specific to this like employee spend, so the entire benefit is taken in this quarter, nothing would be carried forward next quarter?
So it's going to be a kind of recurring saving. So once that gets reflected -- I mean, we have closed on our operations somewhere in the month of June. After that, the benefit which we had has been fully approved in this quarter. So next quarter also we'll see that kind of gain in the employee cost. Most of the gain coming through in the...
Our next question is from the line of Anuj Ramachandra from A.N.P. Investments.
My perspective is you guys are doing really reasonably well in the present market situation. But I only have one question with respect to the long-term perspective. I know you guys have set a steep target of INR 5,000 crores to reach that similar target of INR 5,000 crores. But the only question that's bothering me is, how are we going to reach? Is it like with the present categories or with any -- whether Nutralite is going to be a substantial contributor going forward? Or is it Everyuth, or is it the present Glucon-D, Complan and Nycil?
So I think I have kind of addressed some of these questions earlier. I think each of our brands...
Sorry, I was not part of it. I'm sorry.
No, no problem. I'm going to address it again. I'm just to -- each of our brands have good double-digit growth opportunities and we are building on each one of them. Some of them are already displaying on a consistent basis. Some of them have been slightly behind. But I think over the next 3 to 4 years, I have no reason to believe that any of the brands will faulter on that on a medium-term basis, and therefore, I think it should take care of -- it's not just one brand but that portfolio which should help us get to a double-digit growth.
Okay. And the question is from INR 2,000 crores to INR 5,000 crores, is it like -- is it achievable? Or is it -- how has it been set as a target is the main question?
So I think we are looking at a good double-digit growth as we go forward. There may be some other opportunities, which may be added on as we go along, but our own internal, and something that I'll focus for this conversation will be largely around organic double-digit growth, which should help us push it together as we go forward. That should help us really push the needle up.
Okay. And one second question, just last question. With respect to e-commerce, do we have a dedicated digital marketing team in our company? Or is it the marketing team only handles the digital marketing also?
So I think there are 2 parts when you -- yes, go on, sorry.
Yes, the question is basically with respect to when we see the traction, recently, we released this Everyuth moisturizer, right, moisturizing lotion. I don't see any traction about it on the e-commerce platforms because we see Complan doing quite well actually on e-commerce, though it's lagging behind on offline modes. Complan seems to be doing quite well. Look, we see -- other categories are category leaders. Nycil is okay, but Everyuth seems to be slightly lagging behind on e-commerce also where there's a huge potential?
So let me just address the first part. So almost for 5 years, we have had a dedicated person for e-commerce, much before we acquired Heinz and we've been able to, therefore, use this capability, which we built a bit ahead of the curve in integration of Heinz's portfolio as well. And therefore, there are 2 parts of digital. One is the digital communication brand building, which is on -- across multiple platforms like search, videos, et cetera, YouTube, programmatic work that we do, as well as the fulfillment which is the sales part of it, e-commerce where we have a dedicated team who work very closely with some of these accounts. And that's why, typically, our market shares are equal or ahead of our general market share, general trade market share on the gross platforms.
Some of the new categories, and this shows that you're really tracking us closely, that like you mentioned Complan we are doing well and actually our market shares in some of these platforms are ahead of our general trade shares. Some of the new categories become harder or more expensive on some of these new platforms because these platforms negotiate or bargain much harder, and you don't see right value there, and you want to wait to build it in the other markets. So it's a call which we may take at a channel level how we want to play it looking at the returns we are getting and the value that channel may be providing. But we have a dedicated and a very capable team, which we believe will help us build our share and our scale of our business in these platforms.
Our next question is from the line of Selva Muthu Kumar, an individual investor.
Sir, my question regarding any further plan to expand our Nutralite portfolio to international market, how much revenue from 3 to 5 years from here on? Can you throw some color on this?
Look, our -- the 2 biggest drivers for international market remains on Complan and Sugar Free franchise. We have taken some opportunistic or some good possibilities around Nutralite, Glucon-D and Everyuth in the international market. But we don't have a specific number to share with you, but we are looking at market-to-market. There is good possibilities in limited markets, but the lead will remain around Sugar Free franchise and Complan, which we have seen good value from our international market.
As we speak today, we are also dynamically managing this portfolio, and we've seen [indiscernible] they sound better. So if there may be something that's comes up, we'll obviously be happy to share.
Okay. So what about ImmunoVolt, recent product launches from ImmunoVolt. Can you throw what kind of product is ImmunoVolt and Nycil Body Mist nice? Can you throw some color on these 2 products?
So quickly responding, ImmunoVolt, I think right now, it is -- the market share in the candy part of the energy or the glucose tablets, as it is called by Nielsen, our market share has moved from a single digit to 20%, 25%, 26%. But after that, I think it's also -- now we need to build the category. So it's going to take a little bit of longer time, but I think we are now playing at least in the mainstream. We are looking at can we leverage some of the confectionary part of the market and build this bigger. It's a bit of medium-term haul, not a quick win.
As far as Nycil Mist is concerned, I think we launched in the midst of a COVID season, so we've had a little bit of challenge. We are looking to reevaluate this, and we will share more details in the coming quarters as we go now.
So what about the key input material, aspartame and DMH's ice increasing or decreasing and what kind of strategy you're planning to hedge on this, specifically to aspartame?
So as far as the key input material aspartame and DMH is concerned, we've been able to pass on all the price increases. And we are -- our margins are going to be equal or higher than the past.
Ladies and gentlemen, that was the last question. I now hand the floor back to the management of Zydus Wellness for closing comments. Over to you, sir.
Thank you. I think in this volatile and difficult inflationary environment, I think we've been able to hold ourselves well. But the key task for us remains on 2 fronts to continue driving a double-digit growth for the year, and we are committed to it. We are also very focused on building positive momentum around profitability, which has to start more at a gross margin level, flowing down to EBITDA, and that's really what our commitment over the next few quarters will be to work towards. And hope to see you in the next quarter. Thank you very much.
Thank you, members of the management. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.