Zydus Wellness Ltd
NSE:ZYDUSWELL
Earnings Call Analysis
Q3-2024 Analysis
Zydus Wellness Ltd
The company is navigating a period of dynamic transition with aspirations to return to double-digit growth by fiscal year '25, capitalizing on early signs of improved demand and the promise of new initiatives. A deliberate pivot toward Stevia-based products has propelled consistent growth in the Sugar Free category over multiple quarters, counterbalancing challenges with aspartame-based sweeteners. The product mix within the Food & Nutrition segment discusses stark differentiation, showcasing varying outcomes—Nutralite's price adjustments due to input price changes contrasting with Glucon-D's seasonality pressures.
The outlook suggests a positive trajectory as volume growth aligns with revenue, despite a slight contraction. There is a notable uptick in household penetration for brands like Complan, hinting at an expanding customer base underpinned by a strategic pack price architecture that enhances accessibility while maintaining margins. Future growth targets are bolstered by intentions to broaden distribution networks significantly, aiming to add 50,000 to 100,000 outlets within the next three quarters.
Financially, there is cautious optimism with anticipated improvements in gross margins following a period of pricing adjustments and stabilized commodity prices. Management has signaled higher margins for the upcoming quarter relative to the last, with committed efforts to restore margins to levels seen in fiscal year '21. The narrative remains confident—propelled by strategic pricing, judicious cost management, burgeoning international growth despite challenges in African markets, and proactive expansion endeavors in Bangladesh and the Middle East.
Amid the concerted efforts to revitalize growth, brands like Nycil have experienced an increase in market share since acquisition, indicating successful integration and strategic management. Moreover, there is a commitment to regroup and reintroduce products like Sugar Free Lite, further demonstrating a focus on innovation and market adaptability. The company anticipates a stronger performance bolstered by a robust summer season that could serve as a catalyst for growth in the next fiscal year.
Looking ahead, the company envisions a comprehensive turnaround strategy. With a detailed roadmap to restore EBITDA margins to the targeted 17-18%, the narrative is one of resilience and strategic recalibration. It's a story of leveraging new launches, augmenting distribution, and enhancing product portfolios to sustainably position the company for growth in an ever-evolving market landscape.
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Ladies and gentlemen, good day, and welcome to Q3 and 9 Months FY '24 Earnings Conference Call of Zydus Wellness Limited 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.
Thank you. Good evening, everyone, and welcome to the Q3 FY'24 results conference call of Zydus Wellness. From the management, we have Dr. Sharvil Patel, Chairman; Mr. Tarun Arora, CEO; Mr. Ganesh Nayak, Director; and Mr. Umesh Parikh, CFO.
I'll now hand over the call to Mr. Tarun Arora for his opening remarks, post we can -- post which we can open up for the Q&A session. Thank you. Over to you, sir.
Good afternoon, and welcome to the post-results teleconference of Zydus Wellness Limited for quarter 3 financial year 2023-'24. Like Karan said, we have with us Dr. Sharvil Patel, Chairman; Mr. Ganesh Nayak, Director; and Mr. Umesh Parikh, CFO. It is always a pleasure to interact with all of you, wishing everyone a great 2024.
During the quarter gone by, the FMCG sector continued to witness demand pressure on a sequential basis. Similar to last quarter, as expected, buoyancy in rural demand continues to lag. The same was further accentuated by macroeconomic factors like low agriculture yields impacting rural demand, delayed winter and late festive season. However, some of the consumption segments continue to beat the trend.
The Personal Care segment witnessed yet another double-digit growth for the quarter, with Everyuth portfolio continue to gain good traction, which is further aided by Nycil. The Food & Nutrition segment continued to face some brand-specific headwinds plus demand pressure impacting overall portfolio growth. Similar to last quarter, Nutralite brand continued to witness good volume demand, but had negative value growth due to market-driven prices. The Sweeteners portfolio growth was also impacted due to very low sales of Sugarlite as the Honorable Supreme Court allowed to clear the existing inventory towards the end of the quarter 3 and let the litigation continue at the trial court.
The company registered consolidated net sales degrowth of 3.1% on a year-on-year basis. The consolidated gross margin on net sales is on upward trajectory, showing an improvement of 279 basis points on a sequential basis and 418 basis points on a year-on-year basis.
Let me take you through some other highlights of the consolidated financial performance of quarter 3 financial year 2023-'24. Our net sales degrew by 3.1% to INR 4,001 million. The company reinvested some of the gross margin gain into brand building. As a result, advertisement expenses grew by 11.8% year-on-year. Other expenses grew by 17% year-on-year. Cost of strategy consultant and increase in minimum wages at Ahmedabad and Aligarh facility drove up the other expenses.
EBITDA degrew by 51.1% in year-on-year to INR 127 million. The company reported profit after tax of INR 3 million, which includes INR 34 million of deferred tax liability, a noncash item.
With that, let me share some of the highlights of operations for the quarter, which will also cover category growth and market share numbers as per the MAT December '23 report of Nielsen and IQVIA. Zydus Wellness portfolio brands were available in 2.9 million outlets as per the revised reporting of Nielsen for MAT December 2023. Therefore, we are revisiting our plan for availability to 3.5 million outlets over the next 3 years.
We continued our thrust on marketing initiatives to grow the categories and increase our market shares of our brands during the quarter. On Glucon-D front, the glucose powder category has grown by 4.4% at MAT level. Glucon-D brand has grown faster than the category and registered strong growth for the quarter. The brand has maintained its #1 position with a market share of 60.0%.
On the Complan front, the brand has registered ahead of category volume uptake growth. With continuous efforts and interventions for demand generation, Complan has witnessed 16% growth in penetration at MAT level. The health food drink category has registered a growth of 5.8% at MAT level. Complan market share stood at 4.3%.
On the Sweeteners front, we continue to push consumption of Sugar Free Green with our media campaign with celebrity, Katrina Kaif, which was further amplified with digital campaign during the 2023 Cricket World Cup. The brand maintained its market leadership with market share of 96%.
On the Personal Care front, Everyuth brand registered yet another quarter of strong growth. The face scrub category has registered a growth of 7.6% at MAT level. Everyuth scrub continued to maintain its leadership position with a market share of 44.4%, which is an increase of 263 basis points over the same period last year.
The Peel-Off category has registered a growth of 4% at MAT level. Everyuth peel-off has maintained its #1 position with a market share of 79.5%, which is an increase of 113 basis points over the same period last year.
The Prickly Heat Powder category has grown by 2% in 2023 MAT in December. Nycil brand has grown faster than the category and maintained its #1 position with a market share of 35.1%.
As we speak, we have finished our seasons preparedness and have started replenishment of fresh inventory across trade channels. Our demand generation and brand-building efforts will continue, which will -- which shall drive the growth of the company. The company's journey towards renovation will propel the growth further.
Thank you, and we will now start the Q&A session. Over to the coordinator for Q&A.
[Operator Instructions] We have our first question from the line of Sanket from Ambit. Since there is no response, we'll move on to the next question from the line of Kinjal Mota from Banyan Tree Advisors.
So my question was related to deferred tax adjustment which was mentioned during this quarter. Could you please give some details on what it is? And second thing is, why is the 9-month FY '24 tax is negative? These are the two questions if you could help around.
So this is -- because on a conservative basis, we created our deferred tax asset in the earlier quarters and because they are in the standalone entity of ZWS, there are profits and we had to reverse this as a deferred tax liability. And therefore, you see this as a line item in the P&L.
It's a noncash item.
It's a noncash item.
Okay. Got it. And the second question is what is the MAT credit entitlement so the amount is adjusted for INR 188 million, which is mentioned in the note?
Yes. So MAT entitlement was mentioned even in the last year's balance sheet as well. So -- because we are in the zone in the Sikkim where we have this availability.
Okay. Fair enough. And what is the tax rate that we could expect for the FY '24?
So FY '24 and FY '25 will be in the nil tax rate and thereafter, we will be paying the normal tax.
[Operator Instructions] The next question is from the line of Madhur Rathi from Counter Cyclical Investments.
Sir, I wanted to understand, when I look, even on a Y-on-Y basis, our sales have declined, but we have gained share -- in a lot of our products where we are already market leaders, we have gained additional share. So if you could just help me understand why is that the FMCG market is growing but it's not moving into our sales growth.
So I think if you look at FMCG market, I think there are -- overall, there has been a challenge. While for the last quarter, Nielsen has reported a 6%, but most of the categories are struggling to get growth. For us, also, if you deaverage the whole business, the Personal Care is showing a fairly good growth and which is what we've also reported. It's the Food & Nutrition, which is not growing.
So I think the impact is category by category. Overall, there is a pressure on demand and the categories are a bit of stiff. Fortunately, because of our actions, we are in a good competitive situation. Our market shares are going up despite the market pressures or category pressures. And we believe as we move forward as the demand improves, I think the category growth will be back and we should expect improvement in overall growth and specific to those categories where we have had branded pressures.
Sir, when can we see -- so you said that demand that -- is there a time line in your mind as well as some kind of quantity, like number, if you can give that we can grow up for FY '25 as well as '26?
So if you look at it, I think we had even in the last call also mentioned that quarter 4 onwards, we should see the growth.
Mr. Rathi, can you please mute your line, there's some disturbance coming from your line.
Yes.
So even in the last call, we had said that we expect growth to be coming back from quarter 4, and that's what I think it's looking like that demand is improving, though early days, and it's only green shoots, but we expect growth to be coming back to normal starting quarter 4 and our wish list or our expectation is that FY '25 should be back to normal double-digit growth that we work for.
Okay. Sir, we are -- so there is some kind of growth that you see in Glucon-D for this Q4 as well as Q1 earlier year, which was not very well for us.
So the earlier year, as you said, it was subdued, but we still have to wait until March and April to understand how the season is growing, but the start is good.
[Operator Instructions] The next question is from the line of Karan Bhuwania from ICICI Securities.
Sir, firstly, on Sugar Free that you have mentioned in the PPT also that despite headwinds, there has been good upticks in terms of volumes, right? And -- so if you could elaborate more on that as to how has the demand of the sugar-free products, especially the products that are based on aspartame.
So let me give you our overall Sweeteners portfolio and how our business has been. I think we've had two things that have affected overall Sugar Free business. One has been the Sugarlite not being there for a major part of the business. And aspartame has had a muted run post-WHO.
Most of the growths are being driven, and we've seen now several, 11, 12 quarters of consistent growth of Sugar Free Green, which is a Stevia-based product, which is covering up for it. We are seeing good [uptake] momentum coming from Nielsen, which we hope will help us recruit more consumers as we move forward. A lot of concerns over what affected seems to be reducing, and we hope to be able to convert it into better -- improved penetration over the next coming quarters.
Sir, if you could just highlight what was the contribution of Sugarlite, which was not there in this quarter? So that will be helpful to understand the growth better.
So Sugarlite, at an overall level -- annual level has about 1.5%, 2%. Of course, in the smaller quarters, it gets more accentuated.
Got it. Got it. Secondly, sir, on Complan, are you seeing any increased competitive intensity versus previous few quarters? Are there any change in terms of competitive intensity in terms of pricing or distribution that you are seeing right now?
Not really, it's the usual. It is a very competitive category, and it continues to remain so. So the good part is that we have been able to take some price increases and with the milk getting -- stabilizing, we expect it to be in a better shape both ways.
We have our next question from the line of Priyank Chheda from Vallum Capital.
Yes, sir, my question is on what was the volume growth for Q3?
Volume growth for the quarter is in line with the total fee growth.
So it's almost the same parity of minus 3.
Okay. Okay. My next question is on how do we look into the growth of negative 5% for Food & Nutrition segment? It comprises a portfolio which is very different and very unique to each other. If you can help us, sorry, I might have missed some of the category growth numbers that you spoke. But if you can also help us dissect negative 5% growth, say, in Complan or Nutralite or Sugar Free or Glucon-D, how has been the growth in each of the brands would give us a guide which are the brands which have been doing well and where the action is required.
So like I explained in my initial conversation, I think one part of it is Nutralite where there is -- because pricing has to be adjusted basis of the input prices. And therefore, we've had a reverse mix where the prices have to be brought down. The volume growth is higher than the value growth. There have been also impact on the value for our Sweeteners like I just explained in the last thing. Otherwise, overall, these are 2 major factors if I were to look at and a bit of an impact on Sugar Free, led by aspartame.
So that's Nutralite and Sugar Free. What would have been the growth for Complan in the current quarter?
Sorry?
What would have been the -- so Complan remains one of the largest brands within Food & Nutrition, right? What would have been the growth for that if not...
Complan is not the largest brand. Glucon-D is the largest brand for -- annually. We don't give quarter-to-quarter breakup of numbers, but annually Glucon-D is the largest brand.
Okay. So what would have been the growth for Glucon-D? Would that be in line with the segment decline?
So YTD, Glucon-D, like I explained, has been -- due to seasonality has been under pressure, though last quarter, of course, on a [indiscernible]. But YTD, it has been under pressure because the season got impacted. And we had explained in quarter 1 due to season, it got impacted.
So I think for the quarter, if you look at it, obviously, Glucon-D doesn't have the large part of the realization than Complan is. Complan is -- I think we still need some time to see how Complan moves forward in its growth trajectory, but we are seeing some improvement. So we are hoping that in this coming year, with measured investments and not over-the-top investments, we see a better performance on Complan. But other than Complan, I think our strategy for 2024 is quite aligned.
I'm sure. If you can help me -- so as our portfolio is kind of a seasonal as well as wide, it would be great if you can focus more on each of the brands and their categories, wherein if you can set up more, what are the kind of strategic pillars and the steps that we are taking to revise the Complan, that would be great.
So I think -- for Complan, I think I don't think we -- in terms of our overall 2024 plan, Complan, we will still require to continue to build on the current strength that it has, which is better protein -- superior protein and the aspects of how it helps in growth and height and other benefits. So I think that proposition will continue with the improvement in gross margins and others, we will see that trickle down in terms of better profitability on Complan.
So Complan, I think, currently, it is to manage with the current base of business that we have and grow it in that line with measured investments. The growth and -- the growth for the overall business will be driven by, obviously, the other brands and the skincare brands which are doing extremely well.
How should we look into the gross margin for the full year? On a YTD basis, we are up 100 basis points. Would we end our FY '24 in a similar way? Or should there be impact of June quarter -- sorry, impact of the March quarter where base is very low, so there can be a further expansion into the gross margin for the full year?
So on the full year basis, we are expecting further improvement in the gross margin and good improvement in the gross margin with the commodity prices and milk prices stabilizing, so we are yet to see further gains in the...
So quarter 4, you will see higher gross margin than quarter 3.
Okay. And on the distribution front, if you can help us, what are our plans to accelerate the distribution into the categories which have a very low penetration? Plus, we were tracking data on the household gains for our Complan brand, if you can help us update on that?
So first of all, in distribution, Nielsen has revised numbers for availability across our brand portfolio. They have now stated -- restated our availability at 29 lakhs, 2.9 million for 2023, which was earlier stated at 25 lakhs. Over the next 3 years, we are looking at how do we reach 3.5 million outlets from a GT point of view. We continue to drive our gains in both modern trade and e-commerce. And our, clearly, distribution focus is to make our products more widely available, not just in quantity numbers, but also a wider range across the outlets that we cover.
Over next 3 quarters, we are looking at adding at least 50,000 to 1 lakh more outlets in a direct distribution drive that is planned end of the season, which is post the summer season.
Third part, on the Complan expansion of our households. I think we continue to see double digit. In fact, in my initial speech, also I mentioned, we've seen a 16% increase in household penetration for Complan. So largely Complan is growing on the basis of volume and increased penetration, which is aided by our pack price architecture, which is making it more accessible price points without compromising on margins.
Sorry, if I can squeeze in further one question. So if there is a 16% expansion into the households, penetration for Complan, would it be very suffice to say that even the brand would have grown at, say, at least 10% for the YTD number?
Not really, not really. But we've seen some improvement in volume market shares like we mentioned, but not really. I think some of these data come from different sources. They look from a trend point of view in the right direction, but they don't exactly match.
If you need more -- but the second point is that it'll also add on to our future growth for the brands, which is what this leads into. So it's more of an early measure, early indicator of what we could build Complan with.
So sir, how should we look into -- if there is a household expansion that is happening while...
I have a small suggestion, if you have more questions, please reach out to our Investor Relations. We'll be happy to do a more detailed call to help you with this because...
We have our next question from the line of Tejash Shah from Avendus Spark.
Sir, how would you explain the divergent trend that we have seen in Food & Nutrition versus Personal Care?
So like I explained earlier also, I think the Personal Care shows that both the brands are in good shape, and they are driving and there has been a consistency. Food & Nutrition is a diverse portfolio where we've had a mix bag. Clearly, brands like Nutralite, like I mentioned, continue to be on a volume track and delivering growth and profitability.
There have been some challenges in Sweeteners and Nutrition portfolio, which is sizable. And therefore, they have impacted. But we believe, clearly, Sweeteners portfolio, we should be able to address as with our actions. In very short term, Nutrition portfolio should turn around, but may take longer to get to a full momentum as we see. So it's a quarter which has got impacted from overall.
Sir, second question is, for many quarters, you have been calling out that Sugar Free has -- Sugar Free Green has been going very well, almost since last 11 quarters, as you have mentioned and -- when other variants had very undesigned headwinds also, aspartame as you called out. Despite that, Sugar Free has just reached overall business 7% contribution. So just wanted to know, so that growth is also not materially higher than the overall portfolio growth is it.
So Sugar Free Green is 7% of the Sugar Free portfolio. That's what we have called out. And it has actually moved substantially from almost 2% about 3, 4 years back. And we believe it is growing at a pace where it will disproportionately impact the overall growth of Sugar Free. So I think it's moving in the right direction, and we do believe it will help us keep driving the penetration of Sugar Free, which got impacted over last 2, 3 quarters after WHO. Earlier also, there have been ups and downs with Sugar Free, but this should help us overcome this substantially.
But I think, to your point, one thing is important to understand that Sugar Free Green is at a higher price point than the other SKUs. So I think, as I said, it's a strategy that combines all the 3 brands, and we cannot just only build on only Sugar Free Green. But in the long term, 3 to 5 years, Sugar Free Green will see significant traction in terms of higher market share in the overall Sugar Free space. But both -- the other 2 brands also, both in the culinary and in the use tea and tabletop also have to have the right mix.
So I think that's what the team is working on to make sure that the healthy mix remains, obviously strongly aided by the growth of Sugar Free Green, but with equal opportunity on Sugar Free Natura also and maintaining the base with Sugar Free Gold with the headwinds that we have faced. We have tweaked some things that you -- for the brand. And in the coming quarters, we would see a positive impact from that.
Very clear sir. And last one, sir, when you look at CY '24, FY '25, what are the top 3 things or initiatives you're excited about? And what are the top 2, 3 things that you are actually keeping your fingers crossed for?
So I think...
Fingers crossed for is clear. It's Complan and Sugar Free, we need to see how it trends forward. We hope for a good summer and a good summer -- even a normal summer will be better than the summer last year. So that should have a positive momentum. And beyond that, I think Tarun can talk about the major initiatives.
So we have at least 3 to 4 reasonably large launches that we have planned in this year, which is not just for this year but over the next 2 to 3 years that we'll have. Plus, within these 2 brands, we have some couple of initiatives which should help us drive. Like I also mentioned, there is a distribution expansion, right? So we've got our hands full in terms of how we are looking at it. We're putting some pilots in place to extend ourselves into some new need spaces also. So our activity calendar is reasonably full. And we are -- we still remain bullish on what we can do despite the challenges we face, especially in the last couple of quarters.
We have our next question from the line of Kaustubh Pawaskar from Sharekkhan by BNP Paribas.
I just wanted to understand on your initial comment of seeing a good improvement in quarter 4. So is it because that there will be a lot of uptake prior to the summer season? Is it because of that? Or overall, you are seeing some material changes in the demand environment?
Sorry, good improvement in?
Good improvement in performance in Q4?
So I think there are 2 parts to it. Certain season buildup, which happened across our portfolio, which happens where the wholesale and the distributors start building up in January, February or February, March because the season is coming, which is part of the portfolio and which will happen, which anyway looks good. But we are also seeing some green shoots of demand, and we are expecting all our -- some of our initiatives playing out, which we have put in place. So put together, we believe that quarter 4 should start -- help us take it to the next level from where we've seen quarter 2, quarter 3 demand for our portfolio.
So I think as Tarun said, it's a summer-skewed portfolio at least and quarter 4 is loading. So it happens every year. So assuming that this is a normal summer, we would see better traction.
And Q1 should also be good considering the fact that last year Q1 was affected by unseasonal rains and all. So I think even in Q1 should also be good for us considering the base.
If we have a better summer, Q1 will be the main growth driver for this quarter to FY '25.
We have our next question from the line of Ajay Thakur from Anand Rathi.
So I wanted to check on 2, 3 things. One was on the Sugar Free. So -- this is about the Sugar Free Lite. When do -- can it be kind of just a 1 quarter kind of a phenomenon or we can expect that Sugar Free Lite will be kind of hitting the markets sometime soon? And how do -- how are we looking at filling that gap in terms of Sugar Free Lite?
We have strategy in place, but we will discuss once the launch.
Yes. So I think we've started at it. I think from March starting, we should be back with a normal momentum on this Sugar Lite or equivalent space. And we will, in the next quarter, be sharing a more detailed strategy where we believe, because of this innovation and our capability, we should be back to normal business in the following quarters.
Okay. And sir, I wanted to get more sense on the international business. So we are -- what would be our run rate right now for 9 months in terms of the international business as a percentage of overall sales? And what are the growth drivers that we are looking forward to for the next year in terms of growing it faster?
So in the 9 months gone by, we've had a double-digit growth. However, it's been impacted by specifically Africa market, where we've had some challenges, specifically in our largest market Nigeria, where there were macroeconomic challenges, but most of our other markets like Bangladesh initiative, Middle East are firing as per plan and good to build up right. But at overall level, it'll still be closer to 3%, 3.5% because of the challenges we've faced. So that's very where we are.
Understand. And for the drivers going forward, how are we looking in terms of growing the international business, say, for the next year?
So like I explained, there are these 3 markets we've identified, Nigeria, Bangladesh and Middle East. Nigeria, while we'll look for solving for the macroeconomic issues. In terms of our Bangladesh initiative where we're investing, we've created our subsidiary, and we are pushing stuff. We expect a good traction. We're already seeing some fairly good traction on that. Plus, we're launching new products, some of which are available in our Investor deck. For -- we're starting with Middle East and we'll extend it to other markets as well on Sugar Free D'lite.
Understand. And sir, lastly, in terms of the price increase. So I believe we have taken some bit of a price increase, but given the fact that in the current quarter, if I were to look at it, it is kind of a flattish price increase that we are seeing. Can you just give some bit of an indication of how this would likely trend in quarter 4 and onwards in terms of the price increases? Is there something that we can expect in terms of price increases going forward as well?
So I think it's a mixed bag because like I explained, Nutralite we had to because the oil prices come down, so we have to pass on where the net margins are good. So we'll take calibrated price increases on some of the brands, but some others will not be. So there's no overarching complete price increases, but we do expect to continue to inch up our margins -- gross margins. And that's really the focus to get back to our FY '21 numbers.
[Operator Instructions] The next question is from the line of Devansh Shah, an individual investor.
Actually -- sorry, if it's okay, then I can speak in Hindi also, the mix of that would be more appreciated.
Okay.
Sir, Heinz India purchase -- we have purchased Heinz India by INR 4,500-plus crores company in 2019. I can see in balance sheet, the operating profit margin before that was 20% plus. In 5 years, we are nowhere near to this. So is it a good purchase or it's like what has been happened had happened and we are now trying to serve only for all these days. Because you are a market -- what we are seeing in the market, what we are seeing in the brands, where are we standing, it's a really -- I'm an individual investor, sir. I'm a retail investor. So I have my own perception for that.
Sir, [Foreign Language], we are nowhere near to some 18% [indiscernible], dividend payout is also worst, worst. It's going on worst part. Complan, we are -- Heinz India was a good company before that or after buying that we have disrupted the company?
So I'll give you a short answer. And if you need more details, we can connect with our IR, and we can explain a little bit more...
Yes, yes. Sir...
There are 2 parts to this -- can I?
Yes, yes, yes. Yes, sir.
So there are 2 parts to this. I think at an overall level, there has been 2 or 3 fundamental changes from 2019 to now. One is a substantial GST budgetary support, which was sitting -- which we've stated on records, which is almost INR 30 crores to the EBITDA, which is missing in the base number, which is not there.
Second is '21 -- on FY '21 after that, there's been a substantial inflation, which has impacted gross margins for all FMCG companies, including us, largely impacting by milk, oil and other factors and DMH, et cetera, which has impacted us. While we have managed that with a lot of our cost cutting, but like many other FMCG companies, and much smaller than some other companies, our EBITDA margins have got impacted.
Having said that, we do believe that over the next 2 years, our EBITDA margins can go back to 17%, 18% that we want to grow and with our actions in place.
Talking on the top line, I think from what we acquired, 3 brands that we acquired. Nycil was at 31% market share. When we acquired, it's already at 35%. We believe our margins as well as all our actions in the place, we've increased our margin, we've increased the market share and the presence of Nycil, which has been more successful with us.
Even Glucon-D, which has had, should I say, a little bit of more volatile run, thanks to COVID and last year's summer season getting impacted. Our market shares have got consolidated from 58% to 60% plus. The category has gone through a pressure because we defined the category as there was a penetration rate in 2020. But post that, our penetration and more consumers have come on board. We believe this will continue to build forward. We have a job in expanding the category to the next level, which is what we are working on. So both these have demonstrated a substantial consumer acquisition, margin improvement and better execution.
Third brand, which is more talked about and was already under stress, under Heinz when we acquired had already dropped from a double-digit market share towards mid-singles. I think it was a known challenge which we took on. We believe we will be able to do it better. Of course, there are challenges. We are still at a very similar level of market shares that we acquired it at, closer to 5%. We have probably lost 0.2%, 0.3% over that because the market has not expanded. And to make it worse, the milk prices have impacted the margins.
The good thing is that while the leaders drop the prices, we have held ourselves -- our nerve. We didn't drop the prices. We played with the price point and held ourselves well. We believe with more actions in place like we've discussed, we are good to base this brand forward as the prices are getting better from the input prices and the competition is also realizing that low prices is not the way to build brands.
I think our margins will improve, and we are on path to getting -- recover our shares, but that's a little bit longer haul than we estimate it at that point of time. But at an overall level, despite all the macro and other things, I think the Zydus Wellness team has done an exemplary job of integration, making it one team and taking some of these brands over. I think from where we acquired Heinz brands or so-called iconic brands that they were, they are in better home and they will become only larger from where we are. So that's my view. More details, of course, we can share in a separate conversation.
Yes, yes. That's a normal -- I understood the thing. Otherwise, there should be some part on the annual report also regarding this and 5 years, where are we standing? Sir, we can understand like if FMCG or some sector is going through some of the hurdles or some of that, they are not in the correct flavor of the market. [Foreign Language] FMCG is not the flavor of the market from last 2 years or 3 years.
But sir, retail [Foreign Language]. Sir, I have never seen in my life that milk [Foreign Language] inflationary points. I have never seen this in last 20 years. 20 years would be very small to justify something like this. But sir, my genuine question was regarding that before that company was having only 2, 3 brands, which were the market leaders. Operating profit margin [Foreign Language]. And now you are telling that in 2 years, you are going to come back over there. That's a good part. That's all -- that's only -- that was the major question from my side or from the retail side.
We have our next question from the line of Mayur Parkeria from Wealth Managers India.
Am I audible? Just confirm.
Your volume is very low.
Is it better now?
We can hear you.
So actually, somebody just took away the thought and it was also similar. I also had a similar question, maybe a little more diplomatically and nicely put regarding the same Heinz portfolio. Let me just -- you have summarized your actions and what we have done over the last 5 years well, and you've also tried to give us some understanding of how we look at over the next 2 years. So that will help us. I'll just add a small aspect here and if you can clarify that also. From a shareholders' return perspective -- I understand that management can execute their strategy. Markets will do their own things, right? We know that. But over very long periods of time and 5, 6 years are long periods of time, obviously, there was COVID, there were other aspects, we understand that.
But having said that, it's a 5, 6 years and other companies have done relatively better if not something very phenomenally great, but they are still continuing to do better there. From that perspective, from a shareholder wealth perspective, do you believe -- I'm not asking 1 quarter, 2 quarter, 1 year kind of outlook on stock prices or something, but in general, promoters and owners are the largest shareholders here, do you believe that now this quarter marks the bottom as far as many of the aspects which were concerned, with respect to demand, with respect to costs, with respect to initiatives, with respect to market share and brands and some of the changes which had to be done? Do you believe everything is now largely behind us, and we are on a trajectory where long-term investors and shareholder returns are -- can see an uptick for -- from here on?
From a cost point of view, I think this is the lowest we've seen. So cost-wise, we should be only getting better, hopefully, if no crazy situations happen. Demand is clearly a situation which is dynamic in nature. Right now, we are seeing a positive movement, and we do expect things to only get better from here. Just from a market share point of view, we touched our peak of last 5 years across most of our portfolio. And we remain positive about building on these market shares.
So competitively, we are in good shape. We are looking at, hopefully, demand only getting stronger. Cost-wise, we remain again positive that we will improve our gross margins, and we'll be able to take it to our bottom line.
Sir 17%, 18% kind of margins in 2 years will be largely led by gross margin improvement?
That will be the biggest driver and operating leverage if demand plays out the way we are expecting at least, that's the largest 2 factors.
Sir, we have also reduced the debt over these years substantially and now practically debt-free kind of status. We are coming back to normalcy as far as the balance sheet strength is concerned. Why can't we increase our direct reach or the range? Just a theoretical question, but your -- just to understand your strategy. Why can't we reach 3.5 million outlets in 1.5 year instead of 3 years? Just a question just appeared because you mentioned. What stops us to grow our distribution now we have the strength? Is it spending, which is the curtail? Or is it just the market dynamics or our conservative approach in which we want to build this?
We're not conservative. Actually, when we acquired, we were 2.4 lakh outlets. Now we directly cover more than 6, 6.5 lakh outlets. 2.9 million outlets is where our products are available, but our direct coverage is only 6, 6.5.
Overall, we have seen GT, the general trade being under pressure over last couple of years where a lot of consumers have shifted demand to e-commerce and modern trade, that accounts for almost 21% of our business. So while we are driving our general trade reach, we are also conscious of our cost to serve. So it's a balancing of expansion as well as cost parameters. We are reasonably bullish and capable but we'll do it in a calibrated way so that our costs are managed and not just driving it for the sake of it. So it's a balancing the 2 sides.
Last question from my side on Everyuth. Apart from the scrub and the peel-off, is there any product which you see has potential to grow and which has over the next 2 years, or long term may -- it is possible but over the next 2 years, which can -- which has -- which is positioned in a manner compared to peers or in a category which has -- which can give us -- enhance this growth rate out in the category for the overall brand itself?
Simplistically put, I think scrub and peel-off can give us all the growth that we need but we've had at least 2 or 3 more initiatives. We've launched body lotion. We are working on channel-led specific initiatives on face wash. We have a couple of benefit-led segments like data and portfolio, which will add to this growth, but our core will continue to rise based on increasing their penetration and reach is how we feel. There is enough scope within skin care to grow off that.
We have our next question from the line of [ Malhar Sanghavi ] from Vama Financial Services.
Am I audible?
Yes.
I had a question on ImmunoVolt. Has the demand for that picked up as expected? And if not, then what's hindering the growth there?
So it's still a small part of our portfolio. It is still very small, and we are working on driving it further.
And one more question, just a follow-up on the stevia-based Sugar Free. So that's supposed to be a more healthier-based Sugar Free if I'm not wrong. And if that's the case, why is it not showing as much growth as it should? Why has it not picked up the way you had expected it a couple of quarters or a couple of -- last year?
Sugar Free Green, as we call it, a stevia-based Sugar Free. It is driving -- it has been growing for 11, 12 quarters in high double digits, and that's what we've talked about. So it is actually driving the major part of the Sweeteners portfolio.
And lastly, if I'm not wrong, Sugarlite is doubling each year, right?
Sugarlite, it was doubling each year. In the last few quarters, as we mentioned, there was a trademark litigation and that has impacted our business and impacted our Sweeteners and overall business portfolio.
Right. So I just wanted an update on that, like how is the distribution...
We will -- I think we'll come back in March. Post-March, we should be back and selling it. And post that we will share in the next quarter, our plans and study...
Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.
Thank you, everyone, for your questions. We hope to have a good run in 2024, and wish you all a very nice healthy 2024. We'll see you in the next quarter results. Thank you.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.