Kaya impact still remains skin deep for Marico

With 100 centres under its belt, Kaya has penetrated the best of Indian urban locations. And yet, it is still making losses

Marico’s experiment with services business is still not bearing fruit. Kaya clinic, its speciality skin-care business, again made losses in the December quarter. Marico has been expanding its Kaya business steadily but this has not yet added much to the bottom-line. It opened the 100th Kaya clinic in Guwahati recently, with its services now spanning 27 cities in India and nine cities in the Middle East.

Having penetrated 100 cities, Kaya may have reached a saturation level in India. If so, it is worrying that it continues to lose money heavily. During Q3FY10, Kaya’s skin-care turnover grew by just 10% to Rs44 crore over Q3FY09.

However, this meant a sequential decline of about 9% over the turnover achieved during Q2FY10. The Kaya skin-care business incurred a loss of Rs 3.7 crore during Q3FY10. Marico argues that this business has been impacted by the overall economic downturn, given the discretionary nature of consumer spending on skin care. However, this does not ring true, since there was no slowdown in sales in the December quarter.

Meanwhile, Marico’s overall operating margin has risen to 16% from 15% in the same quarter last year. This was mainly due to a decline in the input commodity prices. The price of copra, which accounts for about 40% of the company’s raw material cost, was 22% lower than in Q3FY09. Similarly, market prices of safflower oil, comprising about 13% of the company’s raw material cost, were 28% lower than in the corresponding period of the previous year.

Marico’s flagship brand, Parachute, achieved a volume growth of about 8% (in rigid packs) over Q3FY09. Parachute’s share in the coconut oil segment now stands at a healthy 45.9%.

The refined edible oils franchise of Saffola, Marico’s second flagship brand, continued to show healthy volume growth. During Q3FY10, the franchise grew by about 18%.

During the quarter, Marico’s hair-oils segment grew 10% in volume over the same period in the previous year. Marico’s basket of hair oils—including Parachute Jasmine, Nihar perfumed hair oil, Hair & Care and Shanti Badam Amla—maintained its market share at 21% during the 12 months ending December 2009.
Marico’s international business, which accounts for 23% of its turnover, grew by over 24% in Q3FY10.

During the Q3FY10 quarter, Marico managed a turnover of Rs670 crore, a growth of 8% over Q3FY09. Pre-tax profit was up 24%.

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