MTR Foods CEO Sanjay Sharma
Credit: DH Photo
India’s retail inflation -measured by the consumer price index - rose to a 15-month high of 7.44 per cent in July 2023, from 4.81 per cent in June, driven largely by food inflation. Against this backdrop, while the upcoming festivals may offer some reprieve, MTR Foods, a household name in India, cannot ignore the absence of buoyancy. The company’s chief executive, Sanjay Sharma, talking to DH’s Shakshi Jain, says the only thing to do, under the circumstances, for the company is to put its best foot forward, though with due caution.
Edited excerpts.
How has inflation affected the retail sector in recent times?
This year the inflation on spices and masala has been quite brutal - upwards of 15%. At such retail price hikes, you often see your business getting impacted, such as a drop in volume growths and a much higher push through as far as price-led growths are concerned.
What has been your strategy to battle these inflationary pressures?
We use a range of strategies to protect ourselves. We look at unit values, relative pricing tied to our competition and shrinkflation - where you reduce the size of the package.
We look at how we drive internal efficiencies in manufacturing by reducing the conversion costs, we look at recipes, ingredients. But those are more long term issues. Typically we don’t change recipes, because the cornerstone of our business is taste. But can we reduce something, increase something, manage so that we essentially deliver the taste? And recipe changes often end up going through extremely rigorous consumer research.
How do you decide on pricing changes?
We go to product level, look at pack level and then we decide things at a very granular level on the market front. Because each pack is targeting a different section of the society. It's not just MRP that is relevant in certain categories, like in spices.
We do an extensive exercise in the pure spices category. We look at the ongoing market rates and we benchmark ourselves on the market rate on a weekly basis. We’re buying materials in bulk also, again there it depends upon what our procurement strategy is - whether we are blocking for the whole year or we are still doing pulsating purchases. Most of the time we’re more efficient than what is available in the market. And then we tend to price ourselves relative to what is the market price movement.
Have your margins been impacted?
We’ve broadly been able to hold our margins as far as 2023 is concerned because of some good procurement positions that we’ve had. But we’re sitting on certain sensitive competitive positions where we are priced much higher than our competitions. For example, on a 100 gram pack of sambar (powder), we may be about 20-25% more expensive than our nearest competition. But if you look at pure spices, we’re very competitive in the market.
How are you preparing for the upcoming festival season?
We’re sitting in a highly inflationary environment at this point of time. Post Covid-19 we’ve had one festival season where people went completely berserk. Now this is the second festival season. People have money, it is to be seen how people view the overall environment. If there’s a general buoyancy then people will splurge. But let’s see. Inflation and not so good monsoon may see a little pull back in the season sales. But coming up in front of us are two big seasons - in Kerala it is Onam, and in Karnataka and Andhra Pradesh it is the Ayudha Puja, Dasara and Diwali which is the time when all root sales bump up. So we’re playing for that. So you've to plan for the best but have a plan B for a softer season.