Marico Limited - Strategic Analysis Review

By: Global Markets Direct, Published: May-2009 Report Code: GMDCPG31158SA

Des cription Marico Limited (Marico) is a leading fast moving consumer goods company in India. The company is principally engaged in manufacturing, sale and distribution of consumer products and services in hair care, skin care and healthy foods markets. The product portfolio of the company include coconut oils, other edible oils, hair oils, fabric care products, soaps, baby care products, skin care and ayurvedics. The brand portfolio of the company includes brand names like HairCode, Fiancee, Camelia, Aromatic, Sundari, Kaya, Manjal, Revive, Mediker, Shanti, Nihar, Hair & Care, Sweekar, Saffola and Parachute. It primarily operates in India, Bangladesh, Nepal, the Middle East and Egypt. Global Markets Directs Marico Limited - Strategic Analysis Review is an in-depth business and strategic analysis of Marico Limited. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed strategic analysis of the company. This highlights its strengths and weaknesses and the opportunities and threats it faces going forward. Scope

Provides key company information for business intelligence needs. The companys strengths and weaknesses and areas of development or decline are analyzed. Financial, strategic and operational factors are considered. The opportunities open to the company are considered and its growth potential assessed. Competitive or technological threats are highlighted. The report contains critical company information business structure and operations, the company history, major products and services, key competitors, key employees and executive biographies, different locations and important subsidiaries.

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Maricos makeover
The FMCG major rides the growing wellness trend in the country with its Saffola range. If you see, globally, it is very difficult to run a business that is against a consumer trend. We are lucky that our products and plans fit into the trend of wellness. _ Saugata Gupta

Saugata Gupta, CEO, Consumer Products Division, Marico

Vinay Kamath A couple is walking along a road when a man comes and runs away with the ladys bag. Her portly husband gives chase but soon gets exhausted and is bent over panting uncontrollably. An old man sitting nearby tut-tuts sympathetically about the mans stamina. Gasping for breath the man expresses regret for not having been able to catch the thief. The ad film cuts to a shot of the couple picking up a pack of Saffola Gold oil, with the voiceover exhorting viewers to use this brand of oil, which helps cut down on cholesterol, and keep themselves young and sprightly. This ad is the latest in a series of television commercials (an earlier one depicted equally portly men and their battles with butter chicken and gulab jamun) that Marico Ltd, the Rs 1,556-crore consumer products company, has been screening over the years to reinforce the goodness of Saffola, its safflower oil (kardi) brand. And, if Maricos CEO of Consumer Products Division, Saugata Gupta, has his way, the brands positioning on the health plank is only going to get stronger. Our thrust is on foods and supplements and we plan to have a range of Saffola products, declares the dapper Gupta in a recent interview to BrandLine. Its foray into the functional foods category was with a brand extension earlier of Saffola to an atta mix, which didnt quite take off but with a change in marketing mix, its relaunch has met with some success. Just off a flight and having battled morning hour traffic jams in Chennai, Gupta sips a cup of decaf while talking animatedly about Maricos brand portfolio. Maricos focus as an organisation, Gupta emphasises, would be in the spheres of beauty and wellness. Given the trend of lifestyle diseases, stress and so on, wellness is a key area. We have a strong brand in Saffola and we think that brand is quite a bit underleveraged, he elaborates. The atta mix, a cholesterol management product, was test-marketed in Mumbai and has now been launched nationally. More such products will follow, avows Gupta.

Hes confident that Maricos portfolio is on the right platform. I think we are lucky to have a product portfolio that rides a trend. If you see, globally, it is very difficult to run a business that is against a consumer trend; it brings into question the long-term sustainability of a business. We are lucky that our products and plans fit into the trend of wellness. Today, wellness is half a leg for us we have salt, oil, but there are a lot of products to be plugged in, he said. And its this category that Marico hopes will grow its business. However, Gupta is clear that Marico will not enter the staples game. Staples, as he explains, is a low-margin high-volume business. And we do not want to get into that. Having moved away from branded commodities, we have moved up the value chain and wouldnt want to undo that. We would like to give efficacious products. Any new category requires category building and investments. Growth will take time to come in, but we are in for the long haul, he says emphatically. Commenting on brand Saffola, the head of a national retail chain says it is indeed a strong brand and its positioning too, with the good for heart perception, is just right, as is its extension to blended oils with Saffola Gold. The problems associated with kardi oil shortage which used to plague Saffola availability too is gone. However, the issue for Saffola is that it is metro-centric and clearly an SEC A product. Extending the brand beyond metros would be a challenge. A fact Gupta is clearly aware of, as high on the agenda for Marico is to gain a higher footprint for Saffola. As of now, it is present only in about 10 cities with a middling presence in the South. However, we have been investing in the brand over the past two years and have nearly doubled our base (in the South), he adds. The other trend that is helping Saffola is the growth in modern trade. The brands modern trade market shares are higher than the traditional trade share. This is because our products are slightly niche and catering to higher-end consumers. We do function at a premium. I dont think people today are very price-conscious, though they are value-conscious, he elaborates.

Some of Maricos products

Maricos other strong growth driver and blockbuster core brand is Parachute, which claims a 57 per cent market share in the branded coconut oil business, a Rs 1,200-crore market. With the acquisition of the Nihar brand from the Hindustan Unilever Ltd (HUL) stable, Marico has further consolidated its position and has pretty much a monopoly in most markets except Tamil Nadu where VVD is the market leader. Points out a retailer: The product is attacked, if at all, by Dabur Vatika at the higher end. However, as pure coconut oil there is hardly any serious competition for the brand. As Gupta points out, it was weak in the Eastern region but Nihar gave it instant market share. On Maricos strategy of acquiring strong regional brands, Gupta is quite clear. As he explains, Automatically, we become strong in that region. For example, we are not so strong in the North, so if we get a brand in the UP-Bihar belt it makes sense, but having a pan-India brand with a 5 per cent market share in a category is not going to excite us because what is the long-term story in that? The other thing about acquisitions is when you already exist in a category where you are competing with another brand, with a similar footprint, it doesnt make sense to acquire if youre catering to the same set of consumers, in the same space, it doesnt make sense. Nikhil Vora of SSKI Securities in a research report says that Marico continues to piggyback upon multiple growth drivers that it has built over the years and continues to strengthen. Its three-pronged strategy has been to strengthen the core, identify new growth areas and take the inorganic route to growth. With the hair oil market unlikely to expand, Marico has been extending its brand to other categories such as shower gels (Parachute Advansed and Go Get Noticed), hair loss treatment (Parachute Therapie) and soaps with Parachute Jasmine. Vora is quite bullish on the company, appreciative of its strategy of aggressively targeting inorganic growth opportunities at home and abroad. As he says in his report: Marico continues to play out the story of transition to a pure consumer play operating on the broader health and wellness platform it will continue to maintain its growth momentum and the growth propellers are in place. It is well on its way to becoming a full-fledged FMCG player and we expect margins to be in line with other consumer majors. Male grooming, with young men increasingly wanting to look good, is a highpotential category that Marico wants to grow in. Maricos after shower hair gel has garnered a 43 per cent share of the market in just two years, Gupta claims. The market size for gels and creams is about Rs 65-70 crore, with growth at 30-35 per cent. But the market for hair gels is competitive with Brylcreem the market leader. Garnier has launched its Fructis brand as well while theres SetWet from Paras Pharma. We believe that this is a category that is going to grow, he adds. For Gupta, there are no short-term measures. As he emphasises, We believe that we need to stay invested in markets, drive category growth and wait for the inflexion point to arrive. Every new product will not immediately grow to a Rs 100 crore. The point is for all our new products, we need to do category creation, its a long haul. Consumer value concept has changed. Earlier, it was only price but

today if you deliver value in terms of functionality people are willing to pay a price. Asked whether Maricos strategy has been to stick to niche products and not directly compete with the big guns such as HUL and P&G, Gupta puts it differently when he says, If you have to grow you have to participate in certain categories but we have to see if there is a differentiated space available. It did test-market a shampoo a while ago but hastily withdrew when HUL and P&G slashed prices to fight a bloody price war. Nor has it been able to transition from a strong hair oil player to a shampoo brand for which Gupta reasons, If you have two MNCs fight, and the numbers are high in terms of investments, international technology needed and so on, do we have a sustainable proposition? Its a question of allocation of resources. Without a completely differentiated product you would get squeezed out. Having said that we are not saying we will never do shampoos but we will concentrate on pre- and post-wash. It has also launched Silk n Shine, a non-greasy hair conditioner which competes with Paras Livon. This is virtually a new market with the former cornering a 35 per cent share and Livon 38 per cent. There are markets out there which have enough opportunities for growth. Its in our DNA; we have been successful in creating categories and innovation as a culture. Uncommon sense, is what Marico likes to call it. The retailer quoted earlier in this report points out the companys core so far has been in oils. Other products such as Revive starch and the Parachute extensions are still small, though good forays. As he points out, Technically the margins can be under pressure if there is a competitive attach. HUL tried it but gave up too soon as it too was stuck on margins. The strength of the brand could be tested if somebody such as ITC were to enter the market.

Survival of the Smartest

NOV 1 Posted by Stephanie Keinert

The evolution of the Indian FMCG market has forced local companies to adapt their strategies in order to survive ferocious competition against international big players Qu trnh pht trin ca th trng FMCG n bt buc cc cng ty ni a c nhng chin lc thch ng tn ti trong s cnh tranh khc lit vi nhng cng ty a quc gia khng l. In recent years, the economic environment in Western Europe and North America has become increasingly challenging. A saturated market in the FMCG sector and a multitude of competitors has left companies with little headroom for growth. Consequently, many multinational corporations (MNCs) have changed their focus to emerging countries and have demonstrated creativity when dealing with impediments like the complexity of varying customer needs or cumbersome distribution conditions. In particular, India has seen striking growth during recent years, which can mainly be attributed to rising disposable income levels and the resulting demographic shift to a fast growing middle-class. Many consumers have already upgraded their standard of living by acquiring luxury items such as mobile phones and cars. Thus, their disposable income is increasingly directed towards pampering themselves. The subsequent rise in expenditure on personal care, together with lowered trade barriers has opened up a myriad of opportunities and has encouraged many FMCG enterprises to enter the Indian market. Consequently, the countrys competitive environment has heated up significantly. Marico Ltd, one of Indias leading consumer goods companies, has so far successfully kept up with this increasingly fierce marketplace. The company operates in 25 emerging countries in Asia, Africa and the Middle East, and has consciously decided not to enter developed markets. To maintain its market position, Marico attempts to circumvent direct competition with large volume players whilst keeping expenses at a minimum. 1. Product Positioning in Niche Segments

Rather than participating in the continual price slashing of large volume players, Marico positions its brands as high quality products, and offers only a handful of niche products which are catered to health-conscious consumers in the upper middle class. Edible oil, for instance, is a major category in the Indian FMCG sector. Marico only covers a small, high-end segment which is promoted as a good for the heart product. Emphasising its brands value propositions and avoiding price wars, enables Marico to establish profit margins higher than the industry-average.nh v sn phm vo phn khc th trng thch hp: thot khi cuc chin gim gi vi cc cng ty ln, Marico nh v nhng sn phm ca mnh l sn phm cht lng cao, v cung cp cho 1 th trng nh, phc v nhng khch hng quan tm ln n chm sc sc khe v sc p thuc tng lp trn trung lu. Du n dinh dng, l 1 mt hng ch o ca ngnh FMCG n , cng ty Marico ch chim 1 phn nh, dnh cho nhng ngi snh si vi qung co l sn phm tt cho tim mch. Nhn mnh vo gi tr thng hiu v trnh chin tranh v gi, Marico c kh nng t c li nhun cao hn trung bnh ngnh 2. Benefit from Market Expansion Marico fosters rapid expansion into other emerging countries by acquiring regional brands in foreign emerging markets which generally have under-penetrated supply in several consumer goods categories. At this stage of an economy, entry barriers are still relatively low and little financial resources are necessary to build a brand and increase its market share. By purchasing existing product lines which already have strong brand awareness, Marico is able to evade extensive investments in marketing activities when establishing their positioning in foreign markets. Li ch t m rng th trng: Marico tng cng nhanh chng vic m rng vo nhng nc ang pht trin bng cch mua li cc nhn hiu a phng ca th trng . Trong iu kin ca cc nn kinh t ny, ro cn nhp cuc vn cn kh thp v i hi t ngun lc ti chnh xy dng thuwong hiu v tng th phn. Bng vic mua nhng chui sn phm hin ti ang c mc nhn bit thng hiu cao, Marico c th trnh khi nhng u t ln v marketing khi bc ra th trng nc ngoi 3. Focus on Core Products and a neatly defined Target Group MNCs generally offer a broad portfolio of products which are present in various price segments. They adjust their products to country-specific needs and even cascade their marketing approaches down to regional habits. This diversity of target segments leads to a severely complex organisation; and the imperative need to invest heavily in R&D entails a high cost-structure. To avoid the latter, Marico decided to concentrate on countries with a similar economic situation and cultural mind-set to India. In all markets the company offers its locally purchased brands and its two core product lines. The narrow range of products

and the homogeneous target groups keeps R&D costs low as there is a limited necessity to adapt product attributes to local preferences. Tp trung vo nhng sn phm chnh v nhm mc tiu: Nhng cng ty a quc gia thng cung cp 1 danh mc sn phm rng vi nhiu mc gi khc nhau. H cn bng sn phm ca h vi nhu cu ring bit ca tng quc gia v n gn vi thi quen tiu dng ca a phng. S a dng trong khch hng mc tiu dn n s phc tp trong t chc; v nhu cu u t ln cho R&D lm tng chi ph. trnh lp li sai lm , Marico quyt nh tp trung vo cc quc gia vi tnh hnh kinh t v vn ha kh tng ng vi n . Trong tt c th trng cng ty cung cp nhng nhn hiu a phng mua li v 2 dng sn phm chnh ca n. Danh mc sn phm hp v mc tiu kh ng nht gi cho chi ph ca cng ty mc thp Evaluation of Strategy Maricos strategy of charging high margins in niche segments, whilst simultaneously avoiding major investments for future growth is part of the companys recipe for its current success. But how will Marico survive the increasingly challenging arena of competition in the longrun? The companys strategy does not adequately consider increasing competition in forthcoming years and thus, might soon precipitate Maricos downfall. Neither in developed, nor in emerging economies do MNCs rely on a single marketing strategy like Marico does. Instead, they create a multitude of approaches for their diverse target groups and regionalspecific requirements. Hindustan Lever, for instance, offers various products such as shampoo, coffee or tea in small and low-priced packages to make them affordable for lowincome consumers. Procter & Gamble employs sales women in remote Indian villages who, equipped with product samples and pictorial literature for illiterate people, go from door to door explaining the products and increasing brand awareness. Moreover, Nestl approaches rural Brazil by selling its brands Maggi and Nescaf via boats on the Amazon River. nh gi chin lc: Chin lc By comparing these diverging market approaches, it becomes obvious that Marico risks losing market share to companies who have already adapted to the increasingly hybrid consumption patterns in emerging countries. Instead of focussing on its short-term success factors, the company should step back and have a look at the big picture: Only by anticipating and proactively responding to increasingly complex customer demands will Marico drive sustainable growth and successfully compete against the big guns who already dominate economic evolution in various emerging markets.

Posted: Sun, Feb 26 2012. 11:33 PM IST

Marico seeks to sharpen focus on growing brands

The move, aimed at creating a portfolio that caters to the youth, will allow Marico to enter categories including deodorants and male grooming
Sapna Agarwal

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Mumbai: Marico Ltd expects to change the perception that it spreads itself too thin by buying a large number of small companies by making its largest acquisition earlier this month. It purchased the Paras personal care brands from Englands Reckitt Benckiser Group Plc. Compared to the past, we now have a very disciplined approach, said Saugata Gupta, chief executive of Marico. We are not doing too many small things but doing a few things, persisting with them and making them big. We will be very, very choosy. Getting scale in India is very important. Marico, the owner of Parachute and Saffola brands, added personal care brands including Set Wet, Livon, Zatak, Eclipse and Dr. Lips to its portfolio with the purchase from Reckitt. The Paras brands have a revenue of Rs150 crore. Consolidation strategy: Marico chief executive officer Saugata Gupta. Photo: Hemant Mishra/Mint The move, aimed at creating a portfolio that caters to the youth, will allow Marico to enter categories including deodorantswhich has been growing at close to 35% a year for the past four yearsand male grooming, which is growing at close to 25% annually. It also consolidates the companys position in the post-wash hair care segment which has reported similar growth rates. Marico is familiar with these categories. They will surely benefit with consolidation in the postwash as Livon and Maricos own brand Silky & Shine play at different price points, said Shirish Pardeshi, executive director and co-head of research at Anand Rathi Financial Services Ltd. The change is in keeping with the evolution of the companyfrom a commodities company in the 1990s to a full-fledged consumer products company. We have more than doubled in the last three-four years. Therefore, the bite size keeps on increasing. What was significant three years ago is no longer significant, explained Gupta.

If Marico manages to grab even a 10% marketshare in the emerging categories and related categories of skincare, shampoos, conditioners, deodorants and such, it can add another domestic Marico in four years, said Nikhil Vora, managing director of IDFC Securities Ltd. Moving up value chain Maricos strategy has remained consistent over the years. The company has moved up the chain by offering new products and variants. It has also explored niches that it can dominate and does not have to battle with multinationals such as Hindustan Unilever Ltds (HUL)a strategy that has proved successful in the past. For instance, it has extended the Saffola brand into the health and wellness category, a highgrowth segment. Currently, Saffola oil accounts for 95% of the Saffola brands revenue; and, over the years, the company hopes to bring it down to 75%. Marico has reduced the dependence on coconut oil from 44% of its revenue in fiscal 2006 to 35% in fiscal 2012 by introducing variants, including Parachute Hot oil, Parachute Ayurvedic oil and even skincare under Parachute Advansed body lotion. In the hair grooming oils segment, it acquired HULs coconut hair oil brand Nihar in 2006. In the amla hair oil segment, it dropped prices by as much as 40% and sustained it at a lower level for over a year. The marketshare of amla oil has increased to about 17% from 9%, according to Gupta. Marico has, however, failed to expand its soaps business. Soap is a category we cant scale up. Manjal (a regional soap brand it acquired in 2006) has a specific set of loyal consumers in a specific market, said Gupta, who plans to retain the brand to cater to Kerala. Maricos strategy appears to be paying dividends. In the recently-concluded December quarter, the company posted a a 21% increase in net profit at Rs84 crore and its revenue rose 29% to Rs1,058 crore during the same period. The plan is to grow the topline in double digits for the next three years as well, according to Gupta. Over the past decade, its market capitalization, which was a mere 1% of HULs, rose to about 12%, according to Vora. Besides, Maricos shares gained 9.72% this year, outperforming HUL, which fell 5.53%, and the BSEs FMCG Indexs 3.83% gain. The acquisition of Paras portfolio will surely get them (multinational companies, or MNCs) thinking what Marico is up to and what the implications will be to their business, said Mike Sills, partner audit services at Ernst and Young, Geneva.

They (domestic companies) are a real source of threat to MNCs. If you go into the boardrooms of MNCs, they are increasingly asking people to come up with who are the key challenges tomorrow and monitoring what are they doing, said Sills. This would not have been a consideration three years ago.

Maricos new strategy to bank on big-bet brands

Kala Vijayraghavan, TNN Apr 22, 2002, 12.50am IST

mumbai: haircare major marico india is working on a new brand building strategy by identifying a few big-bet brands in its product portfolio to increase focus and investments. the larger strategy involves transforming itself into a personal-care company by moving into new growth categories like skincare. most of the big bets are in the value-added hair oil category. "in line with our business direction, we are certainly open to opportunities in areas like skincare. our attempts would be to develop new brands like shanti and, if not feasible, look at extensions. acquisition opportunities is another area which may throw up new brands for marico," milind sarwate, cfo of marico told et. accordingly, marico will focus and support the big bets with commensurate share of mind, resources and demand creation campaigns. the brands in the big bets list include shanti amla, parachute and jasmine hair oils, and saffola cooking oil. steady low volume brands like mediker anti-lice shampoo, fabric care revive and sil jam are not among the big bets. the rs 696-crore company's leading brands include parachute, saffola, sweekar, hair & care, shanti, mediker, revive, oil of malabar and sil. it has primarily used the health platform to market its brands in the recent past. new products launched by the company contributed 12 per cent to the turnover in the justconcluded fiscal at rs 80 crore. the company accordingly spent substantially more on new products like jasmine, shanti amla and kardi corn cooking oil. in march, the advertising and sales promotion (asp) spends on new products was at 28 per cent of the total asp vis--vis 23 per cent in the previous year. according to senior officials, marico has been realigning the composition of its asp expenditure, increasing the advertising portion which relates the demand creation efforts directly to the consumers and reducing the expenditure on sales promotion which can be a tactical tool in pushing sales. "contrary to industry trend, we concentrated more on brand development through advertising instead of consumer offers," said an official. marico's dependence on its flagship brand parachute has steadily declined from 70 per cent in mid-1990s to 38 per cent in the last fiscal. positioned on the value-for-money platform, shanti amla which was launched in the fourth quarter of 2001 mopped up a marketshare of 9 per cent in the value-added hair oil segment by february. marico has already launched the saffola kardi corn blend and commenced marketing of saffola olive oil under the saffola umbrella. according to mr sarwate, "the new products have now assumed a critical mass and, in the process, has lessened the company's dependence on parachute," he said. the company plans to test future big bets by prototyping, a process where new ideas are tested comprehensively in several markets with an objective of improving their success potential before being launched.

Marico: Launching Kaya Skin Clinic

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"Marico's diversification into skincare services in the form of Kaya clinics was an entrepreneurial leap of faith. This was driven by a belief that our Case deep product-led consumer insight can be leveraged into consumer insight for services. The Marico Incubation Cell was conceived to prototype new business models. We perfected the model through this Case cell and Kaya was launched. Kaya provides holistic and customized result-oriented skincare solutions/ treatments to its clients." Case
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BSTA141 Pages 1988-2005 : 2005 Available India FMCG

- Harsh Mariwala, Chairman and Managing Director, Marico Industries 1 . Organization

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In 2005, Kaya Skin Clinic, a skin care venture from Marico Industries, one of India's leading FMCG companies, was on an expansion spree. Having strengthened its presence across tier I cities and the metros in the country, it was in the process of establishing itself in tier II cities and towns. The first such launch was made in Coimbatore on August 1, 2005. Marico had plans to open Kaya clinics at Thiruvananthapuram and Kochi by the end of 2005. Since its inception in December 2002, Marico had established a network of 39 Kaya clinics including two in Dubai. The company planned to add another 50 clinics by the end of 2006. Kaya also had plans to expand abroad.
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Case Studies Collection About Marico Marico, one of the top ten FMCG companies in India with interests in Business Strategy Short Case Studies both personal care and healthcare, generated a turnover of about Rs.10

billion during 2004 - 05. Marico's brands and their extensions occupied leadership positions with significant market shares in most categories (Exhibit1). Marico had come a long way since its inception in 1988, as a spin-off of Bombay Oils with two oil brands (Parachute and Saffola) in its portfolio and net sales worth Rs 100 crore. Marico offered more than 14 products in hair care, edible oil, fabric care and functional food categories, while its subsidiary Kaya Aesthetics was into high-end skin care services and products...

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