Marico's case study

___________Maricorsquos Case Study

Padmashree DrDYPatil UniversityDepartment of Business Management

International Business Management

ldquoCase Studyrdquo Marico Emerging Indian Global

Competitor

Submitted toMrs Surya Bhamre

Submitted byAnjali Vijay Kumar Gupta

MBA-Biotechnology (2009-11)

Roll No MBA-Bt 09006

By Anjali Vijay Kumar Gupta (MBA-Bt 09006) 1

Date January 2011INDEX

SNo Particulars Page No

1 Case 3

2Q1) In your opinion what are the factors responsible for

the success of Marico Ltd

3Q2) What according to you are the likely challenges

that Marico Ltd will face in the future

4 References

Marico Emerging Indian Global Competitor ndash 20 marks

Marico Ltd (Marico) a leading Indian business group in consumer products and services posted a sales revenue of Rs19 billion in the year 2007-081 The group had been able to achieve success by following a path of differentiation in all its product and service offerings In addition to the domestic market Maricos products were sold in Bangladesh the Middle East Egypt and South Africa The groups products included food products (including edible refined oils) hair oils post wash hair care anti lice treatment coconut oil and fabric care products

In the skin care solutions Marico was present through Kaya Skin Clinics (Kaya) and the Sundari range of Spa skin care products In the food products the company had the Saffola range of products Maricos portfolio of hair oils comprised Parachute Hair amp Care Nihar and Shanti Amla hair oil

Saffola was one of the first brands in the country to equate health consciousness with cooking oil It leveraged on heart problems and positioned itself as an edible oil which lowered the risk of a heart attack by reducing cholesterol

In order to stay in tune with the changing tastes and preferences of the customer Saffola came in three variants Saffola Gold New Saffola and Saffola Tasty Blend The Saffola brand was extended to salt and sugar management and cholesterol management products

The focus across all the food products was on health and wellness and it was this focus that the company used to differentiate itself from the competition

Marico established Kaya skin care clinics to take advantage of the opportunities presented by the the Indian beauty industry which stood at US$3 billion as of 2007 Starting with 11 clinics in the year 2005 the number of clinics had multiplied to 65 (56 in India and 9 in the Middle East) by 2007

According to analysts Kaya had filled a void in the country for skin clinics and helped make people look good Kaya had also expanded its services through Skin Zones which were information kiosks located at shopping malls that offered skin care counseling

Experts attributed Kayas success to the personalization of services for the customer and the holistic solutions offered Kayas popular services were laser hair reduction and acne scar and pigmentation reduction

Kaya had also started selling a range of hypoallergenic products for sensitive skin In 2007 Kaya Life was launched to provide holistic weight loss solutions7 The weight loss solutions centered around lifestyle counseling meal planning exercises and body shaping

In 2003 Marico acquired the Sundari range of luxury ayurvedic skin products Sundari was an established brand in the US and consisted of 20 products that sold at spas high end stores and on the Internet In 2006 Marico acquired Hair Code and Fiancee in Egypt and the two brands gave it a market share of more than 50 percent in the Egyptian hair care marketIn the same year Marico acquired Manjal a herbal bath soap brand established in Kerala and the brands Camelia Magnolia and Aromatic in Bangladesh to enter the Bangladesh market

In 2007 Marico acquired the consumer division of Enaleni Pharmaceuticals a South African business firm present in hair care

Marico was also a dominant player in the hair oil segment in India with its brands Parachute and Nihar In 2003 Marico entered the shampoos market and positioned itself on the naturals platform It also introduced shampoos for children in the age bracket 4 to 12 years

According to analysts Marico had emerged as a proactive organization by recognizing the needs of the market and capitalizing on the opportunities whether it be in the edible oils skin care or hair care segment It was ranked among one of the eight companies in Standard amp Poors list of Global Challenger companies in the year 2007

Q1) In your opinion what are the factors responsible for the success of Marico Ltd(10)Q2) What according to you are the likely challenges that Marico Ltd will face in the future (10)

Q1) In your opinion what are the factors responsible for the success of Marico Ltd Ans There are various factors involved in Maricos remarkable transition from a localized oil manufacturer to a health and wellness powerhouse They are

1 Differentiation in all its product and service offerings

The focus of the company across all the products was on health and wellness and it was this focus that the company used to differentiate itself from the competition Letrsquos see the example of Saffola and Kaya skin care clinics

1 Saffola It was one of the first brands in the country to equate health consciousness with cooking oil It leveraged on heart problems and positioned itself as an edible oil which lowered the risk of a heart attack by reducing cholesterol In order to stay in tune with the changing tastes and preferences of the customer Saffola also came in three variants Saffola Gold New Saffola and Saffola Tasty Blend The Saffola brand was extended to salt and sugar management and cholesterol management products

2 Kaya skin care clinics They were established by Marico to take advantage of the opportunities presented by the Indian beauty industry They filled a void in the country for skin clinics and helped make people look good It had also expanded its services through Skin Zones which were information kiosks located at shopping malls that offered skin care counseling Kayas success was due to the personalization of services for the customer and the holistic solutions offered Its popular services were laser hair reduction acne scar and pigmentation reduction It also started selling a range of hypoallergenic products for sensitive skin Kaya Life was launched to provide holistic weight loss solutions which centered around lifestyle counseling meal planning exercises and body shaping

2 Diversified range of products

The product portfolio of the company includes coconut oils edible oils hair oils and other hair care products fabric care products soaps baby care products processed foods and skin care It manufactures and markets its products under the brand names of HairCode Fiancee Aromatic Kaya Caivil Black Chic Oil of Malabar Manjal Revive Mediker Shanti Nihar Hair amp Care Sweekar Saffola and Parachute

3 Understanding of Consumer Needs

Marico always recognized the needs of the market and capitalized on the opportunities whether it be in the edible oils skin care or hair care segmentLet us see the example of Parachute oilBrand name Parachute Positioning As a purity brandTarget Audience The primary target audience of lsquoParachutersquo is women of all ages in both urban and rural population of India

Pioneering idea Parachute pioneered the idea of selling the coconut oil in plasticCommunication Mass communication on the platform of lsquocaringrsquo with mother daughter themeInnovation strategyMarico followed innovation as a major strategy in building Parachute brand The following strategies are followed by the company to offer a customized product in all seasons to grab the price conscious customers and to provide value for money

1 20 ml Parachute - a Rs 5 SKU that enables loose oil users to upgrade to Parachute

2 Flip Top Cap for Parachute bottles - to enhance the safety and protect the purity of Parachute

3 Parachute Mini - a bottle shaped small pack being sold at an MRP of Re 1

4 Easy Jar of Parachute - to facilitate usage especially during winters

Other extensions are5 Parachute Advanced refined hair oil and Parachute Jasmine

Target audience Young and appearance conscious consumer Positioning Focuses upon the fragrance aspect of the oil

6 Parachute After shower Hair Cream Target audience Young menPositioning Focuses upon stylish look non sticky and nourishing aspect

7 Parachute SampoornaTarget audience Women customers Positioning Focus on providing strong hair

8 Parachute Advansed Starz Gentle Shampoo Target audience Children Positioning Focus on enriching hairs with coconut proteins amp vitamin with fragnance of strawberries

9 Parachute TherapieBaseline 45 Day hair fall solution

10 Parachute Advansed Ayurvedic Hot Oil Positioning On the platform of lsquoNaturalsrsquo which makes hair healthier

4 Entered Global markets

In addition to the domestic market Maricos products were sold in Bangladesh the Middle East Egypt and South Africa

With many global acquisitions Marico grouprsquos global arm International Business group (IBG) is a great contributor in grouprsquos overall turnover

In 2003 Marico acquired the Sundari range of luxury ayurvedic skin products Sundari was an established brand in the US and consisted of 20 products that sold at spas high end stores and on the Internet

In 2006 Marico acquired Hair Code and Fiancee in Egypt and the two brands gave it a market share of more than 50 percent in the Egyptian hair care market

In the same year Marico acquired Manjal a herbal bath soap brand established in Kerala and the brands Camelia Magnolia and Aromatic in Bangladesh to enter the Bangladesh market

Recently acquired the Code 10 brand from Colgate Palmolive in Malaysia

Since their growth internationally has been a mix of organic and inorganic growth Marico have brands like Hair code Fiancee Code 10 Caivil and Hercules that are unique to international operations Parachute hair cream is an example of a format that was launched internationally first and brought to India later It is a leading brand in Bangladesh and the Middle East Menrsquos styling brand Hair Code is the market leader in Egypt while Caivil operates in the ethnic African hair care space

Reasons For Global Success

1 Its international success is due to the rsquoglobalrsquo mindset that the company has adopted An Indian company needs to stop thinking of an India-forward mindset and start playing by the rules of that market The key is to participate in formats relevant to that market as opposed to transporting the India portfolio on an lsquoas isrsquo basis In the Middle East Marico reformulated Parachute hair cream to work effectively

under high chlorine conditions prevalent in the region In Egypt where soccer is almost a religion Marico runrsquos programs to leverage the

soccer fever 2 The emerging economies in Asia and Africa like Bangladesh the Middle East Egypt

and South Africa were chosen because They have low-to-medium penetrations in some of the FMCG categories This

signifies considerable headroom for growth in the mid-term Favorable macros changing attitudes of the consumers and progressive policies of

the governments make these markets attractive destinations

Some of them also offer inorganic entry possibilities that can create access to mainstream distribution manufacturing and talent

Thus Marico listed their wholly owned subsidiary in Bangladesh on the local stock exchange And in Egypt where Marico acquired family-run organisations professional managers were sent

3 Critical success factors that were involved in a post-acquisition integration of Marico were pace philosophy people physical execution and providence five Ps

4 Typically it is found that gestation periods tend to be longer as one needs to go up the learning curve in a new market Thus to reduce this gestation period Marico before entering a new geography always interacted with non-competing Indian companies that have established themselves in that market and learnt from their experiences

5 Distribution network It has a large distribution network all over India which includes a wide rural

market reach Maricos distribution width and penetration is acknowledged as one of the best in the industry and is a leverage able strength Every month 56 million consumer packs are sold to about 18 million households through 16 million retail outlets spread across the country Maricos distribution network covers almost every Indian town with a population of over 20000 Thus 1 out of every 10 Indians is a Marico consumer

Distribution AllianceMaricorsquos distribution strength has been recognised by Indo Nissin Foods Ltd through their association with it for the distribution of Top Ramen products on a national basis

Rural Sales amp Distribution Maricos parallel rural sales and distribution network ranks among the top three in the industry and contributes 24 to the companys top line

Its infrastructure comprises direct distributors super distributors catering to many small stockists and van markets A dedicated team of Territory Sales Executives and Pilot Sales Representatives distribute Maricos as well as alliance brands through this vibrant network

Sales CapacityThey have made significant progress in the areas that enhance sales capacity Quality of our distributors Quality and number of the distributor field force upgradation in the role of the companys front-line sales force

Technology (IT) in Sales Marico has been making investments in IT to ensure

Supply Chain efficiencies Availability of the SKU at the right distributor point

at the right time in right quantities Timely availability and reliability of Sales MIS which help in taking prudent decisions on a real time basis

In order to reap maximum benefits from its sales and distribution network Marico embarked on an internet-enabled application - MI-Net - to establish a network between Marico and its distributors through a web interface This project is aimed at providing real time information on the status of various business operations between Marico and its distributors This initiative is expected to provide business benefits in the form of increased penetration by the sales force reduced communication costs reduced working capital requirements etc

6 Management oriented towards innovationHarsh Charandas Mariwala is the Chairman and Managing Director of Marico Mr

Mariwala has adopted an open office culture (everyone in his office calls him Harsh) as the first step Over 250 MBAs from top-notch institutes now work with him and Mr Mariwala -- who lacks an MBA degree -- realised he had to upgrade (his) knowledge base if he had to speak their language He had done courses in IMD Switzerland is a regular participant at C K Prahlads CEO Forums and reads all five business dailies and at least four business magazines

Since innovation is the key to the success of any FMCG brand he himself attends numerous sessions with target customers (from doctors for endorsing Saffola to barbers for Parachute after-shower cream) just to understand their needs

The changes that the company went through were in four different buckets

1 Transition from oils to value-added FMCG products (Saffola Gold for example)

2 From a purely Indian firm to a global entity (the company has huge operations in Bangladesh and has made a string of acquisitions in South Africa and Egypt

3 From low-value to high value-added products (Saffola atta mixes and Parachute gels)

4 From being only in the products space to becoming a solutions player (the highly successful Kaya clinics with their own range of skin care products)

7 Maricorsquos speciality

One of the key reasons for Maricos success (over Rs 1900 crore -- Rs 19 billion) turnover in 2007-08 and growing at over 20 per cent annually) is its constant ability to pick its spots in the crowded segment For instance edible oil is a huge category but Marico occupies a small high-end segment selling oil supposed to be good for the heart This ensures higher margins and avoiding the chance of getting caught in a price war

That explains Maricos entry into the anti-lice shampoo segment where MNC presence is negligible Even in South Africa the company has concentrated on the ethnic hair category which is growing at a scorching pace Thats also the reason why Marico has quickly exited the baby oil category where MNCs have a dominant presence

8 Marico focusing on margins than volumes

Vegetable oil prices are notoriously volatile and its consumers very price-sensitive But Marico is taking a different route from its competitors to distance itself from the commodity tag

The edible oil category has been facing stiff competition from large-scale volume players whose business model is based on low margins and pure price play In this situation Marico have consciously chosen not to get drawn into price wars and instead have kept reiterating their brands value proposition to consumers As a result while volumes may have dropped their margins on Sweekar have moved up It is said that they may be the most profitable in the edible oils business

Low priced packs coupled with packaging innovations have helped the brand retain its market leadership amidst rising local competition in the coconut oil segmentIn fact Marico is investing aggressively in a pipeline of new products to improve its margin profile such as anti-lice oil

9 Unique advertising strategiesMarico had test-marketed Parachute Therapie 45-Day Hair Fall Solution on radio

which was reportedly a big hit Radio City partnered the effort and helped Marico to build brand credibility through word-of-mouth advertising

Q2) What according to you are the likely challenges that Marico Ltd will face in the future

Ans It is always better to analyse the challenges that a company will have to face in the future so that new strategies to counter these challenges can be found out This will help maintain and increase the market share Some of the likely challenges that Marico Ltd will face in the future are-

1 Stiff competition in the FMCG marketFrom large brands to local brands all compete in this popularity and price scale

Some of the present competitors of Marico are Hindustan Unilever Dabur India Godrej Consumer Colgate Palmolive Emami Godrej Industries Gillette India PampG Hygiene Nirma Jyothy Laboratories Bajaj Corp Reckitt Benckiser Henkel India Fem Care Pharma etc In future the number of competitors can increase as FMCG market is always extremely competitiveTherefore competition from the diverse players present in the market may cause loss of market share

2 Oil prices Marico uses strategy of Margin over Volumes And till to date this strategy is

successful but for how long New brands are coming up with similar proposition and at cheaper rates Since inflation is a top issue these days consumers will tend to incline towards low prices over brand name At that time company would need to bring up improvised prices for its products to stay ahead in the market

3 Similar products

Original brand Similar packaged brands

As one can see from above picture that two different brands viz Malabar and Cocoraj sell similar product pure coconut oil in similar packaging as of Parachute at lower prices This is a great threat to Maricorsquos brand Parachute as Price sensitive consumers will buy those other brands thereby snatching market share of Parachute

4 Strong Brands like Garnier Loreal at less prices

Strong international brands like Garnier and Loreal are coming up with sachets for price sensitive consumers When such strong brands come up with cheap and affordable products consumers tend to prefer them over other local products Thus it becomes a threat to Marico

5 Reduced trade barriers and Globalization

The countries where Maricos products are sold ie Bangladesh the Middle East Egypt and South Africa are all developing countries With increase in globalization and reducing trade barriers many multi-national companies would enter these markets in the near future and this would directly reduce market share of Marico

6 Not strong within the shampoo segment having hardly any share

Marico Industries has also decided to stretch the strongest brand in its kitty Parachute to a shampoo Positioned again on the naturals platform Parachute Natural Shampoo contains ingredients such as coconut almond and hibiscus The new shampoo brand is expected to carry the baseline - Baalon mein sehat ka jadoo developed by its agency Orchard Advertising

Although in the past Marico has tried to extend the strong equity of Parachute into more oil variants the foray into shampoos is not perceived too well by industry observers While Parachute is a strong brand in hair oils its chances of success in shampoos is low Because hair oil is in the ethnic category while shampoos have a foreign connotation Although both the applications are in the same part of the body in the consumers mind these are different products which should ideally have different brand names

7 Need to concentrate within the various other market potential zones like hair colorants etc

Marico industries can also concentrate on various other market potential zones like hair colorants This segment also has great potential

Refrences

1 httpstrategicbrandblogspotcom

2 httpeconomictimesindiatimescomopinioninterviewsHaving-a-glocal- mindset-is-crucial-Vijay-Subramaniam-CEO-Marico-IBGarticleshow5833698cms

3 httpsunnymarketingblogspotcom200905swot-analysis-of-all-fmcg- companies-inhtml

4 httpwwwrediffcommoney2008dec09the-secret-of-marico-successhtm

5 httpwwwthehindubusinesslinecom20040224stories2004022401750200htm 6 httpinfoshinecomcompanyMarico-Limited797aspx

7 httpwwwdnaindiacommoneyreport_fmcg-price-hikes-may-give-small-packs- the-miss_1430622

8 httpwwwreportlinkercomp0342227Marico-Limited-531642-Financial-and-Strategic- SWOT-Analysis-Reviewhtmlixzz1AsaOvQwN

9 httpfmcg-marketingblogspotcom200712maricos-distribution-networkhtml

10 httpwwwthehindubusinesslinecom20031021stories2003102100420600htm

Date January 2011INDEX

SNo Particulars Page No

1 Case 3

2Q1) In your opinion what are the factors responsible for

the success of Marico Ltd

3Q2) What according to you are the likely challenges

that Marico Ltd will face in the future

4 References

3 Similar products

Refrences

3 Similar products

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3 Similar products

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3 Similar products

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3 Similar products

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3 Similar products

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3 Similar products

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3 Similar products

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3 Similar products

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3 Similar products

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Documents

Marico's case study