PGCBM20 - Group 43 - Marico Case Study(1)

Consumer Products – Marico Product: Parachute Oil & Advanced Products – Case Study

1/19/2012

Faculty - Prof. Pingali Venugopal Sector : Sales & Distribution Management

Submitted By Group

Anshuman Sinha 2221374S.M.Senthamizh Selvan 2221364Naveen Pillai 2221421Ajay Krishnan Iyer 2221360

PGCBM Batch 20Bangalore Koramangala Center

Consumer Products– Marico

Disclaimer

The project report is being done purely as an academic requirement for the PGCBM-Batch 20 coursework in XLRI Jamshedpur. This work is not for any publication in any form other than academic purpose and within XLRI.

08-February-2012 Page 2


Table of Contents1. Preface.................................................................................................................................................4

2. FMCG Industry.....................................................................................................................................4

3. Market Scenario..................................................................................................................................4

4. Marico’s Competition..........................................................................................................................5

5. Parachute Brand..................................................................................................................................6

6. Positioning...........................................................................................................................................6

7. Retail Formats......................................................................................................................................6

8. Retail Profiling.....................................................................................................................................7

9. Risks and Challenges............................................................................................................................9

10. Marketing Strategy..........................................................................................................................9

9.1 Product..............................................................................................................................................9

9.2 Price...................................................................................................................................................9

9.3 Promotion........................................................................................................................................10

9.4 Place................................................................................................................................................10

11. SWOT Analysis...............................................................................................................................11

12. Marico Distribution Network.........................................................................................................11

13. Surveys..........................................................................................................................................13

12.1 Consumer Questionnaire...............................................................................................................13

12.2 Consumer Survey Results..............................................................................................................16

12.3 Retailer Questionnaire...................................................................................................................18

12.4 Retailer Survey Results..................................................................................................................20

13. Stock Out............................................................................................................................................22

14. Financial Details.............................................................................................................................23

15. References:....................................................................................................................................26



1. Preface

Marico, one of the leading companies in the FMCG industry was incorporated in 1988. It has some of the biggest brands in India. Every month, over 90 million packs reach approximately 150 million consumers in about 30 million households through a widespread distribution network of more than 3.2 million outlets in India and overseas.

In this case study we will be focusing on Marico’s Consumer Product – Parachute’s Sales and Marketing Strategy.

2. FMCG Industry

The FMCG market in India can be divided into two categories: Urban and Rural. The urban segment has high penetration levels and is willing to spend more as compared to the rural segment. The trend towards urbanization continues, with migration from rural areas to urban areas. Urban towns have increased significantly.

Today, consumers are steadily shifting from low cost to a cost-plus platform. They now tend focus on price along with quality, convenience and shopping experience. The urban consumer is more quality conscious and is willing to pay a premium for better services and superior experience.

3. Market Scenario

The hair oil market in India is huge. It is valued at more than Rs 8 bn. The market has been growing at 7-8% despite high penetration levels.

Hair oil usage is a common habit in India. It is due to the perception that application of coconut oil leads to faster and better hair growth and reduce hair fall problem. There are two types hair oil available in the market; Coconut oil and Non greasy perfumed oil. Coconut oil has more than two-thirds of the total market. Penetration of hair oil is at 89% and is evenly distributed among urban and rural areas.



4. Marico’s Competition

Competition in the FMCG environment in India is intense. Companies tend to focus more on branding, product development, distribution and innovation. Counter campaigning by competitors also reduces the effectiveness of the promotions. Similarly, aggressive pricing by competition also leads to disruption.

Some of the competitor’s for Parachute coconut oil across India are:

HUL – Vatika Mangalam’s coconut oil Muskan coconut oil Amway’s – Persona Pure coconut oil Neelam coconut oil Indu – Pure coconut oil MSR coconut oil Nikhar Shikakai Hair Oil



Kevali coconut hair oil Surabi hair oil Malabar coconut oil

5. Parachute Brand

Parachute is premium edible oil. It is the market leader in its category. Parachute hair oil was earlier sold in tins. They have been constantly innovating the product and now Parachute is available in plastic containers. Parachute is also available in small packets to service the rural sectors, thereby increasing penetration and market share.

6. Positioning

Parachute as a brand has evolved over time. From positioning the brand as pure coconut oil to that of a dream theme, with new looks and logo to the current positioning of vital nourishment.The Coconut Dream logo is seen as an opportunity to transform Parachute from being the largest coconut oil brand into a mega brand with several value added products under the 'Coconut Goodness' umbrella.

Innovation in Parachute

Marico has been constantly innovating to ensure that high quality coconut oil is provided to its consumers. Some of the innovations carried out for Parachute are:

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

Easy Jar of Parachute to facilitate usage especially during winters Parachute Mini - a bottle shaped small pack being sold at an MRP of Re. 1

7. Retail Formats

The following kinds of retail formats are available in India

Chain Store Convenience Store Department Store



Discount store Franchise Kirana Mini Markets Modern Retail Online Shopping Shop-in-Shop Smaller Format Superstores Vending Machine

8. Retail Profiling

Retail profiling is a must for the company to identify types of retailer outlets suitable for marketing their products to their target segment. It helps identify the type of outlet suited for the target segment and also understand the extent of service the company has to provide to minimize retailer and customer satisfaction.

The process of developing retail profiles of different formats selling the same product requires an understanding of the following:

Types of outlets that the product Type of customers they cater to and customer’s expectations Retailer behaviour

Retail profiling is developed based on the understanding of the consumer’s behaviour and it’s impact on

Cost of Stockout Bargaining power of the outlet

Retail Profiling of Parachute Oil

The below table is an overview of Marico’s retail profiling for Parachute hair oil



Factor Kirana Store Super Markets/Hyper

Markets

Discount Stores

Cash and Carry

Exclusive Outlet

Customer buying situations

Availability of Parachute

Satisfies customer who wants to buy Parachute but a different variety in the brand

Higher discount products are preferred

Traders buy products which are fast moving and also products where they get a better deal

Satisfies the need of the customer who is pre-determined to buy Parachute brand and variety. This is normally done in the wellness centers, spas where Marico has tie-up

Type of locality

Traditional local shop

Centrally located

No location specific

Normally in the outskirts

Located in posh, high end commercial areas

Factors influencing brand choice


Competitive pricing

Discount offers

Competitive pricing


Customer Patronage

Loyal to product and store

Loyal to the respective Marico product

Not very loyal to the product but loyal to the store

Mostly traders interact where they get a better deal

Loyal to product

Details of stocks

Fast moving Parachute products

Fast moving Parachute products

Maintains only those products where they get better discounts

Maintain full range of Marico products

Maintain full range of Marico products

Service level required

Low on service

High on service Low on service

Low on service

High on service

Retailer profit Medium margins; more volumes

Low margins; medium volumes

Low margins; high volumes

Medium margins; high volumes

High margins; low volumes



9. Risks and Challenges

Some of the risks Marico is facing are:

Input Costs Pricing Power Discretionary Spending Competition Product Innovation Stock Out Currency Risk Funding Cost Acquisitions

10. Marketing Strategy

Marico’s strategy has been to innovate and penetrate the market by straddling Parachute brand across various segments and process. In the marketing mix of Marico, we shall be discussing the 4 P’s of marketing with respect to Parachute coconut oil. The mix shall be analyzed as

Product Price

Promotion

Place

9.1 Product

Some of the various products of Parachute hair oil are:

Parachute Advansed Parachute Jasmine

Parachute Aftershower

Parachute Therapie

Parachute Advanced Starz

9.2 Price



Below are the pricing strategy followed by Marico for all products of Parachute brand.

Parachute:

250ml – Rs. 42

20ml – Rs. 6

Mini – a bottle shaped small pack: Re. 1

Parachute Advansed:

80ml – Rs. 29

170ml – Rs. 50

300ml – Rs. 87

Parachute Therapie:

50ml – Rs.192

Parachute Jasmine:

500ml – Rs. 90

50ml – Rs. 14

Starz Shampoo:

100ml – Rs. 57

Aftershower Cream:

50g – Rs. 38

100g - Rs. 64

Aftershower styling gel:

60g – Rs. 60

9.3 Promotion



Marico advertises through TV prints, Outdoors and Digital media. Celebrities like Diya Mirza, Deepika Padukone and Yuvraj have been featured as part of endorsement campaigns. Marico also utilize van campaigns, haats in rural areas for promotion. Sales promotions like ‘20% extra’ has been done on the 200 ml pack.

9.4 Place

Marico’s products including Parachute hair oil are sold in 38 countries through more than 15 lakh retail outlets and 5,000 distributors who service the entire country through a wide marketing network

11. SWOT Analysis

Strengths

1. Premium edible grade coconut oil2. Market leader in its category. Has a huge loyalty base3. Known for pure coconut oil 4. Parachute has gained the trust of people with every passing generation of customers5. It is entering the shampoo market with Starz and has a range specifically for the age group of 3-10yrs

Weaknesses

1. New innovation are available in select cities only and in limited quantities

Opportunities

1. Skin care is one segment where Parachute can venture2. Launch new variants that have not only coconut oil but also other natural ingredients

Threats

1. Many players are entering the market2. Parachute as a brand is positioned as a coconut oil

12. Marico Distribution Network



Marico has one of the best distribution and penetration width in the industry. Their network covers almost every town in India with a population of over 25,000. The below chart is a high level depiction of Marico’s distribution network in urban and rural markets.

Distribution Alliance

Marico has a very good distribution alliance. It has tied up with companies like Indo Nissin Foods Ltd. for distribution of products on a national basis.

Rural Sales & Distribution

Marico’s rural sales and distribution network is among the best in the industry and contributes more than 26% of company’s revenues. Its infrastructure comprises more than 185 super distributors, catering to 3200 small stockists and 9700 van markets. They also have a dedicated team of sales executives and sales representatives who distribute Marico's as well as alliance brands products.

Alternate Channels

The company has made a significant movement in creating the infrastructure for a Direct to Home operation in select cities. They have taken the lead in establishing a superior quality of



relationships with supermarket chains.

Sales Capacity

Marico has made significant progress in areas that enhance sales capacity.

Ensuring distributors quality The ground sales force have enough resources Improve the front-line sales force

Information Technology

Marico has been making investments in IT to ensure:

Stocks are available with the distributors on time Reduction in stockout Improve supply chain management efficiency

13. Surveys

The sample size of customers is 400 in number and within the company.The sample size of retailers is 10 in number and within the vicinity of residence.Sample size of distributors and wholesalers are 5 in number and within the vicinity of residence.

12.1 Consumer Questionnaire

Dear Respondent,

Thank you for taking few times to fill this questionnaire. All information provided below is purely for academic purpose

1. Which brands of oil are you aware?



Parachute Nihar Dabur Vatika Keo Karpin Amways coconut oil Malabar coconut oil

2. Which oil brand do you use?


3. How do you rate your brand on a scale of 1-5 (5 is the highest)?

1 2 3 4 5

4. What are the reasons to use this particular brand?

Non sticky Brand Loyalty Price Easy availability

5. How did you know this brand?

Friends TV Print Free samples



6. If your brand is not available, you would ….?

Purchase another brand Wait for your brand Prefer a substitute Pick a cheaper available product

7. Which pack size do you prefer?

75ml 150ml 300ml 500ml

8. What parameters influenced you to choose the pack size?

Price Family size Storage Availability

9. How frequently do you buy?

Once in 30 days Once in two months Once in 4 months

10. Are you satisfied with the brand?

Yes No

11. Did packaging influence you to buy a particular product?

Yes No



12. What is your priority towards packaging while purchasing a product?

Protective packaging Eco-friendly packaging Convenience packaging All the above

13. Do you change the FMCG product you purchase as the packaging changes?

Yes No

Personal Information:

Age:LocationIncome (per month)

Rs 1,000 – Rs 10,000 Rs 10,001 – Rs 20,000 Rs 20,001 – Rs 30,000 Above Rs 30,001

12.2 Consumer Survey Results





12.3 Retailer Questionnaire

Dear Respondent,



Thank you for taking few times to fill this questionnaire. All information provided below is purely for academic purpose

1. Which brands of hair oil do you stock?

Marico Nihar Dabur Vatika Keo Karpin Amways coconut oil Malabar coconut oil

2. Which brands of hair oil are the most preferred?


3. According to you, what are the reasons for customer’s preferences?

Brand loyalty No reason Availability Price

4. What is your customer profile?

High income Low income Middle income Can’t say

5. What incentives are provided by the company?

Price discounts Flexible credit window



Freebies on products Others

6. What offers do customers prefer?

Price discounts Freebies on products Others

7. What price change affect customers preferences?

Yes No

Personal Information:

Location of store:

12.4 Retailer Survey Results





13. Stock Out

Stockout can be defined as a situation in which the demand or requirement for a product is not being fulfilled from the current inventory.

The economic consequences of not being able to meet an internal or external demand from the current inventory are known as ‘Stockout Costs’. Normally such costs consist of the following:

Internal Costs

Delay Labour time Wastage Production Loss

External Costs



Loss of profit Loss of goodwill Loss of future profit Loss of market share Loss of customers

Some of the common customer reactions for a product’s stockout are:

Purchase another brand Wait for favourite brand Prefer substitute for the moment till stock arrives Buy anything offered by the retailer

In the below graph, Parachute customers tend to be loyal. Almost 32% of the surveyed customers preferred to wait for Parachute stock to be available. About 20% preferred to purchase another brand, 16% preferred substitute products and around 12% preferred to buy any product the retailer offered but with discounts.



14. Financial Details

Below are the details of the sales across Marico’s consumer products for the month of March 2011.

Below is the Income information.



Below is the Balance Sheet information.





15. References:

We would like to acknowledge the following resources in helping us in the case study.

Sales and Distribution Management – Pingali Venugopalhttp://info.shine.comwww.equitymaster.com/www.marico.com

Ernst & YoungKellogg School of ManagementSloan School of ManagementFuqua School of Businesshttp://fmcg-marketing.blogspot.com/2007/12/maricos-distribution-network.html


http://fmcg-marketing.blogspot.com/2007/12/maricos-distribution-network.html

http://www.marico.com/

http://www.equitymaster.com/

http://info.shine.com/

Documents

PGCBM20 - Group 43 - Marico Case Study(1)