“But it was a B2B business model; they were selling to the spa industry. This was not our core competency. So, we invested in that company,” Mariwala had told ET six years ago. While the business grew to some extent, Mariwala said it didn’t leverage on “our strengths”. Add to it the distance, and the venture was proving to be unviable. Finally, Mariwala sold it off. The mistake, however, came with some insights.
“Looking back, we should have invested in some other category because B2B and B2C are very different. So, what we learnt from this, we implemented it in other markets where we acquired some brands,” he said. Marico then expanded to pre- and post-hair wash care, hair grooming and personal grooming. Mariwala acquired hair care brands in Egypt, South Africa and Vietnam.
Mariwala, who didn’t study beyond a simple B.Com but is now known as a visionary entrepreneur for his keen insights, has built one of India’s largest FMCG businesses from scratch. And just not that. He has also successfully adapted with the changing times, from turning a promoter-driven company into the one which is professionally run to diversifying into food and D2C.
Now, the diversification strategy at Marico to reduce its dependence on Parachute coconut oil and Saffola edible oil — its two traditionally strong, commodity-linked brands — is yielding results. How Marico has been reinventing itselfMariwala joined his family business Bombay Oil Industries in 1971. Back then, Parachute and Saffola oil were among the flagship products of the company At the time, the oils were sold in large quantities in tin cans but Mariwala envisioned retail opportunities After spending some time evaluating the market and addressing various challenges related to design and packaging, round, plastic bottles of Parachute oil were first launched during the ‘80s.On April 2, 1990, Mariwala founded Marico which was established as a separate entity. The company also entered a user agreement with Bombay Oil Industries to use its brands, Parachute and Saffola, initially for a period of three years.
In 1991, Marico launched the non-sticky oil Hair & Care and Sweekar sunflower oil. During 1992-94, the company opened its first overseas office in Dubai. Marico went public in India in 1996. From Rs 50 lakh in 1971, Mariwala’s business now has annual revenue of Rs 9,764 crore. This has been possible with Mariwala’s openness to experiment, learn and reinvent.
Close to a decade ago, Marico ventured into the food segment by launching baked snacks under the Saffola brand. Since the snacks were under a health brand, Saffola, Marico focused on the health part more than the taste part which is definitive of any snack. It shouldn’t have just been healthy but tasty too.
That product was rejected by consumers but it was a great learning which proved useful later when Marico launched Saffola oats. That product was a perfect combination of health and taste. Marico spent a lot of effort studying different regional tastes and came out with a range of masala oats. Now Marico leads in this product segment. In the last few years, Marico has introduced several new products under Saffola, ranging from honey to peanut butter, soya chunks to instant noodles, making it as a healthy-lifestyle-advocating premium food brand from being just an edible oil brand. Saffola is now a Rs 2,000-crore-plus brand.
The switch to new categories
The revenue contribution of coconut oil in the domestic business has come down by approximately 700 basis points(7%) over the last five years, while the domestic revenue share of new categories of foods and premium personal care (including digital first brands) has grown to approximately 15% of domestic revenue in FY23, TOI has reported. This contribution is likely to move up to approximately 20% in FY24.
Although the contribution of Saffola oil has increased by approximately 500 bps mainly due to the sharp spike in prices in the last couple of years, the company believes this will normalise to a large extent in FY24 following the recent correction in the edible oil prices.
“We have rapidly reduced our dependence on Parachute coconut oil and Saffola oil,” Marico’s MD & CEO, Saugata Gupta, has told TOI. “If we look within the Saffola franchise, in the next three-four years, foods could overtake edible oils in terms of turnover. We are reducing our dependence on commodity-linked products. The metric which we measure is the quantum of business coming from premium personal care, foods and digital brands. This has moved from 5% in 2020 to 15% right now and is expected to be at approximately 20% by next year.” Parachute coconut oil and Saffola oil contribute to around 55% of domestic revenues in FY23. An FMCG company’s play in the value-added brand space is usually more valued than one that operates in a commodity-linked brand play.
The D2C play
D2C, or direct to consumer, is a new trend which the traditional FMCG companies can either see as competition or as an evolutionary step to take. D2C brands refer to businesses that have the majority of their revenue or customer acquisition from direct-to-consumer online channels or started with an online-first distribution before going omni-channel. More than 800 new D2C platforms (or those which sell directly to consumers online and not through marketplaces like Amazon or Flipkart), were introduced between January and December 2022, with 40-50 million new shoppers on these platforms, according to RPSG Capital Ventures, which invested in several independent D2C companies.
Many FMCG companies such as Hindustan Unilever, ITC, Emami and Marico too began operating their own micro-sites about a year back. Despite low sales on the individual platforms, FMCG ocmpanies use their microsites as launch platforms, to collect consumer data, build loyalty and then roll out in other larger channels for volumes, or direct consumers to scale platforms like Amazon or Flipkart.
Marico, which has several D2C brands in its fold, saw business worth ₹500 crore from these internet-first FMCG offerings, Mariwala had said in August last year. He also said technology had influenced every business, even defensive sectors like FMCG. Marico is attempting to build a Thrasio-style model where it would create synergies and scale up D2C brands by having a common tech platform, supply chain and customer relations management, ET had reported last year. US-based Thrasio Holdings has pioneered such a brand roll-up model in consumer business.
Marico has already acquired Just Herbs, Beardo and healthy breakfast and snacks brand True Elements in the D2C space and plans to enter more categories by buying brands. Recetly, it announced it would acquire a majority stake in Satiya Nutraceuticals, which owns plant-based nutrition brand Plix which had sales of Rs106 crore last fiscal.
The D2C brands Marico has acquired over the last few years continue to operate in their respective locations, while Marico explores cost synergies in the back-end such as a common tech stack and performance marketing, amongst others. “Although we have significant digital capabilities and 20% of our spends are on digital platforms, our core business is wired in a certain way,” Gupta has said in his interview to TOI. “But, we realized that if we do not participate in the digital business, it would be a missed growth opportunity. Since we did not have the organic capability in the core in 2017-18, we decided to allow the founders to operate independently while we learnt about digital brand business models in a methodical manner,”
“We have been able to rapidly diversify to create future growth engines,” Gupta told TOI. “By the end of this year, at least two of our digital brands will be profitable – Beardo and Just Herbs. We see the brand, Beardo, as the ‘Harley Davidson’ of male grooming. While the habit of sporting a beard continues to be a trend, we have been able to diversify the portfolio beyond just beard-related products.”
(With inputs from TOI)
