ZR-55

December 3, 2015
MD. ASHIQUR RAHMAN
ZR-55
SECTION A
BATCH 20

Marico Industries:
Sustainable Business growth.

I think the primary driver for strategy at our end is growth. We need to drive growth and growth
from wherever growth can come in- be it India or other countries. Our strategy of going
international is to be in markets where can we add value and also those markets in which we can
emerge as market leaders. This value can be in terms of brand building, distribution and so on.

- Harsh C. Mariwala, the CEO

and MD of Marico India

Marico is one of the leading Consumer Products & Services companies in the global beauty and
wellness space. Marico has consistently worked bring innovation to its customers through the
careful creation of continuous and sustainable change. It has a flat organizational structure, with
just five levels between the Managing Director and the shop floor operator. Marico is present in
more than 25 countries across Asia and the African continent.
_____________________________________________________________________________
1.http://marico.com/bangladesh
2. http://tejas.iimb.ac.in/interviews/08.php
Md. Ashiqur Rahman, Student of Institute of Business Administration, University prepared this case study solely as a basis for academic research
and not as an endorsement, a source of primary data or an illustration of effective or ineffective management. This case, though based on real

events, is fictionalized and any resemblance to actual persons or entities is purely coincidental. There are references to the actual companies in the
narration.
Copyright @ 2015 Institute of Business Administration, University of Dhaka.

From cooking oil with 'LoSorb Technology', to rice that keeps you active, personalized
skinscription services and hair oil that comes with a battery-powered head massager, Marico has
entered several categories and believes in thinking differently. The portfolio consists of enduring
brands such as Parachute Advansed, Saffola, Hair & Care, Nihar, Mediker, Revive and Manjal
etc. In addition, the company has acquired the erstwhile personal care business from Reckitt
Benckiser and owns popular brands like Set Wet, Livon, Zatak , and other personal care brands
thereby strengthening its portfolio for the youth and creating a significant presence in the male
grooming and post hair wash segments.
Marico's international portfolio includes brands like Fiance, Haircode, Camelia, Aromatic,
Caivil, Hercules, BlackChic, Code 10 and Ingwe.
Marico is also present in the Skin Care Solutions segment through Kaya Skin Clinics in India,
Middle East and Bangladesh and Derma Rx in Singapore.
In 1991, Marico embarked upon dis-intermediating initiative by ridding the copra supply chain
of exploitative structures and agents. It infused the supply chain with technology platforms for
quick and transparent transactions and started sourcing directly from the farmers. It stopped daily
price negotiations with traders and agents in terminal markets. The backward integration
strategy helped to reduce costs, save time and to be flexible to changing demands. Marico
enjoys sustainable competitive advantage through its supply chain activities, wide and
intensive distribution network, innovation in packaging and introducing new products and
branding activities.

Achievements
-1 out of every 2 Bangladeshi is a Marico consumer
- Parachute brand voted the Best Brand award for FY11-12 across all categories by Nielsen
Bangladesh & Bangladesh Brand Forum
- The Gazipur factory is ISO9001, ISO 14001 & 18001 certified
- ICMAB awards Marico Bangladesh the 2nd best Multinational in the areas of Cost &
Management Accounting
- Super Brands voted Parachute a Super brand in Bangladesh
- Marico distribution network covers over 7 Lakhs outlets

__________________________________________________________
1.http://marico.com/investorspdf/FY14_Q1_Analyst_Note.pdf
2.http://marico.com/investorspdf/Information_Update_-_Q4FY15.pdf

Business Performance
Marico has completed its first quarter (Q1) for the financial year FY14 with a robust
performance registering 16% growth in turnover and 141% growth at PAT level. This growth
came in an environment which witnessed slowdown of countrys overall business due to political
unrest & hartals and other macro-economic factors. The business posted a broad based growth
well supported by healthy performances across all its product categories viz. Coconut Oil, Value
Added Hair Oil (VAHO) and Powdered Hair Dye. The cost structure for the quarter ended June
30, 2013 (Q1FY14) as compare to Q1FY13 is given below:

Revenue Mix and Market Share

Marico, as seen from business revenue charts, is primarily a hair oil company in Bangladesh.
Currently, hair oils account for 80 per cent of the overall revenue. Parachute is the biggest brand
in the hair oil space. Coconut oil alone contributes 80 per cent to the total revenue mix. Edible
oils on the other hand account for 15 per cent of total revenues, where the biggest brand is
Saffola.
Marico is a market leader in hair oil and coconut oil categories at the moment. Being a market
leader, it has a strong competitive position in these categories and has achieved penetration in the
market. Parachute and Saffola recorded a volume growth of 10% and 27% during FY13.
Whereas value added hair oils (Parachute Advansed, Nihar and Hair & Care) recorded volume
growth rate of 24%. Its core business is now on a large scale and hence double digit growth
figures are difficult are difficult to achieve.
______________________________________________________________________________
http://marico.com/investorspdf/FY14_Q1_Analyst_Note.pdf

To reduce its over dependence on its major brand (Parachute) which accounts for more than 80%
of total revenues and to tackle the sluggishness in its core business of hair oil and cooking oil,
Marico needs to take a strategic call to tap different categories.
Therefore, Maricos primary task is to fuel growth through other avenues and to change its
revenue mix with the help of a more balanced portfolio mix.

Secret to Success
Below is a first-hand account from Mr. Harsh Mariwala during INSIGHT 2013.
He talks about identifying your product and how innovative ideas and
execution helped the Parachute brand leapfrog from a small entity to market
leader.
FMCG stands for Fast Moving Consumer Goods. The biggest asset for an FMCG company is
the brand and distribution network. I would prefer not to own a single factory, but would like to
sub-contract everything, because thats not where we add value. We add value in the area of
brand building and distribution which is done fundamentally through good talent and
innovation. Product identification and product portfolio play a very important role in the success
of FMCG companies. It is also known as the defensive sector because even in a recession, the
sector does well and it commands very high premiums. In an upturn, we dont do as well as many
other sectors. So, there is high demand for talent within FMCG companies. The penetration is
low in many categories so there is huge opportunity for us to increase sales by increasing
penetration. And most importantly, we dont need any permits.
We decided to look into categories where MNCs (multi-national corporations) are not present.
One category which we identified was hair oiling. Hair oiling only exists in limited parts, mainly
India, neighboring countries and the Middle East. When I meet analysts and those who want to
invest in our company, the first thing they ask is, What is hair oiling? and then they tell us that
this is a dying sector which is true. But I was very clear that this habit will not die down in
India, and we decided to take a big bet on hair oiling. The overall competitive environment was
less and our chances of success were much higher. That bet on hair oiling has really paid off.
The hair oiling market still grows and we have done a lot of work on the benefits of hair oiling,
and our findings are going to be leveraged in future.

We still continue to be excited on hair oils. We entered the Bangladesh market about 10-15 years
ago and today we have 80% market share there. We are the largest Indian company in
Bangladesh. We get quoted on the Bangladesh stock exchange.
The whole journey of building this brand has been primarily because of innovation and through
packaging. For example, when I started working, Im talking about early 80s, coconut oil was
sold 100% in tins. We decided to convert the market from tin to plastics. Plastics are cheaper
than tins. It is more convenient to pour and more attractive to keep on the shelf, and so we
thought it will be very easy for us to succeed. But normally for FMCG, you do a lot of market
research before launching a product. The research team came back saying that plastics will not
succeed with coconut oil. We got a shock. It seems about 10 years before us, someone else had
come in with coconut oil in plastics and they had packed them into square-shaped bottles. They
didnt do a good job in terms of packaging so the oil would ooze out. Then the rats would attack
the coconut oil in plastics because they love the plastics and coconut oil combination, and the
whole retailer shop would get spoilt.
So, we developed a round-shaped bottle where the rat would find it difficult to get a grip, and
packed it in such a manner that not a single drop of oil was oozing out. We took about eight to
ten bottles and some rats, and put them in a cage for a few days no problem!
That really increased our confidence. We took pictures of the cage and gave them to our field
force saying You take these pictures, explain to the traders, ask them to keep three to six bottles
first and test it out. And slowly we were able to break resistance over a period of time. It took
almost ten years for us to convert the market from tin to plastics. Plastics cost half the tin cost
and we put all that money back into advertising, talking about the benefits of plastics. That
pioneering moment from tin to plastic gave us a huge increase in market share. Virtually from
0% market share we became market leaders. Innovation and execution goes hand in hand, its
not just ideation.
___________________________________________________________________________
http://isha.sadhguru.org/blog/lifestyle/dna-of-success/think-outside-bottle-story-parachute-oil/

Another example is, at one stage, we had 100 copycats of Parachute and were losing about 20%
of our sales to them. So, we designed a certain mold with a foreign mold maker at a very high
cost, and the copycats were not able to copy it. Even in the sachet segment, we have one-rupee
mini-bottles. We had a low market share in this segment and we thought, Can we do something
in the sachet segment, wherein it looks like a bottle. So we imported certain machines and
packaged it in mini-bottles, and our market share just jumped up. Similarly, in winter, coconut
oil freezes, so people would again go back to tins. So we had to design a container with a wide
mouth and a spout.
I think the biggest success of parachute is through innovations, and that happened in a category
like coconut oil, where there are very limited opportunities for innovation.

Knowing Parachute the Brand

Parachute, one of the leading brands in Bangladesh, started its journey in 1996. Synonymous
with 100% purity, Parachute has set new standards of quality. I t also pioneered the switch from
the tin can packaging to a trendy plastic bottle in Bangladesh. Having grown by leaps and
bounds today it has gone from 50% to 78% market share in the branded coconut oil segment in
just a matter of two years.
Market
Parachute offers modernity to all who are embracing the new age with ease, as well as
understanding newer and better means to personal care. Today, Parachute is the undisputed
market leader in the Branded Coconut Oil segment with 78% market share (source: Nielsen).
Other key players in the market happen to be Jui, Lalbag Hanshmarka and Tibet. The brand
enjoys strong loyalty both in urban and rural markets and is available in over 4.5 lac outlets
nationwide. Applying Marico's corporate theme of "Making a Difference", the brand looked
beyond the obvious. Rather than fishing for share gains in the branded coconut oil market,
Parachute widened its source of business to the large, loose, adulterated coconut oil market. The
main strategy included gaining understanding of the coconut oil consumers of key areas
contributing to loose oil. Using these insights, the brand consistently held up its campaign
supported by massive rural activation targeted at converting loose oil users. Using such a

persistent conversion strategy Parachute not only managed to increase the size of the branded
coconut oil market by gaining share from loose oil but in turn also managed to increase its
market share in total branded coconut oil market to almost double in less than two years!
Achievements
Parachute as a brand has flown high and has successfully landed some quite reputable accolades
over the past few years:
2009: Awarded 2nd Best Trusted Brand in Bangladesh by Bangladesh Brand Forum
2008: Awarded 6th Best Trusted Brand In Bangladesh by Bangladesh Brand Forum
2008: Awarded the 3rd Best Brand position amongst FMCG brands by Bangladesh Brand Forum.

In the last 13 years Parachute has established its presence in Bangladesh and has emerged as a
winning brand. This claim has been further cemented when Parachute achieved a Brand Equity
Index score of 7.9 out of 10 as calculated from Nielsen's winning brand model. Brand Equity
Index is calculated based on consumers' response to:
1) Favorite brand
2) Brand would recommend
3) Willingness to pay higher prices
Only about 6% of brands command a brand equity score of more than 3.0. This is arguably the
highest score recorded till date in Bangladesh among major popular brands - a clear testament to
the strength & acceptance of the brand.

Whats next?
Marico has always been that creative company that had all answers. Hence, they have the fastest
growing company in anywhere they have entered. But now, at the moment Marico is facing
difficulty to answer this question. WHATS NEXT?
Expansion
The big problem that you face in a market where you have the lions share is that how you grow
further. Or, you go somewhere else with your brands where you can grab the market that you
grabbed in your market. The next question becomes, Where do I go?

The thing that is especially bugging Marico is that hair oil is a tradition that will stay for a long
time in the sub-continent, which is already captured by Marico. Now, with the Brand Portfolio of
Hair oil and Edible oil should they branch out?
Brand Extension
Another viable option for Marico is that they stop swimming in the Blue Ocean of hair oil and
start biting with strong competitors like Unilever and P&G. Using the Brand Value of
Parachute, they could extend the line of product as they have already done in India.
Marico has used Parachute Advansed (sub-brand) to launch value added products to the brand
line of Parachute. The strategy is aimed at reducing dependence on Parachute hair oil. In this
case, the company hopes to ride on Parachute's purity and value-for-money attributes.
These include:
1.
2.
3.
4.

Parachute Cooling Oil

Parachute Tender Coconut Hot Oil
Parachute Jasmine Oil
Parachute Ayurvedic
5. Parachute Therapie
Parachute also entered mens grooming and body lotion category. Personal care brands have
been benefitting from the surge in personal grooming in Bangladesh. Personal grooming though
dominated by major MNCs, boasts growth rates of 20-25 percent, far higher than 7 percent seen
in Maricos core categories. Mens grooming brands also are in line with future trends and have a
lot of headroom for growth.
This has impacted the portfolio by diversifying it and reducing the dependence on Parachute
coconut oil.
There are pros to this strategy. One is goodwill with the name Parachute. Second, they could see
a growth in other markets if the extensions are executed deftly. Obvious drawback would be
Brand Dilution. On one hand, Parachute is synonymous to coconut oil which brings in the
question if people would buy Parachute branded other products. On the other hand, if the
extensions dont work out well, it could harm the mother brand and hit the existing market of
Marico.

Product development
Product development is a strategy that seeks increased sales by improving or modifying present
products or services. Product development is an especially effective strategy to pursue when

An organization has successful products that are in maturity stage of the product life
cycle. The idea is to attract satisfied and loyal customers to try new products as a result of
their positive experience with organizations present products or services.
When an organization wants to compete in a high growth industry.

Marico pursued product development strategy through brand extensions of Parachute. Marico
has been attempting to get a foothold in different consumer categories by expanding its portfolio.
Unrelated Diversification
This strategy favors capitalizing on a portfolio of businesses that are capable of delivering
excellent financial performance in their respective industries, rather than striving to capitalize on
value chain strategic fits among the businesses. Firms that employ unrelated diversification
continually search across different industries for companies that can be acquired for a deal and
yet have potential to provide a high return on investment.
Where synergies are non-existent, where the market is untested that is where Marico's money
is. It's a move analysts aren't upbeat about. But the cash-rich, debt-free company says if it's
going to take a chance, it's going to be now.
-Excerpt from Business Line article At Marico, skin it is by Purvita Chatterjee
Kaya Skin Clinics (in India)
Kaya's first phase includes four clinics in Mumbai, followed by two each in Delhi and then
Dubai. Advanced treatments at Kaya include,skin polishing and brightening, Kaya glow, laser
hair removal, photofacials, facial toning, peels, capillary vein removal, deep wrinkle removal and
fillers. An average treatment could cost anywhere from Rs 800Rs1,500.
At the same time he has plans for 50-100 KSCs across the metros in the next three years which
may include equity investments by friend and international business consultant, Asif Adil.
MARICO Industries has decided to tread an unconventional path to enter the skin care market.
While the domestic market has seen the launch of its Kaya skin care clinics, the company has
decided to simultaneously enter the international market through the acquisition of the $1-million
Sundari brand of luxury ayurvedic skin care products. While on the one hand we will bring in

Western techniques to India, on the other hand, knowledge from India will be imparted to the
Western world."
A venture by Marico Industries - makers of Saffola, Revive and Parachute', is the communication
being used by the company. Offering a range of skincare services from skin polishing and laser
hair removal to `photofacials' and facial toning, investments to the tune of Rs 7-8 crore is
expected to be made in the first phase..
And it's now showing visible results: 10,000 satisfied customers, and 13 Kaya Skin Clinics
across Mumbai, Delhi and Dubai. All in a matter of 16 months.'

Conclusion
The unconventional Marico is facing a very conventional challenge for a market leader. So far,
the conventional solutions too, seem to be working well. Does this success mean sustainability
for Marico in the long-run? thats a whole different question.

Case Question
What will be the best strategy for Marico to undertake to ensure sustainable growth in the longrun?

Teaching Note:
Target Audience
The case is solely targeted towards academic beneficiaries, especially, people who are involved
in academic learning of Business Strategies. It discussed a very common scenario for all the
market leaders after the market gets saturated. For ensuring growth, depending on the industry,
different companies undertake different strategies. This is a real life portrait of that scenario and
it also discusses the viable options in this scenario.
Core Issue
How does Marico ensure sustainable growth as a market leader in a saturated market?
Solution
Acquisition of established brands in the industry but in different product category is the way to
go for Marico. The strategy undertaken must be accordance with the following:
1. It ensures sustainable growth.
2. Prevents any harm to current brands.
3. Use existing goodwill.
Acquisition does not fall within the last criteria but it gives Marico the opportunity to use the
goodwill of the parent brand bought. It also does not harm the current brands of the company in
any way.
Drawback of the current strategy:
The strategy currently undertaken by Marico, extension of the current brands, will bring success
in the short term and it will also ensure sustainable growth, because of the goodwill of the brands
extended. But, in the long run, it will dilute the brand Parachute and its unique association
with hair oil, which is one of the major reasons why Parachute is so big at the moment. The
company cannot take risks losing their core in the pursuit of new.