Harsh Mariwala, chairman & managing director of Marico, believes value-added products will drive the company’s growth story in future and for this, some cannibalisation is natural. Excerpts from an interview:
What’s been the impact of slowdown on Marico?
When it comes to coconut oil, we see two impacts: people start converting from loose to packs and from packs to value-added goods. Because the overall value of monthly outlay in a household budget is limited, our vulnerability is much, much lower. We are fairly insulated with very little downtrading. Cautiously optimistic is how I would sum up the prospects for the FMCG sector.
Does that mean consumption is holding up?
Yes, I would say that. There is growth, but at a slower rate.
You see no uptrading this year by consumers?
There will be to some degree, but not very significant.
Is consumption holding up for Marico because people use hair oil come hell or high water?
Yes, and also because the outlay on this product is lower. If it was more, the impact would’ve been greater.
Copra prices have softened but competitive intensity has increased because of local players…
Yes, they have stabilised now. See, Parachute has a very strong brand recall so that protects us from local competition.
Has softening raw material prices helped margins?
Yes, they have. We have even passed on some of it.
The Parachute brand has been extended a lot. Has all of it worked?
The response so far has been pretty good. So, we are positive on the road ahead.
Isn’t hair wash a natural brand extension for Marico?
We need a good differentiator there. It is a highly cluttered segment with all the major brands present. It doesn’t make sense to enter until you have that.
You just launched a light hair oil...
Yes, it has the properties of tender coconut. It was done because many people don’t like the smell of coconut oil.
How has the response been?
Well, it’s too early to judge.
Every time you launch something like that, you risk cannibalisation?
That’s a risk. But if you don’t cannibalise yourself, somebody else will.
In edible oils, Saffola volumes have been affected...
Yes, because of the higher price point. It is a big-ticket item in a family’s monthly outlay so…
Will there be discounts and promotions to offset that?
Let’s see. We will have to wait and watch that. Every business has to manage growth and margins. If it helps us achieve volume growth then we may.
What is the roadmap for Kaya?
It will be demerged on April 1. And the larger story there is in integrating the domestic and the international consumer product business. We see greater synergies there in terms of supply chain, products, etc. That is the bigger story that media has not been able to pick up. But that will help us focus on the consumer product business from Marico’s point of view. Kaya is more of a services oriented business. The key thing was that if the two businesses require a different kind of culture and attention then it should be separated.
Kaya has also been going for smaller stores...
We have been prototyping them. There are two right now – in Delhi and Bangalore. We will have a couple more to see how it goes.
Has the business been affected in Kaya too?
To some extent yes, because the overall ticket size for Kaya is higher.
What is the cross pollination scenario?
Currently, our major markets outside are Bangladesh, Middle East, Vietnam and Egypt. We are in the process of evaluating what products can be taken internationally and what can be brought here. But it is all in the drawing board stage. One brand that we have taken abroad is Parachute. We are evaluating if two-three more brands can be taken that way.
Where does Marico go from here?
I think we will have to keep going up the value chain. We will also be looking at more value-added products rather than just vanilla ones.
In five years, will Marico be a non-coconut oil story?
I would say that the value-added businesses will form a larger part. If you look at our portfolio now, it’s divided into hair oil, edible oil, healthy foods, pre and post-wash hair care and then there are the youth brands.
And what happens to the next generation of leadership at Marico?
Let’s see, right now I am here. There are some changes effective April 1 and because of that, my workload will reduce.
But you intend to remain hands on?
I wouldn’t call it hands on. Mind on and hands off is the plan.