‘Marico will not enter highly penetrated ‘red-ocean’ markets’
Marico was born when India’s economic liberalisation started, making this year its silver jubilee. It has grown from a commodities-driven firm to a Rs.6,132-crore fast-moving consumer goods major. Saugata Gupta, MD & CEO, talks about Marico’s journey and its strategy in the aggressive FMCG market. Edited excerpts:
How do you see rural demand ?
Our biggest stress point currently is in rural areas, because a lot of our markets are rural. About 34 per cent of our direct distribution is rural. We have big markets in Maharashtra and Telangana, and there had been two consecutive years of drought in these markets. So, the impact was felt.
Is India still under-served by FMCG firms?
We are not in a mature market, where you manage costs and margins.
In emerging markets, affordability and availability are the biggest drivers of consumption. Penetration is still very low in rural areas (2-3 product categories apart).
Your peers — Dabur, Godrej, Patanjali — are talking about becoming Rs.10,000-crore companies. Your plans?
We can cross the Rs.10,000 crore mark by 2019-2020, but it is not about chasing that number. It is about how you can deliver predictable sustainable growth, how we see ourselves as an exciting company to work with and attract the best talent. We are doing the best innovations and we want to see ourselves as a more admired company. Growth is obviously an outcome of that.
It took Marico 25 years to become a Rs.6,000-crore company. How will you get to Rs. 10,000 in five years?
There is enough potential for growth. International business is currently 22 per cent of the company’s revenues and we have five big bets internally: food, male grooming, hair-fall, the bottom of pyramid, and premium hair nourishment. We believe that there is a lot of opportunity in both India and internationally, and there could be some inorganic opportunities, mostly in international markets.
Certain markets in Africa and South Asia where we are not present could be opportunities.
Ideally, we would like to operate in Indian markets. But having said that, sometimes when you enter a new market, you have to be a little flexible with your portfolio. Inorganic growth gives me a critical size for a new market entry. It has to be a brand with a strong equity.
We are doing different acquisitions in different markets and we look at it as a top-up. Acquisitions accelerate growth. We have done seven or eight acquisitions in the past, so we now have a playbook: what to do and not to do, what succeeds and what doesn’t.
Your company is synonymous with your flagship hair-oil brand, Parachute…
We operate in coconut oil and value-added hair oil. We wish to be number one or number two in most categories we operate in. Our other philosophy is to ensure that we choose volume growth over everything else; we don’t chase short-term margins. We believe that in many emerging markets, margins always come in with scale and efficiency. It’s more difficult to get back lost market share of volume compared to margins. We as an organisation don’t want to enter into categories that are mature, highly penetrated, what I call red-ocean categories.
So, we will not see Marico products among soaps or shampoos?
I don’t see us entering the shampoo and soap markets in India – they are red-ocean, highly penetrated, mature, competition-intensive categories. We want to be focused in a couple of categories and not get into multiple categories.
Dabur launched Anmol with ad campaigns sayingit’s cheaper than Marico’s Parachute. How do you react to it amidst stagnant sales growth and falling volumes?
We have maintained market share in the value-added hair oil segment, especially in coconut oil. The competitive intensity is only going to increase.India has enough opportunity. It’s not a mature market where you fight for market share. It’s a market where you participate in growth.
Source: The Hindu
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