From Business Today
Walking the talk | ||
T.V. Mahalingam | ||
May 1, 2008 |
Regular walkers at the windswept Bandra promenade in Mumbai are likely to spot a professorial-looking man walking briskly past entwined couples and sleepy constables, barely throwing them a glance. Only an avid follower of business magazines or the burgeoning business news channels would recognise 57-yearold Harsh Mariwala, Chairman, Marico, one of India’s fastestgrowing marketers of fast moving consumer goods (FMCGs).
Since 2003-04, revenues have grown at a compounded annual rate of 21 per cent, something few FMCG marketers can match. Net profits are up 30 per cent for the same period. To cap an impressive run, look at it this way: The group has experienced 30 consecutive quarters of revenue growth and 34 quarters of profit growth.
But even that’s not enough for Mariwala. “We want to be the fastest-growing FMCG company. And we want to do that consistently. There is no point in growing one year at 30-40 per cent and the next year at zero,” says Mariwala.To get that consistent high growth, Marico has a hand of four good cards. The first is a portfolio of established businesses and brands (businesses like hair oils and edible oils, and brands like Parachute and Saffola); the second card is the hunger to create new business models, the Kaya Skin Clinics being just one example of this; third, the international operations have grown from strength to strength.
Finally, the company has a distinct style of doing things, be it product innovations or the acquisition strategy.Terra Firma
The Marico way
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And then, of course, there is the story of Marico’s transformation from being a pure oils player to one focussed on health and wellness. Like Mariwala says: “Overall, I would classify the change that we are going through in four different buckets. Transition from hair oils to value-added FMCG products; from a purely Indian firm to a global entity; from low value to high value-added products, and from being only in the products space to becoming a solutions player (by taking the services route with skincare).”
Along with the traditional, Marico is constantly pushing the envelope towards new businesses. Late last year, the company prototyped a diabetes management atta mix in Delhi and the NCR. With this prototype and the cholesterol management product that it introduced the year before that, Marico has signalled its intentions to enter the functional foods markets, which, though still nascent in India, are expected to grow rapidly.
Therefore, we have to look at a product-plus model.” Sure enough, in December 2007, the company launched the Parachute Advansed Starz range of products, including a shampoo, gel and a non-sticky hair oil targeted at kids.
Beauty and wellness
Another ace in Marico’s pack is its successful entry into the services play, with the Kaya clinics. Since starting its first clinic in 2002 in Mumbai, the company has come a long way. “On the first day we launched our clinic in 2002, not a single customer came. The second day, a customer walked in and then signed on our register saying that we are a thousand times better than a competitor. Then we knew that things would work out,” recalls Kaya CEO Rakesh Pandey, an engineer by qualification who can wax eloquent on peels, skin renewal and polishing systems.
Kaya opened 18 new skincare clinics in 2007-08, taking the total number of Kaya Skin Clinics to 65. Of these, 56 are spread across 18 cities in India, while nine are in West Asia. In typical Marico style, Kaya also extended its offerings by getting into the weight-loss space, opening three Kaya Life Clinics in 2007-08.During the year, Kaya clocked revenues of Rs 100 crore. But more than its increasing contribution to group revenues, Kaya holds the promise of boosting the company’s bottom lines, thanks to its distinct service model. Typically, kickstarting a Kaya clinic takes Rs 1-1.3 crore (including technology investments and interiors) in a metro city. The clinic breaks even in about nine months in a metro and takes a little bit longer in smaller cities. Given that Kaya is still in expansion mode, significant margin accrual may not happen in the near future, but nevertheless, it’s a significant engine for the group’s growth.
Spreading wings
Another significant aspect of the Marico story has been its rapidly growing international business and its string of international acquisitions. Marico Chief for HR & Strategy Milind Sarwate narrates an interesting story about the company’s way of doing business. Even as Marico was negotiating its first acquisition in Egypt for the haircare brand Fiancée from the Egypt based Ready group, the company appointed a country head.
“We had the audacity to appoint the country head for Egypt even as the negotiations were going on. The guy (Brajesh Bajpai from Frito Lay) had the audacity to join as Country Head with nothing on the ground, when acquisition papers were yet to be signed,” recalls Sarwate, who has worked on most of the company’s acquisitions.
It’s perhaps this hit-theground-running attitude of the company that has seen its international business grow rapidly over the past couple of years. Last year, international operations accounted for nearly 16 per cent of the group turnover, clocking over Rs 300 crore. International revenues grew by an astounding 59 per cent. In 2006-07, revenues from international operations were at Rs 117 crore, or about 10 per cent of the group’s revenues.
“We expect to capitalise on the rapidly growing ethnic hair care market driven by the Black Economic Empowerment (BEE) policy in South Africa. South Africa and Egypt are our gateways to that region,” says Vijay Subramaniam, CEO, International Business, Marico.
The company’s Egyptian brands Fiancée and HairCode added nearly Rs 88 crore to the turnover. So, what does the future hold for Marico? “We don’t want one growth engine. We want all the product categories to grow. All products have to deliver at least double-digit growth,” says Mariwala. Keeping up with him will then get even tougher.
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