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  • Writer's pictureGalactic Advisors

Marico - No Longer A Safe Parachute!

The story of Marico evolving is divided into phases, the first one being establishing Parachute and Saffola as consumer brands, these were previously under the consumer products division of Bombay Oil Industries (The Family Business).

About the Company:

In 1970, Harsh Mariwala, decided to convert the Parachute and Saffola business from B2B to B2C product. Previously, the Coconut Oil(Parachute) and Edible Oil(Saffola) were sold as a B2B product later on they were sold as B2C products in small packing of 100 ml instead of being sold in big containers of 15 Litres.

Marico’s Journey and change in strategies:

Timeline of Marico:

Source: Marico IP

Industry Overview: FMCG is the fourth largest sector in the Indian Economy, the size of the FMCG industry as on 2018 was 53 billion$. The FMCG sector contributes nearly 20% to the Indian GDP as on 2018.

The segments of FMCG Sector:

Source: IBEF

The main segment for Marico under the FMCG industry is the Hair Care market which contributes around 6.5% to the total FMCG sector. The Coconut Oil and Hair Oil is the major market for Marico and both these categories command 50% of the total hair care market. The company also has some presence in Hair Conditioners category.

Source: Bajaj Corp IP

Business Segments:

*The Kaya business was also the part of operations till 2013.

Indian Consumer Product Business Growth: Over the last 30 quarters, Marico’s Indian Business has shown subdued growth both in value and volume terms. The average volume growth was just 5% from Q3 2013 to Q4 2020. Given Marico’s product portfolio majority of its revenue comes from Coconut Oil which has now become a branded commodity so the demand for the product is not going to rise exponentially and it is also fully penetrated with around 70% penetration. The value growth of the business has also remained subdued in the range of 8-9% over last 30 quarters, mainly because of volatile input prices. Let’s look at the reasons why the Indian part of the business is struggling to grow. All the three major areas of company the Coconut Oil, VAHO and Saffola has struggled lately and has grown in single digits over last 7 years.

Source: Marico Company

Glimpse of Mario’s Dominance in Indian Consumer Product Business: Marico has been the leader in various products and segments and is place either 1st or 2nd in various categories, this shows how the company has been over the years focused on creating a brand in each and every category and this has yield results for the company.

Source: Marico’s Quarterly Updates

Indian Consumer Product Business: The Indian Consumer Product Business contributes 77% to the total Group’s Revenue. The Indian Business has been struggling to grow lately, the consistency and double digit which was prior to 2013, is not the case today. The sales CAGR from 2006-13 was 20% whereas the growth from 2013-20 dropped to 8% CAGR. The low single digit growth could be attributed to many reasons, like saturation of growth of Coconut oil portfolio etc. we will discuss it going forward why the FMCG giant of India is struggling to grow despite a strong foothold in the FMCG market and some decade old brands.

Source: Marico Company