Analysis of Marico’s strategies to drive growth Strategy Formulation (SF) Analysis Analysis of Marico’s strategies to drive growth Compiled by: Group 1 Ayush Bagla (B004) Mitali Bhende (B007) Aditya Choudhry (B012) Gagan Gulati (B018) Shraddha Kalantri (B027) Nipun Mehta (B038)

Overview of Marico Marico’s sustainable competitive advantage Marico is one of India's leading Consumer Products & Services companies in the global beauty and wellness space. Marico is present in more than 25 countries across Asia and the African continent. Turnover of INR 4596 crore in 2012-2013. Marico’s sustainable competitive advantage Backward integration: Supply chain activities Distribution network Innovation in packaging Branding Overall business growth Valuable Rare Costly to imitate Non substitutable Marico achieved revenue from operations of INR 4596 crore(USD 851 million) during FY13, a growth of 15% over FY12. The volume growth was at 12%. .

Overview of Marico Segmental business growth Business revenue mix Marico is a market leader in hair oil, coconut oil and refined edible oil categories. 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 7% during FY13. Whereas value added hair oils (Parachute Advansed, Nihar and Hair & Care) recorded volume growth rate of 24%. To reduce its over dependence on its 2 major brands (Parachute and Saffola) which together account for more than 60% 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, Marico’s primary task is to fuel growth through other avenues and to change its revenue mix with the help of a more balanced portfolio mix.

Corporate Strategy Problem Statement Marico’s core business of hair oil and edible oil is experiencing slow growths. The oil business, especially coconut oil segment, is faced with tepid demand, fierce competition and commodity price inflation. Also, more than 50% of the revenues come from the oil business and hence there is over dependence on two major brands. The key problem is how should Marico strategize to drive growth in face of these problems?

Strategies Adopted Prompted by sluggishness in its core business of edible oil and hair oil, Marico chose to search new business drivers and spurt growth through following strategies adopted.

Analysis of strategies adopted Product Development Marico pursued product development strategy through brand extensions of Parachute and Saffola brands. Marico has been attempting to get a foothold in different consumer categories by expanding its portfolio. Parachute Brand Extension Saffola Brand Extension Parachute also entered men’s grooming and body lotion category. Personal care brands have been benefitting from the surge in personal grooming in India. Personal grooming though dominated by major MNCs, boasts growth rates of 20-25 percent, far higher than 7 percent seen in Marico’s core categories. Men’s grooming brands also are in line with future trends and have a lot of headroom for growth. Some of the products were neglected as far marketing efforts are concerned. To enter into new categories the company would also require to have the patience and provide monetary backing to have a long term plan for a successful brand..

Analysis of strategies adopted Market Development Market development involves introducing present products and services into new geographic areas. Marico has expanded its operations into emerging economies of Middle East- North Africa (MENA), South Asia, Bangladesh and Vietnam. These economies provide enough headroom for growth due to rising incomes and low penetration. The company has a presence in over 25 countries.

Paras Pharma Acquisition

WHAT DID MARICO ACQUIRE? Personal Care brands of Paras Pharma from Reckitt Benkiser Including products like Zatak, Set Wet and Livon Acquistion Cost: Rs 760 Crore BUY v/s BUILD DECISION Setting up a similar business from the scratch Advertising Campaign Cost Also require to strengthen distribution system 3-5 Years Rs 25-30 Crore

PRE ACQUISITION ANALYSIS CHALLENGES Competitive Intensity Demands Constant Advertisement Support Demanding Consumer Base Shift from traditional Marico Advertising Approach Distribution extended to Cosmetics Outlets, Chemists

INVESTMENT RATIONALE INVESTMENT RATIONALE Higher Growth Rates Compared to Categories Marico then operated in Youth Oriented Portfolio Leveraging on the synergies of the Male Grooming Category Demographic Dividend

SPACE MATRIX SPACE MATRIX

Evaluation

FY 2014 Performance (Half Year) Youth brands reported revenues of Rs 42 Cr with a 30% Y-o-Y growth in H1FY14 and the segment is expected to main a 25% growth rate in the medium term

ACQUISITION OF KAYA Analysis of strategies adopted Unrelated diversification ACQUISITION OF KAYA

Slow Growth for Marico before the acquisition Slow Growth in Sales Declining/Stagnant RoCE 2001 2002 2003 Cash 46.74 128.08 182.90 D/E 0.02 0.03 0.05 High cash balance Low debt

The Grand Strategy Matrix Rapid Market Growth 1. Market Development 2. Market Penetration 3. Product Development 4. Horizontol Integration 5. Divestiture 6. Liquidation 4. Forward Integration 5. Backward Integration 6. Horizontal Integration 7. Related Diversification 1. Retrenchment 2. Related Diversification 3. Unrelated Diversification 4. Divestiture 5. Liquidation 1. Related Diversification 2. Unrelated Diversification 3. Joint Ventures Weak Competitive Position Strong Competitive Position   Slow Market Growth

Advantages outweigh the concerns Growth of branded salons Problems with present oil business Aspirational image Unsaturated market No first-mover advantage No previous experience May not be sustainable in long run

Rationale behind acquisition of Kaya High cash balance and low debt Concerns for merger with Kaya No first mover advantage No previous experience May not be sustainable in the long run 2001 2002 2003 Cash 46.74 128.08 182.90 D/E 0.02 0.03 0.05 Rationale behind the acquisition Problems with present oil business Growth of branded salons Unsaturated market Aspirational Image Strong management confidence

Porter’s Five Forces Theory for Retail Skin-Care Market Threat of New Entrants: Moderate Economies of scale are not very important Visibility ,number of outlets, brand name & recall Exit & entry barriers Intensity of Rivalry Threat of new entrants Bargaining power of buyers Threat of substitutes Bargaining power of suppliers Competitive Rivalry: High Product differentiation Organized and unorganized sector Market positioning, promotional campaigns Bargaining Power of Suppliers: Low Products produced in-house Large supply of the dermatologists and staff Bargaining Power of Buyers: High Female urban consumers with a high disposable income Can switch to local salon and independent dermatologists Threat of Substitutes: Moderate Service is customized and has a high aspirational value Cheaper substitutes/better brand name Customer loyalty programs

SWOT Analysis of Marico and Kaya as a combined entity Strengths Unrelated Diversification Of Portfolio Unsaturated Retail Skin-Care Market Weaknesses Weak Financial Performance Lack Of Entrepreneurship Lack Of Consolidation Opportunities Growth Opportunities Of Retail Skin-Care Threats Under Utilization Of Talent Cultural Differences

Conclusion CONCLUSION Having analyzed strategies pursued by Marico to spur growth, we conclude that some of the strategies were aimed in the right direction while others are critically analyzed to suggest alternatives. The strategies pursued by Marico result in diversification of portfolio to introduce a host of brands from breakfast foods, men’s grooming, hair care and personal care. These categories hold promise of high growth rates and leverage on large young demographic across emerging economies. Introduction of new brands has decreased the over dependence on Marico’s business strongholds and introduced newer capabilities. The business is poised to grow faster as the newly acquired/built brands bring resources in form of India’s young demographic.