New products haven’t tasted much success. But the FMCG major is doing course correction
When fast moving consumer goods major Marico decided to withdraw the test marketing of its snack brand Saffola Zest last year, the inevitable flurry of questions followed: What went wrong? Is a follow-up likely?
Marico has had to deal with these questions off and on for some time now. The reason: Quite a few products that were launched during the last two years have either been suspended or withdrawn. (see chart for details)
Zest, for instance, was the company’s foray into the Rs 3,000-crore snack food category — a new segment for the personal care major. But the lack of an effective response from consumers in the marketplace compelled Marico to suspend the test run of the product last year.
Take another example - Maha Thanda Tel — the aromatic cooling oil launched in states such as Bihar in the summer of 2008. It was the first cooling oil to be rolled out by the company to mark its presence in the Rs 450-crore cooling oil segment, which has brands such as Emami’s Navratna Oil in the leading position. But the product bombed. Since then Marico has rolled out two other products — Nihar Naturals Cooling Oil and Parachute Advanced Cooling Oil — in the states of Bihar and Andhra Pradesh respectively.
Nihar Naturals, for the record, continues to be prototyped a year-and-a-half after hitting the marketplace, while Parachute Advanced is a product the company appears to be excited about. “It is a product that is doing well,” says Chaitanya Deshpande, head, mergers & acquisitions and investor relations, Marico. “We are excited about it. You have to understand that not all products will be successful in the marketplace. It doesn’t mean, however, that we haven’t tasted success at all,” he says.
That point is reiterated by Saugata Gupta, chief executive officer, consumer products division, Marico. “In FMCG, not all products you launch will work in the marketplace. There is never a 100 per cent strike rate. But yes, at some level, we do realise that we have to accelerate our existing strike rate,” he says.
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At the moment, new products contribute about 5-6 per cent to Marico’s Rs 2,660-crore consolidated turnover. Gupta says he would like to see this figure go up in future. “It becomes imperative therefore to imrpove the strike rate,” he says.
But will it be easy?
Says Arnab Mitra, FMCG analyst at brokerage firm Indiainfoline, “The kind of products that Marico has been rolling out in the last few years have long-gestation periods. They are products that are innovative but where the market for them is not fully developed yet, it will take some time for the company to establish these products.
| NEW PRODUCT INITIATIVES | ||
| Year | Product | Success/Failure |
| Q1FY08 | Revive Liquid Stiffener | Failed |
| Q3FY08 | Saffola Diabetes Management Aata Mix | A support brand |
| Q3FY08 | Parachute Advanced Starz (haircare range for kids) | Marginal success |
| Q1FY09 | Parachute Advanced Night Repair Cream | Withdrawn |
| Q1FY09 | Hair & Care Almond Gold | Moderate success |
| Q1FY09 | Maha Thanda Tel | Failed |
| Q3FY09 | Saffola Zest | Withdrawn |
| Q3FY09 | Parachute Advanced Revitalizing Hot Oil | Failed |
| Q4FY09 | Nihar Naturals Coconut Cooling Oil | Still in prototype phase |
| Q3FY10 | Saffola Arise | Moderate success |
| Source: Nomura Financial Advisory & Securities Report dated July 6, 2010 | ||
Take the Saffola extensions, for instance. All of them are category creators. These products don’t have a ready market to begin with. You have to create the category from scratch. That takes time.”
But Marico is not likely to cease rolling out extensions of its Rs 400-crore Saffola brand - a platform it is using aggressively to push its agenda on food. “By food here we mean healthy and functional products,” Gupta says.
According to company sources, Marico is looking to occupy every eating occasion through the day with Saffola. “Oats, for instance, is a healthy option for breakfast. Rice is an option for lunch. You will see more new products that will occupy different eating and snacking options through the day,” says a company executive on condition of anonymity.
The gameplan is that of the three-four prototypes that are launched per year, at least two will work in the marketplace. Already the company is targeting a turnover of Rs 30 crore on Saffola Arise, a product that was formally launched early this year after being test marketed last year. “It is a product that is shaping up well,” says Deshpande.
Saffola Oats, which began its test run a month ago, is one where the company is keeping its fingers crossed. “The market for oats is small, just under Rs 150 crore,” says Deshpande. “It is still early days to comment on it. But one thing is clear — our new product pipeline won’t cease because of a few failed attempts in the past.”