Problem of plenty for Marico

The firm has launched two new products in skincare and breakfast cereal this year. The big question is whether the latest brand extensions will succeed.

The shelves in the cabin of Saugata Gupta, CEO of Marico’s consumer products division, are too crowded. Products are jostling for space, with the odd one falling off the shelf.

Ironically, the state of the CEO’s shelves explains the company’s strategy much better than analyst calls. Analysts believe that the company’s portfolio is equally cluttered with a multitude of products, ranging from body lotion to basmati rice. The more charitable view is that Marico is best at innovating new products and categories and it hardly matters if some don’t work.

By launching two new products this year too, Marico has lived up to its track record of launching new products every year. At the start of the year, the company decided to wet its feet in the skincare market by test-marketing in Kolkata a natural coconut milk-based body lotion. It was launched nationally in September under the Parachute Advansed brand. The skincare market in India is close to Rs 5,000 crore and the body care market is worth Rs 1,300 crore.

Another category that the company is seeking a play in is the oats market, the total size of which is Rs 150 crore. Marico is test-marketing an Indianised version of “masala” oats in South India. Even though Marico launched oats sometime back, it’s hoping to make waves with its ready-to-eat masala oats which come in two flavours –masala & coriander and curry & pepper.

Marico, primarily a hair oil (makers of Parachute coconut oil) and edible oil (Saffola) company, has been struggling to change its revenue mix for a while now. Currently, hair oils account for 44 per cent of the overall revenue of Rs 3,130 crore. Parachute is the biggest brand in the hairoil space. Coconut oil alone contributes 31 per cent to the total revenue mix. Edible oils on the other hand account for 15 per cent of total revenues, where the biggest brand is Saffola.

The company has been attempting to get a foothold in different consumer categories by expanding its Parachute and Saffola franchise over time. It has decided that it will consciously focus on the wellness and health category. All brand extensions will reflect this philosophy. This is why the company sold the Sweekar brand as it did not go with the company’s health and wellness plank.

Gupta says over time, 25 per cent of revenues from Saffola will come from the non-edible oils portfolio (Saffola Arise rice, oats and cholesterol management atta). Many within the company say that it has learnt from past mistakes of entering smaller, or very new categories that lacked scale.

Even then, the health and wellness plank is not an easy one. Many of the company’s extensions have not yielded much and the company has defocused from the categories subsequently. For example, Marico launched Saffola Zest, a healthy baked snack, but Gupta says what the company learnt from the experiment is that consumers don’t like compromising on taste. Another example of health positioning not having worked is the fortified atta or the cholesterol management atta mix called Saffola Cholesterol Management. While kirana shops are making a killing by selling multi-grain atta mix, Marico now believes that catering to a segment with does not always work.

In a bid to change the revenue mix, the company has rushed to launch an array of new products or variants, many of which have fallen off the radar soon after. Not much is heard, for example, about several variants of Parachute hair oil that were launched with much fanfare.

Himani Singh, analyst at Elara Capital says “Marico launches products routinely, but its focus towards making them a success in the long term isn’t strong enough. Success is difficult in new categories (skin care) which are dominated by large MNC players. Besides, several areas such as oats, cholesterol-control flour etc are very small”.

Analysts say that the company probably lacks the passion and deep pockets to invest in its new products and brands. It’s not that the categories are not interesting or that there is no growth, but the company has to have the patience and money to back brands in the long-term.

For instance, the skin-care market where the company has ambitions is dominated by the multinationals (HUL, Garnier, Procter and Gamble and Nivea) and none of the existing players will give in without a fight. If Marico has to succeed it has to have a long-term vision and money to invest.

Another criticism against the company is that it tends to enter rather small and niche segments, where scale is not possible. A classic example of this is a product aimed at locking colour from bleeding. The product was innovative but lacked scale; so it was discontinued.

Another example is fortified cholesterol atta, which is only a niche product. The oats market too is believed to be rather small at Rs 150 crore. Even if the company manages to capture a significant portion of this market by replacing upma with masala oats, the size of the market does not justify the high entry costs.