Eco Final Presentation

8/3/2019 Eco Final Presentation

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Marico Ltd.ME Final Project Presentation

Group P



AgendaPart 1: An Introduction to Marico

Part 2: Exploration of the Company

• Demand for products

• Supply of raw materials

• Production, externalities & transaction costs incurred• Competitive and Pricing strategy

Part 3: Examination of the Industry

• Monopolistic market scenario

•

Performance of peersPart 4: Rationale for performance

• Reasons for success/failure

• Suggestions for improvement



An Introduction to MaricoPart 1



Introduction to Marico• Started out as with

Parachute and Saffola asproduct offerings in 1988

• 32 products today with a

turnover of Rs. 26.6 billion

• Products across Coconut Oil,Hair Oils, Post-wash hair care,Anti-lice Treatment, Premium

Refined Edible Oils, nicheFabric Care and skin caresegments

Marico

ConsumerProducts(India)

Personal &Nature Care

Wellness &New Products

InternationalBusiness

Group (FMCG)Kaya



Brands



Exploration of the companyPart 2



Demand for products -Parachute

• Parachute has been in the market since the past 30years

• A strong brand loyalty exists

•

The current market share of 46%• 14% price increase in the past 8 – 9 quarters has not

affected the volumes

• Demand in relatively inelastic

•This is a significant competitive advantage for Marico when it comes to pricing



Demand for Products -Saffola

• Per capita spending on health in India is very lowcompared to other countries.

• India has one of the highest mean cholesterol levels inmales aged 15+

• Due to lack of willingness or time, regular exercise is notaken up.

• This gives rise to eat healthy, stay fit concept

• Saffola has 55% market share in this segment



• Per capita income has increased 1.5 times in the last 5

years and is expected to increase another 63% in

another 5 years

• 38% of Indian population in the age group of 20 – 44

•

Kaya skin clinic is the only player in this segment and thushas monopoly power.

Demand for Products -Kaya Skin Clinic



Supply of raw materials

Monopsony Power • Largest buyer of coconut – 1 out of 13 coconuts

produced in India goes to Marico

• Tied up with 6000 vendors directly

• Reduces impact of coconut price rise by stocking

three months coconut requirement



Production & Distribution• Size and scale advantages in relation to

competitors

• Finesse in production planning, scheduling, andmatching with marketing requirements

• High reliability suppliers – superior quality assurance

• Production at Marico's manufacturing facilities areat 7 locations – largest factory at Kanijikode withcapacity of 1,500 MT

• Extensive distribution network covering 3,600stockists around the country



Externalities• Maximization of potential of society at large

o “Think Fresh, Be Green”

o Reduced Carbon Footprints/Pollution

• Rain-water harvesting at Pondicherry plant

• Energy efficient project at all a manufacturing facilities

• Reduced plastic consumption: use of recycled bags

• Reduction of paper usage

o Saved Rs. 7 million by green initiatives



Transaction costs• Transaction cost: cost of distributing products to

retailers across the country

• Marico implemented the mySAP Supply chainmanagement system to streamline these operationsand reduce costs

• These processes included:o Calculation of monthly shipment requirements

o Electronic transfer of stock level data from the distributors to

Maricoo Push distribution of products from Marico to distributors based on

forecasted retail-level demand and distributor inventory levels.



Competitive Strategy•

Focus on increasing volumes across all brands,without much focus on improving margins

• How is this done?o Introduction of new products

o Taking existing products to new market

o Educating consumers about healthy use of Saffola andshift from loose oil to rigid oil

•

Why this is done?o Provides economies of scale, reducing cost

o Leverage country specific benefits, increasing margins



Pricing StrategyHigh pricing power

o Market presence for last 30 years

o Market leader products: Parachute (46%) and Saffola (55%)

o Market share unaffected in spite of considerable rise inprice of Parachute and Saffola

o Products available in various price segments



An examination of theindustry

Part 3



Overview of FMCGIndustry

• India‟s FMCG sector is the fourth largestsector in the economy

• Rural India accounts for more than 700mconsumers (70% of the Indian population)and accounts for almost 50% of the totalFMCG market

• The demand for FMCG goods isincreasing by 18% in the rural areas andby 11% in urban areas



SWOT AnalysisStrengths

First mover advantage in many markets

Powerful brands

Strong inventory control

Efficient distribution channel

Deep rural reach

Economies of scale

Weaknesses

High cost capital

Failure of product line extensions

Lack of a diversified product portfolio

Lack of extensive resources for expansion

Opportunities

Growth in Indian Middle class

Expanding Market SizeOpening up of Rural Markets

Leverage on flagship brands to introduceproducts

Threats

Increasing Competition from global players

Increasing commoditization of products

Entry of private labels

Marico



Peer Comparison• Peers:

o HUL

o P&G

o Dabur

o Godrej Consumer Durables

• Comparison done on three parameters:

o Sales

o Operating Profit Margin

o Advertising expenses as a percentage of sales



Comparison - Sales

2008-09 growthdecreased as a result

of US Recession

C O



Comparison - OperatingProfit Margin

Sales can be boostedby:•

Reducing the OPMwhen Cost isconstant

• Reducing cost bydecreased rawmaterial prices and

OPM maintained



Comparison – Advertisementas % of Net Sales

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

2006 2007 2008 2009 2010

Godrej Marico HUL P&G Dabur

One of the important

expenditures in theFMCG Industry



Performance rationalePart 4



•

P h K S



Parachute: Key SuccessFactors

• Success largely attributed to „purity‟ value

• Strong brand loyalty

• Flexibility of raw material acquisition strategy

• Packaging innovation that conquered ruralmarkets and prevented duplication from localbrands

• Sub-brands that cater to different market

segments• Smaller package sizes targeting the rural

population



Kaya: Reasons for FailureIn spite of benefits of scale and advantage, longer than expected turnaround

- High attrition of skin practitioners

- Low client retention



Suggestions• Focus on areas of competence – remain in low

competition segments (hair oils) rather than moveinto high competition segments (functional foods)

• Leverage well-established brands

• Extend presence in rural regions to enhancevolumes



Thank you

Eco Final Presentation

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