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Marico Ltd.ME Final Project Presentation
Group P
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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
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An Introduction to MaricoPart 1
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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
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Brands
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Exploration of the companyPart 2
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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
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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
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• 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
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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
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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
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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
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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.
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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
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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
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An examination of theindustry
Part 3
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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
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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
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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
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Comparison - Sales
2008-09 growthdecreased as a result
of US Recession
C O
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Comparison - OperatingProfit Margin
Sales can be boostedby:•
Reducing the OPMwhen Cost isconstant
• Reducing cost bydecreased rawmaterial prices and
OPM maintained
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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
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Performance rationalePart 4
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•
P h K S
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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
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Kaya: Reasons for FailureIn spite of benefits of scale and advantage, longer than expected turnaround
- High attrition of skin practitioners
- Low client retention
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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
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Thank you
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