The lack of high-octane brands and intense competition is perhaps holding back Marico’s growth potential on the home turf, but opportunities in international markets beckon.
For a narrow-based FMCG player, Marico does not mind being a “boringly consistent” company. Over the years it has managed to keep a singular focus on its limited brands, which are profitable and sustainable in the long run, rather than try to expand its portfolio, enter new segments and thereby risk itself spreading too thin. Even though Marico’s corporate motto is “Be more, every day”, its limited mass brand appeal has often proved a hindrance to future growth. Its two master brands – Parachute and Saffola – despite registering a strong 22% CAGR in revenue in the last five years, haven’t been able to make much headway into new product categories. The company’s strategy of keeping a sharpened focus on its limited brands may have served it well so far, but times are a-changin’ and Marico could do better by pulling a few aces up its sleeve.
After all, the opportunity and the market is well in its sights. Already, FMCGs constitute the fourth-largest sector of the Indian economy. The category is estimated to grow to $100 billion by 2025 from the current roughly $13 billion, according to market research firm Nielsen’s report, Consumer 360. And rural India, with over 70% population and accounting for over 55% of consumption, will be the key driver of this growth, as more rural Indians embrace consumption of newer, more contemporary food categories. FMCG players, both homegrown as well as the MNCs, are bracing up to tap this new emerging opportunity. But therein lies the rub for Marico; it doesn’t have the products specifically targeted at this segment.
To give the company its due, Marico has entered new categories of late. Saffola, the premium edible oil brand, has been extended to breakfast cereals and packaged rice. And within a year, Saffola Oats has achieved the third rank in the space with a 16% market share. Even Saffola Arise, the rice brand, is doing well. Both are expected to rack up roughly Rs.400 million in annual sales for the company.
Currently, the oil category, in which Saffola is the market leader with over 55% share, contributes almost 90% of the revenue, while Saffola’s food business brings in the remainder 10%. The company wants it to grow to 75% and 25%, respectively. The Rs.31.3-billion turnover FMCG firm recently posted a 9.4% year-on-year increase in its net profit to Rs.782.9 million for the September quarter. Its net sales increased by 25.6% to Rs.9.75 billion from Rs.7.76. billion year on year.
For a narrow-based FMCG player, Marico does not mind being a “boringly consistent” company. Over the years it has managed to keep a singular focus on its limited brands, which are profitable and sustainable in the long run, rather than try to expand its portfolio, enter new segments and thereby risk itself spreading too thin. Even though Marico’s corporate motto is “Be more, every day”, its limited mass brand appeal has often proved a hindrance to future growth. Its two master brands – Parachute and Saffola – despite registering a strong 22% CAGR in revenue in the last five years, haven’t been able to make much headway into new product categories. The company’s strategy of keeping a sharpened focus on its limited brands may have served it well so far, but times are a-changin’ and Marico could do better by pulling a few aces up its sleeve.
After all, the opportunity and the market is well in its sights. Already, FMCGs constitute the fourth-largest sector of the Indian economy. The category is estimated to grow to $100 billion by 2025 from the current roughly $13 billion, according to market research firm Nielsen’s report, Consumer 360. And rural India, with over 70% population and accounting for over 55% of consumption, will be the key driver of this growth, as more rural Indians embrace consumption of newer, more contemporary food categories. FMCG players, both homegrown as well as the MNCs, are bracing up to tap this new emerging opportunity. But therein lies the rub for Marico; it doesn’t have the products specifically targeted at this segment.
To give the company its due, Marico has entered new categories of late. Saffola, the premium edible oil brand, has been extended to breakfast cereals and packaged rice. And within a year, Saffola Oats has achieved the third rank in the space with a 16% market share. Even Saffola Arise, the rice brand, is doing well. Both are expected to rack up roughly Rs.400 million in annual sales for the company.
Currently, the oil category, in which Saffola is the market leader with over 55% share, contributes almost 90% of the revenue, while Saffola’s food business brings in the remainder 10%. The company wants it to grow to 75% and 25%, respectively. The Rs.31.3-billion turnover FMCG firm recently posted a 9.4% year-on-year increase in its net profit to Rs.782.9 million for the September quarter. Its net sales increased by 25.6% to Rs.9.75 billion from Rs.7.76. billion year on year.
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