The Mariwala family-owned company, Marico, has successfully executed a diversification strategy aimed at reducing its reliance on two historically dominant, commodity-related brands, Parachute coconut oil and Saffola edible oil. This strategic shift has proven to be fruitful for the company.

Over the past five years, the domestic revenue generated by coconut oil has decreased by approximately 7 percentage points (700 basis points). Meanwhile, the domestic revenue share from emerging categories such as food and premium personal care (which includes digital-first brands) has surged to around 15% of domestic revenue in FY23. It is anticipated that this contribution will further increase to roughly 20% in FY24.

While the contribution of Saffola oil has risen by about 500 basis points, primarily driven by a significant price surge in the past few years, the company anticipates a substantial normalization in FY24. This expectation is based on the recent correction in edible oil prices.

During an interview, Marico’s Managing Director and CEO, Saugata Gupta, shared, “We have rapidly reduced our dependence on Parachute coconut oil and Saffola oil. If we look within the Saffola franchise, in the next 3-4 years, foods could overtake edible oils in terms of turnover. We are reducing our dependence on commodity-linked products. The metric which we measure is the quantum of business coming from premium personal care, foods and digital brands. This has moved from 5% in 2020 to 15% right now and is expected to be at approximately 20% by next year.”

Parachute coconut oil and Saffola oil account for approximately 55% of domestic revenues in FY23. In the FMCG industry, companies that focus on value-added brands are generally more highly regarded than those operating within the realm of commodity-linked brands.

In the past decade, Marico has purposefully broadened its business through a combination of organic and inorganic growth approaches. In response to evolving market dynamics, the company has also acquired several direct-to-consumer (D2C) brands to enter the male grooming sector, all the while expanding its Saffola franchise into the packaged foods segment.

“We have been able to rapidly diversify to create future growth engines. By the end of this year, at least two of our digital brands will be profitable — Beardo and Just Herbs. We see the brand, Beardo, as the ‘Harley Davidson’ of male grooming. While the habit of sporting a beard continues to be a trend, we have been able to diversify the portfolio beyond just beard-related products,” said Gupta.

In the direct-to-consumer (D2C) realm, Marico recognized that tasks beyond its capabilities should be entrusted to the founders of the brands it acquired.

“Just like other leading FMCG companies, our core business is characterised by a repeatable model of large brands, mass distribution and mass advertising. Although we have significant digital capabilities and 20% of our spends are on digital platforms, our core business is wired in a certain way. Taking a cricket analogy, very few players can excel in all formats of the game. But, we realized that if we do not participate in the digital business, it would be a missed growth opportunity. Since we did not have the organic capability in the core in 2017-18, we decided to allow the founders to operate in this way independently while we learnt about digital brand business models in a methodical manner,” said Gupta.

Marico’s recently acquired D2C brands maintain their operations in their original locations, while Marico explores cost synergies in the backend, including the implementation of a shared technology infrastructure and collaborative performance marketing efforts, among other strategies.

“We will have a system advantage when operating as a house of brands as compared to other stand-alone digital brands,” said Gupta. “We might not be the best in the world in creating new digital brands ourselves, but what we want to be is best-in-class in profitably scaling up the digital brands we invest in. That’s where we want to specialize because founders create brands; we want to be seen as profitable scalers and not creators in D2C,” he added.

In the food segment, the company is establishing a distinct go-to-market strategy, recognizing that this category necessitates the maintenance of fresh stock and places a significant emphasis on an efficient supply chain.

“One of the reasons we moved into foods so aggressively is we believed that we were under leveraging the brand Saffola. As we keep expanding into foods, the addressable market multiplies. So, we want to make Saffola the best-in-class case study of how a brand can be successfully stretched and re-invented by expanding its addressable market,” said Gupta.

Saffola has expanded its offerings into various segments including snacking, immunity, breakfast, and spreads. Furthermore, it is directing its attention towards plant protein and millets as emerging platforms for future growth.