The Hindu Business Line : Marico looks for more

Vijay Subramaniam, Head of Marico Ltd’s international business group (IBG), is excited about his company’s recent foray into the Egyptian market in more ways than one. For Subramaniam, the acquisition of two haircare brands in Egypt, Fian cee and Haircode, not only gives Marico a huge share of the local market but also serves as a base for the company’s assault on the MENA region.

The Middle East North Africa region, for which Egypt would be a fulcrum, explains Subramaniam, is a strong growth region with many similarities to the Indian market. Moreover, the learnings from operating in international market will be substantive, he says. “Close to 50 per cent of the FMCG throughput in the UAE market is through modern trade. So, we can learn from handling modern trade and apply that knowledge as organised retail grows in India,” says Subramaniam. That apart, he points out emphatically, the agenda is to drive the company’s growth through the international business group. “It’s small now but growing rapidly and we expect to contribute 17 per cent of the company’s sales through the IBG,” he adds.

The Egyptian acquisition of Fiancee, a value-for-money brand, and Haircode, an upmarket urban brand, straightaway gave Marico a 60 per cent share of the market and a Rs 110-crore franchise.

Hair care brand Fiancee which Marico acquired in Egypt

In terms of trade structures and with a modern trade in single digits and with MNC brands such as Unilever, Sara Lee and Nivea, the market is pretty similar to Indian conditions, explains Subramaniam. Egypt has a high import duty of 30 per cent as well which makes imports uncompetitive. Now Marico has access to two huge plants which can supply the region with post-wash creams and gels. “We are strategically placed in Egypt. Now we need to integrate the operations, extend the brands to the MENA region and later offer Marico products. At some point of time Marico will look at extending those post-wash brands to India but Subramaniam points out that India is still largely a hair oil market and the post-wash haircare category would need to grow faster.

Asked about overseas takeovers and their valuations, Subramaniam says that it helps to ramp up scale faster than grow the business organically. It also gives access to mainstream distribution channels. “There are far more opportunities outside India than at home,” he adds.

Sundari, a top-end skincare range acquired in the US

It has taken to the acquisitions route elsewhere as well. In Bangladesh, it acquired two soap brands last year, Camelia and Aromatic, which made it the third largest MNC player in that country. Marico also took over a few years ago, a top-end skincare range in the US, Sundari, a niche brand distributed in spas across several countries. Apart from hubs overseas where Marico now has production facilities, it exports its brands to several South-East Asian markets.

Meanwhile, Marico’s other foray into the skincare salon business with Kaya Clinic has also seen robust growth, 31 per cent year-on-year. Rakesh Pandey, Head of this business, says that Marico has 45 Kaya clinics around the country, including five in West Asia. Now that the brand is fairly well distributed across the top metros, Pandey says the challenge is to take the brand to the tier two cities.

“There’s a need for result-oriented skincare from feel-good to do-good skincare,” he says. It takes longer to build awareness in the smaller cities, he points out. The brand, he adds, is catering to the mass affluent, rather than a solely upmarket, clientele.

Keeping its health and wellness platform in perspective, Kaya has also launched Kaya Life, a weight loss and shaping clinic, the first of which opened in Mumbai recently. “Most weight-loss methods are short-term but our clinic advocates sustained weight loss with lifestyle changes,” he explains. Research also showed that weight watchers want to also lose weight in the right places and to enable that Pandey says the clinic has special European machines to shape the body.

The roll-out of Kaya Life will be gradual with one more in Mumbai followed by one each in Bangalore and Delhi. It has an aggressive programme for West Asia as well, where it expects to be the largest such by the next year with 20 clinics. It is also entering the Saudi Arabian market.

And, in the country itself it expects to have up to a 100 clinics in the next three years. With each clinic entailing an investment of Rs 1-1.5 crore, Pandey envisages an investment tab of Rs 100 crore. This year he expects Kaya to be a Rs 120-crore business, up from Rs 75 crore last year. “We’re still in the growth phase,” he says.

Marico is quite firm that it will not follow the franchisee model for growth as skincare is sensitive and it does not want any quality dilution. It employs 700 people today and in three years it would have 4,000 on its rolls, with several of them being cosmetic dermatologists. To spread awareness, Kaya has started shop-in-shops in retail chains such as Lifestyle and Hypercity in Mumbai where a sample service would be done, a skin diagnosis made or a product handed out. Gleaning customer feedback is intense with Kaya also sending out ‘mystery audit’ teams on services at the clinics.

More Stories on : Strategy | Overseas Investments | Personal Products

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Marico’s makeover

Marico looks for more

Does gender really matter?

When being ‘bindaas’ matters

Coke’s little drops of profit

In God and Godrej we trust

Six ‘life’ secretsTo know the unknown