Marico does a P&G, to focus more on brands

FMCG major Marico, following the model adopted by bigger peers such as P&G, is likely to scale down manufacturing activities to focus on marketing and brand building.

The company has gradually been outsourcing production for most of its new products. Milind Sarwate, chief, HR and strategy, however, clarified that while the company wouldn't immediately stop manufacturing its own brands, it would be an option in the future.

The move to focus on non-production activities comes at a time when most FMCG companies have started manufacturing their own brands in tax-free zones that have come up in Uttaranchal and Himachal Pradesh.

Explaining the rationale behind outsourcing production, Sarwate said in the case of smaller brands such as Aftershower hair gel and Parachute Therapie rather than invest in new machinery, it was cheaper for the company to opt for contract manufacturing.

"The contract manufacturer enjoys the advantage of scale and lower overheads. Hence, it is more cost effective for the company to buy it rather than manufacture it," he said, adding, "in products involving proprietary technology or tax breaks from manufacturing in certain areas, we would not outsource production."

The company still manufactures its entire hair oil portfolio comprising flagship brand, Parachute, apart from Shanti Amla and Hair and Care.

Harsh Mariwala, CMD, had earlier told Business Standard that in the FMCG business, brands and brand building was the key to success. "Manufacturing can be outsourced. It is in the different areas of brand building where the value gets added," said Mariwala. In this direction, Marico has appointed its head of marketing, Saugata Gupta, as the CEO of the consumer products division.

A year back, the company also dropped the word "Industries" from its corporate name. "While for a small brand outsourcing may be viable, as it gains scale, manufacturing it in-house is a better option for the company," said a Mumbai based analyst.