Marico: Focusing on regional brands

Top line growth to be in the region of 20 per cent and margins will settle around 13 per cent.

If the last few quarters are anything to go by, the FMCG sector will see volume-driven growth. And Marico is no different if one looks at the company’s quarterly performance, which saw the top line grow 10 per cent year-on-year, despite cost pressures. While the FM’s Budget proposals for FY12 may not have yielded great gains, except bringing more acreage under cultivation for palm oil, the company seems to be working towards a brand strategy that can capitalise on the consumption cycle.

With the recent acquisition of ICP, a hair care and cosmetics company, Marico is working towards building regional brands as against global brands in the near term. And it is present in all the exciting markets in the region, Sri Lanka, Bangladesh, Vietnam, Malayasia and MENA. The company has decided to focus on three verticals — hair care, skin care and health care. In each of these categories, the company will only be present in sectors where it sees the potential of becoming either the number one or number two player. Clearly, it’s going to be a volume game.

Thanks to the numerous companies it has acquired over the last few years, almost 26 per cent of Marico’s total sales are global. Marico expects skin care (under Parachute and Kaya brands) and health care (through brands like Saffola and Sweekar) to drive growth. The company is running various pilots in different parts of the country, with different brand extensions of Parachute and Saffola.

Marico expects skin care to contribute eight per cent of sales, health care 22 per cent and personal care the remaining 70 per cent. While the share of skin care and health care will grow, personal care will still be the largest chunk of the portfolio.

Despite the pressure of rising input prices, the company is not too concerned. Given that India’s GDP is expected to grow between 8.5 and 9 per cent, the sector is expected to see the top line grow by a healthy 20 to 25 per cent. With such scale, the company believes maintaining margins at 13 per cent is possible, especially since Indian companies are known to respond rather well to such cost pressures.