Marico is constantly on the lookout for opportunities and acquisitions are a big part of its efforts to expand. Saugata Gupta MD and CEO of Marico, a man who has completed two decades at Marico and three decades in the FMCG space, says today, the company is trying to stay relevant and keep with the changes by spotting an opportunity and threat and cope with it.
Recalling his early days, he says, “I remember when I came in, I think Marico was around Rs. 600 or 650 crores. But if you look at the turnover today, Rs. 10,000 crores is what we are going to cross this year.” Under his leadership, Marico has undertaken a significant change in portfolio with diversification.
Edited excerpts
How has 2024 panned out so far?
Today you are hearing about this consumption slowdown. I think the first thing I must say that in India, in the medium term, there has been no structural change as far as consumption is concerned. I think the FMCG medium term outlook is very much intact. I think what has changed perhaps is that what we witnessed two years ago, when there was a little bit of a rural slowdown. But rural is picking up. There has been a little bit of an urban slowdown, a combination of inflation, maybe of incomes or the overall sentiment.
At the end of the day, I always believe that given what happened in COVID and post Ukraine there was huge inflation, companies have to be resilient. They have to spot an opportunity and threat and cope with it. I think there are also huge structural changes happening in FMCG with the growth of Q-commerce and e-commerce. Well, there has been a struggle in GT (general trade), which is where I think a lot of organisations, especially large organisations, still have huge business coming from. The other thing that has happened is that there has been a lack of sanity as far as the digital space or the DTC space is concerned. I think capital is not so liberally available. It’s been an interesting year.
Let’s speak about some of your legacy portfolios. First up, Saffola, which has successfully parlayed into foods over the past so many years. What is going to be the strategy there going forward?
I think Saffola has been a very interesting case study on how to expand an under leveraged brand and expand the total addressable market. If you look at the history of Saffola it was almost like a therapeutic brand – if you have a heart condition you use Saffola. It was limiting. Because you can’t say that you are a healthy brand.
We dabbled with ‘Cholesterol Atta’, ‘Diabetic Atta’. None of them got scale. So we started Oats. But then also we realised that Oats is a very ‘Western habit’. So how do you ‘contemporise’ oats and then drive penetration? So, we made it into Masala Oats. Moved it from breakfast to in-between meals. Then we started immunity with honey. We are now expanding oats. We are now in breakfast. We are in plant protein with ‘soya’. So these are the four verticals. And today, for Saffola, the food category makes much more margin than Saffola edible oil. Secondly, today food is 30 percent of total Saffola franchise. In the last quarter it hit a run rate of Rs. 1,000 crore and it is an amazing run, because we have multiplied 4X in four years. We believe that in another 3 to 5 years food will be a major part in Saffola.
So in terms of revenue contribution, you are saying food will contribute more for Saffola portfolio?
Yes, in 4 to 5 years maybe food will be 70 percent and oil will be 30 percent.
There is growing interest in specialised oils like olive oil, avocado oil, and low-fat oils. How is Marico addressing this shift in consumer preferences?
There are two things. One, Saffola caters to a very top end audience. They also are very loyal to the brand. Yes, they use other oils. But not every oil is conducive to Indian cooking. Secondly, we always advise people to eat healthy and therefore use less oil. So the average Saffola consumer uses very less oil. But we perhaps could innovate better there. We have been the first one to innovate with some of the multi seed oils which are good for the heart. But it is important that we innovate more. For example, cold pressed is another trend. But unfortunately, what has happened in India is that categories like olive oil have got commoditised. And some of the olive oil that is sold is very basic.. They are not very premium. So we don’t want to get into a category which is commoditised because then there is no longer margin play out there.
Can you also give us an understanding on how you know which category or which subsegment to get into? What is going to be the next big thing after masala oats?
In food so we are looking at ‘what is better for you’. And as I said, we are looking into breakfast and snacking. And snacking is a very big segment. And as long as we enter the repertoire of snacking, it can be healthy snacking. What we can’t get into is ‘impulse’ because my distribution doesn’t reach these outlets. So what I don’t want to do is to cold chain because I do not have the capability to do cold chain. I think snacking is the next big bet for us. And even with Masala Oats, I think the penetration is low. We are gradually expanding. Breakfast is a big opportunity. We have just launched muesli and we have also done something called ‘masala millets’, which almost tastes like ‘khichadi’. So that’s comfort food.
We have other brands. ‘True Elements’, which is into premium foods. And the third one, which we are really excited about is a brand called ‘Plix’. It’s a nutraceutical brand. It’s one of the most successful brands in this space. We are extremely confident that within two years it will hit 500 crores and it’s already profitable. Because one of the things about our digital business is that we focus on profitability just not on growth. We are very clear on what we are good at and not good at, and therefore we might not get into things that we don’t think we have the capability to get into. For example, can I do biscuits at scale? I can’t do it. Because it’s a different business model, different distribution. Can I do ₹5 chips, for example? I can’t. Because the brand can do certain things, we want to do ‘better for your health’. We are far better and stronger in urban and organised trade. We don’t have a very mass distribution.
Now Parachute is a brand that we have grown up with. How are you making it appealing to the Gen Zs and the Gen Alphas?
Hair oiling is a habit which is very much here to stay. Obviously, at the very top there is some stress in penetration. So what happens is that people tend to get out of oiling sometimes in their teens and they come back after thirties. I think the job is to drive far more contemporary formats. ‘Hair oiling’ is a habit which is just not very strong in India. It is a very strong in the Middle East and North Africa among the local population. It’s in fact growing in a country like USA. So I think it is very much here to stay. Therefore, there’s a huge trend on ingredients. For example, onion oil became a big fad. Today, rosemary is a fad. Oiling is also growing on the back of efficacy – how do you control hair fall? And also I think that contemporary formats like serums are sensorially far better. So, we are very much here to stay. I think my job is to continue to give interesting ingredients.
If you can share with us some of your learnings after acquiring digital brands like Beardo? And how do you take those learnings and apply them to some of your traditional products and portfolios?
This approach of us picking a stake from the company and letting the promoters run them is extremely important. For that you need to have humility. One of the things that help us also is our empowered culture, because if you are a control freak, you won’t let them run it. One of the things we deliberately didn’t do in the first three years and even now though we acquired 100 percent stake in 2020, is not to ‘Mariconize’ Beardo.
So, four things we control. We control capital, we control portfolio, we control overall compliance and we control quality. The rest, we allow it to be. We clearly realise that they bring with them certain qualities or capabilities. One of the things we have started in our core marketing team was to take people from some of these new age companies. But for this to happen, the senior leadership has to be open to doing these things. And one of the things we did is we started a process called ‘Reverse Mentoring’. We started this five years ago. We found youngsters that are the most digitally savvy in the organisation, and they can actually mentor senior leadership.
In this reverse mentoring process, have you made Reels or Snap videos?
I think the first thing I started doing is going on LinkedIn. I’m not a very hardcore social media person. I am already a below-the-radar person. Given my background as an engineer, I think I was any way inclined towards analytics. So analytics came naturally to me. But some of the new age practices like adoption of AI and more. How do you push for it? Because I think senior leadership has to encourage people to experiment. Because whenever there is something new that comes up, there are going to be failures. But the question, how do you create a culture where you experiment, where you reward people to try out new things? One of the things we have been very good at is trying to say that, okay, we don’t know digital. One of the problems in successful companies, successful leaders, is you say I know everything. So we started by saying we don’t know, let me learn.
After Plix, True Elements and Beardo, what acquisitions are in the pipeline?
We look at spaces where we believe there’s huge opportunity. It could be in skin care. We are not so much interested in acquisitions in food because food, we believe unless it’s niche, premium, the gross margins being low, a profitable business model is a problem.
We will continue to acquire because this is a proven model for us. But again, it has to be differentiated. For us, the quality of founders make a huge difference. Because we invest also in the founders, their ability to grow the organisation and grow it in an organic and sustainable way. Again we also want them to leave a legacy rather than just making quick money.
Being a leader in the FMCG space how do you look at the growth of Q-commerce?
I think Q-commerce is here to stay. It attracts a different set of consumers, a different portfolio, and it’s very critical that companies like us invest ahead of the curve to grow. Like Q-commerce and all other transformations in the urban space. I think rural and direct distribution will continue to be a source of competitive advantage for large FMCG companies. So one of the things which we are doing is investing in distribution. In the top 10 towns, organised retail is going to grow and, therefore, there will be a challenge on the general trade model in that. And we believe that in India it will be an ‘and’ but not an ‘or’ angle. Given the vastness of our country and given the logistics of it, everything will coexist. Obviously, we believe that organised retail is going to grow leaps and bounds. And I think the question for a lot of us is how do you create a differentiated portfolio so that organised retail is a source of diversification, of premiumisation and not just a source of cannibalisation and channel conflict.