Marico Explained: From Coconut Oil to Bangladesh’s Turmoil

Whether it's Parachute’s “Mere Baal, Meri Jaan” or Saffola’s “A Healthy Heart, A Healthy Life”,  Marico has been a part of Indian households. With its masterful marketing skills and affordable product range, the consumer goods company is now at the top.  

Talking about the brand's widespread influence, it's one of India's top consumer products companies! Every 1 out of 3 Indians is a Marico consumer. 😲

The total revenue of Marico for FY23 was ₹9,653 crore, and the net profit the company has made comes to a total of ₹1,470 crore.

Marico has a well-known lineup of household product companies such as Parachute, Saffola, and Livon. Even newer brands like Saffola FITTIFY Gourmet and Beardo come under its umbrella.

The diverse variety of Marico has contributed to its global recognition. Around 26% of its revenue comes from brands in other countries. Parachute Advansed and HairCode are just a few leading names.

However, the company’s business is experiencing hiccups at present due to the political crisis in Bangladesh.

The issues in Bangladesh are related to its PM, which may be you have already heard of. Don’t worry, if you haven’t. We just started with the info. You will find it in the next section. We will not let you just see the cake and not taste it. That’s a pakka-wala promise.

But can you imagine how something related to Bangladesh’s PM can directly affect a consumer products company here in India?
Ye to wahi baat hui - “A tree was cut somewhere and fell somewhere else”.

Let’s see the whole story of what and how.

Article Outline:

• What's latest with Marico?
• Marico's Founding Story
• Marico's Business Model
• Marico's Product Line
• Marico's Financials
• Marico's Competitors
• Conclusion

What’s Happening? Marico vs Bangladesh’s Unrest!

One country can impact the overall business of a brand with its international presence. Especially when the company is overdependent on that country.

Bangladesh has been trending in the news for a while now. After the removal of its Prime Minister, Sheikh Hasina, the country has been handling protests and other political turbulence on its boundary. All these internal unrests have become a focus point for the whole world. Many people want to know the latest happenings in this South Asian country.

And since India has strong and positive connections with Bangladesh, the Indian market and businesses are also facing some serious concerns due to this crisis.

In Marico's case, around 11-12% of its total revenue comes from the Bangladeshi market. The percentage might look small, but it's actually 44% of its total international revenue. This 44% revenue is at stake as this beautiful "land of rivers" is drying up amidst political heat and disturbances.

Impact of Bangladesh’s Disturbances on Marico

Marico, which has three factories in the Gazipur and Chattogram regions of the country, has been affected by the unrest. Due to the events there, its operations were halted.

There are many more insights about the influence of Bangladesh's internal conflicts on Marico's business and how it is strategising to recover its business losses.

The company's stock experienced a drop of over 4% in August 2024 due to the disruption of its sales and operations in the country.

Now, as per the latest update, it has resumed its manufacturing operations in Bangladesh.

To recover from its stock drop, the company is developing strategies and a plan to reduce its business reliability in Bangladesh.  

• The brand aims to reduce Bangladesh's contribution to its international revenue from 51% in FY22 to less than 40% by FY27.
• It temporarily makes operational adjustments by maintaining product supply management to meet market demand.

The company expects a positive future and is slowly reviving its entire manufacturing operations. It is even keeping a close watch on its supply chain and revenue generation. Marico’s major focus is probably on minimising all disruptions affecting its business as much as possible.

To get a better understanding of Marico as a brand, let us go through the company's foundation journey and business model.

Marico’s Foundation Story

The founder and chairman of Marico is Harsh Mariwala. His determined vision has paved the way for transforming the company into a leading consumer goods player in India and now globally.

His family had a traditional commodities business named “Bombay Oil Industries”.

• Mariwala converted this already-established business into a branded consumer products company.
• In the 1970s, he launched Marico's flagship brand, Parachute Coconut Oil.
• The primary focus after its launch was on setting up Parachute as a brand through innovations encompassing smaller packaging and plastic bottles.

This shift from unbranded to branded products proved vital for Marico and gave it the required push towards sustainable growth and profitability. Reshaping the coconut oil market by switching from tins to plastic bottles added success to Marico’s pocket, all thanks to the innovative idea of its founder.

Did you know that Parachute originally used to sell its coconut oil only in 15-litre packages? How it came to change its packaging is an entertaining story! Know all about it by clicking here.

If you search for the timeline of Marico right from starting of its original family company to what it has achieved throughout the years till date, it will be the one as below:

Marico’s Business Model

Marico is strategically focusing on diversification. This strategy can assist it in minimising risks and pursuing long-term growth rather than having a major dependency on certain product categories or specific regions. After all, overdependence on any one geographical region or specific product may lead to volatility.

So, the company is diversifying its portfolio not just domestically but also in the international markets.

1. Talking about the domestic market:

• Marico succeeded in growing its revenues from 15% in FY23 to around 20% in FY24 in the Foods and Premium Personal Care segments.
• The objective is to attain more than 20% Compound Annual Growth Rate (CAGR) and further double this number by FY27 by growing these segments aggressively.
• This growth is also expected to improve profitability by leveraging scale efficiencies.

2. If we consider the international market spectrum:

• Marico has been operating in more than 25 countries across Asia and Africa.
• Its notable contributions come from the markets of Bangladesh, the Middle East, and South Africa.

3. Apart from expanding across international boundaries, focus on new products is also there:

• Marico is growing its presence through its product offerings in the MENA (Middle East and North Africa), South Africa, and Vietnam regions.
• As international revenue continues to flow from other overseas regions, its dependency on the Bangladesh market will shrink.
• The introduction of new product categories such as female personal care, hair oils, and baby care are also in the pipeline.

4. The acquisition strategy of Marico is also playing a key role in its growth marathon:-

• Acquiring multiple brands, such as Just Herbs and Beardo, has magnified its portfolio in the Direct-to-Consumer (D2C) space.
• Through this, the company gets the allowance to be involved in emerging trends and consumer preferences.

In summary, Marico is building a more balanced and sustainable business model with its diversification approach. This will make the company less vulnerable to market fluctuations and more capable of long-term growth.

Marico's Product Line

 Marico is not only famous for Parachute, its first-ever product, but it also has other product options available in the market. Multiple business segments which the company has:

a. Coconut Oil:

With a 63% share, Parachute dominates India's branded coconut oil market. By leveraging Parachute’s strong brand equity, Marico’s business model is focusing on converting unbranded consumers, who still make up 30% of the market, to branded products.

b. Value-Added Hair Oil:

Well-known brands like Nihar, Hair & Care, and Livon play a major role in this value-added segment, with Parachute being the flagship coconut oil brand. This business segment contributes 22% of its domestic business with a 27% market share.

Its business model focuses on a three-pronged strategy:

1. Capturing value-conscious consumers in the lower segment by employing trusted brands like Nihar Shanti Amla
2. Driving mid-segment growth through pricing & brand renovation, and
3. Expanding in the premium segment with innovative products like Parachute Advansed Jasmine

c. Foods:

The company expanded into health foods with Saffola Masala Oats and other nutraceutical products. This segment comprises 10% of its domestic business, and it grew 23% in FY24.

Its Saffola Oats has become one of India’s top oats brands. Saffola's innovation in savoury oats and a focus on taste-driven marketing boosted Marico’s growth. On the top, Saffola Soya Chunks and Saffola Honey also performed well among the consumers.

Newer products like Saffola Peanut Butter and Munchiez added to the portfolio’s appeal. Its other well-known brand, True Elements, expanded into snacking and millet products. While Plix, a digital-first brand, gained traction with its plant-based nutraceuticals.

The model emphasises market development, strategic investments, and innovation to enhance brand presence and capture growth in key categories.

d. Edible Oil:

Saffola is a household name in this super premium refined edible oil category, targeting health-conscious consumers.

e. Premium Personal Care:

The Premium Personal Care and Digital First Portfolio, which grew significantly in FY24, contributes 10% of its domestic business. After acquiring stakes in Beardo, the company is now targeting the rising male grooming market. Similarly, digital marketing for Set Wet and the new digital campaign of Livon are playing their respective key roles for Marico to reach new heights of success.

The brand's expansion into non-beard products and impactful marketing with celebrities strengthens its market position.

There are certain pillars on which Marico’s business model is based. They are coming up with innovations, building a strong portfolio of brands, and expanding into new markets and categories. Even delivering consistent growth in the FMCG sector through operational efficiency maintenance strongly adds to it.

This will become more clear once you take a deeper look at its financials.

Marico’s Financials

Marico has become a giant company over the years of its consistent growth and expansion into various product segments.

In 2023, it generated ₹9,653 crore as its total revenue. The company generates prominent revenue figures from all its business segments. Below is the breakdown of its FY23 revenues:

In the domestic market, the coconut oil segment leads with a 38% revenue contribution, highlighting its dominance in Marico's portfolio. The domestic business accounts for 74% of Marico's consolidated revenues.

The value-added hair oil and edible oil segments provide 22% and 19% revenue shares, respectively. Meanwhile, the food, premium personal care, and digital-first portfolio segments individually contribute 10%. These figures clearly represent Marico's balanced portfolio with a strong presence of its categories in the market.

With its solid foundation in core products and well-diversified domestic business, the company continues expanding into new areas for future growth.

If you turn your attention to understanding Marico's revenue from its international business (2nd pie chart in the image above), you will find the name of Bangladesh at the top, as we discussed above. The international business contributes 26% to Marico's consolidated revenues.

• Bangladesh contributes 44% of Marico's international revenue, making it the company's largest overseas contributor. Now, you can perfectly understand why the Bangladeshi market is a prominent area for the company.  
• South-East Asia then makes up 25% of the contribution.
• The MENA region has a revenue share of 15%.
• South Africa and New Country Development & Exports each contribute 8%, highlighting ongoing efforts to expand into new territories and diversify revenue streams.

Let’s check out the financial metrics of Marico.

Considering Marico's sales growth percentage, it has fluctuated quite a bit in the past 5-6 years, while its operating profit margin has seen just 1-2% shifts in different years.

The Debt/Equity ratio, which is on the lower side, shows the company as stable per market standards.

The volatility in sales growth suggests potential market or operational challenges, but improvements in EPS and a solid dividend payout reflect shareholder value creation. Moreover, the figures show a healthy cash flow/debt ratio, meaning the company is financially in a solid position to cover all its debts by generating cash flow.

Let’s move our center of attention towards the shareholding pattern of Marico.

• Its promoters’ have 59.28% stake holdings and 0.13% of minimum pledge.
• This indicates company’s solid command and financial health.
• Holding figures for FII and DII are 24.61% and 11.21% respectively.
• These high numbers represent institutional confidence for Marico in the market.
• Meanwhile, the low public holding of 4.9% suggests concentrated ownership.

You will get more insights about Marico’s business and growth approach once you understand the company’s peer comparison.

Peer Comparison: Who Are Marico's Competitors?

Marico has succeeded in establishing itself as a strong brand with a balanced mix of profitability and market valuation.

We can easily extract from the above table that Marico is not leading in any specific metric being covered. However, its overall performance is consistent and competitive, particularly in ROE and ROCE.

Its competitors, like Nestle and Britannia, hold stronger market positions and operational efficiency with their solid financial metrics. However, Marico is still capable of standing out in its sector with the steady growth it has shown over the years.  

The Bottom Line

To overcome the political unrest in Bangladesh, Marico is taking smart steps to secure its future. The company is making quick changes to its operations while also planning to diversify its business away from relying too much on the Bangladeshi market.

Marico’s complete business does not rely only on one country. However, Bangladesh has been the biggest international contributor to its revenue. So, like it is said, “Never put all eggs in one basket", Marico is also working on implementing the same now.

By taking adequate measures and staying alert to the situation, Marico is prioritising stabilising its operations and continuing to grow in the FMCG sector. This approach will help the company prepare for whatever comes next, ensuring it remains strong and adaptable in changing times.

*Disclaimer: The stocks and companies discussed above aren't a recommendation from Finology Insider and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.