The Coconut Oil Mafia, HUL
Created on 25 Dec 2021
Wraps up in 6 Min
Read by 8.1k people
Updated on 11 Sep 2022
Take a deep breath and think about your childhood, the memories of the first day of school, or the summer holidays, those silly fights with the siblings, and that bachpan ka ghar. There is no end to these memories and one among such is, Mummy ke hath ki oil-champi especially on those chilly winters!
And I'm sure if you remember the champi, you must remember the oil she used to do it with, mostly it was that tall blue bottle named Parachute and this way Parachute also becomes a part of our childhood memories.
All simple and nice things right? But the business behind the products like Parachute is not simple. It's filled with the number of games, the competition for leadership, and tactics.
How did it begin?
Today, let me tell you about one such game back from the late 90’s. It all started when Harsh Mariwala, a big tycoon, separated the consumer product segment from his hereditary business called Bombay Oil industry limited (BOIL) and formed MARICO.
One of the major products under BOIL was Parachute oil. Since the consumer product segment was separated, Parachute oil came under the umbrella of Marico.
Separating the consumer segment from his well-established family business was already a risk, Harsh had spent years convincing his family to let him do it. The stakes were high but Harsh hoped that they would succeed and with a lot of luck & hard work they did, Marico was incorporated in 1993 and by 1996 its sales & profits were doubling.
The number one contributor in this growth was Parachute oil which had a 48% market share in the coconut oil segment one of the reasons for this success was, the product was already popular among customers since BOIL used to sell it.
Harsh Mariwala, The man behind Marico
But as they say, nothing lasts forever. In the same year, Hindustan lever came into the picture, (We know this company as Hindustan Unilever or HUL now) one of the most reputed FMCG firms looking for expansion and also came along Keki Dadiseth, the newly appointed chairman of Hindustan Lever.
Keki Dadiseth, Corporate acquisition major
There is this thing about HUL that it has thrived on takeovers & acquisitions, its popular brands such as Brooke Bond, Ponds, Kwality, and more were all results of mergers & acquisitions. What's interesting is, the biggest strength Keki had was also corporate acquisitions. (This Jodi was made in heaven)
Keki knew that he could strengthen Lever’s position by acquiring promising companies.
Did I tell you about one acquisition Lever did, which is the most significant in our story, In the year 1993 when MARICO came into existence Lever had acquired an oil company called TAMCO which had a product similar to Parachute called Nihar Coconut oil?
Where on the one hand Parachute had a 48% market share, Nihar Coconut oil had only 7%. So there it was, Marico’s Parachute came into the radar of Keki Dadiseth as he intended to acquire a company with maximum market share in the coconut hair oil market. And the war was about to break out.
Keki wanted to be the market leader in the coconut oil segment and the game of tactics began. Lever started increasing their discounts to retailers, they offered a 35% discount to them against just 10% which Marico was providing. They began spending money on advertising Nihar like never before.
All these tactics began to be noticeable, and news started to spread that the next step of Lever would be a takeover, and competing with a larger predator with very deep pockets like Hindustan Lever would be a huge task for young Marico.
Keki knew how to skilfully close a deal successfully when it comes to acquisition and he was confident that they could add Marico to their portfolio. The news of the acquisition was spreading like wildfire, Marico’s stock price started to fall sharply.
To make things even worse, One day Harsh receives a phone call from the caller saying, “Im Keki Dadiseth” Keki wanted to make Harsh an offer to sell Marico to Lever and offered significant benefits to the Mariwara family.
Keki Further added, “The consideration will ensure that you and your next generation will be cared for”
Harsh replied by saying, “You know that we’re in the coconut oil market. We are serious about it. We have a far superior and deep penetrating distribution network. So, i'm giving you an opportunity to sell out”
Furious, Keki warned Harsh that ‘Marico will be a history’.
Marico and Parachute was the brainchild of Harsh and defeat was not acceptable and there was no question of selling out. He was ready for a battle!
Parachute comprised about 61% of Marico’s revenue. All eyes were on Parachute now, this product was the major target of Keki and for Harsh it was the one to be protected the most.
The face-off was about to begin. The strength of Marico and Harsh was that he had an in-depth knowledge of branded coconut oil, he had consumer insights, sourcing expertise, a well-established distribution & marketing set up as to how consumers connected with Parachute.
On the other hand, Hindustan Lever had an extensive sales & distribution network with the largest outlet reach among FMCG companies. Lever was huge in terms of reach and money.
What Lever started doing was it started advertising more aggressively for Nihar and acquiring another coconut oil brand Cococare to win the market leadership.
Harsh decided to play to his strengths. They had a twenty-five-year-old insight in the coconut oil category and they had to increase investments in advertising, improve distribution and match Nihar’s price along with this they began to rebrand by redesigning their packaging and adding a tamper-free cap signifying purity and they called the new packaging as “Shuddhata ki seal”.
After rebranding, Marico began an advertising campaign focusing on the importance of sacred coconut in Hindu tradition and linked all this value to Parachute coconut oil in the effort of becoming emotionally connected to people; they also worked on widening the distribution channel.
Not only this Marico rejuvenated its sales team and gave them a slogan “Parachute Ki Kasam” setting their spirits high in the determination to compete with Nihar. And all these efforts worked!
The campaign increased the market share of Parachute to 52%. By this time due to Levers efforts, Nihar also gained the market share which was doubled from 7% to 15%.
Lever acquired a brand called Cococare to compete with them Marico acquired Oil of Malabar and relaunched it at a lower price.
The fight with the Hindustan lever strengthened Marico & Parachute even more in terms of structure, marketing, and brand value and enhanced its reputation as a ‘fighter’ which stood against the acquisition major that lever was.
The Bottom Line
This fight went on for six long years. By this time Hindustan liver was rebranding itself to Hindustan Unilever. Marico was giving tough competition to them and was getting more and more market share and Nihar was not even near to them.
On the other hand, Lever which had become Unilever now was facing tough competition from several other FMCG brands in other product categories. During the period of 2002 to 2006, Nihar’s market share which doubled also started coming down from where it started and putting a major focus on Nihar was not a bid they wanted to take forward anymore.
The brand which Lever chose to kill Parachute was becoming their liability. That was it! Harsh Mariwala’s Marico defeated the multinational Hindustan Lever.
Remember what Keki said, ‘Marico will be a history’ had no meaning now. In fact, Nihar was on the verge of becoming history.
Nihar became the product that was of no importance to HUL and they decided to sell it. And guess who came up to acquire it?
It was MARICO!!!!
In the year 2006, Harsh Mariwala saw a huge potential in the deal. The weapon which was introduced to kill his empire was acquired by him in the end. Now Nihar & Parachute both began to thrive together under Marico.
I'm sure Keki Dadiseth, who pioneered acquisitions, must have never forgotten this battle in which he had to lose.
Parachute to date remains the kind of coconut oil in India with more than 59% market share all around the country.
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