India’s FMCG guru and founder of $6 billion Marico, Harsh Mariwala, on how e-commerce has removed entry barriers
- Speaking at the Business Insider Global Trends Festival 2020, Harsh Mariwala said the emergence of digital marketing and e-commerce has made it cheaper and easier for startups to make their mark in the segment.
- Modern trade and e-commerce contribute to 22% of total sales of Marico (as of FY20).
- Mariwala also spoke of brands like the one they have acquired Beardo or others like Mamaearth and Boat, who have made a mark for themselves in the consumer market.
“In the earlier days, if somebody wanted to launch a new product, they had to have a distribution network which would cater to 2-3 million outlets, which would be very very costly and unless you had a ₹1,000 crore turnover, you won’t be able to afford that,” the maker of iconic hair oil brand Parachute and edible oil brand Saffola said in a conversation at the Business Insider Global Trends Festival 2020.
It didn’t end there. The next big expenditure to ensure your brand is known and becomes a household name, companies had to splurge big money in television advertising. “So, for a startup there would be a lot of odds before entering the FMCG sector. But with the emergence of e-commerce, you can prototype your products in these options and also use digital marketing, which is not as expensive as television marketing. We have seen a whole host of new entrepreneurs entering the consumer sectors,” he added.
AdvertisementBut the $6 billion Marico is not sitting back and watching this space evolve. It is changing its approach too.
Marico’s own tryst with e-commerce
Marico has been building up a portfolio of e-commerce with Mariwala’s son Rishabh leading the segment.
Within the company, they also have a front-end analytics team called Marico Miner League, which leverages Artificial Intelligence and works on “predictive modelling using digital and e-commerce platforms data, enabling the business with right decisions and spend optimisation”.
“Marico has significantly enhanced presence in modern trade and e-commerce, with the share of these channels increasing from 12% to 22% over the past two years,” said the company in its annual report of FY20. The pandemic has provided an opportunity to pump it up further.
|Revenue||₹7,315 crore||₹7,334 crore|
|Profit after tax||₹1,043 crore||₹926 crore|
|Segment||Contribution to total sales|
AdvertisementBy the end of the second quarter (June-September), the company said that traditional trade and e-commerce were driving growth for Marico.The company’s second quarter earnings are scheduled to be announced on October 28, 2020.
Marico has an eye for startups entering the space too
It is bracing for a game where younger, more agile startups are making a mark, and he is buying out some of them, like Beardo and Mamaearth, too.
Marico has also completed the 100% acquisition of the Ahmedabad-based startup Beardo, in which it had first acquired a stake in 2017. Beardo’s strong presence in the online men’s grooming segment is what drew Marico to the startup.
Talking about Beardo, Mariwala said, “At some stage of their journey, where they reach a certain level of turnover and when they have to expand it to physical distribution, that time they find it difficult – that’s when they are forced to divest or get into some sort of partnership.”
Even during the pandemic, Marico hasn’t been much affected as most of its products fall in the essentials category.
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