I didn’t know the history of Marico till I read this book. Harsh Mariwala took the commodities of Coconut Oil and Sunflower oil and turned them into household Indian brands. It is a multibillion dollar D2C company today because of the decisions he made. However what is even more amazing is how the original engines of growth for the company now only account for 43% of the sales. It is the new products in new categories that are led by the current CEO and MD who is not a family member of Marico that proves that an institution has been created with innovation at its core and growth as its goal. Here are the lessons I learnt from the book SHAPERS OF BUSINESS INSTITUTIONS: How Harsh Mariwala ‘Groomed’ Marico:
- Figuring out your purpose is a process.
‘I didn’t have any clue when I joined the business what I’m going to do. When they say, “You have to have a dream and a vision,” I think it develops over a period of time,’ Mariwala recalled.
- No matter who you are and where you come from, you will face resistance when you challenge the status quo.
The Mariwala family did not want to venture out into marketing and branding; they prefered to remain manufacturers and traders. Their rationale made perfect sense because: Making do with brands was not for everyone. Commodities accounted for the needs of 98 per cent of the population while brands served a measly 2 per cent. The prevailing impression was that commodities were for the common people, or aam janta, and brands for the well-to-do.
- Harsh persisted because he had unique insights that his family did not.
Harsh had a vision of transforming Parachute to a coveted brand. Insights gained on the field and reaching out to customers at the retail level proved invaluable for branding Parachute. This was the first time a member of the Mariwala clan had set foot on the field and held extensive interactions with sales staff, distributors and retailers, besides discussions with customers. Regular visits to the market, observation of trade behaviour and feedback from field staff set him apart from his family. His experiences on the field convinced him that, given a quality product with differentiated benefits vis-à-vis competition, branding combined with extensive distribution was key to the sustained success for consumer product companies.
- Business is a team sport. You need to work with others who are the best in their respective fields.
For insights into FMCG advertising, Harsh consulted one of Mumbai’s premier ad agencies, Clarion Advertising. For the HR function, he sought out his friend Homi Mulla, HR Head at Monsanto, and for distribution, he recruited a veteran from Hindustan Unilever. Harsh used this network as a sounding board for developing or discarding his ideas on building the consumer product division of BOIL (Bombay Oil Industries Ltd).
- The business came above family but Harsh always made sure that everyone agreed.
By the late 1980s, there were nine Mariwala cousins in BOIL, compounding the challenge of recruiting professionals for the consumer products division. Harsh assembled his cousins involved in running BOIL. At the end of the discussions, in Harsh’s words, ‘We all agreed that we did not see eye-to-eye in the matters of running the business. Plus there were no synergies in the businesses of Bombay Oil, so we wondered about the point of being together.’
- Your attitude towards failure matters because you are bound to fail multiple times
He practised learning through failing without the debilitating fear of failure.
Harsh instituted belief in the ‘you succeed or you learn’ attitude to defang the ‘fear of failure’ in the company.
Marico’s research team developed product prototypes to test for a hypothesis-product-market fit, while adopting a low-cost, fail-fast model. Thereafter, the decision to scale was taken. Over time, Marico brands ranked within the top two or three in over 90 per cent of the product categories and subcategories in which they figured.
FAIL stands for ‘First Attempt In Learning’. Eliminating the fear of failure is a huge spur to innovate. There is nothing like either you win or you fail. You learn and cannot lose.
- You got to put in the hours
As Mariwala puts it, ‘The 1990s were particularly stressful. The decision to set up Marico meant that I was working 18 hours a day. Hiring the team and getting things working took up most of my time.’
- Growth mindset at the top trickles down to the bottom
Harsh believed that growth for any institution starts at the top. When the top management has a growth mindset, the company grows.
- There are no “employees” in Marico, only “members”
To foster a sense of family, Marico chose to refer to every employee as a ‘member’. To cultivate a relationship of trust and comradeship, workers were clubbed into four houses of Marico and sports events conducted after work, fostering friendly competition among them, and between them and the company; this helped to reinforce the feeling of membership. These matches also served to distract the workers from indulging in high ‘spirit-ed’ activity to while away idle time. This is truly a sustainable innovation in the HR area.
‘Freedom within a framework’ is how such leaders described their winning ‘formula’. Trusting employees to work without controls is not in the interest of the company. A blend of freedom and aligned responsibility is the solution.
At Marico, there are no official ‘office hours’. There is no roster for keeping track of the ‘casual leave’ taken. The HR norms also ensure that employees have sufficient space to innovate without being blamed for failure. In this way, employees are empowered to succeed or learn from their efforts and take responsibility for the outcome. And for guidance, access is open to anyone across roles, with no objections from superiors.
- Growth is the goal
He was clear that growth was the tonic for healthy survival and for attracting and retaining talent. Also, chasing growth was acceptable so long as it was profitable and the growth curve was secular, even though initially, margins could be impacted adversely. The organization, thus, set for itself a fifth-year target goal of ₹300 crore in its first Strategic Business Plan for the period 1991–96 with a new product to be added to its portfolio every year. Achieving this goal would be the spring board to yank Marico from the clutches of mediocrity as an SME.
In the two years following its birth, Marico doubled revenues from ₹80 crore to ₹159 crore. For the first time, Marico’s oil business was operating within a five-year business plan with a well-crafted marketing strategy and budget for execution.
As anticipated in the business plan, the revenues grew and surpassed the target of ₹300 crore while margins halved from an average of 8 per cent in the previous three years to 4 per cent—a clear example of Mariwala’s growth mindset. As you reap, so you sow. Thereafter, the company has managed to stay above industry growth rates in both revenues and operating margins.
- Put 15% of your profits towards innovation
Harsh states, ‘We learnt from Prof. Ram Charan that you should preserve 15 per cent of company profits towards strategic funding by design and accept that’s the hit you’re prepared to take.’ This hit was the ‘affordable loss’ for the company in its pursuit of innovation.
Harsh understood that innovation was needed to drive Marico’s growth, which meant experimentation within affordable limits.
Harsh instituted belief in the ‘you succeed or you learn’ attitude to defang the ‘fear of failure’ in the company. Creating a positive attitude towards experimentation set the mindset for innovation.
Marico’s modern, well-equipped laboratory in Mumbai was manned by a team of formulation chemists, nutritionists and packaging technologists. Manufacturing was streamlined and upgraded for quality, volume and operational efficiency. To maintain the pipeline of new product introduction and brand extensions, around 15 percent of annual profits were earmarked for product innovation in the domain of beauty and wellness.
FAIL stands for ‘First Attempt In Learning’. Eliminating the fear of failure is a huge spur to innovate.
Trends originating abroad travel to India more quickly. ‘So, we have to be more entrepreneurial and agile with a higher innovation velocity,’ he adds.
- How are you different from the competition?
The core of Marico’s uncommon strategy has been to create a growing market for consumer brands in categories where the competition is unbranded or is offering local brands and where MNCs are unlikely to enter, like in the categories of coconut oil, safflower oil or even anti-lice treatment. This approach also guided its choice of emerging global markets like Bangladesh and even influenced its acquisition strategy.
- D2C is a marketing game
As Unilever co-chairman Niall FitzGerald said, ‘We’re not a manufacturing company anymore. We’re a brand marketing group that happens to make some of its products.’
Brand building is not synonymous with just acquiring a brand and building the image of the brand. It is the outcome of managing all aspects of contact that the customer would have with the brand, such as packaging, pricing, perception and distribution over and above differentiated product quality.
Brands need to highlight the differentiation from a commodity product. It is the association of the features and attributes of the product to functional and emotional benefits for a particular customer segment that transforms it into a brand. Branding is a crucial activity for a consumer product company, which needs to be sustained with tenacity and innovation.
As Harsh said, ‘We were clear that we should be able to either offer something unique in terms of product formulation, pioneer some product or have a strong brand presence.’
Positioned explicitly as being ‘good for your heart’, Saffola grabbed consumer attention with its dramatic communication. It also reinforced the shift from a ‘me too’ commodity to a stand-out brand that commanded higher revenues, margins and growth rate.
- You cannot offer health without taste if you create eatables
As marketing guru David Aacker prescribes, a strong brand association provides a point of differentiation and advantage for the extension, which proved favourable for Parachute Advansed coconut oil, although not for Parachute Amla oil, Saffola packaged pulses, Saffola Oats and even Saffola Zest, a health snack launched after a market research study! Marico realized that it had focused on health and neglected taste, which did not work for Indian consumers. This is something that a customer insight study could possibly have revealed better than a market research study. This truth was borne out by the success of Saffola Masala Oats, a blue ocean category not inhabited by the giants, Kellog’s and Quaker. For Harsh, it’s the little nuggets of consumer insights that make a company large.
- A leader needs to transition from ‘doing everything’ to ‘influencing without authority’
The shaper needs to change behaviour from ‘doing everything’ to ‘getting things done’ to ‘leading the organization’ to eventually ‘influencing without authority.’ Inability to transition from one stage to the next is the prime cause of enterprise stagnation, decay and exit.
- You should have more than one Engine of growth
Contribution from Parachute and Saffola have dropped from 100 per cent at Marico’s inception to 43 per cent in 2019. Evolving customer trends in haircare, skincare and healthy foods will require a new range of products (Engine 2) made available beyond conventional channels. The organization is geared to respond to this opportunity.
- Fun Facts
Branding made its debut in India with Sunlight (soap) around 1890. However, it was only in the second half of the twentieth century that Indian brands began impacting consumers.
Customizing Brand Strategy: As MNCs like HUL and others have realized and come to terms with, India is not a homogenous market for consumer products. For instance, HUL realized that even for coffee, a beverage traditionally identified with the South, filter coffee is the preferred coffee in Tamil Nadu while people in Karnataka have a different taste profile. HUL thus launched a lighter version of its coffee brand Bru, specifically for the Karnataka market.
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Until next time,
Harsh
