Consumer Products Marico Product: Parachute Oil & Advanced Products Case Study

1/19/2012 Faculty - Prof. Pingali Venugopal Sector : Sales & Distribution Management Submitted By Group Anshuman Sinha S.M.Senthamizh Selvan Naveen Pillai Ajay Krishnan Iyer 2221374 2221364 2221421 2221360

PGCBM Batch 20 Bangalore Koramangala Center

Consumer Products Marico

Disclaimer
The project report is being done purely as an academic requirement for the PGCBMBatch 20 coursework in XLRI Jamshedpur. This work is not for any publication in any form other than academic purpose and within XLRI.

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Table of Contents
Table of Contents.........................................................................................................................................3 Preface.........................................................................................................................................................4 FMCG Industry.............................................................................................................................................4 Market Scenario...........................................................................................................................................4 Maricos Competition....................................................................................................................................5 Parachute Brand..........................................................................................................................................6 Positioning....................................................................................................................................................6 Retail Formats..............................................................................................................................................6 Retail Profiling..............................................................................................................................................7 Risks and Challenges.................................................................................................................................10 Marketing Strategy.....................................................................................................................................10 9.1 Product.............................................................................................................................................10 9.2 Price.................................................................................................................................................11 9.3 Promotion.........................................................................................................................................11 9.4 Place................................................................................................................................................11 1.SWOT Analysis.......................................................................................................................................12 Marico Distribution Network........................................................................................................................12 Surveys......................................................................................................................................................14 12.1 Consumer Questionnaire................................................................................................................14 12.2 Consumer Survey Results..............................................................................................................18 12.3 Retailer Questionnaire....................................................................................................................20 12.4 Retailer Survey Results..................................................................................................................22 13. Stock Out.............................................................................................................................................24 Financial Details.........................................................................................................................................26 References:................................................................................................................................................29

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Preface
Marico, one of the leading companies in the FMCG industry was incorporated in 1988. It has some of the biggest brands in India. Every month, over 90 million packs reach approximately 150 million consumers in about 30 million households through a widespread distribution network of more than 3.2 million outlets in India and overseas. In this case study we will be focusing on Maricos Consumer Product Parachutes Sales and Marketing Strategy.

FMCG Industry
The FMCG market in India can be divided into two categories: Urban and Rural. The urban segment has high penetration levels and is willing to spend more as compared to the rural segment. The trend towards urbanization continues, with migration from rural areas to urban areas. Urban towns have increased significantly. Today, consumers are steadily shifting from low cost to a cost-plus platform. They now tend focus on price along with quality, convenience and shopping experience. The urban consumer is more quality conscious and is willing to pay a premium for better services and superior experience.

Market Scenario
The hair oil market in India is huge. It is valued at more than Rs 8 bn. The market has been growing at 7-8% despite high penetration levels. Hair oil usage is a common habit in India. It is due to the perception that application of coconut oil leads to faster and better hair growth and reduce hair fall problem. There are two types hair oil available in the market; Coconut oil and Non greasy perfumed oil. Coconut oil has more than two-thirds of the total market. Penetration of hair oil is at 89% and is evenly distributed among urban and rural areas.

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Maricos Competition
Competition in the FMCG environment in India is intense. Companies tend to focus more on branding, product development, distribution and innovation. Counter campaigning by competitors also reduces the effectiveness of the promotions. Similarly, aggressive pricing by competition also leads to disruption. Some of the competitors for Parachute coconut oil across India are: HUL Vatika Mangalams coconut oil Muskan coconut oil Amways Persona Pure coconut oil Neelam coconut oil Indu Pure coconut oil MSR coconut oil 08-February-2012 Page 5

Consumer Products Marico

Nikhar Shikakai Hair Oil Kevali coconut hair oil Surabi hair oil Malabar coconut oil

Parachute Brand
Parachute is premium edible oil. It is the market leader in its category. Parachute hair oil was earlier sold in tins. They have been constantly innovating the product and now Parachute is available in plastic containers. Parachute is also available in small packets to service the rural sectors, thereby increasing penetration and market share.

Positioning
Parachute as a brand has evolved over time. From positioning the brand as pure coconut oil to that of a dream theme, with new looks and logo to the current positioning of vital nourishment. The Coconut Dream logo is seen as an opportunity to transform Parachute from being the largest coconut oil brand into a mega brand with several value added products under the 'Coconut Goodness' umbrella.

Innovation in Parachute

Marico has been constantly innovating to ensure that high quality coconut oil is provided to its consumers. Some of the innovations carried out for Parachute are: Flip Top Cap for Parachute bottles to enhance the safety and protect the purity of Parachute Easy Jar of Parachute to facilitate usage especially during winters Parachute Mini - a bottle shaped small pack being sold at an MRP of Re. 1

Retail Formats
The following kinds of retail formats are available in India

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Chain Store Convenience Store Department Store Discount store Franchise Kirana Mini Markets Modern Retail Online Shopping Shop-in-Shop Smaller Format Superstores Vending Machine

Retail Profiling
Retail profiling is a must for the company to identify types of retailer outlets suitable for marketing their products to their target segment. It helps identify the type of outlet suited for the target segment and also understand the extent of service the company has to provide to minimize retailer and customer satisfaction. The process of developing retail profiles of different formats selling the same product requires an understanding of the following: Types of outlets that the product Type of customers they cater to and customers expectations Retailer behaviour

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Retail profiling is developed based on the understanding of the consumers behaviour and its impact on Cost of Stockout Bargaining power of the outlet

Retail Profiling of Parachute Oil

The below table is an overview of Maricos retail profiling for Parachute hair oil

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Factor Customer buying situations Kirana Store Availability of Parachute Super Markets/Hyper Markets Satisfies customer who wants to buy Parachute but a different variety in the brand Discount Stores Higher discount products are preferred Cash and Carry Traders buy products which are fast moving and also products where they get a better deal Exclusive Outlet Satisfies the need of the customer who is predetermined to buy Parachute brand and variety. This is normally done in the wellness centers, spas where Marico has tie-up Located in posh, high end commercial areas Availability of Parachute Loyal to product

Type of locality

Traditional local shop

Centrally located

No location specific

Normally in the outskirts

Factors influencing brand choice Customer Patronage

Availability of Parachute Loyal to product and store

Competitive pricing Loyal to the respective Marico product

Discount offers Not very loyal to the product but loyal to the store

Competitive pricing Mostly traders interact where they get a better deal Maintain full range of Marico products Low on service Medium margins; high volumes

Details of stocks

Fast moving Parachute products

Fast moving Parachute products

Service level required Retailer profit

Low on service Medium margins; more volumes

Maintains only those products where they get better discounts High on service Low on service Low margins; Low margins; medium high volumes volumes

Maintain full range of Marico products High on service High margins; low volumes

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Risks and Challenges

Some of the risks Marico is facing are: Input Costs Pricing Power Discretionary Spending Competition Product Innovation Stock Out Currency Risk Funding Cost Acquisitions

Marketing Strategy
Maricos strategy has been to innovate and penetrate the market by straddling Parachute brand across various segments and process. In the marketing mix of Marico, we shall be discussing the 4 Ps of marketing with respect to Parachute coconut oil. The mix shall be analyzed as Product Price Promotion Place

9.1 Product
Some of the various products of Parachute hair oil are: Parachute Advansed Parachute Jasmine Parachute Aftershower Parachute Therapie Parachute Advanced Starz

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Consumer Products Marico 9.2 Price

Below are the pricing strategy followed by Marico for all products of Parachute brand.

Parachute:
250ml Rs. 42 20ml Rs. 6

Mini a bottle shaped small pack: Re. 1 Parachute Advansed:

80ml Rs. 29 170ml Rs. 50 300ml Rs. 87

Parachute Therapie:
50ml Rs.192

Parachute Jasmine:

500ml Rs. 90 50ml Rs. 14

Starz Shampoo:
100ml Rs. 57

Aftershower Cream:

50g Rs. 38 100g - Rs. 64

Aftershower styling gel:

60g Rs. 60

9.3 Promotion
Marico advertises through TV prints, Outdoors and Digital media. Celebrities like Diya Mirza, Deepika Padukone and Yuvraj have been featured as part of endorsement campaigns. 08-February-2012 Page 11

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1.SWOT Analysis

Strengths 1. Premium edible grade coconut oil 2. Market leader in its category. Has a huge loyalty base 3. Known for pure coconut oil 4. Parachute has gained the trust of people with every passing generation of customers 5. It is entering the shampoo market with Starz and has a range specifically for the age group of 3-10yrs

Weaknesses 1. New innovation are available in select cities only and in limited quantities

Opportunities Threats 1. Skin care is one segment where Parachute can venture 2. Launch new variants that have not only coconut oil but also other natural ingredients 1. Many players are entering the market 2. Parachute as a brand is positioned as a coconut oil

Marico Distribution Network

Marico has one of the best distribution and penetration width in the industry. Their network covers almost every town in India with a population of over 25,000. The below chart is a high level depiction of Maricos distribution network in urban and rural markets.

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Distribution Alliance Marico has a very good distribution alliance. It has tied up with companies like Indo Nissin Foods Ltd. for distribution of products on a national basis.

Rural Sales & Distribution Maricos rural sales and distribution network is among the best in the industry and contributes more than 26% of companys revenues. Its infrastructure comprises more than 185 super distributors, catering to 3200 small stockists and 9700 van markets. They also have a dedicated team of sales executives and sales representatives who distribute Marico's as well as alliance brands products. Alternate Channels The company has made a significant movement in creating the infrastructure for a Direct to Home operation in select cities. They have taken the lead in establishing a superior quality of relationships with supermarket chains. Sales Capacity Marico has made significant progress in areas that enhance sales capacity.

Ensuring distributors quality The ground sales force have enough resources

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Improve the front-line sales force

Information Technology

Marico has been making investments in IT to ensure:

Stocks are available with the distributors on time Reduction in stockout Improve supply chain management efficiency

Surveys
The sample size of customers is 400 in number and within the company. The sample size of retailers is 10 in number and within the vicinity of residence. Sample size of distributors and wholesalers are 5 in number and within the vicinity of residence.

12.1 Consumer Questionnaire

Dear Respondent, Thank you for taking few times to fill this questionnaire. All information provided below is purely for academic purpose 1. Which brands of oil are you aware?

Parachute Nihar Dabur Vatika Keo Karpin Amways coconut oil Malabar coconut oil

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2. Which oil brand do you use?

Parachute Nihar Dabur Vatika Keo Karpin Amways coconut oil Malabar coconut oil

3. How do you rate your brand on a scale of 1-5 (5 is the highest)?

1 2 3 4 5

4. What are the reasons to use this particular brand?

Non sticky Brand Loyalty Price Easy availability

5. How did you know this brand?

Friends TV

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Print Free samples

6. If your brand is not available, you would .?

Purchase another brand Wait for your brand Prefer a substitute Pick a cheaper available product

7. Which pack size do you prefer?

75ml 150ml 300ml 500ml

8. What parameters influenced you to choose the pack size?

Price Family size Storage Availability

9. How frequently do you buy?

Once in 30 days Once in two months

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Once in 4 months

10. Are you satisfied with the brand?

Yes No

11. Did packaging influence you to buy a particular product?

Yes No

12. What is your priority towards packaging while purchasing a product?

Protective packaging Eco-friendly packaging Convenience packaging All the above

13. Do you change the FMCG product you purchase as the packaging changes?

Yes No

Personal Information: Age: Location Income (per month)

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Rs 1,000 Rs 10,000 Rs 10,001 Rs 20,000 Rs 20,001 Rs 30,000 Above Rs 30,001

12.2 Consumer Survey Results

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12.3 Retailer Questionnaire

Dear Respondent, Thank you for taking few times to fill this questionnaire. All information provided below is purely for academic purpose 1. Which brands of hair oil do you stock?

Marico Nihar Dabur Vatika Keo Karpin Amways coconut oil Malabar coconut oil

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2. Which brands of hair oil are the most preferred?

Parachute Nihar Dabur Vatika Keo Karpin Amways coconut oil Malabar coconut oil

3. According to you, what are the reasons for customers preferences?

Brand loyalty No reason Availability Price

4. What is your customer profile?

High income Low income Middle income Cant say

5. What incentives are provided by the company?

Price discounts Flexible credit window Freebies on products

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Others

6. What offers do customers prefer?

Price discounts Freebies on products Others

7. What price change affect customers preferences?

Yes No

Personal Information: Location of store:

12.4 Retailer Survey Results

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13. Stock Out

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Stockout can be defined as a situation in which the demand or requirement for a product is not being fulfilled from the current inventory. The economic consequences of not being able to meet an internal or external demand from the current inventory are known as Stockout Costs. Normally such costs consist of the following: Internal Costs

Delay Labour time Wastage Production Loss

External Costs

Loss of profit Loss of goodwill Loss of future profit Loss of market share Loss of customers

Some of the common customer reactions for a products stockout are: Purchase another brand Wait for favourite brand Prefer substitute for the moment till stock arrives Buy anything offered by the retailer

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In the below graph, Parachute customers tend to be loyal. Almost 32% of the surveyed customers preferred to wait for Parachute stock to be available. About 20% preferred to purchase another brand, 16% preferred substitute products and around 12% preferred to buy any product the retailer offered but with discounts.

Financial Details
Below are the details of the sales across Maricos consumer products for the month of March 2011.
Sales Value(Rs. Million) 16955.4 4764.1 923.1 826.1

Product Name Edible Oils Hair Oils Oil Seeds Traded Others Traded

Year 2011 2011 2011 2011

Month 3 3 3 3

Sales Quantity 141869.12 24750.8 15933.63 0

% of STO 72.22 20.29 3.93 3.52

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Below is the Income information.

Year Ending 31/3/2009 31/3/2010 31/3/2011 Rs in million 23,884 26,607 31,283 Rs in million 122 183 279 Rs in million 24,006 26,790 31,562 Rs in million 2,969 3,668 3,917 Rs in million 358 601 708 Rs in million 286 173 213 Rs in million 2,447 3,077 3,275 Rs in million 0 -19 -50 Rs in million 0 0 0 Rs in million -150 -98 489 Rs in million 409 643 850 Rs in million 1,888 2,317 2,864 % % % 12.4 16.7 7.9 13.8 20.9 8.7 12.5 26 9.2

INCOME Net Sales Other income Total revenues Gross profit Depreciation Interest Profit before tax Minority Interest Prior Period Items Extraordinary Inc (Exp) Tax Profit after tax Gross profit margin Effective tax rate Net profit margin

Below is the Balance Sheet information.

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Consumer Products Marico

BALANCE SHEET Current assets Current liabilities Net working cap to sales Current ratio Inventory Turnover Debtors Turnover Net fixed assets Share capital "Free" reserves Net worth Long term debt Total assets Interest coverage Debt to equity ratio Sales to assets ratio Return on assets Return on equity Return on capital Exports to sales Imports to sales Exports (fob) Imports (cif) Fx inflow Fx outflow Net fx Year Ending 31/3/2009 31/3/2010 31/3/2011 Rs in million 6,699 8,970 12,203 Rs in million 3,144 4,136 5,175 % x Days Days Rs in million Rs in million Rs in million Rs in million Rs in million Rs in million x x x % % % % % Rs in million Rs in million Rs in million Rs in million Rs in million 14.9 2.1 52 17 3,111 609 3,894 4,536 698 10,781 9.6 0.2 2.2 20.2 41.6 49.4 5.2 4.3 1,251 1,024 1,338 1,076 262 18.2 2.2 61 21 3,997 609 5,751 6,540 785 14,644 18.8 0.1 1.8 17 35.4 42.8 4.9 3.6 1,306 946 1,463 1,027 436 22.5 2.4 70 22 4,897 614 8,173 9,155 3,061 21,966 16.4 0.3 1.4 14 31.3 32.1 4.4 1.2 1,392 375 1,545 530 1,015

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References:
We would like to acknowledge the following resources in helping us in the case study. Sales and Distribution Management Pingali Venugopal
http://info.shine.com www.equitymaster.com/ www.marico.com

Ernst & Young Kellogg School of Management Sloan School of Management Fuqua School of Business
http://fmcg-marketing.blogspot.com/2007/12/maricos-distribution-network.html

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