Mumbai: Consumer goods maker Marico Ltd is strengthening its overseas operations by repositioning recently acquired brands and expanding into new regions, at a time depressed consumer spending has slowed its revenue growth.
The international business group (IBG), which handles Marico’s foreign operations, will invest 10-15% of its estimated 2008-09 sales to reposition brands in countries such as South Africa and Egypt, chief executive Vijay S. Subramaniam said in a recent interview.
The seller of Parachute hair oil and Saffola edible oil has operations in Bangladesh, West Asia, Egypt and South Africa, catering mainly to people of Indian and Asian origin.
IBG contributed about 18% to Marico’s overall revenue of Rs1,907 crore in 2007-08, and the company sees room for more growth as penetration levels are low in the emerging markets the group operates in, Subramaniam said.
Marico estimates IBG’s revenue for 2008-09 at Rs400 crore, up 30% from Rs307 crore the previous year but slower than the annual 40% growth the past three years.
“While aggressive growths such as what we have shown in the past may not be easy, we expect the effect on the FMCG (fast moving consumer goods) sector to be less pronounced,” Subramaniam said.
As part of its repositioning, Marico recently launched a range of flavoured castor oils in South Africa under its Hercules brand. It is also repositioning its Parachute hair cream in West Asia.
“The consumers in this region are exposed to water with high chlorine content, which damages their hair in the long run. We reformulated our products so that we are able to offer in addition to nourishment the added benefit of protection from harsh water,” Subramaniam said.
“In Egypt, both our brands Fiancee and HairCode command between 55% to 60% of the post-wash hair care market. In South Africa, while we do have leadership in certain niche categories, at an overall level our share would be in the region of 10% of the ethnic hair care space,” he added.
Marico acquired Fiancee in September 2006 and HairCode three months later, along with their manufacturing units. In October 2007, the company bought the consumer division of Enaleni Pharmaceuticals Ltd in South Africa for Rs52 crore. It is now expanding this business, which includes the Hercules health care brand, to neighbouring Angola and Botswana.
“The brands that we have acquired are good but need more investment for the extra momentum. We want to target more relevant and focused customers through the re-launches,” Subramaniam said.
Analysts say Marico’s expansion plans are a good bet.
Mumbai-based brokerage Enam Securities India Research, in a note to clients on 3 March, said Marico’s international business is unlikely to be impacted by the current slowdown as receding inflation in Bangladesh and Egypt and entry into new markets would maintain growth.
Anand Rathi Research, another Mumbai-based brokerage, said in a report on 13 March that a lack of new brand introductions by Marico’s rivals and the lower cost of launching new products because of cheaper raw material prices and advertising rates would help the company as it expands overseas. Marico’s revenue is likely to grow by 11% in 2009-10, with volume growth of 10%, Anand Rathi added.
Earlier in March, Marico forecast slower sales growth for the fourth quarter and beyond as the benefits of price hikes made earlier in the year wore off, but saw profit growth gaining momentum as input costs softened, Reuters reported quoting Milind Sarwate, Marico’s chief of human resources and strategy.
Much of the growth for Marico in the domestic market had come through price increases on its hair oils earlier in the year, Sarwate had said.