A STORY ABOUT MARICO Ltd in the recently published book The Unusual Billionaires by Saurabh Mukherjea gives an insight into the mind of its founder Harsh Mariwala. In the late 90s, Mariwala had steered the company from an oil manufacturer into a multi-brand FMCG player, but Parachute, its brand of coconut oil, still remained at the core of his business. It was the leader in its category with 55 per cent market share. Hindustan Lever Ltd, the biggest of the FMCG behemoths, then suddenly decided that it wanted to capture this market. The multinational had successfully done something similar in the oral care category, with its toothpaste Pepsodent taking away substantial market share from Colgate. In 1998, HUL (Hindustan Lever Ltd later became Hindustan Unilever Ltd) relaunched its coconut oil Nihar and started a war with Marico Ltd that went on for seven years. In the beginning, it was expected to be a no-contest.
‘In a story that Mariwala loves to narrate, Keki Dadiseth, the then chairman of HUL, called Mariwala in the late 1990s to buy out Marico, saying, ‘Mr Mariwala, I will give you enough resources to take care of you and all your future generations.’ Mariwala spurned the offer and dug in his heels… Even the capital markets believed that Marico stood no chance against the might of HUL which resulted in Marico’s price-to-earnings ratio dipping to as low as 7x, as against 13x during its listing in 1996… In one quarter in FY2000, HUL’s advertising and promotional (A&P) spend on coconut oil alone was an amount which was almost equivalent to Marico’s full year A&P budget (around Rs 30 crore),’ says the book. It quotes a former CFO of Marico remembering how the company quickly reprioritised, shifting its focus and resources to Parachute and even organising a business conference in which ‘Mariconians dressed as soldiers. The project was called Operation Parachute ki Kasam’.
This strange tactic is one of the questions I ask Mariwala in his eighth floor office at the edge of the business district of Bandra- Kurla Complex in Mumbai. He replies that not just employees, but even its dealers dressed up as soldiers and crawled through tunnels. “Hindustan Lever was a big name and there was a lot of fear about how would we take them on. We just had to ignite passion in the field force,” he says. It didn’t occur to him to sell the business because he knew Marico could take on HUL in oils at least. “We felt that we know this business. For us, it is everything; for them it was one out of 20 things that they were doing. It was some degree of doggedness in my mind and some degree of, shall I say, confidence,” he says.
As Mariwala had foreseen, after a while once it realised it wasn’t winning, HUL lost interest and put Nihar on the block in 2005. The company that bought it? Marico.
When The Unusual Billionaires’s author Saurabh Mukherjea, CEO of Institutional Equities, Ambit Capital, set out to write a book on great Indian companies, to make the selection objective, he set up a quantitative screen that looked at big firms listed on the stock market that generated Return of Capital Employed in excess of 15 per cent each year for a decade and also simultaneously recorded annual revenue growth of 10 per cent or more. “Only eight businesses in India passed the test. Marico was one of them,” says Mukherjea. If someone had invested in Marico in 1996 when it went public and held onto the stock, he would have made more than a 100 times his investment. Its market capitalisation, or the value of the company according to its stock price, is around Rs 32,000 crore now. It makes over Rs 1,000 crore just in operating profits each year. Parachute, Saffola oils and foods, Mediker, Revive are some of its well known brands. It was with oil, however, that Mariwala’s business story begins.
Marico has its roots in his family business Bombay Oil Company Ltd, a commodity trader of oils operating at Masjid Bunder. He joined while still in college and then in his twenties started reshaping it from a business-to-business to a business-to-consumer company. It was in this that Mariwala first exhibited his entrepreneurial bent. “When I started, basically I wanted to create a business out of branded rather than unbranded products. At that time this business was mostly sold loose, and when I started travelling I realised that there was indeed a potential to convert this market. We had a low, almost negligible market share, and by investing in proper distribution, marketing, we were able to grow it. I didn’t have any experience. I didn’t study brand management or sales and distribution, so that forced me to recruit very good quality talent. I needed good people rather than doing it myself, which I had neither experienced not studied,” he says.
Other family members advised caution, so he had to go slow, but the results soon began to show when Parachute got a sizeable market share before growth plateaued. At that point, Mariwala made a strategic decision that would spring Parachute to market leadership—he decided to sell the oil in plastic instead of tins. “We were able to grow a market share of 15, 20 per cent. And then we said if we have to grow, we have to do something discontinuous. That is how the idea of plastic came in. Plastic at that time was cheaper than tins. Still it is cheaper. It is more attractive to look at. It is more convenient to pour. From all angles it made sense. From that insight we were able to go to the market place,” he says.
If I can help entrepreneurs grow, it will benefit all stakeholders. Basically helping entrepreneurs learn, scale up and face issues
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But there was a hurdle. He had not been the first to think of this. A player before him had tried to do it in square plastic packs and not only failed but made dealers resistant to the idea. They found that rats would eat the plastic at night and the oil would spill all over the shop. To get around the problem, Mariwala decided to make the bottles round so that the teeth of rats couldn’t get a grip on the bottle. His team then put such bottles in rat traps and photographed how rodents did not damage them. They went with these images to the dealers and convinced them to stock the product. “Many times you think that innovation is easy but it only looked easy. People had given up at that time, but we didn’t give up. Persistence is very important,” he says.
After he separated from the family business and founded Marico Ltd in 1991, Mariwala had more independence. He focused on creating a work culture that would attract high quality professionals. He did away with attendance registers, something unusual among Indian businesses then. Employees could also sign their own expense accounts up to a limit. “[Even before], when we were in Masjid Bunder—I am talking of 30-35 years back—we went into a five-day week, unheard of those days in Masjid Bunder. But we were very clear that if we had to attract the right talent, we had to offer what the multinationals were doing. We did away with attendance registers because ultimately we wanted to establish trust. We were first movers in such processes,” he says.
Mukherjea finds Mariwala’s business journey unusual for a number of reasons. First was him breaking away from the family, not very common for that time. “Then, for a man who comes from a traditional promoter-run family, he proceeded to build a professional business with ethos built around egalitarianism rather than the typical lala companies that promoters build,” he says.
Two years back, once again, Mariwala did something that went against the grain of Indian business culture. He gave up his executive role and instead of passing it onto someone else in his family, appointed a professional CEO. “We needed to have a good succession plan for the organisation. Secondly, I had a good successor who could take up from me. I had much more time but luckily I started doing a lot of new things. I am more than fully occupied because of all the newer initiatives that I have undertaken,” he says.
IN HIS POST-RELINQUISHMENT avatar, what Mariwala is focusing on is to be a catalyst for other entrepreneurs. “I believe they add a lot of value to stakeholders, including society. And if they do well, the business grows, it leads to more jobs, more taxation. If I can help entrepreneurs grow, it will benefit all stakeholders. Basically helping entrepreneurs learn, scale up and face issues,” he says.
ASCENT (Accelerating Scaling up of Enterprises), the foundation that he started four years ago, creates a system for it. It is a peer-to-peer support group of entrepreneurs in which at present 280 of them, with turnovers ranging from Rs 50 lakh to Rs 1,500 crore and totalling Rs15,000 crore, meet in groups of 10 to 12 every month to guide each other. “Once you reach a certain scale, all entrepreneurs have similar issues coming up. The way we have structured ASCENT is to look at common issues and these are mainly to do with leadership, talent, financials, business models, risk,” he says. Mariwala himself has direct individual sessions with entrepreneurs to share his experience and advice.
In the groups, there are 65 different businesses currently. One of the main things while putting a group together is to ensure that they are not from competing industries, since that would constrain open discussions. The groups meet once a month and often come back with concrete takeaways. One entrepreneur in a brick-and-mortar air-conditioner business decided to disrupt his own company to go digital because his group advised him to do it himself before someone else did.
Asim Dalal, managing director, Indo Count Retail Ventures Pvt Ltd, is a facilitator or moderator in one such group. The entrepreneurs in it include those in the field of insurance broking, jewellery, advertising, manufacturing of plastic bags and copper, telecom product distribution, printing accessories and even pharma research. They meet once a month for a minimum of three hours. Meetings begin with members updating about happenings in their businesses followed by a couple of long presentations and discussions. People ask questions of each other, getting to know about other fields and also issues common to all, like Human Resources, Information Technology and so on.
“You get to learn from each other. Suppose I am looking for a good shared warehouse, two of them would put their hands up. If an entrepreneur wants to put processes and systems in place in areas like HR, Finance or Accounts and doesn’t have a clue how it is done, then he can ask those present. You can’t do copy-paste, but you can take things from that, what suits you and start implementing them,” says Dalal. What they don’t do by protocol is advise others. “You talk out of experience— ‘This is how I did it in my business’—and you leave it at that. If the person wants to pick it up, he picks up what he wants to,” he says. “It is not problem solving, it is picking up things from people’s experience and trying to find solutions.”
A reason Mariwala thought of mentoring entrepreneurs is that entrepreneurship is a lonely calling and he plans to expand the scale of ASCENT. A conclave in Mumbai on November 26th will be the biggest event it has held so far, with a number of business leaders talking to 500 entrepreneurs. “We want to be far bigger in Mumbai, 1,000 entrepreneurs over the next one or two years, and then go to other centres also. Be more national over a period of time and go in large numbers,” says the 65 year old.
According to Mukherjea, who interviewed Mariwala for his book, with such initiatives he is trying to create a legacy of a better Indian boardroom ethos. “As an author, it was interesting for me to notice that he wants other promoters to see the world through the eyes of an enlightened promoter,” says Mukherjea.