The emergence of e-commerce, quick commerce, and direct-to-consumer (D2C) brands has dramatically transformed the fast-moving consumer goods (FMCG) industry. Harsh Mariwala, chairman of Marico Ltd, highlighted that this evolution is compelling established FMCG companies to rethink their business strategies and adapt to the new market dynamics.
“Until five years back, our sector was supposed to be one of the most defensive sectors. Nothing could impact the sector because there were huge entry barriers in terms of distribution…Then we saw disruption through e-commerce…all of a sudden the financials for traditional distribution have been impacted. So we have had to re-look at the complete distribution network,” Mariwala said speaking at the Mint India Investment Summit 2024 on Saturday.
With India’s FMCG market projected to reach $220 billion by 2025, major firms are not only launching new brands but are also investing in innovative startups to capture a larger market share and tap into emerging trends.
“The way you approach e-commerce and modern trade is very different compared to the traditional distribution network. So you need a different organizational structure to manage that. On top of that, we saw the emergence of D2C brands in the last four-to-five years. Entry barriers in terms of distribution or advertising were substantially reduced,” he said.
Over the last couple of years, Marico has acquired four direct-to-consumer brands. In 2017 it had acquired a 45% stake in Beardo, subsequently acquiring a 100% stake in the company. Beardo is now a subsidiary of Marico. Last year, it acquired a majority stake in Satiya Nutraceuticals Private Ltd that owns plant-based nutrition brand Plix. In 2021, it bought a 60% equity stake in Apcos Naturals Pvt Ltd., which sells skin and hair care products under Just Herbs. Additionally, it has also picked a majority stake in snacking brand True Elements.
Acquisitions were aimed at accelerating Marico’s digital transformation and participation in new-age internet first brands, the company had said.
“In the last four-to-five years, we’ve seen a huge number of players entering the D2C space. This is good for consumers, but for FMCG companies this can be viewed either as a threat or as an opportunity. At Marico, we have looked at it from both the lenses…We did not want the FMCG mindset to impact the D2C mindset,” Mariwala, who started Marico in the 1990s, said. Marico sells Parachute hair oil and Saffola cooking oil, among other things.
The investments have “worked out well”, he said. “We have got two brands which have now completely come to us. The other two will come over the next two years or so. It’s worked out well, and we are far more profit sensitive compared to the d2c brands, which have been funded from outside. I think the target over the next few years is that our D2C business should make margins similar to our FMCG business,” he added.
Milestone Alert!
Livemint tops charts as the fastest growing news website in the world Click here to know more.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 30 Mar 2024, 09:08 PM IST
Meet Mahtab Ahmad, known for his keen insights into the latest trends and news. Join Mahtab on his blog, where every post is a exploration of the ever-evolving now.