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The Unusual Billionaires

Marico: From A Commodity Trader To An FMCG Giant

Like previous chapters, this chapter too starts with an interesting story about how the company Marico got its name. It was actually named after the profession of Harsh Mariwala’s grandfather, Vallabhdas Vasanji who used to trade in pepper. In Gujarati, pepper is called Mari and Mariwala is a person who sells or trades spices. This made their family name Mariwala. 


However, Marico as we know it today, was a lot different in its history. It was a family-owned commodity trading company called Bombay Oil Industries Limited (BOIL). BOIL was formed in the year 1948 and used to initially trade in spices and then began manufacturing coconut oil, vegetable oil and Chemicals. This remained a B2B company, until the legendary entrepreneur, Harsh Mariwala joined the family business in 1971.


This chapter of the book is divided into various phases., Let’s discuss  each of them briefly to understand how the company took the current form.


Phase 1: 1972-91

While the family business (owned by four brothers) was running well, however, it remained a B2B. Harsh Mariwala was very keen on taking the business from a low margin one to a higher margin B2C which was more sustainable and profitable according to him. So, with the approval of other family members, Harsh started packaging the coconut oils in smaller 100ml packs. He also took other crucial areas like advertising, marketing, human resources and distribution.


Thus began the journey of building one of India’s most valuable FMCG multinationals. Harsh hired talents from other corporates and B-Schools. Among the first one was Bindumadhavan, a Ranbaxy veteran. He was a packaging expert and under his leadership, Parachute oil shifted from tin packaging to plastic bottles.


For Suffola, as it was a niche brand in Mumbai, but was not functioning up to its potential. It was showcased in research that sunflower oil reduced cholesterol levels. Hence it lit up Harsh to advertise Saffola brand on the health platform. Hence, he differentiated it from the regular cooking oil and was able to sell it at a higher price. By 1991, Marico became the market leader in edible oil.


Even after all these successes, the consumer division headed by Harsh became the main profit generator for BOIL but it still remained a part of the bigger organization and hence the chain of commands was extended. Therefore, in 1981, Harsh had suggested the creation of three profit centers – consumer products for himself, fatty acids and chemicals and spice extracts division for his cousins. However, even after this restructuring, Harsh’s consumer division was capital starved as it was hungry for growth. By the end of this phase, Harsh was clear to get the consumer division spun off the holding company BOIL.


Phase 2: 1990-96

This phase started with the spin-off of the consumer division of BOIL. However, the journey was not smooth. The separated entity with 80cr of capital was left with just 90 Lakhs of capital, 2.4 crores of reserves and 4.7 crores of debt. This led Mariwala to keep his focus on making an organization an attractive place for the best of management talent. Also, he decided to slow down the acquisitions.


Marico was amongst the first organizations in India at that time to have an open office. The company also revamped and expanded the manufacturing facilities. Marico was also the first consumer sector company that offered foreign trips to the distributors who achieved stretched targets.


The supply chain was also made more efficient with time. During this phase, Marico also started to expand internationally. According to Harsh, this encouraged managers to work as they were now able to explore multiple geographies rather than just India.


Phase 3: 1997-2006

In my opinion this was a phase which engraved Marico’s name in the Indian FMCG market. Even Mukherjea has kept his tongue in cheek while mentioning about the title of this phase, “David (Marico) vs Goliath (HUL)."


The battle of coconut oil became intense between Marico (which owns Parachute oil brand) and HUL (which owned the Nihar Coconut Oil brand). The battle started when Mariwala quite courageously dismissed HUL’s offer to acquire the Parachute brand. As we all know, Marico even at that time was a very small company in front of HUL. HUL had immense resources and foreign backing that made it spend aggressively on marketing in order to just win the war. However, for Marico, the stake here was survival. This gave the team enough motivation and they called this battle as operation “Parachute ki Kasam”. The company increased distribution, quality, etc. to sustain in the market. 


The battle was finally won in 2005 when Nihar was put up for sale and Marico acquired the brand in 2005. This not only made the Parachute brand superior but also gave it pricing power and hence increased the overall margins of the company. After this, Marico acquired the Mediker brand and also launched Kaya skin clinic.


Mukherjea also notices that during this phase, Marico strengthened the internal processes and integrated the HR strategy with the overall business strategy. IT and supply chain management were also  key focus areas during this time period.


Phase 4: 2007-12

In the earlier phases, Marico had focused on making itself strong internally. Now, the inorganic growth stage starts. 


With the pilot project in Bangladesh being successful with Marico gaining 67% market share of coconut oil, they started acquiring other consumer brands in the emerging market region.


Some of the low margin products from the India portfolio were also dropped. In 2012, they acquired Paras’s personal care brands and entered into a niche market of men’s grooming.


Phase 5: 2013 onwards

As we know, acquisitions are capital intensive and so Marico’s ROCE during the phase 4 dropped significantly from 50% in FY08 to 24% in FY13.


But the company recognized this and Harsh Mariwala himself told in an interview that the company will now focus on digesting the earlier acquisitions and also try and raise the dividend payout to match other FMCG companies. Other corporate restrictions were carried out like demerger of Kaya clinics and appointment of Saugata Gupta as Marico’s CEO and subsequently Managing Director.


Mukherjea notes the secrets behind Marico’s success in the following sections


Section 1: Focus on Core Business

The company remained focused on maintaining brand leadership, extending winning brands and divesting low margin brands. 


Section 2: Deepening Competitive Moats

This section was tackled through the IBAS framework. Let’s briefly look at each of them.



Marico innovated in several areas like:


  • Packaging: The shift from tin packaging to plastic bottles led to the oil becoming storable at the depots and offered protection from rats.
  • Products: Through all its brands, Marico has positioned itself very differently in markets that were earlier unheard of. Some of these would be premium edible oil, male grooming, flavored oats, etc.
  • Human Resource: Marico’s HR department is said to introduce various activities to keep the employees engaged and discourage unionization.
  • Financial: Better budgeting of advertising spends, reserves for unexpected cost rise and demand forecasting kept Marico’s financials under check.


Marico remains a leader in the coconut oil market under the Parachute oil brand, under the premium edible oil market with Saffola brand and in the male grooming market with brands such as Set Wet and Zatak.



The work culture at Marico can be compared to any other MNCs operating in India and abroad. Open office culture was introduced to corporate India by Marico. Also, the managers were given appropriate freedom and the company was run professionally as the promoters took a back seat and talented outsiders were allowed to take the company’s ambitions forward. The board of directors were also well diversified in terms of experience and expertise.


Strategic Assets

The network of distributors remains a strategic asset for the company.


Section 3: Controlled Capital Allocation

The company was able to generate higher capital because of 


  • Low capital intensity
  • Low working capital requirements
  • Higher operating profit margins

This allowed the company to increase its dividend payout ratio, acquire great brands or create brands internally.

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