QZ&A

Cheer up! The economic turnaround is coming, says one of India’s top consumer goods firms

Quartz india
Quartz india

The Indian economy has been under stress over the past year.

The demonetisation of high-value currency notes in November 2016 and introduction of the Goods and Services tax (GST) in July 2017 has put the brakes on growth. Reeling under the double-whammy, Indians have cut back on discretionary spending, which has, in turn, taken a toll on India’s $49 billion consumer goods sector.

Harsh Mariwala, however, is optimistic. The chairman of Marico, which sells a wide variety of consumer products from hair oil to breakfast cereals, believes a turnaround of sorts could begin early next year as the upheaval triggered by GST and demonetisation get ironed out eventually.

Mariwala, who joined his family business, Bombay Oil Industries, in 1971, set up Marico in 1988 and expanded the company from being primarily a hair oil seller to a consumer goods major with a turnover of Rs5,900 crore (FY17) and a presence in 25 Asian and African countries.

Today, besides navigating macroeconomic challenges, Mariwala’s three-decade old company is also feeling the heat from new players like Patanjali unlike till last year. From not considering the yoga guru Ramdev-led company as direct competition, something he told Quartz in 2016, Mariwala has now come to think that the upstart can no longer be taken lightly.

His company, meanwhile, is looking to acquire startups to grow faster. Earlier this year, it bought a 45% stake in Beardo, a men’s grooming brand.

In an interview with Quartz at his Mumbai office, Mariwala spoke on the economy, the churn within the consumer goods sector, and his aversion to partnerships. Edited excerpts:

In the last couple of months, concerns over the economy have increased. How do you view it?

There is a sense of worry and that has heightened in the last one month. But personally I think it’s a matter of time and we can bounce back. I don’t think we are in a tailspin. This is the price we pay for big initiatives like the GST.

In one year, we have seen two major reforms—demonetisation and GST. What’s been the impact on the consumer goods sector?

It has had its share of negative impact in the short-term and we hope it (the negative impact) remains limited to the short-term. GST is a good reform and the easier we are able to fix it (the accompanying challenges), the better for the country. I think things will begin to improve during the January-March quarter next year. It will not be a significant improvement but at least the trend will change.

Is Patanjali emerging as a threat?

Patanjali has definitely managed to get some market share and we can not take them lightly…but it’s not like we are looking at a lot of products that are on the natural side like Hindustan Unilever. And that’s okay because in our core business most of the items such as Parachute coconut oil, etc. are natural products.

How does Marico view India’s consumer goods startup ecosystem? After Beardo, are you looking at more such acquisitions to grow?

We have acquired a 45% stake in Beardo and we will raise it as we go forward. We want to remain in the beauty and wellness segment and will look at more acquisitions in these spaces. An important thing to learn from these new-age companies is how they have handled disruption. For instance, Beardo has created its branding via the digital medium and there are others like them who have done well in the e-commerce space. So companies like these that have handled the disruption and converted them into opportunities are something that every player should look at.

Are you also looking at partnering with startups?

I am a bit reluctant to enter into partnerships because they require a lot of energy. I like acquisitions because then at least things are under your control. I have a strong mindset of doing things on my own instead of doing it via partnerships. Even earlier, we had opportunities of doing joint ventures with leading multinationals like L’Oréal but it doesn’t work out. Both the partners have their own agenda and then half the time they are just fighting.

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