Industrial Economics Project

On

Marico Limited

By Komal Maloo Gargee Ghosh Neha Goyal (Roll No- 31) (Roll No- 25) (Roll No- 44)

Deepak Kumar Sahu (Roll No- 19) Faridul Haque Harsh Kulhara Abhinav Singh (Roll No- 24) (Roll No- 26) (Roll No - 2)

National Institute of Industrial Engineering, Mumbai

Indian FMCG Industry:

The FMCG (Fast Moving Consumer Goods) industry is basically related with production, distribution and consumption of consumer packaged goods. Characteristics of these goods are: Low cost goods Quick turnover Consumed directly by end consumers Consumed at least once within a month Have very less profit margin Mass production Overall profit is due to mass production Customer thinks less before purchasing these goods Have very less profit margin

FMCG is the fourth largest sector in the Indian Economy with a total market size of Rs. 60,000 crores. FMCG sector generates 5% of total factory employment in the country and is creating employment for three million people, especially in small towns and rural India. It remained resilient to recession. It is a very innovative sector. FMCG Sector categorization based on Price Premium goods are those for which the customers are ready to pay more due to their high quality. They have a 25% of share in the industry, where as rest 75 % consists of the daily use non premium goods. The later comprises the rest a big and it share.

FMCG Sector categorization based on Product categories:

THE TOP 10 COMPANIES IN FMCG SECTOR IN INDIA Sl No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Companies Hindustan Unilever Ltd. ITC (Indian Tobacco Company) Nestl India GCMMF (AMUL) Dabur India Asian Paints (India) Cadbury India Britannia Industries Procter & Gamble Hygiene and Health Care

10.

Marico Industries

Marico is basically into three businesses Edible oils Hair oils and Natural care Skin Care

Indian Edible Oil industry:

The Indian vegetable oil economy is worlds 4th largest after the US, China & Brazil harvesting about 25 million ton of oilseeds against the world. Vegetable oil consumption has increased following in a rise in household incomes & consumer demand. India imports half of its oil requirement, making it worlds 3rd largest importer of edible oil. Currently India accounts for 11.2% of vegetable oil import & 9.3% of edible oil consumption.

Premiu m Segmen t >Rs. 110

Saffola

Sundrop

Popular

Fortune

Dhaara

Swee

kar Segmen t <Rs.110 Gold winner Gold Drop

Raag Gold Low End <Rs.70 Dalda Vanaspati

(Palmoli an)

*Price/Li tre

About Marico Limited

Marico is a leading Indian group providing consumer products and services in the areas of health and beauty. It was founded in 1987. 1 out of every 4 Indians is a Marico consumer. Its distribution network covers over 33lac retail outlets. Maricos focus on sustainable profitable growth is manifest through its consistent financial performance a CAGR of 22% in Turnover and 27% in Profits over the past 5 years. Marico has successfully achieved several consecutive quarters of y-o-y growth- 46 for Profits and 42 for sales. During 2009-10, the company generated a turnover of about Rs.26.6 billion in respect of its food, hair care and skin care related activities. In 2010, Marico clinched three international acquisitions. At present, Maricos international portfolio contributes to 23% of Marico Groups revenue. In February 2011 the company acquired one of leading Vietnamese FMCG Companies - International Consumer Products Corporation The Marico group business organization is structured into three Strategic Business Units (SBUs):

Consumer Products Business: It constitutes personal & nature care products and wellness & new products. International Business Group: It includes international FMCG business

Kaya (Branched out to form a separate company Kaya Ltd. a wholly owned subsidiary of Marico) Kaya Skin clinics.

Marico is a major player in FMCG sector mainly operating in Edible oil, hair oils and skin care segments. There are 8 major plants located all over India besides more than 200 Subcontract locations. The major plant locations are Jalgaon, Maharastra All brands of Saffola Kanjikode, Kerala All SKUs of Parachute, Oil of Malabar and Nihar Naturals Ponda, Goa Parachute Pondicherry All SKUs of Parachute, Oil of Malabar and Nihar Naturals Deheradun, Uttarakhand Parachute Hair cream, Hair & care, Silk and Shine Poanta Sahib, Uttarakhand Shanti Badam Amla, Parachute Jasmine Baddi, Himachal Pradesh All brands of Saffola and Parachute Dadra and Nagar Haveli Parachute Advanced

Plant locations in India

Presence of Marico in the world

Overview of Saffola

Saffola is a heart care brand in the foods category in India. It has several products in its portfolio which include edible oils, functional foods, rice and salt. Saffola is known to be a brand which is good for heart and recommended by doctors. For the last 10 years, Saffola life has been educating Indians on preventive heart care through the year. Since risk factors of Cardio Vascular Diseases (CVD) start early in India and prevention of these diseases requires an integrated life course approach, Saffola has over the years built an ecosystem which works actively towards adopting a healthier lifestyle.

Saffola Oils
New Saffola:
The recent understandings in the role of oil in cardiovascular diseases have shown benefits attached with MUFA. The MUFA combined with the proven cholesterol reducing benefits of Oryzanol resulted in formulation of New Saffola. New Saffola contains High Oleic Safflower, which is also known as Kardi Oil and Rice Bran Oil. New Saffola contains almost 60% MUFA along with Oryzanol and Vitamin E. New Saffola provides the benefits attached to MUFA along with the proven cholesterol lowering effect of Oryzanol. Saffola comes with 'LoSorb Technology', due to which oil gets absorbed less, reducing oil consumption in your diet. Saffola oils are Free of trans fats. Saffola encourages you and your family to take care of your heart by using less oil, following a low saturated fat diet with regular exercise and a balanced lifestyle.

Saffola Gold:
Studies have shown that a right combination of Safflower Oil and Rice Bran Oil is more effective in reducing cholesterol than each of the oils singly. Saffola Gold contains Rice Bran Oil and Safflower oil, which is also known as Kardi Oil. The heart healthy nutrients in Rice Bran Oil such as oryzanol are known for their cholesterol lowering ability. Safflower oil has the highest levels of Linoleic acid, an omega-6-polyunsaturated fatty acid, which is well known in reducing cholesterol levels. Saffola comes with 'LoSorb Technology', due to which oil gets absorbed less, reducing oil consumption in your diet. Saffola oils are Free of trans fats. Saffola encourages you and your family to take care of your heart by using less oil, following a low saturated fat diet with regular exercise and a balanced lifestyle.

Saffola Active:
Saffola Active provides Omega 3 and Oryzanol, two important compounds known for promoting heart health. To get these benefits, Saffola Active is made with rice bran oil and soyabean oil. Saffola Active also contains Vitamin E. The heart healthy nutrients in rice bran oil such as oryzanol are known for their cholesterol lowering ability. Soyabean Oil is a good source of Omega-3. Omega-3 helps in lowering cardiovascular risk factors along with several other health benefits. Saffola comes with 'LoSorb Technology', due to which oil gets absorbed less, reducing oil consumption in your diet. Saffola oils are Free of trans fats. Saffola encourages you and your family to take care of your heart by using less oil, following a low saturated fat diet with regular exercise and a balanced lifestyle.

Saffola Tasty:
Saffola Tasty was the first Saffola blend. This oil blend provides the benefits of two oils, thereby giving you added value. It provides the high poly unsaturated fatty acid of Safflower oil and the taste of Corn oil. Safflower oil, which is also known as Kardi Oil has the highest levels of linoleic acid, an omega-6-polyunsaturated fatty acid, which is well known in reducing cholesterol levels. Corn oil has a unique taste and aroma. Saffola comes with 'LoSorb Technology', due to which oil gets absorbed less, reducing oil consumption in your diet. Saffola oils are Free of trans fats. Saffola encourages you and your family to take care of your heart by using less oil, following a low saturated fat diet with regular exercise and a balanced lifestyle.

Production
Saffola is a master brand under which a variety of premium edible oils are made. These oils are basically blended oils i.e. they are prepared by mixing two pure oils in fixed proportion by weight. These oils are very good for heart. This is due to high reduction in gum and fatty acid content in the oil made by refining. Below mentioned table provides the information about the variety of oils available in saffola category and their composition.

Products and raw materials

Product
New saffola Saffola gold Saffola active Tasty

Raw materials and composition

Kardi oil (60%), Rice bran oil (40%) Kardi oil (20%), Rice bran oil (80%) Soya (20%), Rice bran oil (80%) Kardi oil (20%), Corn oil (80%)

Process
Preparation of saffola consists of following steps:

Steps involved in preparation of saffola

Chemicals Used
Chemicals used at different steps of preparing saffola are:

Steps
Degumming Neutralization Pre bleaching Dewaxing Post beaching De-odorization

Chemicals
Phosphoric acid (H3PO4), hot water Caustic, Hot water Bleaching earth, active carbon Dicamol Bleaching earth, active carbon Phosphoric acid (H3PO4)

Processes involved in Saffola Refining

1. Degumming: It is used for removing gums from oil. It is centrifugal process. Phosphoric acid is used to separate gums from oil. When H3PO4 is added, gums start flowing over oil. It is then fed into separators. Separator rotates at 7000 rpm. Separator separates gums from oil. Output: Oil without gums and separated gums

2. Neutralization: Add hot water into oil. Adding water increases acidity of oil. To neutralize oil add NAOH. Addition of NAOH forms soap. Soap is then separated from oil. Output: Neutralized oil and soap (separated)

3. Pre-bleaching: It is colour removal process. First of all oil is heated and then bleaching earth is added to form slurry. Active carbon is added. Retention time is given for reaction to take place. It is filtered twice first through pressure leaf filter and then through polish filter. Output: decolorized oil, spent earth and spent carbon

4. Dewaxing: This is the next step in which the wax is removed from the oil. Wax is the component of oil that causes artery blockages in human body. In this processes we try to remove wax from oil and keep that in minimum percentage. Dicamol is the chemical added to the oil and kept in the crystallizer for fixed amount of time. The oil inside in the crystallizer is cooled bit by bit by passing chilled water through it. This will lead to the formation of crystals of wax. These crystals are then filtered with horizontal filter beds. Now the oil without wax is taken to the post bleaching section.

5. Post bleaching: As the colour is very high in case of some oils pre bleaching is required but post bleaching is the essential step in which high and final reduction in colour takes place. Like Pre bleaching operation, Bleaching earth and Activated carbon is added to the oil and retention time is provided in the bleaching vessel. Now after suitable colour reduction the bleached oil is filtered first through Pressure Leaf Filters and then through Polish Filters. This oil is a feed to the next section i.e. Deodorization.

6.

Deodorization: In this step the odour from the oil is removed. The odour in the oil is because of the large number of reactions that took place in the previous chemical treatments. These chemical treatments led to the formation of aldehydes and ketones. These are sweet components and are responsible for odour in oil. These are evaporated in high temperature and are extracted by means of vacuum in the deodoriser vessel. Then the oil is filtered in polish filters and finally stored in finished oil storage tanks.

Raw Materials
The raw materials with their quantities used to make 1 MT of Saffola is given below:

Product
Rice bran oil Kardi oil Dilute Phosphoric acid Hot water Caustic Soda Bleaching Earth Activated Carbon Dicamol Furnace Oil

Type
RM RM Chemical Chemical Chemical Chemical Chemical Chemical Fuel

Quantity
0.4 MT 0.6 MT 15 kg 10 kg 45 kg 30 kg 5 kg 5 kg 12 kg

Performance Evaluation Parameters

The following are the CCPs (Critical control points) which are monitored:

Sl No.
1

Process
Degumming & Neutralization Pre bleaching Dewaxing Post bleaching Deodorization

Critical Control Points

Hot water Temperature Gum(ppm)
Soap (ppm)

Range
80-95 C 50 50 3 kg/cm2 2-3 % 70-80 % 29 C 4-4.5 kg/cm2 3 kg/cm2 2-3 % 70-80 % 2.5-3 kg/cm2 >8 kg/cm2

2 3 4 5

Open steam pressure Bleaching earth dosing Bleacher level Temp of oil after complete crystallizer filling Pressure in horizontal filter press Open steam pressure Bleaching earth dosing Bleacher level Barometric Water Pressure H.P.Steam Pressure

Sparging Steam Pressure Vacuum Temperature

0.1-0.5 kg/cm2 0-5 torr 230-260 C

Two plants of Marico are involved in production of Saffola. The product distribution according to the plants is given below.
Plant Product Brand Pack Saffola Gold Saffola Active New Saffola Saffola Tasty New Saffola Saffola Gold Saffola Tasty SKU 1 ltr, 2 ltr, 5 ltr, 15 ltr 1 ltr, 5 ltr 1 ltr, 2 ltr , 5 ltr , 15 ltr 1 ltr, 5 ltr 1 ltr, 2 ltr , 5 ltr , 15 ltr 1 ltr, 2 ltr, 5 ltr, 15 ltr 1 ltr, 5 ltr

Jalgaon, Maharashtra

Edible Oil

Saffola

Baddi, Himachal Pradesh

Edible Oil

Saffola

The Financial highlights of Marico Limited are explained below. Financial Highlights (Figures in Crores) Year Sales PBT PBIT Economic value 2005 1007 74.3 31 46 2006 1143 98 25.8 50.7 2007 1556 150 35.8 79.3 2008 1905 205 40.3 131.5 2009 2388 229 37.4 144.4 2010 2660 296 34.2 196 2011 3128 376 25.7 201

added Book value per Share( Rs)

1.2

1.5

1.9

2.8

3.1

3.8

4.7

Reasons & policies behind continuous success story of Marico:

Understanding and anticipating consumer needs Developing product and packaging innovations to meet those needs Ensuring wide availability of its products on retail shelve Creating advertising campaigns to reinforce the value delivered Tracking metrics that support product positioning strategies Huge investment on R&D to focus on quality with development of new products exploring new ways of optimizing cost work with collaboration of many National & international research laboratories

Achievements & accolades of Marico:

The impact of adopting policies stated above upon the health of the company year wise can be summarized as: (from yr 2005-2011)

FY2005:
Milestones Overall turnover: 1000 Cr Rs. International business touched 100 Cr Rs(10% of group turnover) Consumer product business In domestic market Parachute hair oil rose by 8% in volume Saffola franchise is increased by 18% in volume Hair care range grew 14% in volume& 19% in value Parachute samporna, Silk n Shine, Saffola Blench Launching new products

International Business Launching new products

Sales turnover grew by 29% over the last yr Parachute advance after shower(an entry into male hair grooming market) & Saffola daily health function food Marico Bangladesh Ltd

Subsidiaries

MBL Industries Ltd

FY2006:
Top stories Change of RTA(Registrar & Transfer Agency) from Karvy computershare pvt Ltd, Hyderabad to M/S Intim Spectrum Registry Ltd, Mumbai to facilitate a better interface & services to shareholders due to location advantages New subsidiaries in Middle East Marico Middle East FZE Kaya Middle East FZE

Subsidiaries

FY2007:
Domestic Market Parachute coconut oil volume sale grew by 12% over last yr Hair care range grew 21% in volume Saffola grew its franchise by 18% in volume Recorded a growth of 41% over the last yr with turnover 164.8 Cr Rs excluding Egypt Operation in Egypt gave 28.3 Cr Rs turning with total growth of 65% Started use of advertisements Turnover: 74.7 Cr Rs, a 57% increment over the previous yr In India, its business had breakdown a PBT of 0.04 Cr Rs Sales increased by 31% Loses lower than previous yr by 26% Subdivision inface value of equity shares of the company towards enhancements liquidity is marico scrip on stock exchange 2 Egyptian brands Fiancee Hair Code

International FMCG business Kaya Skin Clinic

Sundari

Acquition

FY2008:
Domestic Market Parachute coconut oil volume sale grew by 10% over last yr Hair care range grew 16% in volume Saffola grew its franchise by 22% in volume Saffola Diabetics Alta Mix Refined oil blend of refined rice bran oil Refined Soya oil

Launching new products

International FMCG business Kaya Skin Clinic

Acquition

Overall international business grew by 59% Organic growth increment: 21% Fiancee & Hair code turnover: 88 Cr Rs Revenue: 100 Cr Rs, a 34% increment over the previous yr Added 18 new clinic International business is extended upto Oman & Saudi Arabia Consumer products division, Enaleni pharmaceuticals, South Africa

FY2009:
Top stories Growth 25% with revenue or top line: 2388 Cr Rs Bottom line grew by 12% with PAT=189 Cr Rs CAGR( for the last 5 yrs) Top line=24% Bottom line=28% Parachute coconut oil volume sale grew by 9% over last yr Hair care range grew 17% in volume Saffola grew its franchise by 11% in volume Saffola Zest Saffola Rice Hair & Care almond gold Parachute advance revitalizing oil Revive Recorded a growth of 43% over the last yr excluding Egypt In Egypt, its decision to modify its distribution system impacted the turnover negatively Revenue: 157 Cr Rs, a 57% increment over the previous yr Addition of 20 new clinics & as well new products

Domestic Market

New product launching

International FMCG business Kaya Skin Clinic

FY2010:
Top stories Domestic Market Grew 11% with revenue or top line: 2661 Cr Rs Bottom line grew by 23% Parachute coconut oil volume sale grew by 10% over last yr Hair care range grew 16% in volume Nihar increased by 9% in volume Saffola Arise Parachute advance ayurvedic hair oil Parachute advance ayurvedic cooling oil Nihar cooling oil

New product launching

International FMCG business Kaya Skin Clinic

Acquisition

Covered 23% of total turnover Entered in South East Asia Turnover 600 Cr Rs, with increment of 36% Entered in Bangladesh Launched Kaya Life prototype to offer the customer heuristic weight management solution IPO of Marico Bangladesh Ltd The Hair Style Brand Code Code10, Malaysians hair brand

FY2011:
Top stories Revenue increment: 11% Net profit increment: 24% CAGR(For the last 5 yrs) Revenue=22% Net profit=27% Took 85% share in International consumer product corporation in Vietnam, an entry in male grooming segment Derma Rx(An entry in Singapore)

International FMCG business Acquisition

Acquisitions Of Marico:
1. Oct 10, 2005: Marico Bangladesh Ltd acquires Aromatic Cosmetics-Aromatic from Aromatic Cosmetics Ltd.

Marico Bangladesh Ltd, a wholly- owned unit of Marico Ltd, acquired the Aromatic toilet soap brand of Aromatic Cosmetics Ltd, a personal care products manufacturer.

2. Jan 3. 2006: Marico Ltd acquires Oriental Extraction

Manjal from Oriental Extractions Pvt Ltd.

Marico Ltd acquired the Manjal soap brand of Oriental Extractions Pvt Ltd, a health care products manufacturer. Terms were not disclosed.

Jan 4, 2010: Marico Malaysia Sdn Bhd acquires Colgate Palmolive-Code 10 from Colgate-Palmolive Co.
Marico Malaysia Sdn Bhd, a wholly owned subsidiary of Marico Middle East FZE of UAE, which in turn is a wholly owned subsidiary of Marico Ltd, acquired the Code 10 brand, a brand of hair gels and hair creams in the Malaysian market, from Colgate.

May 25,2010: Kaya Ltd acquires Derma-Rx-Aesthetic Business from Derma-Rx(Asia Pacific)Pte Ltd.
Kaya Ltd of India, a wholly-owned unit of Marico Ltd acquired the aesthetic skincare business of Derma-Rx (Asia Pacific) Pte Ltd, a manufacturer of skincare products. Terms were not disclosed.

Aug 13, 2010: Marico Ltd acquires Ingwe Health Plan

Marico Ltd of India acquired Ingwe Health Plan from Guideline Trading CC. Terms were not disclosed.

The stakes of Marico:

Feb 27, 2003: Marico Ltd acquires Sundari LLC
US - Marico Industries Ltd acquired a 33% interest in Sundari LLC (SL), a manufacturer of skin care products. Terms were not disclosed. Concurrently, Adil Albada & Associates acquired a 5.5% interest in SL.

1. Feb 8, 2011: Consumer Prod.

Marico

Ltd

acquires

International

VIETNAM -Marico Ltd of India acquired a 90% interest in International Consumer Products Corp, a Ho chi minh- based manufacturer of personal care products.

The Divestitures of Marico:

Oct 28, 2004 : Marico Ltd acquires remaining interest in Kaya Skin Care Ltd. Mar 11, 2008 : Scandic Food India Pvt Ltd acquires Marico Ltd-Sil Processed Foods from Marico Ltd

INDIA - Scandic Food India Pvt Ltd, a majority-owned unit of Good Food Group A/S, acquired the Sil processed foods business of Marico Ltd, a personal care products manufacturer. Terms were not disclosed.

SUMMARY:
Year 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Total Acquisitions 0 3 0 0 0 1 1 1 0 0 0 0 3 9 Stakes 1 0 0 0 0 0 0 0 1 0 0 0 0 2 Divestitures 1 0 0 1 0 0 0 1 0 0 0 0 0 3