Management during Changing Times: The case of Marico Industries
One of the greatest challenges confronting any manager is to lead his organization successfully during times of change. Few Indian managers have done so as successfully as Mr. Harsh C. Mariwala, the CEO and MD of Marico India. In his three decades of association with the company he has seen it grow into a leading Consumer Products & Services Company in the Beauty and Wellness space generating a turnover of Rs. 19.1 billion during 2007-08.
In this guest interaction with Mr. Mariwala, Tejas quizzes him on the challenges which he faces in the future with the rise of retail giants, the company's future strategy and his most important task - making sure that his people stay together in the face of these challenges.
Internally as an organization what really defines the DNA of Marico?
At the front end where we are facing the consumer or the stake holder, we have the DNA of being a market leader. This entails being in spaces that we call blue ocean spaces where we retain that leadership on a sustainable basis through innovation. To back this strategy we need a backbone of very strong quality of people. Attraction and retention of people plays a very important role in this journey as well as the culture of the company plays a very important role in driving innovations.
You mentioned that attracting and retaining talent is a very important part of your strategy, how does Marico differentiate itself from a HUL or a P&G in this regard?
I think the key thing if you really look at the two examples that you have given is the issue of Indian firms vs. MNCs. I think the clear advantage that we have versus the MNCs is the kind of empowerment that we give to our people because we do not have to go to some other sub headquarters or somebody else sitting in some other country to decide any of the issues to do with the brand, the sales or for that matter anything else. It is a flat organization. So the kind of freedom that is given to our managers at a very young age is very high. Thus, when people work with us, we provide a lot of empowerment and a lot of satisfaction of doing a holistic job rather than executing the directions that somebody sitting in another country has provided. Here you have to actually do a lot of things including conceptualizing things. That is a key differentiator.
Another difference between us and the firms that you have mentioned is our smaller size. But, I think we have been able to overcome that through our three businesses. We feel that our other businesses (other than domestic consumer goods) are getting into a critical mass. Our international business will be 500 crores .Our Kaya business is also 160 crores with 72 outlets in India and 11 outside India. So now there will be an active job rotation program between domestic consumer goods business, international business and Kaya over a period of time and that will provide a lot of opportunities to our people to get newer experience in newer businesses and in newer countries.
Managing the People
While attracting and retaining talent is important, equally important is to keep them motivated. What has been your strategy in this regard?
First of all you need to take people who are self motivated. Gone are the days where you would use organizational rules to motivate people. Each person, whatever role he has, will see ups and downs. If motivation comes from within they will take it upon themselves to remain motivated. This self resilience is of extreme importance.
While talking of your people policies, one certainly has to mention your 'Total football, Total management' approach to job rotations. A policy of such drastic job rotations does not appear to be a common corporate practice. Why has Marico implemented it?
Frankly, we do not hold any motivation workshops. All they succeed in doing is whip up emotions that will last for 1-2 days. Having said that, we provide lot of training, we have challenging goals, we have innovation, and we want people to achieve their goals. So we set goals in a manner where there is stretch and yet, at the same time, where people are able to achieve the goals. Thus, there is a challenge but when you achieve that challenge there is the satisfaction of achieving it.
Basically, we want to have a win-win kind of arrangement with all our organization members. If I have a person who has been handling finances for 10 years, I understand he will leave in search of some other challenge, some other learning. But job rotation is not only shifting. We first determine what the employee's liking is. It is certainly not ad-hoc as it may appear to an outsider. In the organization, there is a lot of debate and dialogue centered on organizational issues and so awareness of what are the issues in HR is pretty high which helps us make informed decisions. Of course ultimately it is also a matter of taking some degree of risk For instance; sometimes our decisions have not worked out. But this system might help in extending a manager's stay with the company. The manager also gets experience. If it does not work out, then he would leave, there is nothing wrong with that.
Changing FMCG Business with Strengthening of Organized Retail
What is your take on the growth of Indian organized retail?
I would say that in the last 2-3 years, we have seen a huge increase in the number of stores and chains that have come up in the Indian market and this has led to a high rate of growth in terms of percentage growth but in terms of penetration of modern retail, in terms of % of sales through these store vis-a vis the traditional medium that is still very small as compared to the developed markets. It is only 5-6% (approx.) on all India basis but in some cities it contributing as much as 25-30%. So I reckon it is only a matter of time before this number picks up.
How do you think this will change the rules of the game for an FMCG player like Marico?
The problems that some retail chains have seen in the recent times are, according to us, temporal. The primary cause for many of these chains performing poorly financially is that they started expanding rapidly at very high rentals without really putting their supply chain in place in a business which does not have very high margins. Hence, they have suffered financially. There will be a certain degree of shake-out amongst the players but organized retail will grow.
The impact of growth in organized retail on the FMCG companies is both positive and negative. On the positive side, great opportunity exists to sell certain categories where the awareness levels are low. So in those new categories there is very high growth. Also wherever there is impulse purchase, like say chocolates, there has been growth. Thus, benefits are mainly in terms of doing sales in certain newer categories at premium price points.
What then has been Marico's strategy in face of organized retail?
The disadvantages will depend on how strong or weak are you in terms of your own brands. If you are a weak brand you are vulnerable because modern retail will not stock more than 3 or 4 brands so if you are the fifth or sixth brand you will not get an entry itself. If you are a brand that does get entry then again there is a question of how strong you are because it is only a matter of time before modern retail begins to stock private labels which are priced lower. Your ability to take them on will be determined by the strength of your brand. In this regard it is important to realize that to drive a strong brand is not only about advertising but also the formulation and continuous innovation pipeline in the brand. The brand will have to be continuously innovating to stay two steps ahead of the private label brand. So there is no one answer, it will depend on the FMCG player you are talking about.
As I said before you have to take the organized players seriously as it is only a matter of time before they grow. From our side, there is a need to address them in a different manner. For instance, you cannot have the same distributor or same sales representative who is handling a kirana store, handling them. He has to be of a different type because ultimately when you are facing a modern retail chain you are dealing with a corporate manager. Similarly a wide variety of change is warranted be it in terms of your supply chain to ensure that your fill rates are high or in having good relations with these chains or in reducing the number of middle men.
One area of particular importance is the cutting down of supply chain costs because ultimately you are giving certain discounts also to these big chains thus necessitating reduction in costs. Also merchandising will play a very important role. Merchandising in big retail chains is very different because you have enough space for big display opportunities. Hence, the whole thing has to be handled in a very different manner.
Future Strategy at Marico
In these times when the buzz in retail is about countries like India, China and Vietnam, what are the specific reasons why Marico is acquiring in countries like South Africa, Egypt and Bangladesh?
I think the primary driver for strategy at our end is growth. We need to drive growth and growth from wherever growth can come in- be it India or other countries. Our strategy of going international is to be in markets where can we add value and also those markets in which we can emerge as market leaders. This value can be in terms of brand building, distribution and so on. There is a whole rationale of going into these countries. It is because we see ourselves capable of becoming market leaders and there are opportunities to leverage our strengths.
You new initiative, Kaya, is one of the very few examples where an FMCG player is going into solutions business. Why has Marico done this? Do you think this trend will continue?
What you do need to realize here is that global expansion is not being done at the cost of Indian business. There is a clear organization structure, a clear demarcation in terms of responsibility, a CEO of domestic business and a CEO of international business. So there is no conflict of interest in this case in the sense that if we are doing one it does not mean that we cannot do the other.
You are right. I think it is one of the only examples that I know of where a product player has gone into what we call solutions. While I am not aware of the strategy of other players we will be involved in going more and more towards solutions. There is a very strong reason for it. It did happen a little bit by chance also but there was always a desire to go into solutions. If you have a problem of your skin say pimples you will just go buy a cream. As opposed to this when you go to Kaya you will get customized treatment by the doctor then you will have services, products and a special recommended diet. The whole 360 degree approach to the skin is far more effective that just using a product. So the belief is that if you need to address issue of skin or whatever else you are doing - hair wellness etc., you can address it far more effectively through a 360 degree approach that is customized to the customers' needs.
Another reason was that we wanted to enter the skin space and we felt that if we only went through the product route it will be difficult for us to become market leaders in this highly competitive market. So we can actually take it on through a service route and create a brand. And then we also have products under Kaya.
Harsh C. Mariwala is the Chairman & Managing Director of Marico India. Over the last 3 decades, Harsh has transformed a traditional commodity driven business into a leading Consumer Products & Services Company in the Beauty and Wellness space. From a turnover of Rs. 5 Million in 1971, Marico's Products and Services in Hair Care, Skin Care and Healthy Foods generated a turnover of about Rs. 19.1 billion (about USD 477 Million) during 2007-08. Marico markets well-known brands such as Parachute, Saffola, Kaya, Mediker, Revive, among others.
Besides being the Chairman & Managing Director of Marico, Mr. Mariwala is also on the Board of several well known companies such as Cadbury India Limited, MIRC Electronics Limited and MIC Electronics Ltd. among others. He is also the current Vice President of the Federation of Indian Chambers of Commerce and Industry (FICCI).