I remember I was at home when the phone rang. It was Keki Dadiseth, Hindustan Lever’s chairman. He didn’t waste a lot of time, got straight to the point and said he wanted to buy us out. “Agree and all your future generations will be taken care of. If you decide not to, you will be left with nothing,” he said in that clipped accent of his. When I said I wasn’t interested, it was clear it wasn’t the answer he was expecting.
True, it was not the first time Lever had reached out. Bankers had sent many feelers and believed I would sell out without a fuss. Little did they know that the incident only hardened my resolve to build the business. It’s been two decades to that call. When I think of it now, it seems logical. Lever was coming off a big victory in oral care. Their brand — Pepsodent and Signal, had taken away market share from Colgate. Hair oil was the next stop and they had Nihar (from the Tomco buyout) in their arsenal apart from Cococare (a brand they had acquired). With deep pockets, which came in handy in oral care, we were an easy target. I certainly did not bargain for this two years after we went public!
I had said no without any hesitation, but my next thought was how much would Lever spend on advertising? Marico didn’t have as much money, but we had to take them on. With Parachute, our weak link was rural distribution. We decided to work on that. The decisions that followed were not easy. Our P/E multiple at the time of going public in 1996 was 13. During the battle, it came down to seven. But there was no other option. I had to increase ad spend and drop prices. We told investors, it would be a short-term impact only. I’m glad it turned out to be so.
The attention then shifted to getting analysts to view us as an FMCG company and not a commodity one. We had two successful brands in Parachute and Saffola, but even that was not good enough to get the P/E multiple other FMCG companies enjoyed. It took two-three years of sustained work starting from 1999 to make some headway. We did make some headway but what rattled the investors was that the brands were still owned by Bombay Oil Industries! To counter this, we had to shift them to Marico at a very low valuation. The message from us was loud and clear — we viewed Marico’s interests more seriously than our own. The rest of the story just fell into place. It feels good to see the valuation Marico enjoys today, but I can’t ever forget the effort that went into it.
Internally, the team was full of confidence. That convinced me we were on a good wicket. Parachute was our resource-generating engine and it was clear that we had to protect it. For Lever, Nihar was just one of the many brands they had. Yes, they could beat us on better packaging and, of course, advertising. What put me at ease though was the superiority of our product. Besides, there weren’t that many opportunities to create differentiation in coconut oils. It had to be around aroma, colour or clarity — we had done all of that. In that sense, there were entry barriers for Nihar.
I was worried about the distributors though. They were nervous about taking on Lever. We shared our marketing and distribution plan with them. At the same time, we appointed super distributors to improve our reach in rural areas. As expected, Lever went to town with an aggressive campaign. Their market share went up to 12% from 7-8%. Thankfully, none of it came from us, but the smaller players. They continued to spend money for two to three years after that but their share remained stagnant. It was around this time they became more aligned with the UK headquarters. Suddenly, coconut oil was not a part of the company’s global portfolio.
I think that was because of their inability to get a significant market share. Soon, they reduced the marketing and advertising spending on Nihar, and their share dropped back to 7-8% by 2005. It still had a good presence in the eastern part of India though, where we found the going hard.
Not for a moment did we take our eyes off Nihar. Once the battle swung in our favour, we started looking at ways to buy the brand. I did not spare any effort, used all my powers of persuasion with both Harish Manwani and Vindi Banga. When the penny dropped and Lever decided to put Nihar on the block, I was shocked. I assumed it would come to me. If any of the other bidders managed to buy the brand, it would adversely impact our pricing power in the East. If we won, it would mean huge cost savings. We simply had to win the bid. The question was: how far should we go? The board said in no uncertain terms that Marico would need to “quote a price as high as possible” and yet only to a point where there would be no regrets about losing the deal. The weeks leading to the bid were extremely challenging. Dabur, Emami and Godrej were in the fray. We had to play our cards smartly.
There was still a week to go before the bid when I made my way to the golf course in Chembur. The game went well, but I was still worried about Nihar. As if by divine intervention, Harish was there too. He didn’t say much just that “it’s going to be a very competitive bid”. It was clear that we had to be aggressive to win. That tip ensured that I did miss one swing on the golf course that day.
At the board meeting, we felt none of the other bidders would go higher than 170 crore. Our 216 crore bid was a winner by a clear distance, Ashok Wadhwa (our investment banker) is quite superstitious about numbers and he was insistent our bidding amount should add up to nine. I don’t believe in these things but ever since then all our bids add up to nine! Why tamper with good luck, right?
Even today, a conversation around the Nihar story gets the team charged up. Coming from a situation where few gave us a chance, to clinching the brand remains an emotional high. Sometimes, when I go golfing, I still look at the spot where I spoke to Harish. After all, Nihar is one of the jewels in our crown.
I took to golf like my family. But my family members had varied interests — horse riding, polo and sailing. I wasn’t attracted to those. Instead, I spent an hour in the gym every evening and walk by the seaside, listening to Indian classical music. I still do. As a kid, I played the sitar twice a week. It was funny how quickly the teacher gave up on my singing skills. I lost interest in music somewhere after five years, but never in management education.
For about 15-17 years, starting 1971, I was acutely aware of my skill gap. I was just a commerce graduate. As I decided to remedy this in 1985, the late evening Indian Airlines flight from Mumbai to Ahmedabad became a monthly fixture. It was to meet Professor Labdhi Bhandari at IIM Ahmedabad. All night, we would discuss brands and marketing. In the morning, I would fly back to Mumbai.
Having spent years in Lever, he was able to share many insights on brand building. It was on his recommendation that we sponsored and commissioned Terah Panne, a mythological television series with Hema Malini, on Doordarshan, spread over 13 episodes. These were baby steps in building the Parachute brand. The power of television as a mass medium was something he understood very early. He was also keen that I sponsor Ramayan. For some reason, I didn’t. I now wish I had. But you live and learn...
The interactions with Professor Bhandari and Homi Mulla made me realise I had to start conversations with thought leaders. Even if I didn’t have an MBA, I still had to get management inputs. It was necessary to develop a more holistic perspective.
Nothing has been more important to me than the interest of Marico. This has meant letting go of people and even my hold over the company. When it was time to pass on the baton to Saugata Gupta, it went smoothly. For, ensuring Marico’s continuity beyond me was paramount. In typical Marico culture, we put down what each of our roles entails. As chairman, I’m out of the day-to-day running. My focus now is on larger issues such as business plans, M&A and CSR. Or rather, the “hands off, mind on” approach.
I see corporate houses struggling with succession. One of the main reasons for this is that the promoters are unwilling to give up their power. In my case, it was Ram Charan who opened my eyes. Our first meeting was in the 1990s. His advice was to focus more on direction instead of a vision. The 80:20 rule, which gives more time to direction, was something that I was deeply impressed by. Ram Charan’s 80:20 rule suggests that the business environment is changing very fast and more attention should be given to business direction (almost 80% of our time) and once the exercise is complete, one should look at vision.
A lot of things he said reinforced my own belief in Marico. One was that organisations have to grow. Growth, he said, is like oxygen and excites all stakeholders. There was a time when we had to put together the strategy document for Marico. Since he was busy, we had to meet at Munich airport. His energy level never ceases to amaze me. Over coffee and sandwiches, we ironed out the succession plan.
I built this company in a very different era. Between 1990 and 1998, Marico grew only organically. Our first buyout was that of Mediker, a brand owned by P&G in April 1999 . It was important for us to look at identifying gaps in the market. Parachute was our flagship brand. So I began looking at opportunities that were new but yet closely related. Mediker was one we spotted. We bought the brand which had a revenue of 8 crore for 10 crore. It was an anti-lice shampoo and was a small part of P&G’s portfolio in India. Our consumer insight was that rural India was more about oil and less about shampoo. Soon after acquiring the brand, we relaunched Mediker as an anti-lice oil. Our sales doubled within a year of the buyout!
I believe or would at least like to believe that Marico thought ahead of most companies. What is spoken of today like the blue ocean strategy is something we did years ago. Today, we are market leaders in most of the businesses we operate in. We tackled Bangladesh the same way we did India, building up an 80% market share in coconut oil. That success led us to other markets like the US, Africa and rest of Asia.
The international foray helped expand our thinking from hair oils to new areas like hair cream and gels. We even acquired a male grooming brand in Vietnam. But there’s something different about setting up a business that’s hard to replicate. Kaya is that business. When everybody in the mid-1990s was speaking of retail, I was clear I didn’t want to venture in there. After travelling to London and meeting doctors, it dawned on me that the bigger opportunity was in skincare and laser hair removal. We set up an incubation cell that would think only about Kaya. Thanks to this, we started eight clinics in 12-18 months, as opposed to three-four years they would have conventionally taken. With Kaya, there were challenges on three fronts — health care, retail and hospitality. We did underestimate the problems there.
If we did things right, we also got them wrong sometimes. When we launched Zest, a healthy snack in 2008, it was after a lot of research. That counted for nothing. It bombed! It was then that we realised our mistake. We had focused more on health than taste. So when we decided to disrupt the oats market, the approach was to offer savoury options. This time we made no compromise on taste. Saffola Oats was a runaway success in a segment dominated by Kellogg’s and Quaker.
Never into fiction or comics as a kid, I liked pushing the boundaries of reality, armed with just newspapers and an insatiable appetite for information. My tryst with innovation still continues, but I believe it’s the little nuggets of consumer insights that make a company large. Marico is a prime example of that.
This is the second of a two-part series. You can read part one here.