This week, Marico shares hit a record high. So we thought we could discuss the stock and perhaps talk about the journey they’ve had so far.


Marico is one of the largest FMCG companies in India. And the company pretty much owes its legacy to the enigmatic promoter, Harsh Mariwala.

Mr. Mariwala came from a family that had built an empire dealing with agricultural commodities. But after working for a couple of decades, he felt that his ambitions were largely curtailed by family bureaucracy. And so, when they finally decided to carve the company into multiple subsidiaries, Mr. Mariwala had with him for the first time the autonomy to finally realize his vision. With reserves of about a couple crores and two legacy brands, in Saffola and Parachute, Marico was born on April 2, 1991.

And need we say more about Saffola and Parachute. Parachute has been an iconic brand for several decades. In fact, today it commands a staggering 62% share in the coconut oil market and contributes around 38% to the company’s domestic business. It’s an extremely valuable asset. But what you may not know is that the product isn’t sold or marketed as hair oil. Instead, Marico classifies them as edible oil. This distinction is important for two reasons. For starters, edible oil carries a lower tax rate compared to cosmetic hair oil. So if you were a prudent business person, you’d choose to classify the product as edible oil so long as it’s actually edible.

The second important detail to note is that Marico also markets multiple products within a separate cosmetic division. This category includes Value Added Hair Oil (VAHO) and other grooming products. Think — Nihar, Hair & Care, and even Parachute Advansed (Not the edible oil Parachute). However, unlike the coconut oil business, where Parachute still reigns supreme, growth in the cosmetic division has been muted, largely due to companies like Dabur who’ve carved a niche on the ayurvedic front.

Meanwhile, Saffola, the other iconic brand has also been seeing some stiff competition. We all know how Saffola came to dominate the industry by positioning itself as a healthier alternative. The problem today however is that Saffola isn’t the only brand that is now positioned to cater to the health-conscious consumer. Fortune and Emami have been selling their own variants of healthy oil and they sell at competitive rates as well. And while sales growth is still robust, recent years have been a bit lackluster.

More importantly, the general economic slowdown that precipitated during 2019 had a considerable impact on the company’s financials. Rural income took a beating during this time and since Marico derived about 30–35% of its sales from these areas, there wasn’t a lot to look forward to. In fact, during FY 2019–20, sales and profit saw no growth whatsoever.

And the pandemic didn’t help matters either. At least not at first. During the first quarter of last year, parachute, cosmetic oil, and grooming products didn’t do as well because those weren’t priority products. But as home cooking started gathering pace and people began stocking their pantries, sales figures for Saffola edible oil took off. Soon, the other divisions were also showing improvements, including the international business that contributes about 22% to Marico’s top line.

Eventually, however, Marico’s full year (FY21) sales grew by 10% and profits grew by 15% when compared to the previous year. Not bad when you notice how so many other companies were struggling to stay afloat right?

But perhaps the trump card lies elsewhere. During the same period, one other segment saw exponential growth — Saffola foods. This is where they sell products like oats, honey, and noodles. This segment is growing at a feverish pace each quarter. In the last quarter of FY21, sales grew by a whopping 134% when compared to the same period last year. The total turnover during the entire year from this segment alone contributed 300 crores during FY21. They want to target 500 crores this year and 800 crores by 2024. For a segment, that’s so new, this is a bold target, to say the least.

But perhaps investors have taken this as a vote of confidence. Maybe they’re seeing an FMCG company here that has significant upside.


But what we do know for certain is that the company’s promoters have built a very robust business so far and it's paid off investors in spades.

Until next time…

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