A Study of the Parachute Hair Oil in the Egyptian Market

Submitted By:
Sagar Awale (11020541118) Tushar Jagtap (11020541136)

Date: 20th February 2012

2011-13

Introduction about Marico Ltd:

Marico is a leading Indian Group in Consumer Products & Services in the Global Beauty and Wellness space. Marico's Products and Services in Hair care, Skin Care and Healthy Foods generated a Turnover of about Rs. 26.6 billion (about USD 600 Million) during 2009-10. Marico's brands and their extensions occupy leadership positions with significant market shares in most categories- Coconut Oil, Hair Oils, Post wash hair care, Anti-lice Treatment, Premium Refined Edible Oils, niche Fabric Care etc. Maricos business is broadly classified in three categories: 1. Consumer Products Business FMCG business in India.

Marico has strong presence in Indian market & selling skin care, hair care, edible oil products like parachute, Medicare, manjal, saffola & oil of malabar.
2. International Business Group International FMCG business.

Marico's branded products are present in Bangladesh, other SAARC countries, the Middle East, Egypt, Malaysia and South Africa. The Overseas Sales franchise of Marico's Consumer Products is one of the largest amongst Indian Companies and is entirely in branded products and services.
3. Kaya Limited - A chain of skin care clinics.

Marico is also present in the Skin Care Solutions segment through Kaya 100 Skin Clinics. These clinics are spread in India, Middle East and Bangladesh. In addition, Marico also acquired the aesthetics business, of the Singapore based Derma Rx Asia Pacific Pte. Ltd.(Derma Rx), under the Kaya portfolio.

Market Share

Brand

Category

Market Share

Parachute

Coconut oil

46%

Saffola

Premium refined oil

53%

Mediker

Anti-lice treatment

96%

Revive Parachute jasmine, Shanti-alma, hair care, Nihar. Parachute hair cream

Instant fabric starch

80%

Hair oils

22%

Hair cream Dermatology led skin Solution

27%

Kaya skin clinic

Less than 60%

Marico Highlights:

1 out of every 4 Indians is a Marico consumer. Marico distribution network covers over 33 lacks retail outlets.

Most Marico brands enjoy a leadership position in their respective categories. Parachute is the worlds largest coconut oil brand.

Marico entering a new market with the brand Parachute:

For Marico, going global is more than a means of opening up new avenues of growth. In roughly 13 months, between January 2010 and February 2011, fast moving consumer goods company Marico has snapped up four international acquisitions which include brand Code 10 (Malaysia), Derma Rx (in Singapore via wholly-owned subsidiary Kaya Ltd), Ingwe in South Africa, and an 85 per cent stake in International Consumer Products Corporation (ICP) of Vietnam. Thats one new addition every three months or so. For Marico which started its journey as Bombay Oil Industries in a traditional commodity-driven business going global is not just a means of opening up new avenues of growth but also an opportunity for cross-border learning. That, in part, explains the shopping spree, and the amazing growth of its International Business Group (IBG). With a footprint in West Asia, North Africa, South Africa, Bangladesh, Malaysia and now Vietnam, the division has grown from Rs 96 crore in 2004-05 to Rs 734 crore in 2010-11. Today, Maricos international business fetches almost a quarter of the groups revenues estimated at Rs 3,300 crore for 2010-11, thanks to a judicious mix of organic (two-thirds of the IBGs revenues) and inorganic growth. The Mumbai-headquartered company started off by exporting its flagship coconut oil Parachute brand across the subcontinent and in West Asia in the early 1990s, though its real foray as a serious investor overseas happened more recently, in 2000 in Bangladesh, when it set up a manufacturing facility for Parachute oil just outside capital Dhaka. Bangladesh brings in the lions share of IBGs revenues at over 50 per cent, with West Asia (currently present in the Gulf Cooperation Council countries, Yemen, Sudan and the Levant region) bringing in another 30 per cent. The balance is contributed by the other geographies where Marico has a footprint, namely, Egypt, South Africa, Malaysia and Vietnam.

These acquisitions have also brought more than six new brands under the Marico umbrella, significantly adding to the companys international offerings that comprised only one brand (Parachute) till about 2005. However, the companys revenue mix is still extremely dependent on Parachute (hair care) and Saffola (edible oil), its top grossers, which together bring in close to 60 per cent of Maricos overall revenues.

Parachute entering the Egyptian Market

Egypt is one of the most populous countries in Africa and the Middle East. The great majority of its over 81 million people live near the banks of the Nile River, in an area of about 40,000 square kilometres (15,000 sq. mi), where the only arable land is found. About half of Egypt's residents live in urban areas, with most spread across the densely populated centres of greater Cairo, Alexandria and other major cities in the Nile Delta. The economy of Egypt is one of the most diversified in the Middle East, with sectors such as tourism, agriculture, industry and service at almost equal production levels. Egypt's important role in geopolitics stems from its strategic position: a transcontinental nation, it possesses a land bridge (the Isthmus of Suez) between Africa and Asia, traversed by a navigable waterway (the Suez Canal) that connects the Mediterranean Sea with the Indian Ocean by way of the Red Sea. Egypt's foreign policy is supported by its population size, historical events, military strength, diplomatic expertise and a strategic geographical position. It has extensive political influence in Africa and the Middle East. Cairo has been a crossroads of regional commerce and culture for centuries, and its intellectual and Islamic institutions are at the centre of the region's social and cultural development. Economic conditions have started to improve considerably after a period of stagnation from the adoption of more liberal economic policies by the Government, as well as increased revenues from tourism and a booming stock market. In its annual report, the International Monetary Fund (IMF) has rated Egypt as one of the top countries in the world undertaking economic reforms. Some major economic reforms taken by the new government since 2003 include a dramatic slashing of customs and tariffs. A new taxation law implemented in 2005 decreased corporate taxes from 40% to the current 20%, resulting in a stated 100% increase in tax revenue by the year 2006. Foreign direct investment (FDI) into Egypt has increased considerably in the past few years, exceeding $6 billion in 2006, due to the recent economic liberalization and privatization measures taken by minister of investment Mahmoud Mohieddin.

Market entry strategy

In 2006, Marico acquired Hair Code and Fiancee in Egypt and the two brands gave it a market share of more than 50 % in the Egyptian hair care market. Thus, it followed the acquisition strategy to enter into the lucrative Egyptian market.

Segmentation, Targeting and Positioning:

Geographic Segmentation: Target: As the great majority of people in Egypt live near the banks of the Nile River the key regions to target will be the densely populated urban regions where about 99% of the population of Egypt lives. About half of Egypt's residents live in urban areas, with most spread across the densely populated centres of greater Cairo, Alexandria and other major cities in the Nile Delta.

Demographic Segmentation: Target: Age group from 10 to 60 years. The youth which are style and appearance conscious will be targeted. The burgeoning pie of middle class population in Egypt comprising of nearly about 70% will be the most preferred target segment. Women of all ages in both urban and rural population.

Psychographic Segmentation: Target: The target segment will be ambitious youth of the country. The Middle income group will be targeted. Positioning: Positioned on the platform of purity.

SWOT Analysis:

Strength
Market leader in its category. Brand has sought to remain relevant and differentiated through a slew of initiatives. One of the most recognized and trusted brands.

Weakness
Parachute Hot Oil should be a seasonal product and should be sold in winters and not during summers in places where it gets very hot. Innovations like personal massager not available. The original parachute oil solidifies in winter season.

Threat
Many players are entering the market. Parachute as a brand is positioned as a coconut oil. Competitor brands are communicating the advantages of using oils that are made of badam, amla, mustard, jojoba etc.

Opportunity
Parachute can get into skin care by introducing oils for application on the entire body. Launch variants that have not only coconut but also other natural ingredients that benefit the hair.

Porter Analysis:

Threat of Substitutes: Traditionally Egyptian people use jojoba, badam oils. Competitor brands are communicating the advantages of using oils that are made of badam, amla, mustard, jojoba etc. These can prove as the substitutes to the coconut hair oil. Threat of new entrants: Parachute has more than 50% market share. The established companies have a very huge base of loyal customers which will create entry barrier to any new entrant in the market. Bargaining power of Buyers: Due to the availability of multiple products in the market the buyer is in a better position to bargain in the market. Bargaining power of Suppliers: