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How Harsh Mariwala built Marico as a labour of love, and gave over management control to a professional CEO

How Harsh Mariwala built Marico as a labour of love, and gave over management control to a professional CEO

Harsh Mariwala, Chairman of Marico, says he doesn't consider himself to be the owner of the FMCG major and talks about his journey as an entrepreneur

Harsh Mariwala, Chairman of Marico Harsh Mariwala, Chairman of Marico

Marico Chairman Harsh Mariwala, who comes from a business family, set up the consumer products business practically from scratch. Over the past four decades, he has not only built Marico into one of the leading FMCG companies in the country, but has also transformed what was essentially a family-managed business into a professionally managed one. Mariwala, who has seen the FMCG space transform over the past few years, says Marico views every disruption as an opportunity. In a candid conversation with Business Today’s Global Business Editor Udayan Mukherjee, Mariwala talks about the learnings from failure, succession planning and what the future holds for the company. Edited excerpts:

Q: Harsh, if you had to assess your own career over the last four decades, would you be fully satisfied? Had you been told as a young man that this is how it will pan out, would you have grabbed it with both hands?

A: The short answer is yes, Udayan. But let me delve a little deeper in terms of what I expected from myself and how it all turned out. So, first of all, I am just a graduate; I have not done anything beyond my B. Com. Yet, at the very outset, I was absolutely clear that I was not going to work for anybody else. I had to run my own business. So, from that point of view, full marks; I never worked for anybody else. I joined the family business at a very young age of 20 and built this business of consumer products [Marico] virtually from scratch. It was completely a family-managed organisation. There were no professionals; there was no one to teach me, and we were not in consumer products to begin with, so I had to start virtually from the bottom. I had to travel to rural areas, appoint distributors—even stay with the distributors in small towns where there were no hotels.

Then, we appointed an ad agency and the first thing I told them was that I wanted to spend one week with them to understand how advertising is created. So, this experience of learning everything from scratch has really helped me in terms of understanding how things work at the bottom. And then matters were complicated by my large family, my father, three of my uncles, followed by five of my cousins in the same company. So, how you untangle yourself in a large family was a big challenge for me. It took two to three years, [and] I had to show a lot of patience. But, ultimately that also worked out. So, I have no regrets. Overall, I feel good that I was able to start from scratch and build a company of good repute, before passing it on to professionals. Marico has transitioned from an owner-managed company to a strategic investor-led company.

Q: Nor should you have any regrets. I’ve been reading all of this in your wonderful biography, Harsh Realities, where you mention that you tried to get into business schools as a young man but failed to get admission. This, you say, was a blessing in disguise. Why?

A: You are absolutely right. I tried getting into business schools in India. Then, I wanted to go abroad but my father said no—he was wise enough to know that when I came back and joined the family business later, I would be deeply frustrated. After all, in a typically family-managed business, there are no systems, no professionals. Similarly, had I come in after doing an MBA, I would not have gone through the learning curve which I had to, simply because I was not qualified, [and did not have] a postgraduate, MBA qualification. So, I think, it worked out well in my favour. My father probably said no as he thought I would never come back to India. Maybe, he thought, I would get married to someone there and stay on. In those days we were obedient to our fathers, and I couldn’t say no to him. Today if I say no to my children, they will just rebel and do things their way. But those days were very different.

Harsh Mariwala, Chairman of Marico

Q: Yet, when you went about setting up Marico from scratch, you sought out people with the very academic pedigree you lacked. All of them came from the best business schools, and had worked for the best companies. Why?

A: I was absolutely clear that if I were to run a top-notch FMCG business, I had to hire the best quality talent—best in terms of qualifications, attitude and also overall performance. I think that belief developed in my formative years, of always investing in talent. It played a crucial role in the success of Marico. I always looked for individuals who were better than me because I was not a functional expert. I had to recruit the best-quality marketing professional… the best quality sales professional in the hope that they would bring their experience to the table and add value to the company. Many entrepreneurs think they know it all, and that is the biggest mistake they make. They do not try to recruit somebody who is better than themselves. Perhaps it is insecurity. But I had a different view: I always needed to recruit someone better than what I was in that particular functional area. And then I was able to empower that individual and delegate to them, without abdicating my responsibility.

Q: There’s an interesting anecdote in your book where Uday Kotak says that there are two kinds of companies in India: the king and his subjects type—a family-run company where the boss thinks he knows everything; and the other being the value-driven company, where all decisions are taken keeping only the firm’s interests in mind regardless of what the owner thinks. He puts Marico in the second category. But when you look at the ecosystem today, candidly, do you see more of the first category?

A: I would say if they are family managed in terms of leadership, they are more in the first category—the king and his subjects. The biggest problem I find amongst entrepreneurs in India is that they think the company belongs to them. If you’re running a company that is a public limited company—you may be the majority shareholder, the promoter, or the founder—that doesn’t entitle you to call yourself owner, especially when you have diluted your ownership to many other shareholders. It’s not right to say that this is my company. I never say Marico is mine; okay I may have a majority holding and that’s fine. But, it is not my company and I have to look at all the stakeholders, even the smallest of shareholders and have to always decide in the interest of the company and not in the interest of promoters. Unfortunately, many promoters think their interests come first, followed by the interests of the company, which is just not right.

Q: The turf for FMCG has changed a lot today. When you were bringing the company up, you were up against giants like Hindustan Unilever or P&G but today there are smaller, nimbler players like Nykaa, Mamaearth, the Good Glamm Group, who are chipping away at the edge and plugging product gaps in the market. Is this a very different kind of challenge that Marico has to contend with today?

A: Let me go deep into this subject. The FMCG business has always been seen as one of the most defensive sectors, in the sense that very little discontinuity impacted the sector. But today, the emergence of D2C (direct to consumer) brands is a huge disruption for FMCG. Some of the entry barriers which existed earlier, in terms of distribution, infrastructure creation—you had to distribute your products into thousands and lakhs of outlets to achieve a certain scale. You had to advertise on mass media like television or print, and that required big budgets. Now in the case of D2C brands, you can do digital marketing; you need not advertise on mass media at all; you don’t need to create a massive distribution network; [and] you can sell through e-commerce platforms. So those old entry barriers have vanished. On top of that, there are many funders who are eager to fund you, and so we have seen brands like Mamaearth and others that have emerged in the last few years. For us, there are two ways of looking at it: One is to view these entrants from a threat perception—that is how they will impact my core business; another is to look at them through an opportunistic lens.

At Marico, we have chosen the second path—viewing this discontinuity from an opportunistic angle. We have acquired three brands which are D2C. The first was Beardo, in beard-related products; the second was Just Herbs in personal care; and we have just acquired a foods company, True Elements. We also have two or three of our own D2C brands. The key is not to have the same mindset in managing the FMCG business, as you do with the D2C business. So we have put all these three brands plus our own brands at a different location, manned by a different team much younger, and they have been told to work nimbly like a small outfit. Now, the challenge is, can you scale them up? Beardo, for example, this year we expect to do `100 crore of business, and over the next two years, we expect that the D2C brands of ours would add up to about `500 crore of business. That is a great start.

Q: Yes, and some of these will inevitably stumble; and in your book, you speak a lot about failures and how important failures have been in your career.

A: Absolutely. Unless you experiment, unless you fail, you’ll never learn because there are limitations to market research. No amount of market research is going to give you all the answers. There is just no shortcut to launching products and testing them with real consumers. So, it’s vital for organisations to take that risk and study the consumer reaction, not only to the product but the brand name, the packaging, the pricing, and so on.

Let me give you one example: about eight or 10 years ago, we identified an opportunity to get into baked snacks under the brand umbrella of Saffola. At that time, there were no baked snacks, but the biggest mistake we made was in thinking that since it was under the brand name Saffola, health would have to be the salient plank and so we gave preference to health over taste. We failed to realise that it was an impulse product. If you’re sitting in the afternoon with a cup of tea, or with a drink in the evening, you want something that is tasty and not just healthy. So, the consumer rejected the product but there was a huge learning for us in that failure.

After a few years we decided to go into Saffola oats. Halfway through, we realised that Indians like savoury breakfasts and not sweet breakfasts. So we asked, can we do what Maggie did to noodles, by offering a range of savoury oats? We profiled the consumer preference in each and every state, this time going overboard on taste. For example, in Tamil Nadu, we had a Pongal Masala Oats and some other states where they require a hotter version, we offered that instead. This time, the product was a huge success. We have an 80 per cent share in that market, which is now a `300-crore category, just by learning from the failure of our baked snacks foray. So, there is always a silver side to any failure in terms of learning, as long as you can analyse what exactly went wrong and apply it in your next initiative.

Q: Would you place Kaya in your list of mistakes? Could it have been handled better?

A: In short, the answer is yes, we could have done a better job. Though it was picking up, all of a sudden this pandemic came in. Over the last two years, we’ve had a terrible time in terms of closure of our clinics. April onwards, things have bounced back and we have a new CEO in place, but we have made mistakes. This is a very complex business compared to the FMCG business. It’s a combination of three different businesses—hospitality, retail and healthcare—and you have to find the perfect balance between these three. We made some mistakes in the past, which set us back. But, to answer your question—could it have been done better? The answer is unequivocally yes, we should have done a much better job.

Q: The other significant thing that you did is to relinquish the CEO’s chair in favour of a professional, which is quite rare in family-owned businesses. What prompted that and how do you see succession at Marico from here on? Could your son Rishabh take over from Saugata [Gupta, Marico’s MD & CEO] one day?

A: Good question, Udayan, because when I took that step in 2014, I had not thought that I will relinquish my responsibility at that point in time. At some stage, I had to but not quite then. But, my current CEO Saugata Gupta, who had been working with me for 10 years, expressed his desire to be in my shoes. I discussed that with my board at that time, and the board felt that it was a good idea as we needed new blood in Marico. They felt I should give him that opportunity and step down, and it would also pave the way for management succession. The starting point was my belief that the company does not belong to me and the organisational interest comes first and then my personal interest. So though I was not ready to step down, I stepped down in the interests of the company. The needs of hierarchical society meant that my children would inherit my role, but at that time my son was not ready, and also not that keen to run an operating company. So, I took that step. Looking back it has been a very good step, because it freed me in terms of doing a lot of new things that I never thought I would be able to do if I was running the company hands on.

So, earlier Marico was a promoter-managed company; now it is more of a strategic investor-driven company, where we are the biggest investors. So, I don’t operate the company on a day-to-day basis, but I have review meetings with the management and the team. I may be spending two-three days a month on Marico.

As far as my son is concerned, he is already running a very successful investment office, which has done exceedingly well. He has found his calling in that particular area, so I don’t think he would like to step into Marico’s shoes. But, if you ask me what would happen over a period of time, I think I would like to step down as Chairman, not immediately but over a period of time, and I’m grooming Rishabh to be the Chairman of Marico. So, he would take care of the family’s interest as a strategic investor.

Q: Finally, Harsh, there’s a very interesting chapter in your book called ‘Angels and Predators,’ where you talk about the time when HUL wanted to buy out the young upstart Marico, and got very upset when the offer was rebuffed. These days, the big predator on the block in practically any industry is Adani, and he even happens to be a competitor to Marico with Adani Wilmar. If Adani came to you with an offer, would your answer be the same?

A: Absolutely the same! I am very clear that I have created this company from a perpetuity point of view, and not to sell it. Forget Adani, if I wanted to sell it, there would be other buyers, too; and there have been many approaches made to me in the past, and I’ve always said no. The question of selling out doesn’t arise. Two, I am preparing the company from a long-term point of view in terms of the role of the board and what kind of decisions the body will take over a period of time. If you look at the history of a Procter & Gamble or Unilever, they started as family-owned companies, but survived over a very long period of time. I am viewing myself from that point of view. We have a 60 per cent shareholding as promoters, therefore are not vulnerable in terms of a hostile takeover.

 

Published on: Oct 06, 2022, 4:32 PM IST
Posted by: Arnav Das Sharma, Oct 06, 2022, 11:07 AM IST
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