Garlic hair cream isn’t your run-of-the-mill grooming product. Not too many supermarkets stack it on their shelves as a matter of routine. In West Asia, however, the pungent pod is traditionally regarded as a failsafe solution for thinning or falling hair and is commonly used not just in cooking but also as a vital ingredient in many unguents and potions. So branded beauty products containing garlic stand a fairly good chance of succeeding in the region, if not the rest of the world. While it will be a very niche market, one Indian company already sniffed out its potential a few years ago.
The Mumbai-based Marico Ltd. has been known best for two brands: Parachute coconut oil and Saffola cooking oil. Across the Middle East, though, the $508 million consumer products company also sells Hamam Zait, a post-wash hair care product that is offered in herb and garlic variants.
It’s a good illustration of Marico’s "think global, act local" strategy in the Middle East and North Africa (MENA) region, where it claims to have become the leading hair cream brand in the Gulf Cooperation Council (GCC) countries and Egypt. Parachute hair cream has a 27% share of the GCC market, while Fiancée and Hair Code – Egyptian brands Marico bought in 2006 — together account for close to 60% of the hair styling products market in that country. "Marico took the time to understand the local populace and then extended its offerings to incorporate local needs. That, coupled with its opportunistic acquisitions, has paid off for the company," says Shripad Nadkarni, director of MarketGate Consultancy, a Mumbai-based strategic business and marketing consultancy firm.
The numbers bear that out. Marico chairman and managing director Harsh Mariwala set up the International Business Division (IBG) as a separate company in the mid-1990s believing that combining domestic and overseas businesses wouldn’t do justice to either. IBG then earned just a few hundred thousand dollars. Now, it’s a $106.6 million business, accounting for 21% of the group’s revenues and clocking a compound annual growth rate of nearly 45%. About a third of IBG’s revenues come from the MENA region. IBG’s CEO Vijay Subramanian says the company has been imbibing a very heady cocktail of organic and inorganic growth. Participating in different geographies gives us [lessons] we can deploy everywhere, while helping us fulfill our growth aspirations."
Indeed, Marico’s foray into MENA is a study on how to adapt to new markets and new consumers.
Sliding to Success
Marico began exporting Parachute coconut oil to Dubai in the mid-1990s. Its target was the significant expatriate Malayalee Indian community in the region. (Malayalees are natives of the southern state of Kerala and favor coconut oil as the cooking medium, in addition to using it as a hair grooming product.). Parachute, which is the leading Indian coconut oil brand, was already making its way to the Gulf countries through the grey market, so in a way, the company was just going where its customers were. Before long, though, Marico realized that the really big numbers would come only if the local consumers also warmed up to the Indian offering. But that wasn’t happening and it took a while – and a lot of consumer research – before Marico understood why: Arabs prefer lighter hair creams, not sticky hair oil.
In 2001, Marico launched ‘Parachute Advansed’ hair cream in Dubai. This was a product created especially for the Arabian market, with a lower coconut oil content to suit local consumer needs. It didn’t enter Indian stores until four years later. (Hamam Zait, the garlic hair cream, was launched a couple of years later and is still sold exclusively in the Middle East.) Marico had learned its first lesson in entering a new market: Give customers what they need, not what you think is right for them. "The best way to go international is to first assess your core strengths and understand what the new consumers want," agrees Sunil Alagh, marketing expert and chairman of business consultancy SKA Advisors. "The next step is to ensure you have the sustaining power both in terms of financial strength and corporate commitment required for advertising, marketing, building distribution infrastructure and market share, and the patience for your game plan to play out."
For Marico, customization meant more than tweaking the product formulation and packaging (the new cream carried text in Arabic). Even the communication strategy changed completely. Where earlier advertising was restricted to adaptations of Indian creatives, this time around Marico hired a local agency and designed advertising especially for the Arabian market. A local television star was signed on for commercials that played on an Arabian channel mix.
The communication, though, was very different from other hair cream brands in the region. Subramanian says that until then, most hair cream communicated on the styling platform with an all-male audience. Marico, on the other hand, spoke to women, on an ‘it’s-good-for-you’ platform. The creatives also had to be in keeping with West Asian societal norms: for instance, rather than showing male appreciation for a woman’s shining hair, the ads would focus on a child’s admiration or on the nourishment proposition. The celebrity connection was also played aggressively, with taglines that promised consumers hair like the brand ambassador’s if they used the Parachute product, endorsements on the packages and promotional material like hair-care booklets by the actor. The result: Sales grew incrementally and the hair cream was soon Marico’s highest revenue-generator in the region.
Getting Under the Skin of the Market
The Middle East launch of Kaya Skin Clinics, an up-market skin care service started by the company in December 2002, was also based on the insight that beauty is a high-involvement area for Arabs. Rich Arab women flying to London and Paris for their beauty treatments isn’t unheard of. "There are various factors behind setting up operations in the Middle East. Marico already had strong operations in the territory and it was a strategic decision to leverage this opportunity. The significant presence of the Indian diaspora was a strong supporting factor. We could also build on [what] Marico [had learned about of Arab consumers," points out Ajay Pahwa, CEO, Kaya.
Marico’s experience in the region proved particularly useful when deciding locations for Kaya clinics. Instead of considering Dubai as representative of the UAE and focusing all its energy there, Marico, says Pahwa, "looked where no one was looking" – the other Emirates like Ras al Khaimah, Al Ain and Abu Dhabi, which were thrice as populous as Dubai. "That’s where we found our potential target audience," he says. And the audience made it clear right away that it preferred dealing with locals. "We realized that the Arab consumer is only comfortable talking to Arab dermatologists and skin practitioners. Due to many factors like language, culture and understanding, the business can be a success only when there is a large Arab component among the frontrunners," says Pahwa. Since 2004, Marico has opened 13 Kaya clinics in the region, including three in Dubai alone.
Bottom of the Pyramid
Having established itself in the beauty and wellness space in the Gulf, extending operations into Egypt and through it to the rest of North Africa seemed a logical move for Marico. But where the Gulf countries provided a ready expat Indian market, there were no such familiar faces in Egypt. To ensure it hit the ground running, Marico, therefore, opted for the inorganic route. In 2006, it acquired not one but two companies in Egypt: value player Fiancée in September and the mid-market HairCode three months later. Together, the two hair styling brands account for close to 60% of the market in Egypt. Last year, Marico dug its roots into Egyptian soil even deeper by setting up a manufacturing unit outside Cairo for Parachute products. The new plant, Marico’s third in the country (HairCode and Fiancée have separate manufacturing facilities) is likely to act as Marico’s sourcing hub for the region and help it spread further into North African markets such as Algeria, Sudan and Morocco. It will also help Marico launch its flagship brand in Egypt without having to pay prohibitive import duties. "Setting up the Parachute manufacturing facility in Egypt sends a very powerful message," says Abraham Koshy, professor of marketing at the Indian Institute of Management Ahmedabad (IIMA). "The strategic implication is that the company is fully immersed in these markets and that it is settling in for the long haul."
If West Asia was about learning new lessons, Marico’s Egyptian experience has been about applying old knowledge in new situations. HairCode and Fiancée were established brands when Marico took over. Rather than make unnecessary changes to the product and its marketing, Marico decided to try out some market-growing strategies that had already earned their stripes in India. Last year, in a bid to drive penetration into the market, HairCode styling gels were made available in single-use sachets, affordably priced at 1 Egyptian Pound (18 cents). Package-specific promotions are also being used, based on local tastes and preferences — the chance to win tickets to the Fifa World Cup this year, for instance, as well as promising to feed the poor with a percentage of the sales generated during the holy month of Ramadan.
What explains Marico’s success in MENA? Yes, it did get under the skin of its customer and immersed itself completely in the market. But marketing experts point out that the similarities between India and the West Asian region also helped. "Indians are adept at, and accustomed to, low margin, high volume businesses. The average African consumer is likely to be very similar to Indians in his preferences and shopping habits; the upper segments will buy imported, high-end Western products but the middle and lower-end consumers will prefer value-for-money products," points out Alagh. Adds Koshy: "The knowledge accumulated by operating in a fragmented market like India, with its diverse markets and consumers, helped Marico become bolder in stepping out."