Marico Industries Limited: Marico Industries Limited Analyst Meet
April 22, 2004
Overview: Overview Financial Recap
Business Model
Segmental Highlights & Strategies
Shareholder Value Issues
Outlook
Overview: Overview Financial Recap
Business Model
Segmental Highlights & Strategies
Shareholder Value Issues
Outlook
What we said last year.. Analyst meet - May 14, 2003: What we said last year.. Analyst meet - May 14, 2003 FY 03 was a tough year, but we held our record
FY 04 is also special as we
Get into an Investment Phase
Move towards new/ higher value adding businesses/ products
This cusp is Crucial
for Marico and its stakeholder value
Let us see what we did last year……………..
Slide5: FY04 FY03
Sales 880 775 13%
PBT 73 64 14%
PAT 67 56 19% Rs.Crore Consumer Products -FY04
Slide6: Consumer Products -Q4FY04 FY04 FY03
Sales 222 201 10%
PBT 16.7 14.5 15%
PAT 18.8 16.0 17%
Rs. Crore
Slide7: FY04 FY03
Sales 887 775 14%
PBT 65 64 2%
PAT 59 56 5%
Rs. Crore Group -FY04
Slide8: FY04 FY03
Sales 225 201 12%
PBT 14.4 14.2 1%
PAT 16.5 15.8 4% Rs. Crore Group -Q4FY04
Slide9: Consistent Performance Year on Year Growth
14th consecutive quarter for Turnover
18th consecutive quarter for Profit
Payout
Over 50 % of PAT
Dividend Yield ~ 3.4% at today’s price
13th consecutive quarter for Dividend
Group Financials: Group Financials Economic Value Added grew by 24%
Rs. 31 cr to Rs. 39 cr
Compared to FY 03
Impact of new businesses
100% consolidation for line items
Operating Margins Comparison with FY 03: Operating Margins Comparison with FY 03 Exceptional items in FY 03
Other Income
Deferred sales Tax Income Rs 3.2 Cr
Compensation from P & G Rs 4.6 Cr
One-time Depreciation Rs. 7.8 Cr
Margins % are impacted by sales value increases
Margin per unit of volume have improved
Operating ROCE has in fact improved
39 % vs 33 % in FY03
Capital Utilisation: Capital Utilisation ROCE up
Major Capex-New Hair Oil Unit in Dehradun
Hair Oil industry de-reserved in FY04
Fiscal benefits
First off the block amongst FMCG- December -03
Key Performance Drivers- FY 04: Key Performance Drivers- FY 04 Portfolio realignment
Stronger Established Franchises
Volume Growth across categories
Consolidation of Market shares
Stronger Flagship brands - Parachute & Saffola
New Engines
Sustained growth in International Business
New Products - Growing portfolio
Nurturing of new business - Kaya & Sundari
Portfolio Realignment: Portfolio Realignment
Margins Volume Growth + - Hair Oils
Shanti, Jasmine, H&C Parachute CNO Saffola Sweekar OOM Low High Mediker Revive Higher focus on the High Margin Products Volumes up 11% Volumes down 14% Sil
Overview: Overview Financial Recap
Business Model
Segmental Highlights & Strategies
Shareholder Value Issues
Outlook
Business Model: Business Model Focus on FMCG
Step up value add continuously
Turnover only in branded goods / services
Portfolio rejig towards High Margin
New Product Stream - Aggressive prototyping
Sustain competitive advantages
- Branding, Distribution, Costs, Innovation & R&D
Business Segments: Business Segments Consumer Products- Domestic & International
Hair care, Healthy Oils & Foods, Fabric Care
Skin Care Services
Global Ayurvedics
Overview: Overview Financial Recap
Business Model
Segmental Highlights & Strategies
Shareholder Value Issues
Outlook
Indian Hair Care Market: Indian Hair Care Market India’s share in World Population - 16% India’s share in World Hair - 28%
Average length of hair in India
~ twice that of world average
Hair Care Market Categories: Hair Care Market Categories Wash Pre /
Post Wash 70% 30% Rs.2400
Cr Rs. 1100
Cr. Coconut Oils
Rs. 1500 Cr.
50% unbranded
Hair Oils ~ Rs. 800Cr.
Others :
Conditioners, gel, creams, anti-lice,etc. ~ Rs. 100 Cr. Shampoo
Rs. 1100 Cr.
Marico Brands: Marico Brands
Turnover Rs. 4 billion
~ 25% of Branded Pre / Post Wash Market
Hair Oil - Unique Market: Hair Oil - Unique Market Large size segment
Presence of many sub segments
Coconut Oil, Amla, Cooling Oil, Value Added Coconut Oils, Non-sticky hair oils, problem solution oils, Mustard, etc.
Small share of households’ monthly outlay
Deep rooted habit, high loyalty
Weak MNC presence
Hair Oil - Marico Strategies: Hair Oil - Marico Strategies Present in all segments
with products straddling across price points
Grow market - conversion of loose oil customers
in categories with dominant presence
Slide24: Coconut Oil Market
Large Market - 50% unbranded ~ Rs. 8 Billion
Parachute as a brand was not seen as modern brand
A discontinuous approach in this area would mean
Tapping “A Big Opportunity”
In terms of form: Sleeker Pack; Pearlised Look to appeal to the young audience In terms of image: Modern brand New Ad Campaign - Young, Vibrant: In terms of form: Sleeker Pack; Pearlised Look to appeal to the young audience In terms of image: Modern brand New Ad Campaign - Young, Vibrant Relaunched
Relaunch Results: Relaunch Results Significant 4% + Increase in Market Share To update
Parachute Franchise - PCNO Overview: Parachute Franchise - PCNO Overview
Slide28:
Small Pack strategy
Convert loose oil consumers
To packaged Parachute Coconut Oil
Parachute Mini Pack
Re. 1 Pack - Value for Money - Convenience
Now contributes about 3% of Parachute Volumes
Volume growth of 55 %;outlet growth of 100% Mini Pack
Blister: Impact on Franchise: Blister: Impact on Franchise Parachute excluding Mini 2800 3 Cr.
Parachute Mini 100 2 Cr.
Way Forward: Way Forward Expand Category
Propagate criticality of oiling
Launch low price point packs
aimed at loose oil conversion
Rs 5 pack added to the portfolio
PR and surround activities
Extend Parachute Brand to other value added oils
Slide31: Background
Acquired from P&G in 1999, volumes stagnating
Market Opportunity
Lice incidence level in the country among school going girls at 60%+
Branded lice solutions current usage at 10%+
Shampoo Penetration - Low
Slide32: Non Users of Mediker Anti-Lice Treatment
Apply hair oil & then comb out lice with a lice comb
Need for more acceptable product form
that fits into existing habit/regime
Birth of Mediker Anti-Lice Oil in FY03
An oil with natural ingredients
Coconut oil with Neem and camphor
Consumer Insight
Slide33: What has worked? New product delivery format
Backed by clinical research and trials
Advertising on two fronts
Tactical - Announcer highlighting natural ingredients
Theme communication with never before used insight
Lice = “mother’s social embarrassment”
Home to Home selling and detailing exercise
Trial generation and Word Of Mouth
Education on lice problems
Slide34: Results so far and plans Franchise Volumes Double in just one year
Mediker Oil has tapped a new market
No Cannibalization of Mediker shampoo
Usage gone up from 10% levels to 20% now
Future
Create a Rs. 50 Crore brand in next 3 years
Extend Mediker equity beyond anti-lice
Other problem solution areas
Hair oils: No 2 position consolidated
Parachute Jasmine:
34% growth in volumes
Market share up to 28%
Shanti Amla:
Volume Growth of 9%
Market Share up to 15%
Fastest growing Hair Oil brand
(Jan-Dec ORG)
Outlets Reached: 5.8 Lac
Hair & Care
Volume Growth of 10%
Hair oils
Hair Care - Going Forward : Hair Care - Going Forward
Extend Presence to other segments
Launch differentiated value added products
Strengthen Youth connect
burgeoning >25 segment in Top 10 cities
understand hair care needs
Launch relevant products
Prototypes : Prototypes New improved Hair & Care
Silk and Shine
Shanti Maha Thanda
Edible Oil Market Categories: Edible Oil Market Categories
Premium Popular
Safflower Soya
Sunflower Mustard
Blends Cotton Seed
Value Rs.9.4 bn Rs.17.3 bn
Market Growth 5% 29%
Marico operates in the Premium segment
Turnover ~ Rs. 2.5 billion
Healthy Oils and Foods: Healthy Oils and Foods Features
Low margins in the popular segments
Healthy Foods is a sunrise segment
But low branded portion
Growing at 15-20%
Marico Strategies
Invest in Top end - Healthy Oils
Protect Margins
Functional foods e.g. Soya Nuggets
Slide40: Saffola Franchise:
Volume Growth of 3 %
Higher growth in the high margin component
Saffola campaign:
New TV campaign helps volume growth
Saffola Gold Prototype
Saffola
Healthy Foods - going Forward: Healthy Foods - going Forward Consolidate Saffola Franchise
Move the brand from therapeutic to preventive platform
Continue to be the thought leader in the category
Consolidate on Optimist & Enabler position
Saffola Gold Prototype- scale up
International Business: International Business
International Business: International Business Parachute Hair Care
Bangladesh Rs. 450 million
Middle East Rs. 250 million
Others Rs. 60 million
Total Rs. 760 million
21 % growth 9% of Total
Largest Indian FMCG company in Bangladesh
Presence in 18 countries
Profitable Business all over
Global competitiveness of products
Slide44: Parachute in Bangladesh
Offered Modern Plastic Packs as opposed to tin packs
Wider choice for the consumer
Parachute Tuni
Parachute 50 and 100 ml Packs
Investment in Sales and Distribution infrastructure
Own field force
Impactful Advertising - local language and local channels
Investment in backroom
Own manufacturing unit What did we do differently?
Slide45: Parachute in Bangladesh
During the last 3 years
The Market Share has almost doubled Dec-01 24% Dec-02 36% Dec-03 43% Consolidates No. 1 position Results so far
Bangladesh Potential: Bangladesh Potential Category Size Growth Marico’s MS
KL Rate %
CNO Total 36000 2% 10%
Hair Oils 1800 2% 15%
Slide47: Parachute in Bangladesh
Achieve deeper market penetration - grow distribution
Convert loose oil users to Parachute users
Continue Market Share growth from competition
Extend Parachute Umbrella to other hair care products
Parachute Herbal - a value added Coconut Oil - launched in FY04
Enter other hair care segments - Shampoos Future Plans
Slide48: Hair Care market in the Gulf
Market Size Marico’s
In Rs. Million Market Shares
Coconut Oils 300 35%
Hair Oils 500 11%
Hair Cream 900 9%
Slide49: Hair Cream Market in the Gulf Opportunity
A Big growing Market ~ Rs. 50 Crore +
Market dominated by MNC’s - Brylcreem & Sunsilk
Parachute Cream
We launched Parachute Hair Cream in 2001
A product specifically customised for Arabs
Leveraged Parachute Equity
Goodness of Coconut without coconut fragrance
to cater to tastes of Arabs
Results so far
Marico commands a 9% market share - Growing year after year
International Business: International Business Marico Strategies
Cater to typical Indian demands
Coconut Oils, Hair Oils - leverage Parachute equity
Customise products for local needs
Hair Creams and mild perfumed hair oils for the Gulf
Enter new geographies
Pakistan - a Big Opportunity
Kaya Skin Clinic The Science of Skin : Kaya Skin Clinic The Science of Skin
A pioneering opportunity : A pioneering opportunity
Hair Care Heart Care Skin Care
What is the consumer need?: What is the consumer need? The modern consumer is looking for options to enhance his or her appearance - a self esteem enhancer
Skin needs continuous rejuvenation due to pollution, environmental factors and stressful lifestyle.
Healthy skin is becoming a high priority area for today’s consumer
What is the Kaya concept?: What is the Kaya concept? Provide safe, effective, result oriented cosmetic dermatology procedures
US FDA approved world class technology
in a spa like ambience
All treatments
Non-invasive
Specially customised for Indian skin types
Highly trained skin practitioners
Personalised & customised to your skin’s needs
Who is the Target Audience?: Who is the Target Audience? Men & Women
Age group: 16 to 60 years
SEC A 1 & A 2
Across metros and minimetros in India
What are the Skinservices?: What are the Skinservices?
Normal Skin
Permanent Hair
Reduction
Kaya Glow
Skin Polishing
Glycolic Peels
Problem Skin
Pigmentation &
Scar Reduction
Acne
Wart Removal
Psoriasis Beautiful glowing skin Visible Results Ageing Skin
Non-Surgical Face Lift
Photo Facials
Botox
Restyalane Forever young
What are our differentiators?: What are our differentiators?
Efficacy
Experience
Safety
Efficacy: Efficacy All clients meet with the dermatologist who prescribes a personalised, skin care programme for them to ensure effective results and address specific concerns.
Each of the services by skilled skinpractioners are delivered using best in class technology. A home care regime of effective products are also recommended.
A series of gentle procedures spaced appropriately which target specific concerns (aging, acne, unwanted hair, pigmentation, fatigued skin, environmental effects)
Experience: Experience The zen like ambience
The Kaya drink concocted by Karen Anand
The skinpractioner’s uniforms designed by Bhairavi Jaikishen
The personalised attention by dermatologist, clinic manager and skinpractioner.
The private spacious rooms for each procedures
Safety: Safety Choosing appropriate technology for Indian skin
Training process for skinpractioners
All services supervised by qualified dermatologists
Checking medical history of clients to rule out any contraindications
What are our clients saying ?: What are our clients saying ? “Just what Mumbai needed: a good clinic for completely professional treatments.”
“10,000 times better than anything in LA.”
“A very refreshing experience from start to finish. Feels good just being here.”
“A must for all women”
“Beautiful ambience”
“Feel young! feel reassured! Feel optimistic!”
What has been the progress?: What has been the progress? 13 Clinics operational as on date :
7 - Mumbai
(Bandra, Juhu, Kalaghoda, Napen Sea Road, Mulund , Worli & Lokhandwala )
4 - Delhi
(GK II , Punjabi Bagh , Safdarjung , Noida)
2 - Dubai
( Jumeirah, Karama)
How are we doing ?: How are we doing ?
Total Client base of 10000 +
All Clinics are meeting Marico action standards
Most of the clinics achieving break-even
Service Quality Customer feedback Scores in all clinics at Excellent Level - Score above 4 out of 5
What is the way forward ?: What is the way forward ? Saturation Strategy in Mumbai & Delhi markets
Expand to other regions : Over 50 clinics in next 2 years
Establish Middle East business model
Expand range to products
Establish Kaya as the most effective & trusted skin care destination
Sundari : Sundari
About Sundari (a beautiful woman): About Sundari (a beautiful woman) ~ 20 skin care products based on philosophy of Ayurveda
Moisturizers, Cleansers, Nighttime treatments, Eye treatments, Other specialty products
Distribution through
Spas, Internet, Departmental Stores, International Distributors
The Sundari Skin Care opportunity
Ready business in the US
5 years of spade work
Accelerates Marico’s learning curve
range of quality products, packaging
a new product development pipeline
established back room
acceptance by beauty press, PR coverage
Slide67: Pre-acquisition status Small company with turnover of $1 million
Dependent on a single channel
Low focus on cost management
Slide68: Current Status and
Growth strategies
Business growing in the Spa & Internet channels
Portfolio being expanded
Integration with Marico
Culture
Performance management system
Product development and trials
Web-site marketing and sourcing
Leverage international distribution network
Focus on cost management
Slide69: Spa Channel Spa business in US growing fast
Revenues doubled bet 1991($5 bn) to 2001( $10.7bn)
Spa outlets increased - 5,300 in 1999 to 9,632 in 2001
Size of products sales through Spas - 1- 1.5 bn $
Entry barriers for selling through Spas high
Differentiator - Training to Spa personnel on new services
Spas value training provided by Sundari
appreciate learning something new
Slide70: Dual source of income
Retail sales (80%)
Sales to Spas ( 20 %)
Fixed costs high - primarily manpower
Longer gestation for channel
Though lower than retail
Now contributes 44 % of Sales
Spa channel
Slide71: Internet - A big opportunity in US
Internet is a focus areas for Sundari
Revenue has built up consistently
Revenues doubled between Q1 and Q4
Share of total sales increased to 26 % from around 20 %
Helped by new product introductions and PR
Promotions around special days
Internet channel
Overview: Overview Financial Recap
Business Model
Segmental Highlights & Strategies
Shareholder Value Issues
Outlook
Journey over the past few years…...: Journey over the past few years…... Greater Resilience to competition
Higher Quality Earnings
Dependence on Parachute reduced
Brand Equity- Pricing Power goes up
New product successes
Consistency of earnings
Aggressive Distribution Policies
Improving Liquidity in scrip
Slide74: Resilience to Competition Marico’s frontline brands - Parachute, Saffola & Sweekar
have shown remarkable resilience against competition
Brand Category Market Share (%)
2000 2004
Parachute, OOM CNO 53-54 56-57
Saffola, Sweekar ROCP 13-14 15-16
Parachute Jasmine,
Shanti, Hair & Care Hair Oils 7-8 16-18
Slide75: Unique Placement vis-a-vis Competition Products largely Indian in nature
not in MNC parent focus
not caught in crossfire of an MNC battle
Continuous Innovation
Packaging Upgradation
Contribution from small packs is high
limited scope for undercutting
Best Cost structure in the Industry
Dependence on Parachute: Dependence on Parachute Share of Parachute brought down
In Turnover from 70% to 40%
New Products have helped with continued growth
Five Back to Back Success stories
Saffola Tasty Blend, Parachute Jasmine, Shanti Amla,
Saffola Nutri Blend and Mediker Anti-Lice Oil
Slide77: Brand Equity- Pricing Power Fairly resilient to commodity price fluctuations
Margins commanded per unit of volume
No speculative position taking
Market leadership protects contribution
No.1 sets the price tone
Pricing Power protects Margins
Slide78: New Products/Businesses New Products / Businesses contribute 18% to Turnover
Uncommon Consistency ! : Uncommon Consistency ! Growth
14 Consecutive Quarters of YOY Sales Growth
18 Consecutive Quarters of YOY Profit Growth
Net Profit CAGR past 4 years 16 %
Payout ~ 50%
13 Consecutive Quarters of distribution
Consistently high return on capital: Consistently high return on capital Better capital usage
despite investment at CAGR 25 %+
ROCE > 30% for past 43 Quarters
Economic Value Added
EVA Growth even after including new businesses
Growth for past 6 years in a row
Distribution Policies: Distribution Policies Increasing Payout ~ 50%
Regular Distribution
reflecting the confidence
Innovative options
Used to Increase Liquidity
Liquidity in the Scrip: Liquidity in the Scrip Dispersal of free float
Share holder base doubles - ~ 5000 to~11000
Volume per day
~ 65000 in Q4 Vs 10000 in Fy03
Trades per day (BSE + NSE)
469 in FY04 Vs 135 last year
Will keep exploring new measures
What Next… ?: What Next… ? Size of the Company - Mid Cap
Targeting Rs.1000 cr next year
Liquidity in the Scrip
Improving - has grown 6 times in 4 Quarters
Large non-promoter holdings
Top 2 used to hold 16 %
Now down to 11%
Comparative Market Valuations: Comparative Market Valuations Marico Other FMCG
Average
Price to Earnings 13.0 ~ 21
Price to Book Value 4.0 ~ 11
Price to Sales 0.8 ~ 3
Overview: Overview Financial Recap
Business Model
Segmental Highlights & Strategies
Shareholder Value Issues
Outlook
FMCG Industry: FMCG Industry Marico outside price war zone
Major Players focussed on other categories
Slide87: Near Term Growth Strategies Constant realignment of Portfolio
along higher margin lines
Focus on -
Volume Growth
Consolidation of Market shares
Strengthening Flagship brands
Grow New Products-Existing launches & Prototypes
aim for 2-3 new product launches in FY05
Slide88: Near Term Growth Strategies Sustained growth in International Business
add new countries - Pakistan
Nurturing of new businesses
expand Kaya business
de-risked focussed growth in Sundari
Growth Philosophy: Growth Philosophy
Commodity conversion Technology
Low Value Add High Value Add
Hair oils Personal Care (Hair + Skin)
Edible oils Healthy Oils and Foods
Local Global
More enduring Competitive Advantage
Leading to
Enhanced and Durable Stakeholder Value
Slide90: Thank You