Global expansion is a marathon, not a sprint

Global expansion is a marathon, not a sprint
Global expansion is a marathon, not a sprint

Mumbai-headquartered Marico Limited is a consumer goods company providing products and services in the area of health and beauty. Vivek Karve, the chief financial officer (CFO) of the firm, speaks exclusively to 'India Global Business' about the firm's global expansion strategy, why Africa has been a focal point for some of its well-known brands and what other Indian firms with global ambitions can learn from its success story. What has the trajectory been like for Marico′s international business strategy over the years Marico started serving the Indian diaspora across the world before establishing its organic footprint in the Middle East and Bangladesh through the nourishment portfolio. In order to expand in new geographies and new categories, Marico commenced its inorganic journey in various markets acquiring different brands and companies across countries of Egypt, South Africa, Malaysia and Vietnam. This has extended Marico's presence across emerging markets in the continents of Asia and Africa. Marico's International business has grown at a 10 year CAGR of 27 per cent. The operating margins have improved and are sustainable at 17-18 per cent range. Marico's International strategy is to participate in the growth of existing categories in existing geographies as well expanding into adjacent markets of South-East Asia, South Asia and East Africa leveraging the existing the infrastructure. Marico aspires to grow at 13-15 per cent constant currency growth in international business in the medium term. What would you define as your secret of success Marico has succeeded whenever it has been able to provide a differentiated value to the consumer while ensuring sustainability of growth and profitability over a longer period of time. Our focus on five areas of transformation - innovation, go-to-market transformation, talent management, cost management and analytics - has so far enabled us to stay deeply connected with consumer, trade and talent and has created resources that fund growth. We believe this is a continuous journey. It's a marathon rather than a sprint. What is Marico′s strategy in the emerging markets Marico's strategy is to concentrate on emerging markets of Asia and Africa. In Africa, our focus markets are North Africa, South Africa and Sub-Saharan Africa. Countries with per capita income of $5,000 and below, higher percentage of young population, a good track record of GDP growth, greater concentration of traditional trade, low penetration and political stability are targeted as we believe they have greater prospects of growth. We have expanded our base in the continent in the late 2000s by acquiring local brands in South Africa and Egypt. In South Africa, we have a blend of ethnic hair and health care portfolio. In Egypt, we are market leaders in the Gels category.

Looking ahead, we would like to expand in the sub-Saharan east African markets of Kenya, Tanzania and Uganda. In Kenya we have already appointed distributors who sell the South African brands. In addition to organic growth, we are open to acquisition and alliance opportunities in the African market to achieve scale and benefit from economies of scale. What makes Africa an attractive FMCG destination What can Indian firms offer the region Africa is a large market with a population base of more than a billion people. As economies grow, the purchasing power of the masses will only grow and here lies the big opportunity for the FMCG players to sell branded packaged goods to this consumer. Africa is a developing continent and is closer to India than to the developed markets on various parameters such as market construct, consumer purchasing power, macro-economic trends etc. The Indian firms can adapt better to the market conditions better. India has a well-developed FMCG sector with an array of product categories, advanced sales infrastructure, competitive cost structure. With such repertoire, Indian firms can service the African consumer with quality products at affordable costs. What are your firm′s wider global expansion plans In the financial year 2015-16, our international business grew by 4 per cent in constant currency terms while sustaining operating margins at 18 per cent, which structurally shifted from 8-9 per cent four years ago. International business growth potential looks encouraging with strategic investments planned in core markets of Bangladesh, Vietnam, Middle East North Africa (MENA) and South Africa coupled with the expansion in adjacent markets of South Asia, Indo China region and East Africa. We believe that the core markets of Bangladesh, Vietnam and MENA are “Invest to Grow” markets and the company will continue to drive growth with brand restages, new product launches and capability building initiatives apart from aggressively tapping and growing new markets. Rest of South East Asia and East Africa are the new growth engines for future. We will aim for organic and inorganic growth in these markets.

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