Marico to launch Parachute into skincare market - Economic Times

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NEW DELHI: Hair oil and edible oil maker Marico will enter the Rs 4,500-crore skincare market in the country by extending its two-decade-old coconut hair oil brand, Parachute, to body lotion and other skincare products, a person directly involved with the development said.

First off the block will be a body lotion at entry-level pricing to compete in the mass segment, the person said on condition of anonymity. The company has carried out a low-key test exercise in the east, and awider rollout in select cities is expected in a few weeks from now.

"The strategy is aimed at reducing dependence on Parachute hair oil," the person said. "In this case, the company hopes to ride on Parachute's purity and value-for-money attributes." Marico CEO (consumer products business) Saugata Gupta declined comment.

The company will enter the cluttered skincare market under the Parachute Advansed umbrella and compete with Hindustan Unilever's Vaseline and Pond's, German company Beiersdorf 's Nivea, L'Oreal's Garnier and Johnson & Johnson's Neutrogena among others.

Analysts and industry watchers say the success of the move will depend on how much marketing and distribution muscle Marico can infuse in the brand.

"Success of brand extensions are generally linked closely to the parent brand's attributes; and depends on how closely these are aligned to the consumer's perception of the brand," says consulting firm AT Kearney Partner and VP Debashish Mukherjee.

The success of extensions of strong brands is not always certain. Cereal maker Kellogg's extension to biscuits flopped.

Marico hasn't had much success with brand extensions

But Reckitt Benckiser's Dettol is a classic succession of an antiseptic medicinal liquid to antiseptic soap. Marico so far has had limited success with brand extensions.

Also, there is strong competition in the skincare market, although with an annual growth rate of 20% it's one of the fastest-growing consumer product categories.

"It's a case study of a very strong haircare brand, established over decades, trying to take on the larger umbrella of body care.

Very few brands have been able to manage this, especially ones with a very strong positioning in one area," said a marketing head of a rival consumer products firm, not wanting to be quoted. Facial creams, moisturisers and fairness creams are the most popular categories in skin care, contributing close to 60% to the category.

Manoj Menon, senior analyst--consumer at financial services firm Kotak Institutional Equities, says, "There could be a reasonably high probability of success, but skin care is very fragmented and the brand will have to compete against well-entrenched players."

Marico, which has two mainstay brands in Saffola cooking oil and Parachute hair care, has dabbled with several extensions of both the brands.

Leveraging on Saffola's strong 'heart association', the brand was extended to a salty baked snack called Zest two years ago, but was withdrawn last year following weak offtake. Saffola's two other extensions--rice and oats- are still niche and will take time to build scale.

About six years ago, Marico had extended Parachute to shampoos, positioned on the 'naturals' platform. But that did not succeed. But Parachute Advansed has various haircare variants like styling products and after-shower gels.

Marico has a skincare presence with its Kaya skincare clinics. But it does not have a presence in the packaged skincare segment. Marico's hair oil brands include category leader Parachute and Nihar, which it had acquired in 2006 for close to Rs 220 crore.

The Mumbai-based firm has been trying to reduce its dependence on Parachute hair oil. "Over the years, we have reduced our dependence on Parachute.

Earlier, 60-70% of our revenues used to come from Parachute, now it is about 40%," Marico Chairman and MD Harsh Mariwala told ET a couple of months ago. He said the firm would focus on four mainstay brands -Parachute, Saffola, Nihar and Hair & Care.

Marico has divested brands it doesn't consider core to its growth like Sweekar sunflower refined oil and Sil jam. Historically, Marico has had higher acceptance in urban markets, but over the last two years, the firm has been expanding rural penetration.

This has been mainly on the back of aggressive pricing in Shanti Amla and lower price point packs in Parachute. Rural sales comprised about 30% of its sales in 2010-11 compared with 25% in the previous year.

05 Sep, 2011

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