A new twist was added to the on-going battle in the branded coconut oil segment, when market leader Marico Industries bought 'Oil of Malabar' brand from West Coast Industries. The move comes close on the heels of Hindustan Lever Limited (HLL) acquiring 'Cococare' from Recon Oil.
Marico understands that if HLL keeps on acquiring recognised brands, then it will find it difficult to save its dominant 54% market share. It wants to avoid a situation like Colgate is in currently in the oral care segment. HLL has nibbled away its market share and its dominance in the oral care segment.
Hence, Marico has adopted an aggressive stand to maintain its market leadership. It was also one of the main contenders for 'Cococare'. Infact, it has sued HLL and Recon Oil stating that Recon had gone back on its agreement to give it Marico the first right to buy Cococare. With the acquisition of Cococare, HLL's market share has gone up to 20% in the branded coconut oil segment.
Though the acquisition is a positive move on part of Marico, it cannot afford to use this strategy continuously. For one, it does not have deep pockets like HLL for doing so, nor does it have big advertising budgets to sustain two or three brands in the same category. The 'Oil of Malabar' acquisition itself will adversely affect its cash flow and profitability.
Since both HLL and Marico are on an acquisition spree, the segment is likely to see more consolidation and buy outs in the coming months. In particular brands like 'Shalimar' (10% market share) and 'Cocoraj' (4%share) are likely to be on both companies wish list.
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