How to Find the Next Marico

It's said that in advertising, if your brand name can be interchangeably used with a dictionary word, you have successfully achieved marketing success.

A classic example is the company Xerox. Every kid needing a photocopy walks in to stationary shop and asks for a 'Xerox' of the document.

The company which makes the photocopy machine is Xerox. There are players like Canon and HP too making photocopy machines, but have we ever heard anyone say, "Can you make a Canon copy of this"?

So from where does this brand superiority come from? Does it come from first mover advantage?

Well, in my opinion, no.

Take the case of the Apple iPhone.

The first thing which comes to anybody's mind when we think about a phone with a touch screen is the iPhone and not IBM or a Motorola.

In fact, IBM was the first to launch a touch screen phone in 1992, way before Apple. But phones are the last thing people would associate IBM with.

Here's an example in the Indian context...

Parachute hair oil by Marico is the market leader with more than 60% market share in the hair oil category.

The reason why I rate Parachute and Marico, highly is the market leadership position over the past 5 decades. This despite intense competition in the hair oil segment.

From rivals HUL to Dabur to Emami, the competitive intensity is extremely high. And yet, a majority of us prefer Parachute.

I'm sure, advertising budget is not a constraint for any of Marico's competitors. I mean they have piles of cash to spend on marketing and brand building, along with a strong distribution reach.

So why is Parachute still the number one selling hair oil brand in India?

The simple answer is innovation.

Here's an example on how Marico innovated to stay ahead of the curve.

Back in the 70s Parachute was sold in huge tin cans of 15 litres each, mostly through wholesalers.

Traders in Bombay began experimenting with different packs and sizes. Some of the more adventurous dealers started selling Parachute in smaller packs.

These new packs were more consumer-friendly and received a lot of interest from buyers and sales skyrocketed.

Harsh Mariwala found an opportunity in the dealers' feedback. He immediately charted a plan to introduce Parachute in cheaper and more consumer-friendly plastic cans.

But there was a problem. Retailers were wary of stocking these plastic variants because they were soft & brittle.

Rats could nibble on these cans and break into them with relative ease. So, this wasn't going to work. The team observed that rats nibbled on these cans because the plastic broke at the seams. It was easy for the rodents to grip the edges.

But what if they could package the oil in a rounded plastic bottle and harden it? Maybe the rats would give up?

And that's exactly what they did. In the early '80s, Marico convinced retailers to stock the rigid plastic pack by putting it alongside a bunch of rats in a cage. The rigid pack stood firm as the rats could do nothing to them.

Marico was the first to launch small packs of its flagship hair oil brand Parachute across the country.

What was a small learning and innovation by traders and stockists in Mumbai, was implemented pan-India. The advantages which flowed were unbelievable.

By reducing the size of the packs, demand went up exponentially, especially in rural areas. People who couldn't afford to buy 15 litre tins bought smaller packs.

Also, retailers found it easier to store as per the demand rather than buying in bulk. This was because smaller packs took up much less place than large cans. Distributors as well as retailers saved a lot on inventory costs.

In fact, no competitor was doing this in the early 80s. It was a smart innovation. The openness to experiment led to Marico becoming the market leader.

Its competitors and FMCG companies were threatened by Marico's dominance. The company received generous buyout offers. However, Harsh Mariwala declined them. And the rest is history.

The reason I'm writing about Marico and innovation is that investors need to be on the look out for such out of the box thinking.

Marico could never outdo the financial strength or distribution reach of HUL. The only way to beat HUL was to innovate. And that's precisely what Marico did.

So how do you find innovators or small companies which are market leaders?

You can either buy a large-cap stock or a MNC company which is the market leader, or you focus on smaller companies which are not market leaders but are trying to create a niche in the backyard of market leaders.

Another way to spot innovators is to look at supply chain stocks. Find companies which supply niche products to the market leaders.

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For example, there is a small South India based company which manufactures latex rubber threads used in the inner wear industry.

It's a key supplier to Jockey, Lux, and Rupa. It's such companies which have a niche and are going to grow along with their customers who are market leaders.

Watch this space for more ideas...

Warm regards,


Aditya Vora
Research Analyst, Hidden Treasure

PS: In my video - Can this FMCG stock be the next Dabur or Marico? - I spoke about Bajaj Consumer Care, the market leader in the almond drops hair oil category with an 80% market share.

However, over the past two years the company has lost its mojo as both sales and profitability have stagnated. I believe, with new product launches and the management's intention of doing something different can add some glitter to the stock.