Marico’s success in Parachute had put the firm on the radar of consumer giant Hindustan Unilever Limited (HUL). Thanks to its acquisition of Tata Oil Mills in 1993, HUL owned Nihar, which had a 17 percent market share in coconut hair oil and competed with Parachute. In a story that Mariwala loves to narrate, Keki Dadiseth, the then chairman of HUL, called Mariwala in the late 1990s to buy out Marico, saying, ‘Mr. Mariwala, I will give you enough resources to take care of you and all your future generations.’ Mariwala spurned the offer and dug in his heels. Thus began an epic brand war that would come to define Mariwala and Marico.
After failing to make inroads into the category despite several product relaunches, HUL finally gave up and put Nihar up for sale in 2005. As poetic justice, Marico acquired the brand for Rs 220 crore, giving it more than 80 percent market share in the perfumed coconut oil category along with a stronger geographic presence in the erstwhile weak markets of north and east India. Following the Nihar acquisition, Marico also stopped its cost-plus pricing for Parachute.
So, in 2006, when copra prices got corrected, Marico did not take a price cut. Despite the high price, Parachute retained its market share, and this helped Marico improve its EBITDA margin from 9 per cent in FY05 to 13 per cent in FY06.
The war with HUL spurred many changes within Marico. To reduce dependency on Parachute, Marico acquired the Mediker shampoo brand from Procter & Gamble (P&G) in 1999 and relaunched the shampoo in an anti-lice oil format. Marico also pursued new business opportunities under a new business incubation cell. This led to the launch of the Kaya skincare business and the acquisition of Sundari (a brand of luxury Ayurvedic skincare products) in the US in 2003. Marico introduced several new brands over 2000–05. Not all the new launches were successful. However, these launches helped the company reduce its dependence on its existing portfolio of Parachute coconut oil and Saffola edible oil. The contribution of new launches to total sales increased to 21 percent in FY05 from 5 percent in FY01.
Not just Life, business also comes a full circle it seems 🙂
Taken from Unusual Billionaires book.