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“Narendra Modi, Amit Shah, and Virat Kohli, three of the most important men in the country at present sport beards. As a style statement, beards have really caught on with the current generation of Indians,” Saugata Gupta, managing director and CEO of fast moving consumer goods-maker Marico Ltd, tells Forbes India
It is little surprise then that Marico, whose product basket ranges from coconut oil and deodorants to edible oil and oats, has decided to venture into the beard-grooming segment. On March 17, Marico announced that it had acquired a 45 percent stake in Zed Lifestyle Pvt. Ltd, an Ahmedabad-based company that owns the brand, ‘Beardo’.
According to the statement issued by Marico on March 17, Beardo was born in response to the growing wave of male styling and grooming in India. “It caters to the discerning, urban male, who is on a lookout for safe and specialized products/options to grow and maintain his beard,” it added.
Beardo, founded by entrepreneurs Ashutosh Valani and Priyank Shah in June 2016, has a product portfolio that includes growth oil, wax, and shampoo for beard; wax and serum for hair; lotion, soap and facewash for the skin. It has a strong presence in the online channel and salons, and almost three-fourth of its turnover comes through online sales.
The acquisition is strategic for Marico, which closed fiscal 2016 with a turnover of Rs6,132 crore for multiple reasons.
First it enables the FMCG company, founded by its chairman Harsh Mariwala in 1988, to deepen its penetration in the rapidly growing male grooming segment. Marico is already present in the male grooming market with its ‘Set Wet’ brand, through which it retails mass products like deodorants and hair gels.
While Marico has not disclosed the amount it paid for acquiring Zed Lifestyle it did say that the male grooming market is worth Rs3,200 crore. In this segment the company already has Set Wet, a brand it acquired when it bought Paras' personal care brands from Reckitt Bankiser in 2012. It is a wise strategy for Marico to diversify its male grooming portfolio since the deodorants market has become increasingly crowded. Marico has had a mixed record with the brands that it acquired form Paras. At present, Set Wet competes with Hindustan Unilever's Axe, ITC's Engage and J K Helen Curtis' Park Avenue brands and is not in the top three deodorant brands. Fogg, another brand of deodorants marketed by Vini Cosmetics, which entered the market in late 2013 is the market leader in the segment.
Second, the acquisition also comes at a time when consumer goods companies in India have been struggling to show
meaningful volume and revenue growth for the past several quarters. All consumer companies are constantly on the lookout for acquisitions that add to sales or allow them to enter a new growth area. In the quarter ended December 31, 2016 Marico saw revenues fall eight percent to Rs1,416 crore. In the same period profits fell seven percent to Rs190 crore. The company's stock peaked at Rs306 per share on the BSE on August 2, 2016. It has since fallen four percent to Rs293 on March 17, 2017.
Third, according to Gupta, the creation of a strong digital brand to leverage e-commerce opportunities and increasing the proportion of premium products in its existing portfolio will be future growth drivers for Marico. “We will focus on creating a strong digital brand that will be exclusively sold online,” Gupta told Forbes India
. “It is much easier and cost-effective to test the market for new products online, than it is through the physical channel.” The strategic investment in Beardo, which is a very visible brand on social media platforms like Facebook, may well be the first step in that direction.
Marico, which is well-known for brands such as Parachute (for hair oils and skincare) and Saffola (for edible oil and oats), has also been increasing focus on premium products –including products like value-added hair oil and virgin coconut oil (as a superfood). The strategic interest in Beardo is a further step in that direction, as it helps Marico move ahead from the mass-market clutter of deodorants in the male grooming segment.
“This partnership will help us access the emerging niches at the premium end, and will turbocharge our digital marketing and social media engagement capability,” Gupta said in the statement in the March 17 statement. “The promoters (of Zed) bring in a strong understanding of the online space which will support in scaling up Beardo. This is also in line with our emerging focus of venture investments into start-ups to incubate new engines of growth.”
The acquisition is also synergetic for Zed, which gets access to a deep, pan-India distribution network and supply chain expertise through its association with Marico.
“In Marico, we have found a perfect strategic partner to help us broaden our market segment and significantly grow our brand while remaining faithful to the founding principles of Beardo,” says Valani, chief executive officer of Zed Lifestyle. “Our combined expertise in brand building, marketing and distribution will ensure Beardo rises to its true potential. Marico’s resource and knowledge will be an incredible asset for us and our team cannot wait to get started.”