I am a strong believer in building businesses the old way: Marico founder Harsh Mariwala

The corporate world might be gung-ho about startups but these new-age companies are yet to impress one of the country’s earliest entrepreneurs. Harsh Mariwala, who founded Marico in 1990 and became known for brands such as Parachute coconut oil and Saffola edible oils in the face of competition from behemoths like Hindustan Unilever, believes in building companies ‘the old way'. In a conversation with Moneycontrol, the veteran shares his insights into the importance of people, setting up the right culture, and succession planning in an organisation. Edited excerpts:

Q: What was the vision when you started? Did you have an inkling that you were on to creating a few of the top brands in the country?

A: It is a misconception in many entrepreneurs’ minds that you start the business with a certain vision. It could happen with some entrepreneurs, but I did not have any indication. We were at that time selling edible oil in bulk and I saw an opportunity to convert that market from unbranded to branded. But I did not have a vision of Marico… The vision evolves as you progress.

First of all, I was not even sure that I would succeed. I am just a commerce graduate. There was nobody else to guide me on the journey. There were no professionals, it was a completely family-managed company located in the heart of commodity markets in Masjid Bandar in Mumbai. Hence, it was very difficult for me to predict if I would succeed. It was a trial-and-error situation and I made a lot of mistakes. Eventually, as the business started expanding, I got a better idea, which was over a period of 5-10 years, that having created Parachute and Saffola, we can launch more brands now…

This whole vision thing is a little bit overblown by many people in theory. In fact, if you have a vision cast in stone, then it can be restrictive. It is better to be flexible and have a business direction so you are broadly aware that you are going in a certain direction.

Q: When did you realise the potential that Parachute held as a brand?

A: We started expanding our distribution network and clocked some sales, but we reached a plateau in terms of our market share. Our market share in packed coconut oil was in the range of over 15 percent and mainly through a distribution network and also because the quality of our product was far superior to other branded players. And then we did innovation through packaging, converted it from tin to plastic and that’s when the sales just shot up. And we became a market leader. So, I think in phases, we start getting confidence. It doesn’t happen on day one. But the first phase of confidence was through distribution, network expansion, the second phase was through innovation and packaging. And then once we became the market leader, we started expanding the market size. It again evolves over time.

Q: How did the plastic packaging make a difference?

A: Tin is inconvenient to use because you have to dip your fingers to take out coconut oil or through a spoon. Also, tin is not as attractive on the shelves as plastic, and plastic is cheaper than tin. We looked at all these three advantages in terms of convenience, attractiveness and cost. Then we had problems with retailers when we rolled out plastic packaging but we resolved it. You don’t give up as an entrepreneur and if you see an opportunity, you have to be persistent and try to find out the answers.

Q: Back then in the early 90s, Marico was not the large enterprise that it is today. What were some challenges when you were trying to attract talent?

A: The first was the location of our office, which was in Masjid Bandar. The first decision we took when we formed Marico was… to have an office in far better surroundings, and that’s how we went to Bandra. We had to give an assurance that we will be unlike a family-managed company; it will be a professionally run company, where I will be the only family member in the management, and everything will work on merit, and influence will not work, which happens in most family-run businesses. We had to give a lot of assurances to potential employees that we are a good company to work with and also have very high standards of governance. Professionals do not want to take the risk with a family business that starts cutting corners.

Q: You talked about failures as an important part of being an entrepreneur. What were some of your failures?

A: I can go on for hours about my failures but I will give you a broad sense here. We didn’t have a strong legal process and a strong quality assurance process and hence faced problems. We had failures because we had not entered the right segments in the FMCG market. We entered categories where we were a me-too product and hence had to fight a strong competitor. The third failure was about consumer insight. We were not as insightful on consumer needs as we should have been. We were more inside-out than outside-in. As was in the case of Saffola Snacks. When we launched the product, we focussed on the health aspect as it was under the brand name Saffola, but consumers want taste first. So, we had a setback there. We used this insight in the launch of Saffola Oats, which was a very tasty product.

While there were multiple failures, the key thing is it’s alright to fail – every failure has a learning. And we may still fail because the overall success rate in FMCG is one or two out of 10 globally. People should not have a fear of failure within the organisation. You have to encourage people to take risks and to ensure that people are not afraid of failure.

Q: In 2014, you passed on the baton to Saugata Gupta. Most family-run companies in India are not keen on handing over the business to professionals, so what prompted this move?

A: I have a viewpoint that my organisation has to have perpetuity. It has to continue, whether I am there or not. It depends on the type of entrepreneur who runs the organisation. Some are like hunters – they see an opportunity, catch it, sell it off, and then look at some other opportunity. And then there are the ones who are like farmers. They look at it from a long-term point of view and I am more of the latter, the likes of Procter & Gamble and Unilever, which have now become institutions. We have to move towards a situation where continuity is ensured as far as the business is concerned. That’s where we learned that it’s time to hand over the reins to a professional and also strengthen the board, which will help the company in terms of sustainability.

Q: In many cases, promoters hand over the business but have a difficult time letting go of the company, which results in conflicts. How do you avoid such a situation?

A: It is very important that once you step down, you have to fully step down. You cannot step down on paper and then interfere with the operations. I did one exercise with my managing director: we identified what is my role and what is his role to ensure there is no overlap… This even included minor details such as what we will talk about in our media interactions. I talk about macro issues but if you ask me about ‘Marico business’ I will guide you to the current MD. This clarity in terms of the role and discipline has played an important role. It is important to select the right person and have that clarity so both can co-exist together and be effective.

Q: Marico was built quite differently from the startups of today. Today, the focus is on scale and not profitability. Do you think sustainable businesses can be built out of this approach?

A: I am a strong believer in old-age businesses. I am not able to digest how these companies can be incurring huge losses but the valuation still keeps climbing. I think there has been some degree of sanity in this area due to the pandemic and most of the investors are now asking: when will we see the profits? The size is important but at some stage, it has to show profits. I will never be able to build a business with this new mindset.

Q: Which are some of the sunshine segments in the startup space, according to you today?

A: I understand consumer-facing businesses. Things like D2C (direct to consumer) businesses, I see a very bright future for them. Some entry barriers which were there earlier in terms of distribution or branding or advertising have gone down now because of the opportunity provided due to the D2C route.