Marico SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Increased demand in the economy to drive consumption: Increased demand in the rural economy, buoyed by better agriculture and non-farming activities will lead to drive in consumption. Further factors such as rising income, rising urbanization, rise of nuclear households, as well as a growing workforce will drive growth in FMCG sector in India which will increase the market potential for Marico. India as an economy is no longer fragile, with strong capital inflows which boosted the foreign exchange reserve to USD 350 billion. The economy’s GDP is witnessing strong growth of 7.6% in FY16 with the projected GDP growth for FY17 being 7.8%. Consumer inflation has come down significantly to 5% from double-digit figures in 2013. In addition, the FMCG sector valued at USD 38.8 billion is one of the largest in India. The sector has grown by a CAGR of 5% over the last 5 years. With researchers forecasting a normal monsoon, Marico can continue focusing on its strategy of “fewer products, higher volumes” strategy to drive sales growth.

2. Benefits from implementation of GST: The Indian Government’s implementation of Goods and Services Tax (GST) from July 2017 will result significant benefits for a company like Marico in terms of logistics and freight costs in the long term. The implementation will also help the company in the ease of doing business and decrease input costs.

3. Promising growth in rural markets: As the Indian government plans significant investments in developing rural infrastructure, its presents a positive growth area for Marico with rural consumption heavily dependent on nourishment (approx. 50%), Marico can leverage its already robust distribution network to establish strong presence in rural markets. This applies to markets with similar demographics in Bangladesh, Egypt, Vietnam and South Africa.

4. Investments in health, fitness and next-gen consumer businesses: Investments in next-gen consumer focused businesses such as healthtech and fitness; men’s grooming; e-commerce are the new growth opportunity areas. Marico in line with the trends has made significant investments and is one of the leading players in the Indian male grooming segment. With Set Wet and Parachute Advansed Men in its portfolio, the company acquired 45% equity stake in Zed Lifestyle Pvt. Ltd., the parent company of Beardo. Beardo is a specialized brand for the urban men who are looking for options to grow and maintain their beard. As per a recent BCG analysis report, the INR 8,600 crore male grooming market is expected to grow rapidly at around 20% CAGR over FY17-20. Further in April 2018, Marico has also acquired 22.5 per cent stake in Revofit, a fitness and wellness solutions app, thus entering the health and fitness space. Leveraging its power-brand Saffola, Marico is entering into brand extension with proactive health solutions and nutraceuticals segment with products such as Saffola Active Slimming Nutri-Shake and Saffola Active Soups.

Threat

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Political

1. Strong government at the center in India ensures political stability: India currently enjoys political stability with strong National Democratic Alliance (NDA) government in the center with a complete majority. This has ensured smooth passage of economic policies and reforms which were long due. The government is also pro-industry and has favored initiatives such as ‘Make in India’ which bodes well for companies like Marico. Political stability ensures business certainty and the current government is set to retain power in the general elections scheduled in 2019, though with reduced majority. However, an adverse outcome in the general elections for the present government may result in instability which may result in hindered economic growth.

2. Expansion potential in countries with good political relations and high expatriate population: Marico has good expansion and export potential in Asian and African countries which have good relations with India. With an established presence in emerging Asian and African markets, Marico is further expanding in adjacent markets of South Asia, the Indo-China region as well as new export markets. Further countries in the Middle East region such as Saudi Arabia, UAE, Oman, Qatar, Bahrain and countries in East-Africa such as Kenya and Uganda have a high number of Indian expatriates which increase the market potential of Marico’s power brands such as Parachute and Saffola.

Economic

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Social

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Technological

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Legal

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Environmental

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