Marico puts Sweekar on the block

Marico puts Sweekar on the block

Author | Source: The Economic Times | Saturday, Oct 14,2006 9:18 AM

Marico puts Sweekar on the block

FMCG major Marico Industries is learnt to have put its edible oil brand, Sweekar, on the block. Sources say Marico's move to divest the Rs 100-crore Sweekar brand is part of its strategy to move out of low-margin commoditised businesses and focus on value-added categories.

When contacted by ET, Marico Industries CFO, Milind Sarwate, said, “It has not been our practice to react to any speculation about any particular brand.”

He, however, added, “Marico has always focused on optimising the margin profile of its brand family. This requires us to take a hard look at and analyse all our brands from time to time, to check their contribution to Marico's objective of sustainable profitable growth. Such analysis may point out the laggards in our portfolio and over a period, we may deal with such laggards in the best possible manner.”

Earlier, speaking to analysts in July, Mr Sarwate had emphasised that Marico 'directionally' doesn't intend to be in the edible oil business. Two years back, the company in a strategic shift, decided to reduce focus on low-margin brands like Sweekar, Revive, Oil of Malabar, Sil, but kept them in its portfolio to maintain distribution channels.

Meanwhile, the company has also been de-focussing on the vegetable oils businesses to build a high-margin portfolio with a wider geographical reach. As the result, the contribution of edible oils in the company's revenues has come down to 20% from a high of 35% in '01.

The cooking oil market is pegged at about 12m tonnes per annum and is growing at about 6% per annum. This includes both branded and unbranded cooking oils. Sweekar Sunflower Refined oil was launched in 1988 and quickly became one of the leading brands in this category.

The emergence of a slew of regional brands in refined oils during the late 1990s put pressure on margins and cooking oils category began to get commoditised.

Marico has rolled out a slew of premium brands in conventional businesses to persuade consumers to upgrade. Value-added hair oil brands - Parachute Jasmine, Parachute Advanced, Shanti Badam Amla and Hair & Care - have managed to pep up value growth for the hair-care business.

The company has also forayed into categories like hair conditioners (Silk 'n' Shine), male grooming (Parachute after shower cream) and baby care (Sparsh baby oil), which can deliver substantial value growth with higher margins.

The company has also followed an aggressive acquisition strategy. In addition to Nihar hair oil, which it bought from HLL earlier this year, it acquired a hair care brand in Egypt last month.

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