Innovator and now thought leader and catalyst, Harsh Mariwala, founder and chairman of consumer goods company Marico, looks back at his decisions in an interview with FE, and also at the future—be it challenges in the FMCG space, rural sentiment or the work hour debate. Edited excerpts:
The debate about professional management versus family ownership always seems to suggest that family should distance itself from the management of a company? Why is this so? Family members can also be as professionals as outsiders.
It depends on the family and the capability of the family members. For family members to operate in a professionally managed company, they have to behave like professionals. They can’t say we are family so we are entitled to certain rights of decision making or preferred treatment. Otherwise, professionals think that meritocracy is in doubt. In a professionally managed company, even if the family is involved, meritocracy is still the only way to move forward.
You say you have created a company for perpetuity by putting it in the hands of professionals. But does this not reduce the passion and risk taking that is also so essential for a business to flourish?
It’s not that I don’t play a role in implied risk taking in the organisation. I am not only operating at the board level, but I also have discussions with the management team every month. I spend 15-20% of my time on the business; I know exactly what is happening there. And whenever I see the need to do some risk taking, I can play that role in my current capacity as chairman. So my role has shifted from actively managing a company, to influencing output in a strategic investor-driven company. And, it’s not that the company is left alone. Within a certain boundary once in a while they are alone, but I am involved in creating those boundaries.
For an FMCG company, how important has been the rural market for you, and how do you see the rural consumer sentiment today?
A lot depends on the product portfolio and to what extent are these products used in rural areas. The percentage of rural contribution to total sales can vary from 5-10% to 50%. But wherever it is important, it means upwards of at least 20-25% of the turnover comes from rural. Currently, the rural market is a challenge as it is undergoing some stress and degrowth, due to high inflation, unemployment and lack of purchasing power.
How do you see consumer discretionary spends today, especially as your company is on a acquisition spree for such brands, and the MD is on record saying you want to reduce dependence on staples like Saffola and Parachute?
There are very good opportunities available in the D2C space. These companies mainly have demand creation through online. We also have to learn this business as all this time we were only offline. How to operate an online business is something which FMCG companies have not had experience of. And these acquisitions not only help us increase our sales and cater to the demand, they also help us understand the online business.
Banking veterans say banks should learn to live with the fear of death as a startup can disrupt the business. Will FMCG companies also live with the same paranoia?
By startups in the FMCG space, you mean D2C companies? There are many such startups in the FMCG market because it is challenging to enter offline businesses. Creating distribution infrastructure and building a brand through digital marketing requires significant investment. However, the reality is that the investment required in traditional media like TV and print is much higher. Currently, online sales contribute only about 10-15% of the total sales. So, to answer your question, in the near future, there is no threat to the FMCG market from online sales. However, stiff competition can affect certain product portfolios, but it will only be for a certain percentage of the business.
And your own strategy has been to see these brands as opportunities and not as competition, maybe which is why you have been acquiring several D2C brands recently?
I believe that any discontent in environment could either be an opportunity or it could be a threat. So we look at it as an opportunity. When we look at D2C, we examine if we can acquire them, can we learn from them, can we own these brands…
As an industry veteran, what advise would you have for startups today, as we see many of them winding down very soon?
Any startup has to have something differentiated in this highly competitive business environment. Unless you are differentiated in the marketplace compared to what’s being offered by current players, your success will be limited. This could be either in terms of new technology or a pioneering initiative or some innovation. So first is how to create a strong right to win by offering something unique. Number two, how do you leverage that by attracting the right talent and the right culture. And number three, don’t take shortcuts, in terms of governance, etc. We have seen valuations of many startups going down by 70-80%, so it is better to look at governance issues from day one and not when you are bigger, else it will hit you badly.
You have dismissed Mr Narayana Murthy’s call for a 70-hour work week, calling for quality rather than quantity. How has Marico adjusted to the changing times in terms of HR policies?
I personally think whether it is Marico or any other organisation, it is important to create the right culture, the right job and opportunity for an employee to enjoy and excel, and to make it clear what would it mean for them if they worked really hard. It’s very easy for an entrepreneur to say that I have worked 70 hours, because a lot goes in creating a business, and it is wealth creation, but for a lower and middle-level employee, they are at a point that if they work harder, they’re not going to get anything unless you create certain kinds of incentives of extra money for higher productivity. And, it is very difficult for organisations to create that at a mass level.
Coming to flexibility and work hours, I think we have to wake up to the new expectations post-Covid that people can operate from home at least in some cases. In certain sectors like IT, there is much higher degree of flexibility as all the work can be done from home. In our case, there’s a lot of interdependence and you can’t do everything from home because you interact with people in the office. But we are more flexible than what we were in the past.
What according to you is the one decision that has had the most positive impact on your business – right from hiving off from the family business to branch out on your own?
I think the most important decision was to form Marico. I had to convince my family, comprising 8-9 members, to let me be completely independent and be the only person managing the business, even though my stake was only 25%, the same as what I had in the family business. It took two to three years in terms of gaining consensus, which was actually similar to an exercise like GST, where you have to have all states on board. Building consensus was critical, as these things cannot be done through force. It required a lot of patience, but once it was done, it gave me a lot of freedom, and I felt liberated in terms of whatever I wanted to do. My family members gave me a lot of independence, but at the same time I was accountable to the family too.
You seem to have taken all the right steps: innovation, treating competition as an opportunity, successful succession planning, etc. What is the one decision you think was a misstep?
I think going into some other businesses which were affiliated was one. And though we did not pay a heavy price, we acquired a company in the US which was in the business of manufacturing products for the spa industry and that didn’t do well. It was an unrelated business in a different geography. Now I am a strong believer in focus, and strong believer in sticking to the core, and whenever we have done that, the chances of success are much higher.