You were reached out to sell it, friend. Otherwise we will finish him off. There was lots of fear within me. I also got a direct phone call from the Chairman of Lever: 'Sell out, otherwise.' Our turnover that time was about 700 crores, and Parachute would be worth Rs 400-500 crore. Lever latched onto Nihar and started saying that we should eat the parachute. They tried very hard to scare me. Many problems arise in the entrepreneurial journey, but an entrepreneur never takes no for granted easily.
How did you start Parachute?
I was clear that I was not working for anyone else. I will do it and be my own boss. Listen, now I feel so easy and good, but I am sure it's not so easy when you're doing it. Over a period of time, we saw whether the modern generation uses coconut oil. I don't do it because it's a bit sticky. We said we will change and become normal. Some people use it for after washing. So we had a campaign: 'Apply Oil One Hour Before Shower.' I fell victim to this ad. Then sales also increased.
And when you were doing this, where did your personal time go?
Our FMCG sector is more concentration. Any CEO's marketing and sales depends more on distribution. That's where most of the value is created. America had the top three values. One then, so when you have two very good leaders together fighting with others, what did you do?
This founder transformed a small family business into an empire worth Rs 13,000 crore. I am talking about Harsh Mariwala, the FMCG joint companies like Parachute and Saffola behind the business. Today's podcast is not less than an MBA. Because we know how did the parachute become a parachute? How did he become successful using money, and the reason behind all the multiple mergers and acquisitions made such a big company from it. There is a lot in this, a great case study. This is what we're talking about: how Unilever bought the Mariwala Group, threatened that if he did not sell, we will destroy you. But Harsh Mariwala did not sell, and in fact within five years, Harsh Mariwala ended up buying Nihar Coconut Oil from Unilever itself. On top of this, we also talk about how leadership, culture, team building, hiring, how it all happened. Step by step, we have explained its tips in addition to all the brilliant case studies. So check out the full podcast and please comment what you have learned.
Firstly, thank you so much for doing this. Thank you for calling me. I went through Parachute, Saffola, and all of it. And I have to tell you, I am so inspired by how you built Parachute first, then Saffola, and then used that cash flow for the M&A and all of that. How did you start Parachute? Why did you move from an unorganized sector to an organized sector? So thank you very much, Ayush, for inviting me to this podcast.
I did my B.Com from Sydenham College, Bombay. And after that, I had to study more. I was clear that I wanted to do an MBA. It is not to be done through a chartered account. Because after doing a B.Com, either become a Chartered Accountant or an MBA. Many people also turn to lawyers. But I was clear that I will do business. I was clear that I will not work for someone else, and I will remain my own boss. Because my family, my father, my uncles were all together in business. Grandfather also was there at that time. So it was a family business. I did not get admission to an MBA school. I told my father, and he said you should join business. I said okay. I had no idea what life was going to be like, but I was open-minded and had a determination that I had to do something in life.
Our office was in Mumbai. You went to the mosque area, didn't you know? But this area is very congested. It's a wholesale market, green market, station, transport godown. There is a lot of traffic, many people, very crowded, and it is a very dirty area to walk in. So difficult, not a good location to have a corporate office. But it was the same, so I left. It was a completely family-managed organization. There I met my uncles and my dad used to do all that. So very few professionals, and we had three different businesses: an edible oil business, a spice extracts business which was completely exported, and a chemicals business. So businesses were very different.
The first year, I just visited factories in different businesses, went to customers just to get the idea of what's up. And then I felt that this edible oil business was about crushing of coconut oil and refining of edible oils. That would have been more of our business, both B2B. That means they used to supply to industries. Coconut oil supplied to the trade in large tins. They used to sell in tankers. A small pack is a manufacturer's brand. They used to sell it in tankers. Here, they used to pack. So I thought it all worked in the loose, so the margins keep decreasing a lot. So business made to increase margins and business too be steady. So from that insight, I told you this much: that you had to move B to C and build a brand to increase margins. I didn't know what you were going to do. It all happened together. Both our brands were Saffola and Parachute, but no one paid attention to it. Saffola was somewhere in the family, sold in a few outlets in Bombay and Delhi, but there was no organized sales force. Parachute distributor somewhere near us in Maharashtra, in Vidarbha, they used to buy from us and market it themselves. We were the market leader there, so I said, 'Parachutes are still sold there. So why is it not sold all over India? Because our quality was the best, and because of that, people came to our dealers. I used to buy big boxes of 15 kg, and those were loose. We used to sell trade to consumers. So that's why more loose coconut oil was used, and the pack was less. So I said, wherever the parachute goes, it goes to some other area. Why can't I go?' So two things: first, distribution expanded. From Maharashtra to Vidarbha, Maharashtra, Gujarat, first covered the West, then covered the South, then North, and then East. It took me two to three years to cover it. And that distribution coverage grew our business. We increased our base and market share. Then I felt that something more should be done. We want to become the market leader. So how did he become the market leader? It was a big challenge.
Then we realized that coconut oil was all in small pack tins. So we gave coconut oil to consumers in plastic, so it would be convenient for them. The reality is good looks and cost is also cheaper. So I thought that this is a good opportunity in the market to convert, because first we can become more. Went to the consumer, so they say it is a good idea. Then we launched a new product. Trade is important. Accessible only through consumer trade. They were there, but now they have become D2C brands. If yes, you can also reach directly. But in those days, trade was done through e-commerce. If it was there, then the trade said, 'No, no, this won't work because there are no plastic bottles.' I said, 'It will work because 10 years ago I launched our product. Before that, no other manufacturer had taken it in a plastic bottle.' Then I felt there was a problem: there was leakage in the trade. It was biting, and the container was also square shaped. On top of it, on the outer surface, if oil was also available, rats would like coconut oil. So they close the shop at night, and then when a retailer woke up in the morning, the rats had bitten the coconut oil, and the coconut oil was gone. The product was gone, but the shop was also spoiled because all the oil spilled in the shop. So what to do now? The consumer says yes, but the trade doesn't. So any entrepreneur faces many problems in the entrepreneurial journey. But never does an entrepreneur take no easily. If there is potential, solve some problems. So we went to our packaging manufacturer. I said, 'Make me a bottle that the rat cannot bite.' It became a round shaped bottle. Then we went to the factory and said, 'Pack the good part so that even a single drop of coconut oil does not come on the outer surface, so the rat won't know that this is coconut oil.' After you've done all this, then he said, 'How to do the test now?' We did a rat cage: put four to five rats in a cage and two to three bottles, and if you keep it for a day, there is no problem. If it happened, then we took pictures of our field force. We gave the picture to the field force to sell with proof. We were so confident that if any retailer faces any problem, we would compensate him for any damage. This is how the journey of plastics began. It took us four years to achieve 100% changeover from tin to plastic. But our price was also less than this. We also used to advertise the benefits of plastics over tin. So our market share in four years went from 15% to 50%. This was from 1985. Our market share increased a lot, sales increased a lot. And accordingly, Parachute became the market leader, strong at 50%.
So the first learning is distribution. You increased sales by increasing distribution. Second, innovation.
Yes, innovation in plastic. But a lot of innovation in plastic. Coconut oil freezes in the cold season. We had plastic bottles with narrow mouths. We shifted back to tin in winter. So we widened the mouth of the plastic jar. Even if it freezes, you can remove it from your hand. We solved the winter convergence. Many such steps were taken in innovation. Then we had many copycats. Our brands seemed similar, so we sourced a mold from Italy which was a combination that is difficult to copy. It had a flip top. We bought that mold because it was expensive. For two years, there were fewer copycats, but Indian mold makers made the same mold at very low cost. So any company should do this because the competition will copy it. We should be two steps ahead. According to this, our market share increased. Then we launched many new SKUs. Stock keeping units are bottle sizes. When I first started, I had 2 kg, 5 kg, 1 kg, and 500 grams. Then we thought we had to generate a lot of trials. People with middle and lower income need small bottles. We expanded from 500 to 200, from 200 to 100, to 50, and brought 25 ml sachets. Our SKU range increased. Around 1990, penetration increased, and the market size grew because the price point was low. Then we advertised a lot about why our oil is better than loose oil. Our taste and smell are better. We told you how loose is manufactured in dirt, while we manufacture in a hygienic factory. So we took all those steps to convert from loose to packaged. When I started, 15% of coconut oil was packed in India, 85% was loose. Today, around 70-80% is packed and 30% loose. So the market size has increased a lot. By giving all these initiatives, increasing the packaging range, and advertising, we became a brand.
But here also, before you go ahead, you said innovation. It sounds very easy and good, but I am sure when you were doing it, it was not so easy. How did you come here? How did you get the round shape? How did you work with people? Because innovation is not the work of one man; it happens through teamwork.
Yes, this was a packaging question. How do I pack the packing? The question was. There was no consultant that day. It was from our own man. I used to bring the team myself. Give me an idea how to solve the problem.
Then sales increased in India, so we thought we should take it further outside India. First, in the Middle East, there was smuggling. Coconut oil was smuggled for export. In 1991, in the Middle East market where Indians, Pakistanis, and Bangladeshis lived, they used the smuggling route. So we got permission from the government to deregulate coconut oil for export. First, we exploited the Middle East market. Then we saw that the Bangladesh market was very big. There were local brands, and all the coconut oil there was in tins only. So I thought that if we take the innovation we did in India there, we will be able to bring success. So we started exporting to Bangladesh. We did all four innovations there and became more aggressive because I knew that if it was so successful in India, it would be successful there. Because of that, we have a lot of influence in Bangladesh. Our market share there is 80%. It is a big market. It is the biggest company listed there. Good success came.
Then I asked, what now? Parachute has so many good brands. Any strong brand has some properties. What does the brand stand for? Parachute brand stands for nourishment and trust and coconut equity because it is associated with coconut. So we went to a consultant and told him that people feel Parachute is connected with the goodness of coconut, not just coconut oil. We started a campaign for coconut oil. Then he said, what can we do? In many years, after that, we brought extensions: Parachute Ayurvedic, Parachute Aloe Vera, Parachute Jasmine Oil, Parachute Hair Cream, and we just launched Parachute Baby products. In Bangladesh, we have the whole range of Parachute Shampoo and baby products. That is brand extension. Strong brand over personal products, they have extended all that. Because of this, the Parachute brand has become very strong. It has been extended from coconut to more personal products.
Here also, once again, I would like to show you this bottle. You are giving a lot of lessons at once. You said you should remain ahead of the competition. You said this looks like oil or something unique. The customer doesn't know why that meant something to them, but you were saying that when the competition used to copy the blue bottle, you started copying this, then you brought the next innovation with the mold. You brought the mold which smaller companies were not able to copy. So you were coming two steps ahead. When they came back after two years, you were bringing something new. You were always ahead. And now take the cap too. If you open the cap, it's easy. This is proof that it cannot be copied. It is puffer proof. Now it is easy to insert. First it was big, so it used to be a lot. Now it comes drop by drop. If you had done this innovation constantly, and distribution constantly increasing, you could keep increasing. Earlier we were urban, then as the brand grew in rural areas, we thought we should go to rural areas. First urban, then semi-urban, small towns, then rural, now small villages. We are promoting coconut oil across India. It is used in South and West India. If we have all India potential, we increased distribution and sales.
I read that there are some 11 million outlets in India, out of which around 6 million will cost you, which is more than 50%, and one of the highest FMCG companies in India. So how did you reach 6 million? How did you achieve so much distribution?
One is direct distribution. We have distributors, field forces who go to the retailer. Organizing distribution in a large country like India is difficult. So the wholesale route is we sell to wholesalers, and wholesalers sell to rural areas. These are the two main areas. A lot has changed now. Modern trade has arrived, e-commerce is here, quick commerce is here. So distribution was the main thing. But now you also do commerce. Do you see the resistance between the two? How the market is changing? It went from 75% to 25%. The shift has already happened. According to me, today our total turnover is about 80% traditional distribution and 25% modern trade, e-commerce, and quick commerce combined. Out of that, modern trade is 15%, e-commerce is 6-7%, and quick commerce is 2-3%. Compared to 10 years ago, quick commerce will keep growing, modern trade will also increase, but traditional distribution will remain because India is a very big country. In small villages and towns, e-commerce will not be able to go. It is limited to Tier 1 cities.
And while you were doing this, where did your personal time go in the period from 1985 to 95? You were also doing marketing, product development, innovating. You were everywhere.
Well, we see everything as CEO. I used to look after everything marketing. But in our FMCG sector, there is higher concentration on any CEO's marketing and sales distribution because that's where most of the value is created. Value creators innovate, as you were saying. Marketing, please explain a little bit. You said you were marketing. But as product innovation was happening, what was happening with your marketing team? What kind of campaigns did you run? There are many iconic ads of Parachute which I also remember from my childhood. How did they come? He wants to work with an advertising agency. But I can tell you one or two ads. One was the comparison with loose oil. TV had started then. We were one of the first companies to sponsor programs. There was a program called 'Corner by Corner' 30 years ago. It was a very good program. We sponsored it. It was beneficial because when you sponsor, ads appear in the middle of the program, and the program became a big hit. We did such sponsorships and launched new campaigns. Over a period of time, we noticed that the modern generation doesn't use coconut oil because it is a little sticky. So we said how to convince the modern generation? We said we would change it. Normally, some people use it for after wash. First, we did a campaign called 'One Hour Champi' – apply oil one hour before shower. I am a victim of this ad. Then sales increased. Innovation demands innovation. We will find a USP. Then many people use it for Holi. If you apply coconut oil before playing Holi, your skin will be protected, and the color will come off easily. This campaign was also done.
And when did Saffola come into this picture?
