Harsh Mariwala Marico Limited Tsks 21

TITLE: Harsh Mariwala | Marico Limited | TSKS 21 CHANNEL: Krish Kothari DATE: 2023-11-28 ---TRANSCRIPT--- It’s interesting you say in the book that the night you got that phone call sleep eluded you. Um in a karmic twist of fate in 2005 you actually ended up acquiring their company. How did you sleep that night? Harsh Mariwala is the founder of Marico, the company behind iconic brands like Parachute and Saffola, and one of India’s largest and most iconic FMCG companies. His story is as inspiring as it is replete with lessons in scaling a business profitably as well as creating an organization that will outlast any individual. At the time he handed over the reins at Marico, the company had annual sales of close to 5,000 crore. Today that number stands at about 10,000 crore. Perhaps the best assessment of Mr. Mariwala is courtesy Uday Kotak of Kotak Mahindra Bank. I divide Indian businesses into two categories. One category is the king and his subjects. This section comprises of Indian businessmen who believe they are king and the shareholders are subjects. The king can do no wrong and therefore the subject should be accepting of what he leaves behind for them. The other category is a smaller one. This order believes in what I call the value system. Here the interests of the firm transcend those of the individual. Harsh clearly falls in the second category. I sat down with Mr. Mariwala to learn more about his journey, experiences building Marico, and life lessons learned over the years. I hope you enjoy the conversation as much as I did. Hi Mr. Mariwala, thank you so much for coming on. Welcome to the Sensei Kujaku show. Thank you. Thank you, Kurush, for inviting me. My pleasure. So, Mr. Mariwala, there’s obviously a lot I want to cover and there’s so many fantastic lessons and stories from your life and career. But, I want to start with a slightly more philosophical question. Um, we always look at different entrepreneurs and try and come up with a formula so what causes success. What what are the characteristics of the greatest entrepreneurs? What I want to know is in your opinion, do you believe that grit and perseverance are more important than intelligence in creating a successful entrepreneur? So, I think grit and perseverance are needed in the context of the fact that everything is not going to succeed. And you will have failures. And they say passion is important. But, if you don’t combine passion with perseverance and grit, then the tendency will be to give up too easily. So, that need to last from a longer time frame is very critical for for the business. And that’s where the grit and perseverance come in. But, intelligence is also required. So, it’s not either or. So, I would also Basically, I would equate grit and perseverance with passion rather than intelligence and uh rather than intelligence. And they say that greatest entrepreneurs, greatest men, and the most powerful empires are born out of struggle, that they’re forged in fire. Do you Do you believe that at least with the benefit of hindsight when things do work out, you can look back at hard times and say, “I wouldn’t be who I am today for if it were not for those times.” Yeah, I think every person goes through ups and downs and challenges. And some of them are, as you said, you have to go through the fire. And if you succeed in that and not every time you may succeed, then you become far more stronger as a person. You’re able to handle stress. And that confidence within you would improve dramatically because you overcome some big big challenge in your life. And at that particular time, you may be undergoing a lot of stress, but once it is overcome, I think that joy you get it is far more lasting. And you know, you get associated with that externally also. So, it’s I think every person, if you want to reach a certain level of whatever whatever you’re doing in your journey, you will have to go through some tests like this. And if you go through some of them, and if you come out well, if you don’t come out well, then I’m sure there’ll be a lot of learning. But you can’t avoid you can’t avoid conflicts. You can’t avoid those situations where it you have those uh those moments where you have to undergo through a certain process of either a threat or something which is unusual which you need to cope up with. And Mr. Mariwala, do you believe in destiny? Uh to some extent, but you know, a lot of people say that, you know, you’re successful because you’re lucky. Luck, everybody gets luck streaks, you know. So, of course, destiny is important, but that’s not the reason for a person’s success. I think success on a perpetual basis, if you look at the long term, I mean, one lucky break you’ll get, of course, that was destiny. But if you say that all your life you know, it’s destiny which has played a role, that’s completely wrong. I think a lot will depend how you’re able to encash on that opportunity which is thrown up by destiny, you know. A lot of people get a lot of opportunities, it comes their way, but they don’t do anything about it. So, the destiny is I mean, it’s wasted. So, Mr. Mariwala, I when I I studied your career in the run-up to this um and I reread your book Harsh Realities, which is a fantastic book. And one thing that really struck me about your career and your approach to business, let me put it that way, is there is this incredible focus and the ability to say no. My guess is you said no more than yes more in life. And and and I say that as a compliment. It’s important to know where to spend your time and energy. Absolutely right, yeah. And I want to use a critical event in the history of Marico to talk about that and the way focus shows up in a variety of ways when you’re working. So, I want to talk about the HUL attempted buying Marico. And you narrate the incident in the book and when you got that ill-fated phone call saying, let me put it nicely, asking if you would like And the fascinating thing is that if you look at your response to that, one is it wasn’t a volatile reaction. It was a well-thought-out, well-constructed sort of response. But more importantly, you were very focused on understanding what are the things that actually matter. And there’s one thing that really struck me, which is you quickly came to the realization that it may seem Marico is the David to HUL’s Goliath, but you were in a sense not facing Goliath. You were facing a section of Goliath. The person you were going to essentially go to war with was not the main man in charge. It was a lieutenant rather than a general. Can you talk to me about how you think about focus and and what do you think gives you that focus in life? Is it some internal wiring or what else is it? So, I don’t know what has led to this streak of focus, but you’re absolutely right. I’m very focused. I strongly believe that focus leads to depth and depth leads to excellence. And if you want to succeed in whatever you do, uh you have to be focused. There are examples of businessmen who are not focused and also successful, but they’re are rare. So, that’s why you see that if you go into an unrelated business, the chances of your success are much lesser than you expand into your current business or to adjacencies of what you’re doing currently. The chances of your success are better because you don’t go through your learning curve. And you’re able to concentrate on on the business because of focus. And you’re able to go much, much deeper. And it leads to a far more, shall I say, sustainable stronger organization because you are so focused that you are taking all the steps to improve your capability to ensure that you are two steps ahead of competition. And to ensure that the organization is built on very solid grounds. So, my belief in focus is is very, very high. And it has helped us in terms of our product portfolio. And what you were saying earlier, you know, if you get an opportunity to enter some unfocused area or some completely different area, because your focused approach is very easy to say no. Because the most tempting thing for any entrepreneur is getting lots of ideas and opportunities are there, but I think at some stage you need to decide whether are you really going to pursue each and every opportunity. Or it makes sense for you to say no. So, I think focus helps you to say no. Because it is something unrelated and you say I want to be on only related. Now, if the business in your related or your current business does not have opportunities for growth, then of course you have to go beyond that. Because you have to grow the business and growth is very important. Growth is like oxygen for any business. You have to make the organization grow, and if the growth doesn’t happen, then all the stakeholders start losing interest whether it’s your employees or or shareholders whoever it is, you know. So, to sum up I would say that focus is very critical. And I would deviate away from focus only if my current business is not able to grow or I’m not able to diversify into related adjacencies. Uh and I have to go through completely new. But ultimately I have to drive growth. And if that current business doesn’t offer opportunity for growth, then I have to look at something completely different. But if I have to look at something different, then it has to be you have to remove escape buttons, you know, because you can’t expect and I think many entrepreneurs tend to take shortcuts by asking the same team which is managing the current business to look at something new. And because their hands are so tied up and their competency is towards a certain business they are currently managing, they are not able to think differently. I’ll just give you one or two examples, you know, and two examples I’ll give you, you know, when we were many years back, we were only present in India. And we were getting opportunities to go outside India. Because India business was so big, we decided to hand over the international opportunities to the India head of sales and marketing. But because India was so big, the overall attention given to international market was so low that we made a presence but very minor. Until one fine day we said that international is very important to us. We will remove the escape button. This guy is too much into India, so we’ll appoint a senior person. That person’s role will only be international business because international business is very different than Indian business, you know. The customer is different, the culture, the people, the opportunities could be different, the brands you could launch internationally different. So, once we did that, we expanded organically to markets like Bangladesh, neighboring markets, Middle East. That person we identified opportunities for acquisitions some countries like Egypt, Vietnam, we acquired companies and basically we expanded and made went international. And today about more than 25% of our turnover comes from international markets. Yeah. But the key thing was removing escape buttons, you know. And the same thing happened with Kaya and I was getting a lot of ideas and to some extent I’ve gone out of focus in terms of a new business was when you launched Kaya, you know. It’s It’s completely different business compared to Marico. Of course, it’s a brand. It’s in skin care, but it is a service business and very very different, you know. Yeah. But I earlier I would go back to my own team to expand and it would just get not get the right So, I moved two persons that I moved from my team and they reported directly to me to look at new business opportunity. That’s how Kaya happened. But if I had not removed those two persons and relied on my existing team of Marico, I would never have gone to a new business. Now, that was sound decision or I’m not getting into it. But uh it’s not done as well as I thought it would be. So, I think I’m more and more convinced that focus is very important. There are exceptions like Ambani and Reliance where they’ve gone to completely unrelated business and very successful, but that’s very few. And many other organizations which have gone beyond what uh what they were doing in today’s environment. Maybe 20 years back when the competitive environment was much lesser, you could succeed in new business. But today most businesses you go into are are degree of competition has increased dramatically compared to the past. This landscape is littered with companies that diversified incorrectly, right? I mean, globally, it’s not just in India. Coming to your I mean, I didn’t finish your question about the levers part, you know. So, you were right. I, you know, I didn’t uh react uh immediately in terms of that threat, and I within me, I was quite confident we could meet that, but you know, I think I am I’m a deliberative risk taker. I don’t just take risk. I go into a little bit more detail, you know. So, I had to my you may call it my intuition, you may call it my judgment of taking them on was I had to go a little deeper. So, I met Karsanbhai Patel of Nirma. I went to Ahmedabad just to meet him because he was taking on Levers, and I met many other people, and then internally discussing with my team came to the conclusion we’ll take them on. So, it was just not my personal judgment, my intuition, but it was verified and value-added by others, also. It’s interesting you say in the book that the night you got that phone call, sleep eluded you. Um in a karmic twist of fate, in 2005, you actually ended up acquiring their company. How did you sleep that night? No, it was a great moment internally for for all of us. I mean, internally within the organization, we felt elated, we felt great about it. So, it was a I mean, as you said, as I said earlier, during that phase of the when you’re taking them on, there was a lot of stress. But when you came out winners, of course, it was a great feeling, you know. You know, in that phase, it it seems impossible today, but there was a point in that phase when Marico as a publicly listed company was trading in a at a single digit P. When that happened, did you ever second-guess yourself? Did you ever wonder, you know, maybe I should just give in, I should just give up? No. No, no, never. No, I I mean, there was doubt in my mind that to give up, you know? Because I I mean, two things. One is I was confident about the fact that we were in this business for much, much longer time. We knew the business inside out. We had a very strong brand. They could not have hit us except in the area of distribution and marketing spends, for which we took some action. So, rationally we analyzed and came to the conclusion that I mean, at the most we may suffer for a few years. And I think that exactly happened for the one or two years our margins were lower. But, never a doubt that we will we will sell out to them. And and do you think that that sort of mindset, that almost warrior mindset, that you know, it doesn’t matter what you throw at me, I’ll come out on top. Do you think that that is something you’ve developed over time or this it’s a gift from God? I don’t know, but maybe I think it’s a gift from God, you know, sometimes. But, I think more than that, you know, sometimes some people may want to encash on something. You know, there are different type of entrepreneurs. There are some entrepreneurs who are serial entrepreneurs. They will start something, they’ll sell it off, they’ll start something else. I’m not the serial entrepreneur. I want to be in the business from a long-term point of view. So, that’s my mindset. Number two, I money does not excite me beyond a point, you know? It’s not going to take you anywhere. Some people encash on it, I will have a lot of wealth, I’ll These are all myths, you know? You can’t enjoy money beyond a point. It’s not going to impact, you know? So, my lifestyle may not have changed at all, you know? But, just because I’m more wealthy doesn’t mean that I will lead a different lifestyle, you know? Do you think you would have been unhappy if you Forget, forget under duress, but even if you at a very attractive valuation sold out, how long do you think it would take you to come back and realize I’m too bored, I need to get on with it? Oh, immediately. Immediately. You wouldn’t last even 6 months? I don’t think so. I would not last 1 month also. Yeah. Because that’s how I am built, you know. I I mean, I have to be occupied even after I step down as the managing director. I had to take steps to keep myself occupied. Not in an operational role, but what beyond Marico, you know. And I think that’s reinventing yourself at different stages in life, you know. You have to reinvent yourself. Because then what and I was not able to do what I’m doing today. And I would not have been able to do that if I was still in operation. But now I have a lot of time, so I have proactively have done a lot of things which which I couldn’t have done it earlier. I want to talk about Marico’s journey as a listed entity. You maybe you know, you went public maybe earlier than you otherwise would have if things had been different. But it’s an interesting case study because you grew up in the public eye versus a lot of what what a lot of companies do today, which is they come as far more mature companies when they come to public markets. What was your experience growing up in the public eye? And And do you What do you think were the advantages and and, you know, drawbacks of doing that? So, I think first of all, circumstances forced me to go public. So, it was And I think many people say, “Should we go public?” And I think my answer to that has always been it’s a means to an end. Why do you want to go public? Now, if there are some investors who invest in your company, they want to exit, then public going public could be an option. It could be selling it to some other investors also. But in my case, the key issue was I had taken a lot of debt because I had bought over some of my other family members, and I had taken a lot of debt in my personal hands, and I had to And at that time, the the PE culture was not present in ‘96, you know. So, I was forced to go public. Having said that, we went public at a time when we had strong brands, but they were perceived as branded commodities, you know. So, they were always branded as always perceived as a branded commodity player or not an FMCG player. So, our challenge was though the brands were very strong, our margins were good, was to how do you transit toward a valuation of an FMCG company, which is almost double or treble in terms of price to earning multiple compared to a branded commodities player. Uh and I think that journey began once we we became public. We said that we have to be in the same bracket as the FMCG index. And we can’t be perceived as a branded commodities, which meant taking a lot of action at our end. Action in terms of improving our product portfolio, going to more value-added products, ensuring that on a quarterly basis we’ll go on showing growth. And I think if I remember rightly, almost 50 quarters in a row we showed top line and bottom line growth, which meant that we are not a branded commodity player. Because if you’re a branded commodity players, you will be subject to commodity prices and you know, profitability fluctuating with the fluctuation in commodity prices. So, we went for more value addition, consistent performance. We became far more transparent in terms of our our overall sharing of information. Governance played a very important role. So, a combination of these four, five things helped us move towards a multiple of And we went public 13, it fell to seven, eight, and now in the range of 50, you know. Yeah. Yeah. It’s I I I still I’m amazed at the fact that it never reached seven, eight. You think about it at the worst time in the GFC, Yeah. it was 20. So, I’m just I’m I’m thinking if someone offered me Marico at eight times that bite his arm off right now. But, you know, that time it was perception about the threat from Levers, you know. I think that drove it that, you know, I’m a fool foolish person to take on a giant like Levers, and you know, I will suffer. Right. So, Right. You know, I want to come back to something you touched upon earlier, which is creating the right team. And often in an organization’s journey, the people who are useful at a one crore level are not the right people at 100 crore, and then you need a third team at 1,000 crores. Can you talk about the finding the right people as a leader, and and what you think has worked in before getting them on board, knowing that this is the right guy? See, I think it it all depends on the scale, you know, what kind of leadership team you require. Because when you are small, it’s relatively simple. Uh the business is simple, because you don’t have specialist functions. And because you’re small, you can’t afford a very high level of talent, also. And even if you get a high-level talent with a very small business, then they will also get frustrated, because they unless they are there is huge scope for them to to grow, you know. So, I think a lot depends on what the business can can afford. Those days again, we didn’t have those luxury of making losses and growing sales. And I still don’t know how to do that. So, I mean, business has to show profits. And if you consider that as as given, then I mean, how much can you pay an individual? Uh would And if you don’t if you don’t have that kind of budgets, you will take individuals at at that level of competency, you know. But as the business grows, then your level of complexity increases. And the business may grow because of newer product lines, newer geographies. So, it becomes far more complex. So, as complexity increases, scale increases, you need a different type of talent. Now, there may be some individuals who can be exceptions. They are able to adapt to the changed circumstances in terms of complexity, in terms of scale. But I’ve seen that many a times, you know, that same individual is not able to cope. And multiple times I’ve asked those people to go those who are very relevant at some stage not getting relevant. And what do you do then, you know, you you can’t continue with them. You can’t reward loyalty because it’ll impact your performance. So, ask them to go but do it in a human manner, you know, give them some time to find them some option and have have a replacement at a far higher competency level. And that has happened I mean if I look back at my own journey it must have happened two, three, four times because you know, we grew from 100 crores to 10,000 crores so every time at some juncture, you know, you say that now we need to change the level of competency within the team. And the team itself has undergone change. So, I don’t have some people who have been with me for 40 years for example. I want to just talk a bit about how how you went about building the Marico brand and and I see Marico and of course the individual brands under Parachute, Safal and so on. In your mind, what what does Parachute and its Oh, sorry, Marico and its brands mean to the average consumer today? What is it that comes to the mind when they think of that? So, I think the first thing which drives a consumer is the brand name whether it’s Parachute or Safal whichever brand they’re buying, you know. And our challenge with the brand name of the company is more in the corporate end and not with the consumer. Consumer mostly many consumers even 50% I think I don’t have data 50, 60% they will not even know which company it’s coming from. So, basically they are buying a Parachute or Safal. But it’s important to build the brand company brand because to attract talent to retain talent, you know, if I want to recruit you and you know, if I tell you Marico and if you tell your parents, Marico, and they don’t know about Marico, then they’ll say, “Why you want to join? Join Unilever or something which is well known.” So, I think that image of the organization is very crucial in corporate, especially in when it comes to attraction and retention of talent. When it comes to corporate governance with investors, you know. So, I think it’s developed over a period of time. But, at a at a brand and company level connection, it’s still weak and but I can’t do it overnight, you know. It has to be done over a period of time, you know. So, I mean, we we said that to increase our association if if there’s an ad from ad about Parachute, then it’s product made by Marico would come in, you know. But, it’s it’s a minor message. My major message has to be towards the brand Parachute, you know. So, it’s still evolving. Our image in corporate circles and, you know, in the job market is improved dramatically. So, that challenge to some extent is has been met. But, this will happen over a period of time. Mr. Mariwala, someone once told me that a little success makes you arrogant, a lot of success makes you humble because no matter how good you are, you realize that to reach a certain level, you need the energy, effort, and brilliance of others. Even the biggest men at some point have to stand on the shoulders of others. Has that been your experience? So, I have always been a very open person. When I say open, I mean, some people think that open is Suppose if you come to me and I have an open mind to hearing you out. Open, that’s openness from a limited part. It is more reactive openness. Now, if I have to be proactive as an open person, then I have to come to not only you, but whoever can help me in my journey. So, what is new? What can I learn from you? It need not be you. It could be a person at the shop floor level also. How can we be different? So, if I exhibit that curiosity, it has to be combined with humility because I can’t I have to come down to your level to ask that question. And that search for learning of what’s happening it has to come from within, you know? So, if you have that search, then you will read more, you will interact with more, you will take that extra effort to to get the answers. And um I mean, I know that there are many leaders who think that they know it all, but at some stage because they are not open, they would tend to falter because if I don’t listen to you, and you’re reporting to me, for example, and I know that I know it all, you will not tell me only because why should I tell you? I don’t listen to me. So, you will though you may be very feeling very strong, but you’ll be reluctant to tell me because I would I’m not listening to you. But if even if I have a different viewpoint compared to what and if I react saying that yes, Krish, thank you for bringing me this whatever idea. I appreciate that. And for these reasons, I don’t agree with you, but please go on bringing such opportunity. You’ll again come back to me. If I tell you you’re useless, I don’t want to hear that. You’ll never come to me. So, you know, how you react in terms of So, there is a difference between criticizing and critique. You know, I have by giving you negative signals, I have criticized you. By giving you positive signals, I have given a critique that I’m open to hearing and please come back to me. Yeah. Hey, there’s a fantastic line in your book. It’s um You know, a mind like a parachute only only works when it’s open. Not my line. It’s it’s been there. I mean, yeah. So, fantastic line though. So, you know, coming on that point of dealing with people in your organization, especially when you are the man on top. What what do you think you did to ensure that you weren’t inadvertently surrounded by yes men going through life? So, I think again it starts with an assumption that every person has blind spots. And not a single person knows the overall context. And there is a lot of learning inputs which can come from others. If you have yes men, they will only agree to what you are saying. They will not critique you. They will not value add you because you only want people who are agreeing to you. And that’s not good for any organization because you don’t get opposing viewpoints. The blind spots are not covered. But it’s fear of constructive no men. Constructive no men. That means if you you may not agree, but you are doing it constructive way. You’re telling me to do it differently for this this reason. And not just saying no, don’t do it, you know. So, you’re trying to convince me for whatever your viewpoint. I think your organization needs more of that. You need dissent. You need uh divergence because I think everything is getting very complex. The whole world and the businesses are getting so complex with so much of geopolitical, COVID, competitive environment, technology, disruptions. You need constructive no men. Yeah. Yeah. And it’s it’s we live in they say a VUCA world, right? And there’s so much uncertainty and but what do you think has helped you make sound decisions over time and when there is so much uncertainty? And and is it that, you know, some people say that data allows you to make sound decisions, but great decisions are made by intuition. So, I think you can’t just be deciding without any data based on intuition. I I don’t know. I find very difficult to say that I have intuition I will succeed without any data. I think somewhere in your mind you have analyzed all that. But that final, shall I say, if you are uncertain, intuition would play a role in that, okay, I am little bit confused, but I know I have to be, you know, because I think I will succeed. And I think to that extent intuition would play a role. Every time you may not succeed, but I think ultimately leads to a certain decision. Otherwise, you you will go into analysis paralysis mode if you are confused, you know, if you are not able to decide. And that also is not good for any organization or for any decision. Mr. Mariwala, I have just one last question. When you look back at your life and career, what is the overwhelming feeling that you have? I think the overwhelming feeling which I still is not even my career is not over is to make a difference, you know, it’s just not success monetarily or size or scale. I think to make a difference to all our stakeholders. So, whether it is our shareholders or whether it is our employees or our associates or the society or at a personal level, can I make a difference to whoever I’ve interacted with? And ultimately that will that’s the purpose which is driven by the organization, and that’s where you get higher degree of satisfaction than just creating something for your own good. Mr. Mariwala, this was so fantastic. Thank you so much for taking the time. It was wonderful hearing about all your stories. Thank you, Krishna. All the best. Thank you. Thank you.