How MARICO's Saffola beat ITC & Hindustan Unilever in EDIBLE OIL WAR in India?: Business Case study

Hello everyone, Suffola is one of the most legendary companies in Indian

business

history. In the last 21 years, the share price of its parent company, Mariko, has skyrocketed by 17,200, rising from just Rs 2.67 to Rs 487 in 2022, and if we look at the market share of the category of surface, stood at an incr

edible

81 percent market share as of 2021 and have literally been the undisputed king in the ultra-premium

edible

oil segment for the last 30 years. The question is how the marijuana family turned suffola into such an iconic brand in India, what exactly was their

business

strategy that allowed them to stay ahead of their giant competitors like ITC and Hindustan Unilever and most importantly, what Are the business lessons we should learn from Suffola's iconic rise in India?

This video is brought to you by eating money, but more on this at the end of the video. This is a story that dates back to the 1960s. During this time, medical research identified zamora oil as a beneficial ingredient for heart health. This was because it had a higher ratio. of something called polyunsaturated fatty acids, but the problem back then was that only raw safflower oil was available on the market and it tasted very, very bitter, so every month the Mariwara family received postcards from heart patients who They requested a few liters of oil. to be refined and when this began to happen constantly, the Mariwala family would make special arrangements to refine a small amount of safflower oil and that was when they thought that perhaps there was a larger market for safflower oil in India and when it was looked deeper, it turned out that India was home to one of the highest numbers of heart patients and diabetics in the world;

In fact, even today, if you look at the statistics, public health estimates indicate that India accounts for approximately 60 percent of the world's heart disease burden and heart disease is the number one cause of mortality and is a silent epidemic among Indians, but despite the existence of this major problem, there were three major gaps in the market. Number one, as I said before, there was only raw saffron oil available in the market, which was very bitter. On flavor number two, there were very few refining companies on the market and most of them were unbranded and unreliable, this was one reason why doctors couldn't recommend safflower oil even if they wanted to and lastly , patients had to get it refined locally. entrepreneur or had to completely eliminate oil from their diet and, as everyone knows, it is very difficult to resist when your table looks like this.

It was then in 1965 that the Mariwala family decided to launch a product under the Bombay Oil Company and this brand. It is what we all know today as safula, now that we look at the huge size of the market and the dire need for the product, most of us would think that Bombay oil very easily captured the Indian market, well not really guys, because you see when they are the first to move. In the market, while there is no threat from competitors, the biggest threat to your brand is actually a lack of awareness and this is something you will see with many game-changing products.

An elegant example is plague news. If I saw a

case

study

, I would do it. We know that despite pregnancy being as affordable as Rs 50 and despite offering the extreme convenience of detecting pregnancy without going to the doctor, rural women had no idea what a pregnancy detection kit was and although it They didn't know, they didn't know how to do it. spelling the term pregnancy detection kit similarly here establishing factories and selling the product was not enough, the marijuana family actually had to raise awareness about suffola and heart disease, so the suffola team identified three critical stakeholders to build a strong name in the market, the first stakeholder.

They were doctors who would recommend Suffola to their patients and obviously once doctors recommend a product to a patient it would turn them into lifelong buyers and the second interested party was consumers who had heart problems so very systematically the Sofala team started with tough health campaigns in association with leading medical institutes like Bombay Hospital Escorts Health Institute and others, apart from that, several conferences were held among cardiologist circles to spread the product, secondly Firstly, from a consumer point of view, awareness campaigns and free cholesterol checks were carried out so that people could know that sofola means healthy heart and very soon, in the 1990s, the scale of these campaigns was so large ones that were being carried out in nine cities and in fact for 85 lakh people, the company even started a dietitian dialing program through which people from all over the country could talk to nutrition experts and they could search advice on diet and lifestyle of these exports.

In this way, Suffola added so much value to patients' lives without selling the product that, by default, the perception of Saffola was configured as a trustworthy and authentic brand. who really cares about his clients, so this way he captured the patience market, now you see, after generating this degree of trust in the patient market, everything looks perfect, well, not really, guys, because there is a big problem here, you see, for an fmcg product like safola, the cardiac patient market is very very small and if suffola sold products only to patients, they would be perceived more as a medical product intended only for sick people.

It was then that the suffola team realized that the biggest market for their product is not the segment of people affected by heart diseases, but the segment of people who want to prevent heart diseases, this is the reason why they start tap into the third group of stakeholders who are people who wanted to prevent heart disease, which was literally 10 times larger. market compared to the patient market and they did this through extensive television commercials to inform people about the four main risk factors that cause heart problems, obesity, hypertension, diabetes and smoking. This was followed by radio campaigns, newspaper advertisements and more, each of which communicated the exact information.

The same message is to prevent heart disease. Now I don't know how many of you remember this, but a long time ago Suffola very cleverly designed this ad telling the story of over 45 obese men whose wives were extremely concerned about the health of their children. husband and the beauty of these commercials was that although the consumer was primarily the man of the house, the customer was the women of the house who made the decision about which oil to use, so the commercial very, very cleverly instills fear in the minds of housewives. which automatically led to large scale acceptance of suffola, so all these fields together created such a fruitful impact that a survey conducted reflected that 80 percent of the user base would switch to suffola from other oils and this clearly indicates that marketing was nothing.

Apart from being extraordinary, the best part was that because Suffolk created such incredible awareness about its brand and also provided the life-saving added value, the company was able to sell the product at an ultra-premium cost, which is how Sofola established itself. as an ultra premium product. In the market now the question here is when this heart oil market was such a big market with huge margins and huge growth potential. How come other brands like ITC and Hindustan Unilever couldn't

beat

Safola well? This is where the Saffola brand comes into being. The protection strategy comes into play, you know, in the 80s, both Hul and Itz saw the opportunity in the sunflower market and launched their own products called Flora by Hul and Sun Drop by Itc, and even spent a ton on advertising high intensity and claimed health benefits just like savola and to attack sofola, they even priced their products five to ten percent less than suffola.

This is what started a fierce price war between three of India's biggest consumer goods brands, which were mariko itc and hul, now threatens it. here was that if mariko lowered the price of safula, they would lose the huge profit margins of the product and once they lower their prices by 10, they cannot suddenly raise their prices to put it in numbers if they sell 10 million rupee units in With a cost less than Rs 10, they would lose Rs 100 crore immediately but at the same time if they didn't lower prices they would erode their market share and kill Suffola, so the question is what did Safola do right, they didn't do any of these two.

Instead they went for the third option and introduced a low cost variant called suica sunflower to protect the premium suffola brand and this strategy is something that many of the brands have also used now if you remember from the Havel episode, fans by Havel and Crabtree. Both switches have established themselves as premium brands but when competitors started targeting the lower segment, they addressed them by placing their own sub-brand like standard fans and rio switches. Similarly, bbk does this with oneplus oppo and realme, this way the brand perception and value of the premium brand is not diluted, at the same time the company also has control over the lower segment of the market and this prevents competition achieves economies of scale and erodes the market share of the premium product.

In this

case

, Suica focused on itc and hul in all cases. aspect equalization price average share sharon distribution reach and in 1991 suica and suffola together achieved leadership as the number one brand in the refined oil edibles market with a market share of 14 and together they got ahead of their competition, in fact in 1998 suica was the second largest brand after itc sun drop and had a revenue of one hundred rupees from crew and sold three times the volumes of suffolk, but you know, despite selling such high volumes, it only contributed one third of the unit margin of suffola so you see although itc and Suikar were selling huge volumes and couldn't even come close to Zafullah's profits.

This is how Mariko protected Suffola's brand perception and profits from the fall and the last aspect of Suffola that really fascinated me was Hard Mariwala's brilliant business acumen and how brilliantly it enters the market. market intact in his book harsh realities talks about the problems of the safflower market. This is a story that goes back to the 1990s and during this time there was a serious shortage of safflower seeds on the market and the problem was that it was a single season crop so they only had three months to build up the inventory. of raw materials for the entire year and because Mariko was the only importer of safflower in India, shipments usually took several months to arrive, so because of this working capital was affected by higher interest costs. finances without suffering and generally they had no choice but to increase their cost and this was very very risky for the brand value of suffula, meanwhile during the same time medical opinion also started to change and along with polyunsaturated fatty acids, doctors also suggested a balance of both. poly and monounsaturated fatty acids and if suffola provided a balance of poly and monounsaturated fatty acids, the only option was to mix two oils, but at that time the Indian government did not allow mixing of oils, because it would have expanded the scope of adulteration on the part of the manufacturers now, in this case, any entrepreneur would simply consider this rule to be an unsolvable restriction and would have simply moved on, but you know, Mr.

Hard gathered his food technology team and asked them to come up with results scientists. arguments about why mixing and adulteration are two completely different things and convinced the government itself that mixing would bring multiple benefits to the market, which were, first of all, that traders would be able to sell mixed oils during bad agricultural seasons without fluctuations and shortages. Number two, customers could get better prices because blended oils will help the industry to offer packages to the consumer with stable prices and different prices due to the composition and lastly, for the farmer it offered greater flexibility to grow different oilseeds according to weather patterns, so it was a win.

It's a win-win for all stakeholders, so Suffolk's tech team petitioned the food and drug department itself and did its best to convince the government and guess what the government finally officially granted permission for the oil blends in 1998 and now Mariko could throw safflower.oil blends with corn oil and raspberry oil, in addition to its existing product range, in fact, you must have also seen these products in red and green bottles, as a result, suffola was able to further expand its offering and again became a pioneer in the market and now there are no more supply shortages, no more struggles with profit margins and no more compulsive price increases, this is how the mariwala family created a multi-million dollar brand with suffola and today they have a market share of 81 percent in super premium edible oil. segment and being a market leader for 30 long years and this brings me to the most important part of the episode and those are the lessons we must learn from the iconic rise of sevola, but before we continue, I would like to give you a disclaimer, Please do not consider any of our content as investment advice.

We conduct business case studies to develop your business acumen and these should not be considered stock advice, but if you really want to make strategic investments in the stock market, you should. Consult our partners at money. They have a membership called et money genius that gives you customized stock portfolios based on your risk appetite for different investment horizons. The portfolio is mainly made up of high-quality in-demand stocks to help you earn good returns without waiting for many years. And did you know that over the last 15 years, if you had invested in a great high-growth portfolio for seven years, you would have earned 22.4 annual returns?

If you find this useful, we have left a special link in the description to download the et money app and once you download it, get the et money genius membership to start moving to the case

study

lessons. The first thing we must learn is that just because you have invented an amazing solution to a critical problem does not mean that the market will immediately accept it, so you must first educate the consumer about the existence of the problem and then educate them about the product that actually exists. it is a solution to the problem in our case prague news did this with awareness campaigns for rural Suffolk women did it with tough health awareness campaigns for the Indian middle class and only So do people really value them second If you have cultivated the ability to obtain a premium price?

That little delt of 10 is a billion dollar asset, so never dilute your brand perception because of your competition. Apple does this by avoiding the low-cost line. volkswagen does this by diversifying into sub-brands based on different segments and suffolar did this with its low-cost sub-brand called suicar and lastly as uruguay amani once said, a hindrance in business can be treated as an obstacle or a killer of the competition in this case, while lack of safflower supply prevented players from entering the market. Suffola entered the market and became the first mover in the industry, while government rules prevented players from entering the saffler oil market. the tough mariwala defied the very rule and turned it into an opportunity with its blended oils. and again he made a lot of profits and got rid of supply problems and this is what made him one of the most legendary businessmen of his time.

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