Wednesday, November 5, 2008

Indian hair care company to open third plant in Egypt

By Sherine El Madany, Daily News Egypt,November 3, 2008

Marico India will officially inaugurate Wednesday its third plant in Egypt’s Sadat City that will bring Parachute, the company’s largest selling hair care brand worth LE 700 million, to the Arab world’s most populous market.

“The fact that we are setting up our third factory here shows a lot of confidence in the Egyptian market. This factory is a big indicator of Marico’s long-term commitment plans in Egypt,” said Mukesh Kripalani, Egypt’s operations manager.

With a 60 percent share of Egypt’s market, Indian hair care giant Marico India Ltd has become firmly rooted in the heads of Egyptian users.

Betting on Egypt’s inexpensive labor and consumer culture, Marico jumped in with both feet, acquiring local manufacturers Fiancée and Hair Code — top Egyptian brands of hair creams and gels — in September and December 2006, respectively, for undisclosed sums.

“We started from a [relatively] low base and later managed to capture 60 percent share of Egypt’s hair care market,” said Kripalani. “Now, after a year and a half of operations, Hair Code is the number one brand in gels, and Fiancée is number one in hair creams.”

The company is looking to beef up its hair care portfolio in the Egyptian market, which the company pegs to be growing at a healthy rate of over 10 percent.

Marico is one of India’s leading cosmetics companies, with a market capitalization of LE 4 billion and a broad range of hair and skin care as well as wellness products. “We are market leaders in hair care products — oils, creams and gels — and our global total sales have reached $450 million,” stated Kripalani.

Mumbai-based Marico is the world’s single largest manufacturer of coconut oil, branded Parachute. The company also owns 17 different beauty and wellness brands that sell in 25 countries, including the Gulf Cooperation Countries (GCC), Bangladesh and Lebanon.

Marico also owns a series of skin care clinics called Kaya, with over 40 branches in India and five in the GCC. The clinics specialize in skin treatment, skin polishing, anti-aging treatments and acne reduction.

Without revealing total investments poured into Marico’s third venture in Egypt, Kripalani said the factory would manufacture Parachute range of hair-oil products in Egypt with the capacity to export to neighboring countries, particularly the GCC countries.

“We will use Egypt as a big base for our operations as well as an export hub for the GCC and North African markets,” he explained. “Egypt is a very attractive destination. Geographically, it is uniquely positioned at the center of the world, and it [hosts] several sea ports that present easy access to European markets.”

Through its Egyptian base, Marico plans to tackle markets where it is currently not present, such as Iran, Lebanon and Algeria.

But geographical location is not the only reason Marico had its eye on Egypt. “The investment climate is very attractive in Egypt. With this new factory, we were [licensed] the land within 24 hours and were able to begin construction work in seven days,” Kripalani stated. “This is a fast response that we have not seen anywhere else so far. It shows that the government means business.”

Marico is also betting on Egypt’s large consumer market, with a population of roughly 78 million. Despite low per capita income and high poverty relative to other Middle East nations, Egyptians spend around 5 percent of their monthly salary on cosmetics and hair care products, according to company estimates.

“Egyptian consumers also look at value-added offers. They take advantage of good products that are offered at affordable prices,” said Kripalani.

He added that the company primarily targets middle-class consumers and offers products in multiple sizes to suit various purchasing powers. “We do research as well as door-to-door surveys and see what consumers look for when grooming their hair.”

During Marico’s first year of operations, the company tapped Egypt’s economic growth which posted its fastest pace in decades at 7 percent.

However, escalating inflation rates, coupled with a global economic downturn, later emerged as a tough challenge for Marico.

“The first year went very well, and operations were good. I can say we met our expectations,” Kripalani explained. “However, this year we face challenges, both internal and global.”

Consumer price inflation in urban parts of Egypt shot to a 16-year high this summer and currently stands at 21.5 percent in the year to September, which compares to 9.3 percent a year ago.

Meanwhile, the global economy has been thrust into the center of a financial tempest that is expected to weigh on Egypt’s growth rates and purchasing power.

“Inflation in particular is a challenge, especially because we target lower-income segments,” he pointed out.

To combat rising inflation, Marico plans to expand its consumer-base and include higher segments of the society. “We will also offer low-priced products that come in smaller packages tailor-made to lower-income segments.”