Harsh Mariwala on grooming the next generation, his family office, and Marico’s D2C bets | Company Business News

New Delhi: Business families should engage the next generation in entrepreneurship early, while also allowing them to pursue interests such as working with startups, facilitating unlisted deals, and philanthropy, said Harsh Mariwala, chairman of Marico Ltd.

“It’s very important for the family elders to create the right culture among youngsters to inculcate values about business… it means taking youngsters to factories, to marketplaces—I do that with my grandchildren,” Mariwala said, speaking at the Mint India Investment Summit in Mumbai on Saturday.

“I think the second thing is to ensure that just because you are born in a business family you don’t have an entitlement mindset where you assume that you will automatically go into a leadership role… I believe that simplicity is required for youngsters to grow up; you can’t give them everything on a platter. They have to put in the hard work to succeed,” he said.

Mariwala’s comments come as banker Uday Kotak recently expressed concerns about the trend of young business heirs focusing on managing family offices and investments rather than pursuing entrepreneurship and building new businesses.

Mariwala established Marico, a listed consumer products company operating in the health, beauty, and wellness sectors, in 1990. But prior to that, he had begun his career with Bombay Oil Industries, his family’s business.

On Mariwala’s family office

The Mariwala family set up a family office called Sharrp Ventures in 2015 for diversifying investments. The firm manages the proprietary capital of the Harsh Mariwala family, the founding family of Marico.

This includes investments in public market funds, private market funds, and direct investments in unlisted enterprises. Rishabh Mariwala, Harsh Mariwala’s son, is founder and managing partner at the fund.

“For me, a family office extends beyond stock market investments. It encompasses a wider range of activities, including investing in and scaling unlisted companies, managing taxes, and engaging in philanthropy,” Harsh Mariwala explained at the Mint event.

“We were very clear that we will only invest in consumer-facing businesses. Those are the kind of companies we will support and mentor. We are very clear that about 50% of investments go into unlisted companies—most of them are consumer-facing,” Mariwala added.

Mariwala said that defensive sectors, particularly fast-moving consumer goods, are currently witnessing considerable upheavals, driven by competition from emerging brands and changes in distribution channels.

“Each and every business is getting disrupted—be it geopolitical developments or emergence of technologies and changing consumer trends. The key thing for any business to do is to evaluate how sound their business is and what is disrupting them and whether it is an opportunity or a threat,” he added.

Digital threats and opportunities

The emergence and popularity of direct-to-consumer or D2C brands also poses a threat to the traditional FMCG sector, Mariwala said.

“Prior to that all of us thought that we (FMCG) were the most defensive sector. It is very difficult for any new player to build an all India distribution network, you need big advertising budgets to launch a new product. D2C (direct-to-consumer) brands now require a fraction (of budgets) in terms of marketing costs. They don’t have to go to all retail outlets; they can rely on e-commerce. All of a sudden, those entry barriers have vanished,” he said.

Despite these challenges, Marico has responded by acquiring a series of digital-first, new-age brands and launching its own in recent years. “We said we have to look at it from an opportunity perspective. The way we are going—we would be one of the largest D2C players in the country,” he added.

In 2021, Marico acquired a majority stake in Apcos Naturals, the parent company of Just Herbs, a premium skincare brand. In 2022, Marico acquired a majority stake in HW Wellness Solutions, which sells packaged foods under the True Elements brand. It followed that with a majority acquisition of Plix, a plant-based nutrition company, for Rs369 crore in 2023, and has fully acquired Beardo, a male grooming brand.

Marico anticipates that, over time, its D2C brands will yield returns similar to those of its established FMCG brands, Mariwala said.

“D2C brands funded by private equity players have been losing a lot of money. We feel that we can actually get economies of scale when we combine those four brands,” he said. “We have a definite task of turning around our D2C brands much faster. Over a period of time we see our D2C brands giving similar returns as our FMCG brands,” he said.