Changing Kaya's positioning was a mistake, says Marico Chairman Harsh Mariwala

Marico chairman Harsh Mariwala decided to de-merge his Rs 366.8 crore retail wellness brand, Kaya, from the flagship company last year. The decision, he says, has paid off. Marico Kaya Enterprises has finally made profits since its launch in 2002. In a conversation with Ajita Shashidhar, Mariwala talks about the Kaya strategy and the lessons learnt from the mistakes the company made in the past. Excerpts:

Q-What was the idea behind de-merging Kaya and listing it as a standalone entity?

A- You have to see holistically both from a Marico as well as Kaya point of view. In the initial phases Kaya was part of Marico and as Marico grew, Kaya also grew. We realised that the skills needed to manage a services business are different from the skills needed to manage an FMCG brand . The mindset in selling consumer goods with huge advertising budgets is very different from managing Kaya. At Kaya, we interact directly with customers, versus Marico where we don't meet the customers. We meet the trade and the supply chain is through the trade. Customer experience was very important for Kaya, it wasn't important for Marico. Cost consciousness, having an entrepreneurial kind of a drive because of the small business, is very important to Kaya. So, we realised that. At the same time, Marico had three different businesses -- the international business, domestic business and Kaya. So, we started seeing synergies between international and domestic businesses in terms of supply chain synergy, marketing synergy. At one level we said that we will blend, then Kaya was standing alone, not really fitting into Marico's structure. So, we decided to spin off Kaya into a separate subsidiary.

Also, since there was big brother Marico taking care of the financials, that much pressure wasn't there on Kaya in terms of taking care of financial performance. If we made them stand alone then there is nobody to support them. We felt that would energise the company from an employees' point of view. We also felt that if Kaya gets listed it will be an opportunity for Kaya employees to belong to a company which has a separate identity and image than Marico. All this has materialised over the last one year. We have been able to turnaround the business. We are getting extra visibility, at least in the capital markets. I think it has been a good decision. Separately, combining Marico's international and domestic business has paid off good dividends.

Q- Kaya, at the time of launch, was positioned as a dermatological-led skin 'cure' services brand. You then went on to reposition it as a skin care service brand wherein you offered regular skin management services such as facials and so on. Today, you have once again gone back to your original positioning of 'cure'. What has been the learning?

A- Looking back, the change in positioning was a mistake. We should have stuck to the positioning. If you look at my own history, I haven't changed positioning of anything. Parachute stands for nourishment, Saffola stands for heart care. Kaya wasn't doing well and in frustration I decided to change the positioning. When the business is not doing well, you tend to get certain ideas which you think will lead you to profitability, but you tend to overlook the fundamentals. We thought that by going to the care mode, we will get a lot more customers and they in turn will go into the cure mode. A lot of our advertising went towards pushing our skin care positioning and  'cure' suffered. Even the doctors in the clinic were not feeling belonged.
Changing the positioning was a wrong decision, but luckily it didn't happen for a very long time, so we could easily shift back to cure, which was our original DNA.

Q- Did the change in strategy lead to closing down of stores?
A- No, it didn't. The focus went back to investing in technology for 'cure' and marketing those newer initiatives. Now the 'care ' services continue but what gets promoted and invested is in the 'cure' part. So, the doctors are feeling far more energised, the business has become much stronger.

Q- What percentage of revenue comes from 'cure'?
A- Two years back the 'care' services contributed more than 60 per cent of the revenue, now it's the other way round. What happens in care is that you think you are offering better facials but the customer experience here is quite different from what you get in a conventional salon or spa. We don't really pamper them with a massage. Our services are more about safety and efficacy than pampering.

Q- What kind of investment have you made in technology after your shift back to the 'cure' positioning?
A- We have invested in laser hair removal, pigmentation through Q Switched machines, in skin-tightening and anti-ageing solutions, in platelet reducing plasma and so on.

Q-What's the way forward for Kaya?
A- We have 87 clinics in India and 26 outside, and the plan is to add another 10-15 clinics in India a year and two-three clinics a year overseas. We have prototyped what we call Kaya Skin Bar last year, we will scale that up too. Kaya Skin Bar is a product-only format. We have three stores in Bangalore. It is a smaller footprint than Kaya (150 sq.ft. to 300 sq.ft. of retail space. This will enable us to engage with our customers at multiple touch points. We also hope to scale up this model much faster as being a product-only model it provides you opportunity to look at franchisee as an option to scale. By the end of the year we are planning at least 10 Kaya Skin Bars.

Q- Are you looking to enter newer verticals under Kaya? You launched the fitness brand Kaya Life which you withdrew. What went wrong there?
A- There is lot of scale up to be done in Kaya itself. Kaya Life was more to do with lifestyle change, one needs to diet, exercise, unlike competition which had a more passive weight loss reduction model through machines. That actually gives short-term benefits and the consumer is also looking for quick solutions. For those who were willing to regulate their diet and exercise, it had good traction, but that was not critical mass. I had personally spent lot of energy in developing Kaya Life, but unfortunately it didn't work.

Q- What are your revenue goals?
A- We hope to grow by at least 20 per cent year on year.