MARICO BUYS COLGATE’S MALAYSIAN BRAND

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MARICO, makers of Parachute hair oil and Saffola edible oil has said that it has bought Colgate-Palmolives’ haircare brand Code 10 for an undisclosed sum, as it pushes for revenue growth in the Southeast Asian markets and strengthens its position to fight future competition in India.

"Code 10 brings strong consumer equity in our portfolio and this brand will provide us a platform in the Southeast Asian market,” said Marico international business CEO Vijay Subramaniam. “Code 10 is the third largest-selling brand in Malaysia and enjoys a double-digit market share. We are looking at a faster organic growth in Malaysia’s 150-million ringgit hairstyling market.”

The acquisition by Marico’s Malaysian unit, estimated to be about Rs 25 crore by analysts, also gets intellectual property rights related to the brand from Colgate-Palmolive. Marico declined to comment on the transaction value.

Indian consumer goods companies are buying up brands and product technologies around the globe as they prepare to increase their offerings in a market that is growing at about 20%. This is Marico’s second overseas acquisition in the segment after buying Egypt’s ‘Hair Code’ in 2009. Godrej Consumer is reportedly planning to buy some brands of Sara Lee Corp. Global companies with multi-billion dollar revenues are selling brands and products that are insignificant for their profits, but makes sense for relatively small Indian companies.

"The approximate ticket size of the deal is around Rs 20-25 crore and the brand Code 10 has just above 10% market share in Malaysia, which means it has yet to grow in that market,” says Anand Shah, FMCG Analyst, at Angle Broking.

Marico’s shares rose marginally to end at 103.25 on the Bombay Stock Exchange.

Marico, the dominant player in the Indian hair care market with brands such as Mediker, Shanti Badam Amla and Nihar, will not launch Code 10 in the country in the near future, since its focus would be to make it grow in Malaysia. “For a company like Marico, it makes sense to develop separate brand for Indian market rather than launching an acquired brand in the domestic market,” says Shah.

The Mumbai-based company with a sales of Rs 2,390 crore (about $478 million) during 2008-09, gets 21% of its revenues from overseas market.

The company plans to buy more such brands in the haircare segment. The consumer goods market is growing by 15-20% in urban and rural areas where demand for branded products are growing due to increased disposable income, said Milind Sarwate, chief-HR & strategy, Marico.

As part of the deal, Colgate-Palmolive will continue to distribute the Code 10 products for a limited, but unspecified period in Malaysia.

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