Operations Case Study

An Operations Case Study on Acquisition of Personal Care Brands of Paras from Reckitt Benckiser

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Nitin parked his car in the office parking lot and started walking towards the elevator. He looked forward to a challenging and exciting day. The office environment was infectiously enthusiastic these days (even more than the usual!); Marico had taken a big step by acquiring the personal care brands of Paras from Reckitt Benckiser. Nitin checked his mail in the elevator; subject line read Paras brands Current Situation and Way Forward. Nitin smiled- the brands were still being called Paras brands even though Marico had already acquired them. His heart sank when he went through the excel sheet attached with the mail. The excel sheet contained the actual material stock figures- details of the stocks currently present at various points in the supply chain- depots, distributor points etc. The material stock spread across batches and to top it all, the stock value was significant!

After taking over the portfolio, the Marico team had decided that they will focus on a few categories initially- Deodorants for Men, Male Grooming, Hair Gels and Hair Serums. The brands in these categories- Set Wet, Zatak and Livon- were to be relaunched in the first phase- the benefits accrued from the margins and synergies would be immense. However, the material stock data made Nitin question the

decision to re-launch these brands. The best before dates for all the products was 24 months. What should be done with the various categories of stock- expired, soon to be expired- and the brands which were to be launched later? This was a difficult question and he decided to reserve his judgment for now. He moved on to the next sheets; it had the sales figures of various brands over the last few years and also the market share figures.

He also knew that the value share of Set Wel Gel had increased from 23% in 200809 to 28% in 2010-11. Livons value share had increased from 61% in 2008-09 to 62.5% in 2010-11. For Set Wet Deo, the value share average across 2009-11 was around 7% and for Zatak, this figure was around 1%. At time of the acquisition in February 2012, the deodorant category was growing in excess of 50%, hair gels around 30%, serums or leave-in conditioners at 20% and the hairfall category was growing at close to 13%.

Clearly, the market share of some of the brands had been declining over the years due to low focus by the owners of the brands- sales targets were not being aggressively driven in the market. This meant that this data did not give an accurate representation of the market potential. To add to his woes, Nitin knew that some of the categories were new to the organization- the team had limited understanding of the way these categories behaved. Nitin had time till June- that is when Marico would start handling the stocks.

Will you help Nitin with the following? 1. Material stock handling strategy: What should Nitin do about the stock lying at the depots and with the distributors? 2. Demand forecasting: What scenarios should Nitin consider when forecasting demand? Also, how much demand should be forecasted? Assume that Maricos growth aspiration was 25% across all categories.