Saffola is one of the most legendary companies in Indian business history.
In the past 21 years, the stock price of its parent company Marico has shot up by 17,200% going from just ₹2.67 to ₹487 in 2022.
If you look at the market share of Saffola in its category, it stood at an insane market share of 81% in 2021!
They have been the undisputed king in the ultra-premium edible oil segment for the past 30 years.
The question is,
How did the Mariwala family turn Saffola into such an iconic brand in India?
What exactly was their Business Strategy that enabled them stay ahead of their giant competitors like ITC and Hindustan Unilever?
What are the business lessons that need to be learned from the iconic rise of Saffola in India?
This is a story that dates back to the 1960s. During this time, medical research identified Safflower oil as a beneficial ingredient to heart health. This was because it had a higher proportion of polyunsaturated fatty acids. But the problem back then was that only crude safflower oil was available in the market and it had a very bitter taste.
So every month, the Mariwala family would receive postcards from heart patients who were requesting a few litres of oil to be refined.
When this started happening consistently, the Mariwala family would make special arrangements for refining a small quantity of safflower oil.This is when they considered that there may be a bigger market for Safflower oil in India.
On looking deeper, they found that India was home to one of the highest numbers of heart and diabetes patients in the world.
In fact, even today, the Public health estimates indicate that India accounts for approximately 60% of the world’s heart disease burden; and Heart disease is the #1 cause of mortality among Indians.
But in spite of the existence of this major problem there were 3 major gaps in the market:
1) Only crude safflower oil was available in the market which was very bitter in taste
2) The few refining companies in the market were unbranded and unreliable. Hence doctors could not recommend safflower oil even if they wanted to.
3) Lastly, patients either had to get it refined from a local businessman or completely compulsive oil cut off oil from their diet.
This is when in 1965, the Mariwala family decided to launch a product under the Bombay oil company; Saffola.
Looking at the humongous market size and the dire need for the product, most of us would think Bombay oil would’ve captured the market easily, right?
Whenever you are the first mover in the market, the biggest threat to your brand is Unawareness.
This is something that you will see with a lot of game changing products.
A classic example is Preganews.
In spite of Preganews being as affordable as ₹50, and offering extreme convenience in detecting pregnancy, rural women had no idea that a pregnancy detection kit existed.
Even if they did, they didn’t know how to access and use it.
Similarly, in this case, establishing and selling products was not enough, Saffola had to create awareness about it’s product and heart ailments.
So the team identified 3 critical stakeholders to build a solid name in the market:
Once a patient is recommended a product by a doctor, it would turn the customer into a lifelong buyer.
#2 Consumers with heart issues
So very systemically, the Saffola team started with ‘Heart Health Campaigns’ in partnership with leading medical institutes like Escorts Health Institute, Bombay Hospital and others.
Apart from that, several conferences were held among the circles of cardiologists to spread the word about the product.
#3 Regular consumers
Both awareness campaigns, and free cholesterol checks were conducted so that the people would know that Saffola stands for a healthy heart.
By the 1990s, the scale of these campaigns were so huge that they were being conducted in 9 cities for 85 lakh people.
In fact, the company even started a ‘dial-a-dietician’ programme whereby people from all across the country could speak to nutrition experts, and seek advice about diets and lifestyle.
This way, Saffola was adding value in the life of the patients that by default, the perception of Saffola was shaped as a dependable and authentic brand.
But even after capturing the market of patients, there was still one problem.
For an FMCG product like Saffola, the market of heart patients was very very small. If Saffola sold products to only patients, they would be perceived more like a medical product meant for sick people.
This is when Saffola realised that the biggest market for their product was not the segment of people affected by heart disease, but the segment of people who wanted to prevent heart disease!
This market was around 10 times more than the patient market!
They targeted this audience through extensive TV commercials. They enlightened people about 4 major risk factors that cause heart problems: Obesity, Hypertension, Diabetes and Smoking.
This was followed by radio campaigns, newspaper ads, and other forms of media; Each of them communicating the exact same message; ‘Prevent heart disease’.
Saffola cleverly designed this Ad by telling the story of 45+ obese men whose wives were extremely concerned about the health of their husbands. The beauty of these commercials was that although the consumer was primarily men, the customers were the women of the house who took the decision of which oil to use. The commercial instilled fear in the minds of housewives, which automatically led to the wide-scale acceptance of Saffola.
All of these campaigns together created a fruitful impact. A survey carried out reflected that 80% of the user base shifted from other oils to Saffola.
This shows that the marketing was nothing short of extraordinary!
The best part was that, because Saffola had created such widespread awareness about its brand and provided life saving value additions, the company was able to sell the product at an ultra premium cost.
The question is
When the heart oil market was so huge with high margins and potential to grow, how is it that other brands like ITC and Hindustan Unilever couldn’t beat Saffola?
This is where Saffola’s brand protection strategy came in.
In the eighties, both HUL and ITC saw an opportunity in the sunflower oil market and they came out with their own products named ‘Flora’ by HUL and ‘Sundrop’ by ITC.
Even they spent a ton on high-intensity advertising, claiming health benefits just like Saffola.
They even priced their products at 5–10% lower cost than Saffola. This is what started a ferocious pricing war between 3 of the biggest FMCG brands in India; Marico, ITC and HUL.
The threat here was that; if Marico brought down the price of Saffola, they would lose out on the humongous profit margins. If they lowered their prices by 10% they couldn’t suddenly hike their prices.
To put it in numbers; if they sold 10 Crore units at ₹10 lesser, they would lose ₹100 Crores right away.
But at the same time, if they did not lower the prices, HUL and ITC would erode their market share and kill Saffola!
So what did Saffola do?
They opted in for a 3rd option; Introducing a low cost variant – Sweekar refined sunflower oil.
This protected the premium brand of Saffola.
This way, the brand perception and value of the premium brand was not diluted, and the company also has a hold over the lower segment of the market.
This prevented the competition from achieving the economy of scale and eroding the market share of the premium product.
Sweekar targeted ITC and HUL in every aspect; matching the price, the media share and the distribution reach. By 1991, Sweekar and Saffola had together become #1 brand in the refined edible oils market with a 14% share.
Infact, 7 years later, in 1998, Sweekar was the second largest national brand after ITC’s Sundrop. It had revenues of around ₹100 Crore and sold three times the volumes of Saffola. But in spite of this, it only contributed 1/3rd of Saffola’s unit margin.So ITC and Sweekar could not come close to Saffola’s profits. This is how Marico protected Saffola’s brand perception and profits from falling.
The last aspect of Saffola that is fascinating, was the brilliant business acumen of Harsh Mariwala; how he brilliantly entered the untouched market.
In his book, Harsh Realities, he talks about the troubles of the safflower market.
This is a story that dates back to the 1990s.
There was a dire shortage of Safflower seeds in the market. Safflower was a single season crop so they had only 3 months to stack up the raw material inventory for the entire year. Because Marico was the only importer of Safflower oil in India, the shipments used to take several months to arrive.
Due to this, working capital suffered, and higher interest costs impacted the Saffola financials. They had no other option but to increase their cost, and that was very risky.
Meanwhile, Medical Opinion had also started changing. Along with polyunsaturated fatty acid, doctors also suggested a balance of both poly and monounsaturated fatty acids. If Saffola were to provide this balance, the only option was blending oils together.
But back then, the Government of India didn’t permit the blending of oils as it would widen the scope for adulteration by manufacturers. In this case, any entrepreneur would consider this an unsolvable constraint and move on.
But what did Mr. Harsh Mariwala do?
He gathered his team of Food Technologists and told them to come up with scientific arguments for why blending and adulterating were two different things.
They convinced the Government that blending would bring in multiple benefits to the market:
1) The traders could sell blended oils during the bad agricultural season without fluctuations and shortages.
2) The customers can get better prices because blended oils would help the industry offer consumer packs at stable prices and different price points.
3) It offered greater flexibility for the farmer to grow different oil seeds based on weather patterns.
This it was a win-win for all the stakeholders.
The tech team of Saffola petitioned the Food and Drugs Department and did everything in their capacity to convince the government.
Finally permission was officially granted in 1998.
Now Marico could launch the Safflower oil blends with Corn oil and with Rice Bran oil in addition to their existing product range.
As a result, Saffola was further able to extend its offering, and became a first mover in the market.
Now they no longer had supply shortages; no more struggles with profits margins; and no more price hikes!
This is how the Mariwala family created a multi-million dollar brand with Saffola, have a market share of 81% in the super premium edible oil segment, and have been standing as a market leader for 30 years now!
Lessons we can learn:
1) Inventing a solution to a critical problem doesn’t mean the market will embrace you.
You have to educate the customer about the existence of the problem first.
Saffola did this with heart health awareness campaigns for the Indian middle class, only after which did people actually value the product.
- If you have cultivated the ability to command a premium price, that little delta of 10% is a billion dollar asset. Never dilute your brand perception because of competition.
Apple does this by avoiding the low cost line up itself. Volkswagen does this by diverse sub brands based on the different segments. Saffola did this with its low cost sub-brand called Sweekar.
3) Lastly as Dhirubhai Ambani once said
“An obstacle in business can either be treated as an obstacle or a competition killer.”
In this case, while lack of safflower supply prevented players from entering the market, Saffola entered the market and became the first mover in the industry.
While government rules prevented players from entering the safflower oil market, Harsh Mariwala challenged the rule, and turned it into an opportunity!