"Consumer-Focused R & D is the Future"

Dr. Sudhakar Mhaskar,
Chief Technology Officer, Marico Limited
Citing journey into product development for hair care category as an example, Dr. Sudhakar Mhaskar, Chief Technology Officer, Marico Limited shares his expert views on the Evolution and Critical role of R & D in the FMCG sector, Challenges to balance cost-efficiency with novel product development, Need for collaboration and the Trends in future for the growing consumer aspirations in FMCG in an exclusive interview with Mittravinda Ranjan.

Share some insights on the evolution of R & D in the FMCG sector as the strongest driver for business growth?
The role of R & D in any organised industry is to create future growth through innovations which satisfy consumer needs emerging out of evolution of society. The evolution can be in many spheres - economic, social, and cultural or exposures to new things. In FMCG, R & D is more challenging, as consumers experience the product first hand. In cosmetic industry, the challenges become more acute, as consumers wear the product on the body, in other words, there is an intimate experience with the products.
In the FMCG space, the consumer buys a product to avail of a certain benefit and to also create an experience. In this case, the experience is functional , which is a tangible benefit, as well as sensorial, which is about making a product acceptable for prescribed usage. This is where the role of FMCG R & D differs from a typical chemical research lab. The acceptance is based on meeting expectations from the product, which is out of a virtual image created in the consumers' mind. This virtual image is created out of the past experiences, i.e. cultural beliefs, previous product experience, climate, etc. The role of R & D is to understand the consumer framework of product evaluation proactively, and imbibe it in the design stage.
For instance, a consumer has used numerous hair oils while growing up, and based on his or her own experience formed an expectation from any new hair oil being launched. The name itself creates a list of requirements that the new product needs to attain. For example, Ayurvedic oil should be green, day hair oil needs to feel light, and rose oil needs to smell like rose.
Of late, product needs are changing at an ever-increasing pace due to the rapid evolution of consumer habits. Hence, it becomes critical for companies and their R & D teams to spend substantial time with consumers to understand their changing habits, which essentially requires a good amount of resource and time.
How does changing consumer behaviour impact the FMCG sector, along with the role of R & D with new innovations coming to play, such as developments in product packaging and so on? How are companies responding to this massive change?
As everything in life is moving to be quicker and more effective with time, it has not left the FMCG industry untouched. Specifically speaking about the personal care industry, there are three main trends that have emerged over time - effectiveness, faster to act and multifunctional. As the products evolve, consumers are demanding higher benefits and efficacy. The demand for higher potency is pushing R & D teams across the world to discover and synthesize new molecules. Consumers are also seeking greater results in a shorter time span. Additionally, consumers do not want to use multiple products for varied functional benefits. This has led to the generation of multi-functionality of benefits in products. For example, if a product provides hair nourishment, the consumer would also like to have anti-hair fall or maybe anti-dandruff benefits in the same hair care solution. Basis this demand, the evolution of BB, CC and DD creams have taken place.
When consumers buy the product, the thinking process actually has many stages, called moments of truth (MOT). In the personal care industry, consumers experience their products in the real sense, only when they buy it and take it home. Hence the decision to buy the product, which is called 'Trial', is based on the touchsee process in the store. The packaging of the product, which is known as 'First Love' in consumer language, decides the success of trial stage. As a result of this, packaging in FMCG has gained immense importance along with many other attributes of the product. Packaging conveys to consumers its benefits, value, premiumness and utility. Packaging evokes emotions in consumers which compels him to select a particular product amongst various choices. Thus, the role of consumers in shape and design has been greatly emphasized and studied lately.
In order to stay ahead of competition and also serve consumers better, R & D verticals are actually changing their operating model. The model is not to invent everything in the company, but leverage the strength of many others outside the company. So suppliers, vendors, institutions and trained experts are all roped in to make the innovation cycle faster and more effective. Research is being done at universities where the best of talent and infrastructure is available with the mindset of exploring the unknown.
Changes in the bottom-of-the-pyramid are another occurrence in India. As affordability starts spreading across population, consumers wish to move to level-next or the higher-end product category. If you observe the consumers at the bottom-of-the-pyramid, people use basic material because of cost constraints. So, a user of unbranded soap would wish to move onto branded soap bars and perhaps further to an international one or body wash. In order to help this move, companies develop bridged products with intermediate cost and sensorials.
How do you ensure affordability of products to the consumer?
It is known that in a developing market, the affordability of the product drives penetration and consumption. Affordability for the consumer is not only the MRP, but it is the experience delivered by the product at its best benefit-cost ratio. This is also called Total Value for Money (TVM) which the consumer creates in his mind in a very unique way.
There are many ways in which companies can achieve affordability. A very logical one is to reduce the cost of the product formulation and packaging. Several companies have on-going cost effective programs not only around product mixes, but across the entire value chain. The cost effective programs in Marico has yielded us good savings in packaging raw material cost.
Other way, is to make Low Unit Price (LUP) packs which is highly prevalent in most developing countries. The entire sachet market in the shampoo category is borne out of this consumer angle. This helps consumer to buy for an occasion or for a shorter period rather than investing in larger packs. It enables aspirational consumers to experience product at a lower outlay. The small product grammage also allows consumer to get fresh product at regular intervals and also allows them to switch the product if they do not like the one in use.
Another aspect that consumers look at is multi-functionality. As mentioned before, the new trend in skin creams is that of multi-functional creams like BB, CC and DD creams. It enables consumers to save their expenditure on separate products for different benefits.
How important is it for the marketing team to work out on a plan to create consumer awareness, considering there are many products in the market and each product is looking at creating a differential? How does marketing work towards projecting the relentless efforts of R & D in the right light ?
In any FMCG company, the convergence point of Marketing and R & D is the end consumer. Suffice to say it is imperative that marketing and R & D teams need to understand the consumer and his requirements in depth.
Many personal care products are launched every year, possibly in thousands, but very few succeed. It is therefore pertinent for products to be distinct and differentiated. Marketing actually understands the market construct in terms of product benefits, positioning and the value equation. This is the basis for identification of a new space for creating a differentiated product. On this brief R & D makes the product and tests with consumers in the market.
The product can be great in delivering the benefits, but if the saliency and relevance of the benefit is not called out to the consumer, the win is elusive. Marketing needs to know the pulse of their target consumers and communicate the product's benefits in a very effective way. This needs development of some specific clinical protocols, certain sensory cues or simple diagnostic tools. However this should be understood by and relevant to the target consumer.
Have there been any incidents wherein information from the consumer has been brought to the marketing, where R & D teams have worked on it to develop a new product or come up with a new formulation?
It is a tradition in India to use coconut oil for dry skin in winters, as it moisturises the skin and if used before bath, reduces the dryness of skin. But this tradition has been relegated only to the low-end consumers since progressive consumers demanded sophisticated products like body lotion for sensorial experience and functional benefits. Market research findings highlighted that there were 2-3 players that dominated the market. It was of paramount importance to thus create a product which will have a unique differentiator. How do you develop a product that exactly meets your consumer demands? How do you know what the consumer is actually looking for and what is the miss in the currently available products?
Consumer research indicated the limitations of existing products in meeting the holistic expectations from a body moisturiser. A unique product containing coconut oil which could withstand the tropical as well as dry climates in India along with delightful sensorial, was thereby created. The product, today, is a market success.
The best way to create a new product in any category is to target dissatisfied consumers or lapsers as these are the ones who are still using your product despite being dissatisfied. They are crucial because they have a need which the existing products do not satisfy.
Does the above mean, some formulation/modification has already been done, which is not equal to developing a new product from scratch?
This depends on the type of product and business objective. If the objective is to make a product for premium consumers, there is some cost advantage; hence you can take liberty of building on the existing formulation. However, if the objective is to create a product for the mass consumers or a low cost product for the current category, the ZERO based approach is adopted.
At Marico, we have successfully implemented a new model Called "Connect and Develop" where the intellectual property created by several people outside the company is tapped and brought into the company. In this model you leverage the global efforts and save the time required to create within the company.
Is Marico collaborating with other R & D institutes such as those by the GoI to source new information from outside or collaborating with academia, or reaching out to students trained at R & D in the company ?
We, at Marico, have three types of collaborations in seeking new knowledge from outside. We have a research advisory committee comprising of senior university professors and retired industry experts to guide us through the science/product development process. Secondly, since we cannot run all types of basic research programmes at our R & D centre, we sponsor projects at selected technical institutes. The third collaboration is for infrastructure support and capability. We work with many laboratories in India and internationally, who have specific sophisticated instruments. These facilities enable us to solve the critical business problems quickly .
When you ship products to International markets, what is expected of the R & D at Marico?
We are an international organisation, operating in 6 to 7 countries. In every country, the consumer ethnicity, culture and usage patterns are different. At Marico, we create capability in every region to understand the consumer habits and behavioural patterns. Product creators have to pick these consumer patterns and understand them, because it is critical for product design development.
Also Marico has two regional technology centres in South East Asia and the MENA region. Whichever place the product is created; it is always tested on target consumers in that country. This is important as the sensory requirements are different across geographies.
Are there any business collaborations with other firms in International markets, to push the products not from an R & D perspective but from a marketing and distribution viewpoint?
Marico has acquired companies across developing regions in its course of inorganic expansion. These companies had their own products under different brands in the host countries. When the integration is completed, the GTC of Marico looks at these products several times for learning and in a few cases for improvement.
What will be the future of FMCG and the role of R & D to drive the business? The future trend in the FMCG sector is all about seeking higher benefits at a lower cost, incorporating multi-benefits and shorter time frames for benefit delivery.
If you look at the future in terms of products, focus on naturals is growing as consumers are increasingly becoming conscious of the health cons of using excessive chemicals. Therefore, Naturals is an area which is booming with new opportunities, and the presence of Ayurveda makes the journey in India possible and challenging at the same time.
The beauty from within, i.e. through foods, is catching up in the western world. Nutrition is linked to overall health and hence it will also deliver beauty and wellness. New concepts like pollution prevention, epigenetics and genomics are making an entry in order to make new-age personal care more scientific and also cause-targeted. As the longevity is increasing in India, senior consumers will demand products with specific benefits for them.
Customisation is a new trend which is picking up as every consumer feels that he has a different physiology and therefore needs a different product. Cost-efficiency is a trend which is going to stay in the country for long, because most people belong to the bottomof-the-pyramid. Also, premiumisation on products is another trend to be witnessed soon in terms of better sensorial, naturals, multi-benefits and short-time.
Tell us more about the Marico Science Day?
Marico Science Day is an activity which started about four years ago to attract experts from outside to share their rich experience in Science and Technology, the theme being "Science inspired by Science". Many eminent speakers from the different science streams have spoken at this forum. On this platform, our senior partners from R & D also speak and exhibit possible new directions for the business.