Personal care major Marico has called a halt to the expansion plans of its services business, Kaya Skin clinics in India and is currently reworking the busines strategy, top officials close to the development said.
Marico said a drop in discretionary spends and price hikes following the imposition of 10% service tax on services has affected consumer demand. The company is likely to focus on operating fewer but profitable clinics in line with the current retail industry trends, officials said.
Milind Sarwate chief (finance, strategy & HR) said, “We are taking stock of the business and may rework the overall strategy to ensure that it is profitable.” Ajay Pahwa, CEO, Kaya said the company is focusing on improving the value of services offered. “In this scenario if we stop expanding, we would start making money, but then scale is important for a company likes ours and within a two-three year timeline we should achieve higher growth.We are confident about the medium and long term growth and profitability prospects of Kaya Skin Clinic.”he said.
Marico had launched Kaya skin clinics in June 2002, with the first store in Mumbai. The company has 84 stores in 27 cities in India and 15 stores in 9 cities in the Middle East and one clinic in Bangladesh. Marico has also launched skin care and hair care products under the Kaya brand and has ambitious plans of scaling it up through innovations, company officials said. Kaya skin care clinic is a part of Rs 2000 crore plus Marico which owns brands such as Parachute and Saffola.
Company has plans to put on hold its further expansion to Kaya skin clinic in India and concentrate more on profitability of current clinics. However, it will continue to add more branches in its Middle East portfolio where profit margins are higher due to ready market and non tax benefits.
Kaya’s skin care turnover grew by 10% during the quarter ended Dec’09. However, a cut in consumer spends and price hikes by Kaya company affected growth.” Kaya has expanded to 100 outlets which include Bangladesh and Middle East along with domestic locations.
Source: The Economic Times