Brand equity plays a major role in a volatile business milieu as consumers generally buy trusted brands rather than trying out new ones, observes Mohan Goenka, Director, Emami Ltd
Foundation
Kolkata headquartered Emami Ltd (the flagship company of the Rs 6,000 crore conglomerate Emami Group) manufacturers and markets personal and healthcare products, and has a marked presence in India and internationally. Co-founded by childhood friends R S Agarwal and R S Goenka in 1974, the venture was initially registered as Kemco Chemicals. The company that operated from a small office in Kolkata, began manufacturing cosmetics and Ayurvedic medicines under the brand name Emami. It launched various products such as talcum, vanishing cream, cold cream and glycerine soap. The products became popular with consumers through the mid 1970s.
Four years into operations, Kemco, in 1978, acquired a sick unit of Himani Ltd (the 100 year old cosmetic producer was incorporated as a private limited company in 1949). Although the business was in dire straits, it enjoyed trusted brand equity, especially in Eastern India.
Reminisces Mohan Goenka (son of R S Goenka) and Director, Emami Ltd, “Buying a sick unit and turning it around into a profitable venture was a considerable financial risk for the founders, as they were a very young organisation at the time. But they also realised the opportunity it offered for the growth of the company; acquiring Himani Ltd proved to be a real turning point.” Under the Himani umbrella, flagship brand Boroplus Antiseptic Cream was launched in 1984. In later years, Boroplus Prickly Heat Powder and other products and brands were launched.
1990s onwards
During the1990s, a flagship brand Navratna Cool Oil was added to Himani’s kitty. Also, to increase production, the company opened a second factory in Pondicherry. A key milestone was achieved in 1995 when Kemco Chemicals was converted into a public limited entity, and rechristened Emami Ltd followed by a merger with Himani Ltd in 1998. In the following years, the company began to focus more and more on innovation, and began adding more brands and products to its product basket. It also widened its distribution network and increased its customer base.
“In 2005, Emami created marketing history in India by launching Fair and Handsome – the first fairness cream for men in India. The product was a unique outcome of marketing research based on consumer insight, suggesting that 30 to 35 percent users of fairness creams in India were men with a growing interest in personal grooming,” Goenka apprises.
The company achieved yet another milestone when it acquired the century old Zandu Pharmaceuticals (a household name in India) with an investment of Rs 730 crore. Goenka points out that it was one of the biggest acquisitions in the history of FMCG business in the country at that point of time. The deal brought Zandu Balm, Zandu Chyawanprash, Zandu Kesri Jeevan, Zandu Pancharishta, Sudarshan, and Nityam Churna brands under Emami’s fold.
Present scenario
Currently, Emami Ltd has 7 manufacturing units in India and one in Bangladesh. Its brand portfolio consists of power brands such as BoroPlus, Navratna, Fair and Handsome, Zandu Balm, Mentho Plus Balm, and Fast Relief. Goenka informs that Emami produces over 250 products in personal care and healthcare categories, many of which are market leaders.
The company’s international footprints span more than 60 countries. With a current market share of 74 percent, Boroplus is not only the largest selling Antiseptic Cream in India, but also in Russia, Ukraine, and Nepal. While Navratna with 55 percent is a leader in the cool oil category, Fair and Handsome also rules its category with a current market share of 63 percent. The brands offer varied sku sizes at multiple price points, including sachets. The company has also brought forth packaging innovation by introducing Rs 1 sachet packs for Navratna Cool Oil and Navratna Cool Talc.
Emami has been pursuing innovation, product launches and extensions quite aggressively. In recent months, it has launched Zandu Vigorex (an energy and vitality product), Boroplus Anti Pollution Face Wash, and Fair and Handsome Instant Fairness face wash (the first brand extension of Fair and Handsome). Emami 7 Oils in One (hair oil) is a new addition.
The company has ventured into the deodorant market with the HE brand deodorant for men, and has roped in Bollywood superstar Hrithik Roshan as its brand ambassador. A pan-India rollout of the product is currently under way, beginning with 23 top cities including metros and mini metros, tier I and II cities in the northern, western and eastern markets in the initial phase. The company is confident that HE will carve a significant consumer mindshare and establish itself as a dominant player in the next few years.
More recently, Emami has entered into an agreement with Mumbai-based Royal Hygiene Care Pvt Ltd (RHCPL) to acquire the ‘She Comfort’ brand of sanitary napkin. This marks Emami’s foray into the Feminine Hygiene space. She Comfort, considered one of the top five brands in its category in India, will add a new dimension to Emami’s existing portfolio and strengthen its presence in the personal and healthcare segment. The acquisition is a part of the company’s inorganic growth strategy and is being funded through internal accruals.
Emami will further the benefits of feminine hygiene by offering best quality products at affordable prices, and use its well entrenched distribution network to reach both rural and urban markets. Sanitary Napkin with a current market size of over Rs 2,100 crores is a growing category with low penetration and is growing at 19 percent. Although a relatively new entrant, She Comfort with its differentiated positioning of ‘rash free’, has been able to make its presence felt in a market dominated by multinationals and garner a good consumer base and trials due to excellent product quality. The brand offers a range of comfortable, easy to use, quality sanitary napkins available in various sizes, thickness and dimensions.
Awareness of feminine hygiene is still not at an optimal stage in India. The sanitary napkin market is currently a low penetrated category. However, with growing literacy and awareness of healthy lifestyle, more and more new consumers are entering this segment, fuelling the growth tremendously and presenting brands an opportunity.
Distribution and supply
The company’s distribution network has grown manifold in both domestic and international markets. Its five regional distribution centres (mother warehouses) cater to 33 depots in different states. “Domestically, we have created a presence across all states. Our products are sold in over 40 lakh retail outlets across India through a network of 2,500 super stockists who in turn cover about 6,000 sub-stockists. We have a field strength of over 2,000 people who are directly reaching almost 6 lakh outlets. Considerable investments have been made for increasing penetration into the rural heartland. Internationally, we are focusing on countries in the CIS and Eastern Europe (CISEE), Middle East, North Africa and Pakistan (MENAP), and SAARC and SEA (SSEA) regions,” Goenka informs.
For increasing rural distribution, Emami has launched project ‘Swadesh’ – a direct distribution channel aimed at enhancing the brand’s penetration in rural markets. The project follows a combination of various distribution models, including the hub and spoke, direct distribution, and van operations. Adds Goenka, “Swadesh currently covers close to 8,000 villages with a population of 20,000 and more. However, in states likes UP, Bihar, and West Bengal, several villages with a population of 7 to 8 thousand are also covered. By 2015, we plan to extend our reach to about 20,000 villages via this channel.”
The company has also structured its sales organisation under the project so as to specifically focus on rural sales. In many states, a separate field staff has been appointed to cover the rural markets. “The move has given tremendous push to our expansion plans in rural markets, and it has positively impacted our urban coverage as well,” says Goenka.
Modern versus traditional trade
The company has balanced skews across regions, though, in recent years, the growth has been marginally higher in northern India. Also, the emergence of organised retail in India has put forth certain challenges for Emami. Modern trade requires a different approach – right from the quality of people to consumer interface, feels Goenka, and believes that the added element of conflict between organised and traditional retail channels cannot be undermined; plus supply chain challenges in organised retail are also different from traditional retail. “We have a specialist key accounts team to manage modern trade channels. Category management, brand visibility, and consumer engagement via varied activations have now become key components of our success.”
He informs that the company has forged strong relations with organised retailers by assisting them in category management, which has been mutually beneficially. They also ensure transparency and level playing amongst all the channels. As a result, despite a sluggish economic growth and high inflation, Emami has increased its market share across all key product categories and delivered good profits.
Marketing and promotions
“Our marketing strategy is based on a thorough understanding of the consumer,” says Goenka, adding that the company spends considerable time and resources to understand consumer needs, and in innovating. “Innovation has been one of our key strengths and we continually pursue it in all aspects of our business, but more so in product and packaging development.”
Emami’s product development is an ‘insight and innovation’ led process, which builds sustainable and long-term consumer franchise. For marketing, Emami has effectively utilised celebrity endorsements to engage and communicate with consumers for almost all of its brands. Its list of brand ambassadors include popular personalities from the field of entertainment and sports, namely Pandit Birju Maharaj, Amitabh Bachchan, Shah Rukh Khan, Madhuri Dixit, Kareena Kapoor, Sonakshi Sinha, Bipasha Basu, Kangana Ranaut, Yami Gautam, Milkha Singh, MS Dhoni, Gautam Gambhir, Virender Sehwag, Mary Kom, Saina Nehwal, Vijender Singh, Sushil Kumar, etc.
According to Goenka, celebrity endorsements have successfully complemented the company’s aggressive consumer engagement initiatives targeted at experiential marketing. Additionally, the company is now active on social media, besides touching a chord with rural consumers through participation in events such as melas, haats and jatras.
Overcoming challenges
Economic depression and inflationary conditions are a major concern for FMCG business as consumers hold back purchases and cut down on discretionary spend. “We also have to deal with challenges posed by erratic weather conditions because our product portfolio is predominantly season specific,” says Goenka. He proposes that manufacturers should be dynamic enough to quickly and suitably respond to market changes. Identifying gaps for differentiated products and innovation too plays a major role in addressing market challenges.
He observes that brand equity plays a major role in a volatile business milieu as consumers generally buy trusted brands rather than trying out new ones. “We must remain focused on innovation, and continue to be aggressive with new launches and brand extensions. Nearly 40 to 45 percent of our sales are from rural markets, but I feel penetration in these clusters is still quite low, and there is huge scope for improvement. We would like to tap more villages through direct as well as micro-marketing.”
Goenka adds that Emami has adopted and initiated appropriate corrective measures for both domestic and international markets, with strong focus on internal optimisation and effective cost management.
Going forward
Over the last five years, Emami has maintained a CAGR of 19 percent. During FY 2013-14, the company recorded topline growth of Rs 1,821 crore, and its international business clocked growth of 23 percent. Goenka declares, “Our products are vast in range and reach and we strive to preserve our legacy, constantly improve, thrive in diversity, and find pattern in chaos to connect with consumers, especially in India.”
The company is mulling a foray into new categories through organic as well as the inorganic route. As regards the company’s healthcare vertical, Goenka informs that major plans are underway, which will give a thrust to it, and is confident that in the next 5 to 10 years, apart from personal and skincare category, Emami would be a key player in the healthcare space also.
Namita Bhagat has an academic background in management and finance. She writes on the retail and franchise business in the Indian and Middle East markets.
