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 Our Key to Success

 

There has been just one secret behind the transformation of Emami into a frontline Indian FMCG company. The ability to understand latent unexpressed needs of consumers and translate them into clutter- cutting products. The result is a company that was valued at around Rs. 21,200 crore in market capitalisation as on 31st March 2016, growing by nearly 40 times in value since its Public Offer in 2005.

Emami is present in the fourth largest national sector. The sector touches billions, across geographies. The sector is overcrowded by organisedand unorganised players. These players manufacture a large number of products. A number of these products are me-too and even counterfeit.

The aim is not to merely survive this environment; the objective is to succeed in it. This success needs to be derived from the identification of niches relatively insulated from competition. These niches are created (and occupied) by understanding where the external environment is trending, what consumers are likely to need and working backwards to create relevant and affordable products. Our edge lies in spotting categories that are unique, devoid of competitors and with a unique proposition, enabling us to enjoy absolute category leadership.

In this environment it would be easy to offer deep discounts and freebies in the pursuit of short-term visibility and market share but the strategy would be largely unsustainable and even brand-destroying.

Since inception, Emami’s success has been derived from its keen understanding of Indian middle-class aspirational consumers. This competence is oftenunder-appreciated; since India is a vast country with varied geographical and climatic conditions where consumer profiles change every 100 km, what one needs, is a product portfolio addressing diverse consumer requirements.
And this is where we come to something we are deeply proud about: Emami is a truly Indian company that addresses middle- class aspirational consumer needs by creating truly Indian brands.
Emami’s consumer understanding extends beyond product functionality. When our consumer study indicated that nearly 30% of women’s fairness creamswere actually used by men, we studied user buying patterns. Men were not comfortable buying the product directly across the counter. There was a hesitation in admitting openly that men also needed to look fair. We worked on these cues and the result was that we introduced a fairness product exclusively for men - Fair and Handsome – supported bya communication strategy that empowered closet users to step out and buy the product. We didn’t just launch a product; we created a category for the first time in India.

Or take the case of Nityam tablets. The conventional consumption of an ayurvedic laxative is cumbersome. Weworked around this problem to introduce a convenient tablet. This innovation is not just about a new product introduction;it encourages a new form of consumption, graduating the consumer experience.

That brings us to four words that have made all the difference at Emami.Graduating the consumer experience.We don’t merely plug product gaps; we create stand-out products. We don’t just make consumers feel good about purchase; we graduate their experience to a different level. We don’t just focus on therapeutic safety; we weave a deepresearch-led ayurveda tradition into product safety. We don’t just bank on ayurveda; we validate our products through competent safety studies.

Emami’s success is derived from its niche ayurveda andherbal-based positioning as well as its strong innovation and new category incubation. We have leveraged ayurveda withmodern-day science to deliver best, yet affordable, and effective products, which have been manufactured using advanced scientific and laboratory practices. Most of our manufacturing units are ISO 9001: 2000 compliant and accredited with ISO 14001: 2004 and ISO 18001: 2007 certifications.

It would have been defeating for a truly Indian company addressing its vast middle- class consumer base to be urban-driven. The reality is that Emami is among the few Indian FMCG players to extend deep into a rural market which accounts for more than 70% of the country’s population. Heretoo, we progressively adapted our role: we graduated from marketing large SKUs to small affordable equivalents. Besides, we marketed products around attractive price points that encouraged enhanced value- addition without becoming expensive, creating a compellingvolume-value play.

It would have been convenient for a truly Indian consumer products company to continue marketing within the heart of India on the grounds that this, given the extensive under- consumption, represented a world of an opportunity. Emami is a confident global Indian corporate; we customised our brands around the climatic and physical suitability of countries the world over. The result is that we extended our Indianmulti-category leadership to international markets. And best of all, we did not merely market in some of these countries;we commissioned our first international manufacturing unit (Bangladesh) to address the needs of that geography.

It would have been time- consuming for an ambitious Emami to grow through the organic route. We selected to acquire businesses instead. In 2008, we acquired a multi- decade Zandu possessing a rich repository of ayurvedic knowledge and products. The acquisition was considered daring for its scale; we implemented the acquisition, repositioned acquired brands and the result is that the Zandu portfolio has trebled itsdomestic sales since acquisition. In 2015, we acquired the ayurvedic hair and scalp care business under the Kesh King brand (ayurvedic medicinaloil, aloevera herbal shampoo and ayurvedic capsules) on the grounds that the ayurvedic hair and scalp-carecategory was extensivelyunder-penetrated.

It is just not enough to createeffective and affordable products of the best quality. They also need to be competently communicated to consumers. Emami’s products are backed by robust communication understood bythe masses. Our products have been consistently positioned around enhanced life quality. We complemented this pitch through the pioneering engagement of celebrity brand ambassadors.

Even as a strong consumer pull was created because of these initiatives, it was important to create a robust distribution system. We reached consumers everywhere; we made our products available in villages of population clusters of less than 10,000. The result is that we now have more than 2,900distributors, a direct coverage of more than 6.4 lac retail outlets and indirect reach across more than 4 million retail outlets. Even in the remotest part of the country, you are likely to finda store – possibly the smallest shack – marketing Emami products across the counter.

The cumulative impact of our differentiated business model is evident in the numbers

16%Five-year CAGR in Revenues

22%Five-year CAGR in EBIDTA

20%Five year CAGR in Cash Profit

More than Rs. 1,700 crore Spent on advertising and promotion in the past five years

Rs. 850 croreCumulative dividend payout in the last five years
3.5xIncrease in market capitalisation in the last five years
25+New products and extensions introduced in the last five years
Outlook

Emami’s Power Brands are growing and penetrating further. The brand extensions and new launches are receiving encouraging response. The International business is expected to grow aggressively. An improving economic landscape leading to higher disposable incomes and normal monsoons are expected to revitalise the rural economy and FMCG prospects. Emami is poised to take benefit of these growing opportunities.

The bottomline is that we find Emami waiting to capitalise extensively. Our story is just beginning.
RS Agarwal | RS Goenka
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