"We expect growth at Emami to not just sustain, but accelerate
across the foreseeable future"
SUSHIL GOENKA, MANAGING DIRECTOR OF EMAMI LIMITED, EXPLAINS WHY
Q: Were you pleased with the way the Company performed in 2020-21?
A: I am pleased with the way the Company performed, considering that
when we entered the financial year there was complete uncertainty on when the markets
would re-open, to what extent they would re-open and how consumers would respond.
When we ended the financial year under review, the country appeared to
be looking out at a five-year economic growth possibility, which explains the extent of
sea-change that transpired during the course of the year.
Q: What could be the reason for this sharp divergence between the first
and last quarters?
A: There were a number of factors at play. While on the one hand there
was definitely a decline in consumer incomes during the first lockdown quarter, there was,
on the other hand, a financial saving in staying at home.
I also believe that years of thrift and saving found an expression at a
critical point in the country's existence: consumers voted with their spending rather
than postponing for another day.
Q: Why did this transpire?
A: Rural India was not as extensively affected by the pandemic as urban
India. Rural India benefited on the back of reasonable monsoons and high minimum support
prices. Besides, rural India did not suffer lockdowns or a decline in their income cycle.
The result is that rural India continued to spend across staples and affordable products.
Faced with inventory depletion when the companies reopened, it was a rush to play catchup
to produce more to replenish what had already been sold, kick-starting a virtuous cycle of
increasing production and consumption.
Q: How did Emami respond in this growth environment?
A: I am pleased to communicate that Emami returned to attractive
profitable growth; EBIDTA margin grew 460 bps, RoCE strengthened 1,280 bps and the Company
finished the year under review witRs 6 times higher cash on its books despite rewarding
shareholders with dividends amounting to RS 356 crore and a share buyback worth RS 221
crore.
Q: What are some of the initiatives that contributed handsomely to the
Company's outperformance?
A: Before one explains the various initiatives that contributed to the
outperformance, it would be relevant to communicate an over-arching message: Emami could
have played defensively in a transforming marketplace; it responded by playing positively
and aggressively and that made all the difference. The Company had been engaged in
addressing a range of challenges in the last few years that found collective expression
during the first half of the last financial year. These challenges were related to sales
and distribution on the one hand and growth of brands on the other (Zandu Pancharishta,
Kesh King, Fair and Handsome). As an analogy, I would state that at a time when batsmen
would have been concerned about protecting their wicket on a turning track, Emami selected
to bat its way out of the challenge on the front foot. Let me provide a simple instance.
Most companies in Emami's place would have deferred the launches of new products at a
time of sectorial flux; Emami trusted its conviction and went ahead with more than 40 new
launches in the domestic market. Most companies in Emami's place would have deferred
spending on brand re-positioning and relaunch; Emami felt that a weak consumption market,
when spending was being deferred by most players, was the best time to capture consumer
attention. This contrarian streak, coupled with boldness, madeallthedifference.
Q: What else contributed to the Company's sharp performance
improvement?
A: The second point that one needs to highlight is that Emami addressed
a challenging market place by not playing for incremental gains; it responded with a
number of calculated concurrent initiatives its decision to focus on Power Brands
as opposed to spreading itself thin across its vast portfolio; its commitment to
broad-base its distribution presence beyond wholesalers and towards e-commerce, modern
trade format and direct distribution; its commitment to strengthen its international
business; its commitment to moderate costs, reducing its break-even point and
strengthening any-market competitiveness. The fact that Emami could engage in these
concurrent initiatives, pull them off and create a new foundation of sustainable growth,
is a validation of our managerial capabilities, knowledge bandwidth, courage and strategic
vision.
Q: Emami faced a priority in reviving growth in some of its brands like
Kesh King, Zandu Healthcare Range and Fair and Handsome.
A: The message that I wish to communicate is that even as the sector
was faced with slowdown and pandemic challenges, there were teams focused on repositioning
specific brand segments with the objective of reviving growth.
Take the instance of Kesh King. The Company focused on a combination of
approaches: direct to consumer delivery, while promotions highlighted its superior
price-value proposition and brand positioning as India's No.1 Hairfall Expert. The
result is that Kesh King Oil returned to growth, growing by 15% over 2019-20. Turn to the
Zandu Healthcare range, where the Company strengthened processes, decision-making and
time-to-market for all new product launches. Besides, the Company widened the rural and
urban coverage for ayurveda products. The Company collated feedback from the medical
fraternity and retailers leading to responsible product development. The result was an
appreciable improvement in the offtake of this segment during the year under review. Come
to the performance of Fair and Handsome where the consumption of men's fairness
creams and face washes declined due to a decline in discretionary spends. Emami could have
waited for the market sentiment to change; instead, the Company rebranded Fair and
Handsome Fairness Cream' and Fairness Facewash' as Instant
Radiance Cream' and Instant Radiance Facewash' respectively. Besides, the
Company engaged Salman Khan and launched a new TV campaign. The proactive counter-response
resulted in the Fair and Handsome portfolio growing 18% in the second half of the year
following the relaunch.
Q. How did the Company's International business perform?
A. Here too, a distinctive response became visible. Even as the
COVID-19 pandemic translated into a global economic slowdown and trade disruption, which
initially affected
Emami's international business, the Company responded with speed:
it extended its international brand Creme 21 into skin care (for all ages), graduating
this acquired brand into a multi-category platform, widened its ASEAN footprint and
empowered teams across various global markets. The result is that the Company's
international revenue grew 12% by value over 2019-20.
Q: How does Emami intend to grow from this point onwards?
A: Emami will do what it has always done: keep pushing the frontier,
keep daring the odds, keep thinking contrarian and keep reinventing the conventional. This
means that new categories are likely to be explored, new products launched, old products
relaunched, brand extensions made, new territories entered, fresh acquisitions made, new
areas for costs to be moderated in everything that one will associate with a
company that intends to grow faster.
Q: What provides you with the optimism that this is likely and
possible?
A: What we are seeing is a transforming India and world: there is a
greater propensity to consume natural and herbal products, which is something that we have
been doing for nearly four decades; more than 80% of Emami's products today have an
ayurvedic base.
What we are seeing is a bigger willingness to buy online or through
modern trade formats, which is where Emami is proceeding. What we are seeing in a greater
focus on digitalisation, which is why we have been investing and will continue to invest
in the future in digital transformation. What we are seeing is a greater consumer focus on
the Personal and Home Hygiene segments following the pandemic, spaces where we forayed
into. The result is that Emami is in the midst of increased sectorial relevance, the full
benefit of which will play out across the foreseeable future.
Q: If you had to leave one principal message with shareholders, what
would it be?
A: This is a new digitalised Emami that is moving with considerable
agility. Most initiatives whether in terms of cost management, product launches and
promotions are being increasingly digitalised. This has enhanced organisational
agility, moderated costs and enhanced our consumer engagement, especially with
millennials. We are optimistic that this re-interpretation of Emami is broadening the
foundation of appeal across a younger spending population, which will generate improved
prospects across the foreseeable future.