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Eveready's second coming: Betting on core business success for FMCG play

The company's first FMCG diversification had taken place in 2006, when it forayed into the highly competitive mosquito repellent market with the launch of Eveready Poweron

Eveready Appliance
Eveready Appliance
Avishek Rakshit Kolkata
Last Updated : Jan 24 2018 | 8:34 PM IST
Eveready Industries India Ltd (EIIL) has kick-started its second innings in the mainstream fast-moving consumer goods (FMCG) space -- with Jollies, a fruit-chew brand from its own stable, and by entering into a joint-venture (JV) partnership with Indonesian FMCG major, Universal Wellbeing Pte Ltd (UWPL) for the distribution of the latter’s products in India.

With a target to double its current turnover of Rs 13.53 billion in the next five years, it plans to generate 25 per cent of this consolidated revenue from FMCG sales. For this, the company first forayed into the confectionery segment on its own and then decided to form a JV UWPL in which it will hold 30 per cent stake under a distribution agreement. 

Amritanshu Khaitan, the company’s managing director, is of the view that he can use EIIL’s strong distribution reach of one million direct and 3.2 million channel outlets to make Jollies and the distribution foray with UWPL an instant success. Thereafter, based on consumer response, the company might roll out more products from its own stable.

However, back in 2006-07, the company, then under the leadership of Deepak Khaitan, had tested its first FMCG diversification by foraying into the highly competitive mosquito repellent market with the launch of Eveready Poweron. After failing to come up with sustainable branding efforts and much headway in the face of tough competition – Reckitt Benickser, Godrej & Jyothy Laboratories are established players with Mortien, Goodnight and Maxo brand of coils, respectively – the company exited this business in 2011.

Despite this background, Amritanshu now seems confident of the success in Jollies and the JV with UWPL.

The reason behind the optimism is the fact that EIIL’s core business of batteries is now strong and debt has reduced, significantly freeing up cash availability. So a concentrated branding effort will be put in place to ensure success of the brand.

During the 2006-07 financial year, EIIL’s total liabilities stood at Rs 6.90 billion, with long-term borrowings accounting for 47.68 per cent of the total outstanding. However, by the end of 2011-12, though the total liabilities reduced marginally to Rs 6.6 billion, a large portion of the long-term debt was repaid which brought it down to 22 per cent. By the end of March 31, 2017, the company’s total debt had gradually reduced to Rs 1.96 billion, and the Khaitan scion believes the company will soon be debt-free.

“Now, it’s not the same situation as it was in 2006. Debt has gone down significantly and the core battery business is strong enough to feed new ventures. The cash flow situation has improved dramatically,” Amritanshu Khaitan told Business Standard.

The company also roped in Akshay Kumar to promote its battery and LED business and reworked its signature ‘Give Me Red’ brand campaign.

Also, with learnings from the previous instance of venturing into highly competitive markets like mosquito repellent, the new-age Khaitan made a conscious decision to enter a market that is apparently less competitive and has a 20 per cent growth potential in the mid-term.

The confectionery market in India is pegged at Rs 90 billion, of which the fruit chew segment accounts for five per cent of the total category. It is expected that the entire category will expand to Rs 140 billion in the next five years, and the fruit chew segment will account for Rs 10 billion in the same timeline.

He believes that if EIIL is able to capture “even a portion of this market”, it would translate into revenues to the tune of Rs 2 billion for the company. 

The confectionery category is dominated mostly by ITC and Perfetti through its brands Candyman and Alpenliebe, respectively, besides Jelly Belly and others.

Faced with limited growth potential in the batteries market of the country, Khaitan’s idea is to enter newer large-value categories which have high growth potential.

Harish Bijoor, CEO at Harish Bijoor Consults Inc, is of the view that as long as EIIL keeps the “Eveready” brand-name aloof and positions Jollies as a standalone brand, it has a fair chance of success.

“Over a period of time, a particular brand gets associated with a particular product or product-line and consumers start associating the brand with the product,” he reasons.

In 2015, the company forayed into the LED lighting segment and it launched its range of appliances a year later; all of these were part of EIIL’s plans to open new revenue channels as growth potential in the dry-cell space is expected to narrow down further.

To keep its capital expenditure under check and boost cash flows, EIIL is resorting to contract manufacturing for all the new forays.

Currently, batteries and flashlights accounts for 71 per cent of EIIL’s revenue, with the lighting segment contributing another 21 per cent. Appliances account for three per cent. In the next five years, EIIL wants to bring down the contributions of batteries and flashlights to 40 per cent of the total turnover, with lighting and appliances accounting for 30 per cent. The remaining 30 per cent is expected to come in from the FMCG venture.
The Joint Venture
  • Eveready Industries to hold 30% in the JV and Indonesian Universal Wellbeing to hold the rest
  • Initial paid-up capital of the JV to be Rs 250 mn; to be scaled up to Rs 1 bn
  • JV to be formed before March 31
  • Eveready Industries to have two directors out of a total seven in the JV
  • Initially, the JV will import Universal Wellbeing products for sales in India. Later, it may start contract manufacturing
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