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Pencil battery users are familiar with the copper and black-bodied Duracell that costs three times that of an average carbon-zinc battery.
Even though parent Procter & Gamble (P&G) decided last week to divest the brand as part of its endeavour to focus on core categories, Duracell has carved a niche for itself in a market that largely belongs to the traditional disposable carbon-zinc dry cell battery. Duracell, which is a disposable (non-rechargeable) alkaline battery is part of a segment that is only 4-5 per cent of the 2.62-billion-unit dry cell battery market. The balance is made up of carbon-zinc batteries.
The rechargeable battery segment, on the other hand, is negligible. Carbon-zinc batteries constitute 95-96 per cent of the battery market, especially as its price-points are a third of alkaline batteries. Duracell's ilk then is considered as premium and is profitable for manufacturers.
Bringing its iconic pink bunny to use in its Indian communication, Duracell has always toed its global positioning over the years - of lasting longer than regular batteries. The brand's mascot can be seen running, dancing and listening to cricket commentary for hours at end, even as rivals stutter to a stop. In one of the ads the bunny, while listening to commentary on his radio, ends up sharing his feed with his counterpart when he runs out of battery.
Competitors (read: Eveready) have for long said that Duracell's claims of lasting long are misleading. "The claim that it lasts six times longer is for one specific variant. And it is not that carbon-zinc are non-performers altogether," says an executive from Eveready Industries, who declined to be quoted.
Eveready is the leader in the carbon-zinc battery market with an over 50 per cent share. Some of the other players include Nippon and Panasonic. But in alkaline batteries, Duracell calls the shots with an over 70 per cent share of the market. Eveready's entry in the segment, Ultima, has a 20 per cent share, according to sector analysts.
"Duracell's divestment will not affect the listed entity, Gillette, which is a subsidiary of P&G, because it gives the company about 4-5 per cent of its revenues and the capital employed in the business has not been substantial either," says Amnish Aggarwal, FMCG analyst at brokerage house, Prabhudas Liladhar.
While P&G's total capital employed on its battery business came down 81 per cent to Rs 1.26 crore for the fiscal ended June, 2014, it had pumped nearly Rs 7 crore in fiscal ended June, 2013 and Rs 4.25 crore the year before (June, 2012). For the fiscal ended June, 2011, P&G had employed Rs 25 crore of capital in its battery business.
P&G has said that the reason for the divestment of its battery business was linked to its desire to focus on core segments such as personal care, laundry and oral care. This came close on the heels of its August announcement of shedding upto 100 non-core brands.
Alok Nanda, founder & CEO, Alok Nanda & Company, a Mumbai-based brand and design consultancy, says that he sees no negative rub-off on Duracell because of P&G's decision to divest it.
"It has always been perceived as a very international product, which is reflected in its design and packaging. This has helped it find an audience of its own," Nanda says.
The audience consists mostly of urban householders who do not mind paying a bit more for a product that can last long enough in their electronic gadgets. "I pick it up blindly," says Rita Davis (name changed), an executive working with a multi-national company in Mumbai, "it lasts long and I don't have a problem for at least a month if I put it in a TV remote."
The company recently raised prices of Duracell by 10 per cent, increasing the price-point from Rs 30 to Rs 33. Rival Eveready is also said to be contemplating a price hike of 20 per cent on its Ultima brand, taking it from Rs 25 to Rs 30 per unit.
But Duracell's loyal consumers don't seem to mind the increase in price. "If I look at the price-value equation, I don't think the price tag is so steep," says Davis. Santosh Desai, MD, Future Brands, says, "There is significant ground that Duracell has covered in terms of educating the consumer of the benefits of using alkaline batteries. In a sense, its attempts at brand-building have also helped build the category size."
Ironically, Duracell's growth has been impeded by the category size. Executives at Eveready point out that while the alkaline market is growing at about 30-35 per cent on a small base, it will never be able to cross the carbon-zinc segment.
There is also the looming threat of the rechargeable battery market, which is expected to pick up in the coming years. So P&G's decision to exit the battery market was not off the mark, say analysts, given that marketplace dynamics are changing fast. Duracell's segment of non-rechargeable, alkaline batteries is shrinking across the world. And no one, say experts, wants to be a part of a shrinking market.
