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When Jyothy Laboratories (JLL) acquired Henkel India in 2011 for a measly Rs 685 crore, it took over more than three brands with great mindshare. Besides the brands Henko (detergent), Pril (utensil cleaner) and Margo (soap), Jyothy also took over Henkel's accumulated losses of Rs 600 crore. The three brands themselves were seen as also-rans in their respective markets, with the parent company never really spending much in terms of marketing support.
Today, the picture looks completely different. The company touched Rs 1,255 crore in net sales and Rs 106.1 crore in profit in 2013-14 and is aiming for Rs 5,000 crore in sales in the next five years. For the six months period between April 2014 and September 2014, JLL reported net sales of Rs 752.81 crore compared to Rs 649.11 crore in H1 of FY14, a rise of 16 per cent. Pril, Margo, Fa and Henko products, which give the Mumbai-based company 30 per cent of its Rs 1,300-crore annual revenue, are leading its fight back into reckoning.
What are the few things it did to beat the slowdown blues that have afflicted some other companies in its sector? "First we undid and then we did," says K Ullas Kamath, joint managing director. The annual report of the company for the year 2013-14 clearly states the challenge and the opportunity for it: "The acquisition made us realise that we also needed to professionalise the organisation, keeping in mind the scale of operations. The Henkel acquisition was a game changer and paved the way to create new milestones by completely transforming the way in which we operated as a company."
To be fair, Henkel did have an advantage - the master brand enjoyed considerable goodwill in the consumer products market and the category brands had considerable mindshare. All the Henkel brands were positioned at the premium end. Jyothy, without tinkering the prices too much, reconfigured the portfolio. It invested into advertising and communication. While Jyothy used to spend around 6-7 per cent of its revenue on advertising, Henkel's brand spent was negligible. "We increased advertising spend slowly and in 2014 we spent around 12.6 per cent (which includes the Henkel brands). Sales of the Henkel portfolio has seen around 25 per cent y-o-y growth in the last three years," Kamath adds. Moving away from its earlier strategy, the company decided to work with a number of agencies.
It introduced smaller SKUs for semi-urban and rural markets. Henkel products started moving to semi-urban and rural areas where JLL had a strong distribution network while JLL brands started moving to urban areas where Henkel brands had considerable visibility. Besides streamlining costs, JLL had to rework its list of distributors -Jyothy was used to working with smaller distributors who were adept at selling products like Ujala. That apart, the company had to rework the payment plan. The company reduced the payment period from 90-120 days to 7-15 days to keep the working capital flowing. It also started e-procurement to get best possible rates in the marketplace. "We had thought that the slowdown will last three to six months but when you start tightening things you get used to it. Even today we keep a tight control on every expense so that we have the bandwidth to grow the business," says Kamath.
In the last one year the company focused on extending some of the brands to keep them fresh. It has launched Margo facewash, relaunched Henko detergent in the premium category. It also re-launched Pril in Q2 FY15.
