Emami Back To Pre-COVID Levels? | Mohan Goenka Of Emami To ET NOW

Yeah, everything is good as of now.

So I think we are very happy with our quarter two numbers. After a long time we have seen double digit volume growth. Interestingly, this growth was led by a lot of brands, it was not led by just one or two brands, which was very fascinating. And even more interesting is the numbers that we are seeing in the third quarter. The winter has set in very well for us in north and central India, because the third quarter consists of a large winter portfolio. So we are very optimistic of seeing double digit growth in the third quarter as well. Things look to be bright. As I said, even in the third quarter this growth is led by a number of brands, not just by the winter portfolio. So yes, we are at beyond our pre-COVID levels. Also because Emami has a large rural base, rural is really flourishing I would say. Rural is growing for us. So from all sides I'm happy.

So winter portfolio largely consists of Boroplus brand and of course the Chawanprash portfolio. So both the portfolios are double digit. As I said, winter has set in much earlier this time across India. And because it's a rural more rural-led brand, the volume growths are at double digit levels. We have to see how long this winter continues because it is just set in. If it continues like this, then of course we would grow much better than our last year numbers, both on Chawanprash and on Boroplus.

Yes, though Chawanprash is relatively small in our total portfolio. It is around 50 crores of our sales come from Chawanprash. But yes, we have in the last quarter also we grew at almost 2x plus, in this quarter also we are seeing about 30 to 40% growth in Chawanprash. But it is relatively small compared to our other portfolios. But what is interesting is to see the numbers of Boroplus. As I said, Boroplus has really fired in the last one and a half months. If the winter continues to be the same, then you know we will outnumber our own budgets for Boroplus.

So we have always been a rural play. And because of the reverse migration, you know we are seeing more traction coming from rural. And what is also interesting to note in the recent past is consumers have upgraded from local brands to branded goods, both in urban and rural. Because Emami has a large rural play, we are seeing more traction in rural. And as I said, what is very interesting for me is not just it is led by Boroplus, it is led by Kesh King, it is led by Navratna or every other portfolio that we have. So which is very, very interesting. We have not seen this in the past. Of course we have to see how long this trend continues, but as of now there is strong traction.

No, I would say that it would be rural dominated. We are a mass market company, so we look at consumers across the straddle. Of course our contribution comes more from the rural, but yes, the new offerings, the new products that we have launched, it is across in health, in immunity, in hygiene. So because of this pandemic, we have seen a great opportunity in Zandu, in Boroplus range, and the new range that we have launched under home and hygiene is Emas. So it would cut ice across here in rural, I would say.

So we have seen benign raw material prices for quite some time now and it still continues. So our margins are at all-time high. Last quarter we had almost done plus 30%, this quarter also it looks to be above 30%. Our average margin, EBIT margins have been in the range of 26 to 27%. So we are happy with our margin profile. And if the raw material prices remain to be like this, then we are very confident of doing an ever-highest margins. Menthol also, one of our key raw materials is menthol, which is also benign for quite some time now, right.

Yes, absolutely. Kesh King is firing across urban and rural. So we have seen some consumers moving from other brands to Kesh King in the recent past. As I said, also consumers' preference have moved from local to branded goods, which we are seeing across our product range, in which Kesh King has also benefited I would say. In the third quarter also, Kesh King numbers are double digit growth.

So yes, for now we have become very aggressive. As I said, we have launched multiple products in the last few months, which would be backed by very strong advertising. What looks like that our advertising should be in the range of about 17 to 18%, what was at the pre-COVID levels. With new launches, because we have only become aggressive in the last few months as far as new launches are concerned, which would take away substantial amount of advertising.

So we have launched multiple products under our brand Boroplus, which is to do with health and hygiene. Also home care, we have launched a new brand Emol. We have launched multiple products under Zandu, because health, immunity, these have become buzzwords. Consumer preferences are really changing towards home care remedies or towards Indian Ayurvedic preparations. So these are some of the products that we have come up with. And we expect roughly about 4% of revenue coming from the new products, and we have seen that in the last quarter, this quarter also it looks like it should be in the range of about 3 to 4%. The consumers have accepted, I would say, all the new launches that we have done in the past. It has been welcomed by the trade. Some of the products are showing good traction with the consumers also. So of course we would have to wait and watch because these are all new products. We have to be consistent with our marketing strategy. As I said, preferences are moving towards Indian brands, preferences are moving towards branded goods. So I think there is a good opportunity for us to grow in these times.

There's a very clear trend. Of course this has been very unique. Of course there were trends where we were seeing that premium products were gaining traction, e-commerce was on the rise, but during these times we have seen a clear shift towards health, immunity, and hygiene. Everything has now limited to health, immunity, and hygiene. And as I said, Emami has a good room to play because we have multiple brands where we can launch products under Boroplus or under Zandu, even an international brand which we acquired two years back in Germany, Cream 21. We have launched so many products under Cream 21 and we have seen the benefit. So every household today, every research that we do, they are doing something or the other as far as home care remedies are concerned. So these are trends. I think this should continue because people have understood the benefit of home care, people have understood the benefit of Ayurveda, whether it is honey, whether it is aloe vera, whatever you talk of today. So I think Zandu Healthcare can really take off, and we have also launched many products under Zandu.

So there are no more challenges as far as supply chain is concerned. Now of course there are periodic lockdowns in some cities, some towns, but I think by and large we have understood how to manage those situations. If we know there are lockdowns, then we of course supply to our distributors much in advance. We stock our distributors. So we have learned to manage these situations. Now there are no more disruptions, I would say.

So we really, Diwali doesn't really matter so much for us because it's the entire winter that matters. As I said, winter has set in so well in the north and also in the central and the East, and Boroplus has grown significantly well only because of the setting of winter. And so that is what it is. I think the trend should continue. Every data that we have seen suggests that the winter should be there for till January or February. It should benefit Emami by and large.

So as I mentioned, see in the second quarter, after a long time we grew double digit volume growth. It was almost I think 11-12%. This quarter we are looking at similar numbers or even better if the trend continues in December. So advertising is again would be at 17-18%. Our margin should be at all-time high despite high advertising spends. Some of the new launches we are seeing good traction. So by and large, even international portfolio is doing good after a long time. So overall I would say numbers look seems to be interesting for the third quarter as of now. And as I said, brands like Kesh King has fired in the second quarter, we are seeing similar trends in the third quarter. Fair and Handsome, which is completely discretionary, we degrew quite substantially over the last few quarters. In the last quarter the degrowth was I think about 25-26%, and this quarter I think there should be a very low single digit degrowth in Fair and Handsome. We can even grow in Fair and Handsome. So there is a visible trend that discretionary spends also are coming up, at least for Emami we are seeing across the board there is growth momentum.

This is very interesting. We see a huge scope in e-commerce. Presently our e-commerce business is only 2% compared to some of our peers who are at almost 4 to 5% or some are at 6%. So we have identified this as a huge growth opportunity. We have grown two and a half times in the last quarter, 2.5X. We expect to be at 4 to 5% of our total sales in the next four quarters. For which, of course, we are building up teams. We are launching specific SKUs for e-commerce, promotions for e-commerce, and some specific products only for e-commerce. So it's a very interesting channel, it is going to stay, it is going to grow, and we understand the importance of it. So this should be a growth driver.

Of course there is a huge opportunity. See, still as far as Emami is concerned, the penetration levels for most of our brands are at single digit or at 12-15%. So there is huge, huge opportunity for Emami products. Of course now we have a huge basket. Almost we have got seven brands which are plus 100 crores portfolio, we have three brands which are almost 500 crore plus portfolio. So to grow these brands, it becomes even more interesting and challenging. And the more you penetrate, the faster we grow. So I think the outlook is fairly very robust. As I said, preferences toward branded goods are increasing. As GDP grows, per capita income grows, we would always see consumers moving to branded goods. Still there is a huge rural play. We are expanding on our distribution network in villages, in small towns everywhere. The more we penetrate, the more growth we see. So I think if we look at a slightly longer term view, there is a huge opportunity as far as we are concerned and the overall industry is concerned.

So we are absolutely committed. You have seen even in the most difficult times we brought down our pledge from 90% to 40%. Now in every analyst call I have, we have committed that promoters will bring down their debt to zero. And we have enough assets. We are trying to monetize some of our land banks, some of our other assets. We are in no hurry to really liquidate them at a distress value. So we are in talks with some of the interested parties but at the right valuations. But yes, as far as the family is concerned, we have demonstrated and we are very, very sure we would bring our pledge to zero. I can't really commit timelines. Earlier we had planned for March, but with the things the way things look like, every industry is growing, we can get much better valuations for our some of our assets, particularly in the real estate or our healthcare side. So we would dilute at the right time.