CEOInterviews.AIRise With India - CEO Speak With Emami

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Interviewer0:00

We thought today we'll chat with the Emami management and figure out whether the second quarter double-digit volume growth is going to sustain from them or not, and whether or not they're recovering to high-teen revenue on a 10-year basis. Also, they're focusing on niche categories, acquisitions, as well as product launches. So let's chat about all of that with the management. Then on the show, let's bring on board Mr. Mohan Goenka, the director at Emami. He joins us in the show right now. Mr. Goenka, good morning. Good to speak with you. The categories that you're present in are not exactly mainstream, one would say very niche categories like female and male grooming and especially oils. Are markets not as large as say soaps and regular oils? What makes you stay in such niche categories?

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Mohan Goenka0:47

If you see the history of Emami, we have always been in the niche category. We started with Boroplus antiseptic cream, we launched Fair and Handsome, we bought Zandu balm. So those have always been niche. And our strategy since the beginning has been focused on the Ayurvedic categories, and mostly if you see Ayurveda, they fall into the niche categories. They are never mainstream.

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Interviewer1:18

Right. So where will future growth come from then, Mr. Goenka? Gaining more market share, or would you say it would be penetration to deeper sections of the demographics?

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Mohan Goenka1:30

See, now the new mantra or everyone is talking of Ayurveda, so Emami was a very early entrant into this Ayurveda. We also bought Zandu in 2008-9. So I think the next leg of growth would surely be from the Ayurveda, and we are seeing a very big traction from consumers on this particular Ayurveda, herbal, natural. So we are focusing a lot on this front, and I'm very confident that Ayurveda is the next growth.

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Interviewer2:07

The recent data suggests that good monsoon, higher MSPs, and green shoots are visible. You've mentioned how rural is finally recovering. How do you see rural demand shaping up and what was it last time?

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Mohan Goenka2:21

No, we have been very bullish on the rural side. So we have invested a lot on the distribution as far as rural is concerned. So definitely over the last two-three or I would say four-five months, rural has really grown, particularly the heartland. So our investment continues on the rural side as far as distribution is concerned and also marketing efforts are concerned. So I would say the growth we are expecting more from rural compared to the urban.

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Interviewer3:00

Mr. Goenka, you know, second quarter saw a stellar recovery come by in your volumes. You managed to creep into double digits as well after many, many quarters. Is this something which is sustainable?

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Mohan Goenka3:13

Oh absolutely. I am very confident, I'm very bullish on the FMCG sector going forward. So now I think that all the GST hiccups are almost over, and the market is now on a positive note. So we are very confident that the next few quarters are going to be definitely double-digit growth.

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Interviewer3:39

What is your view on GST and are all the transmission related adjustments behind in terms of the GST implementation?

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Mohan Goenka3:48

Yes, so by every passing day we are seeing markets improving. Of course certain markets are still under some pressure, some few wholesale markets. But more or less, I think if I have to give a number, I think it is 80 to 90% is in line. So GST I think is over. I think we have to move forward and focus on the consumer.

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Interviewer4:17

Okay, your international business, Mr. Goenka, which has been a pain point off late too, showed signs of very sharp recovery although on a very small base. But do you see sustainable green shoots there, especially in the Middle East region?

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Mohan Goenka4:33

Yes, so if you had seen our second quarter number, we have grown aggressively on our international business, and Saudi Arabia was one market where we were struggling a bit, but it has really done well in the last quarter. So I think the worst is over for international. Going forward, we are anticipating almost a double-digit growth also from the international market.

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Interviewer5:00

Position of stake in Helios, where have you – you have become the second company in the listed space to really bet big on the male grooming market. Now relatively small market, what is the potential which you were seeing there?

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Mohan Goenka5:12

So we were very early in men's grooming when we launched Fair and Handsome. So we realized this potential almost in 2002-03. And we think going forward, men's grooming again is a very, very interesting category, particularly in the premium segment. Also, the consumer trends are shifting towards digitization or e-commerce. So this is a very interesting company and interesting products, so we would learn from each other. And the market size is definitely a little smaller, but we think going forward it will become a very big market.

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Interviewer5:56

Right. K. King has not been a very smooth road for you post acquisition. It has also seen its fair share of challenges to building up. Do you believe this brand will sustainably contribute to Emami's overall revenues?

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Mohan Goenka6:13

Oh definitely. I think for any new acquisition, there are initial hiccups. So but by and large, now it is completely in fold of Emami. So over the post-demonetization, the K. King has been slight in stress. But I think going forward, we have changed our strategy a bit in K. King, and we are seeing some initial signs of growth. So let us see. I think in the next two to three quarters with the relaunch of our new strategy, we are hopeful that the brand would revive.

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Interviewer6:52

Mr. Goenka, you've mentioned that in FY19, new products will contribute about 2 and a half to 3% to your overall revenues. So what is it that you have in the pipeline, and are they premium in nature these products?

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Mohan Goenka7:05

So Emami has always been a strong believer in new products. And what we have thought that our existing brands like Navaratna or Zandu, Fair and Handsome, they are still not leveraged. So we are launching most of our products under these brands. So we want to strengthen the mother brands. So I am, I think 2 or 3% is a conservative number. We are very aggressive on our new launches going forward. As I said, men's grooming, Ayurveda, these are future growth potentials.

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Interviewer7:44

Growth for last 5 years has been 11%, it has slowed down. When you compare the CAGR growth of last 10 years, it's about 17.7%. Do you think you will be able to go back to your average?

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Mohan Goenka7:56

So we start the year with a number of almost 14 to 15% growth. I think last one year has been a little slow because all of us know because of demonetization and GST issues. But by and large, I'm confident that as the rural is taking shape and also we are getting aggressive on our new launches also on our advertising front, so I am very confident that we should be able to grow at about 14 to 15% going forward.

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Interviewer8:30

Right. Emami has really been a company which has really been a true example of the rise with India story as well. And it's a brand that is really the quintessential made in India, risen with the India example too. In a market like female and male grooming, sir, that's dominated by foreign players as of now, how is it that you've managed to make your mark?

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Mohan Goenka8:57

Emami has a long history. We started in 1974. It's a brand which Indians reckon with. So I don't think that we discuss this on a day-to-day basis. It's a very, very deeply penetrated brand. Some of the brands like Navaratna or Zandu are available in almost 30 to 40 lakh retail outlets. So I don't think that we have any threat from the MNCs per se. These are Indian brands, deeply rooted in every household, I would say. So we don't really see multinationals as a threat to Emami.

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Interviewer9:43

Mr. Goenka, such a pleasure speaking with you. Thanks so much for taking time out and speaking with us today. All right, thank you so much. Thank you so much.