Eveready Industries India Ltd. (EIIL) is engaged in marketing one of the best-known household brands in the country. Til competition started sniping at its heels, the brand was synonymous with flashlights and dry cells. The going became tough for the FMCG company over the last few years, owing to a gamut of factors. Associated with one of the most respected business families of Kolkata, Eveready is now trying to come back, positioning itself as a lighting solution company. Amritanshu Khaitan, a director of the company, talks about the company’s plans in an interaction with Indrani Dutta. Excerpts:
Things have not been hunky-dory for Eveready of late, what happened?
We have been a market leader in battery and flashlight. That position remains intact. However, the company had to weather storms raised by factors not within its control. We were leaders in flashlights using incandescent bulbs — that started changing. The market for such flashlights disappeared, we had to adapt.
This also had an impact on battery usage as incandescent flashlights used ‘D’ size battery which was a high-margin product. LED flashlights used different batteries — AA, AAA. There has been a huge change in the product-mix. This was one angle of the problem; the other was a severe cost-push. About 70 per cent of our raw material is import-linked. This hit us badly in 2011-12, especially after the rupee depreciation. An FMCG product could not pass on a 20 per cent hike. After all, 50 per cent of our turnover is from batteries. Now, we feel that the de-growth in the D segment has flattened out and the worst is behind us.
What are your plans for the future?
We are increasing our focus on new categories. Batteries alone will not be able to contribute significantly to achieving the desired top line growth. It will remain a high contributor to turnover but, in three years, this will come down to around 30 per cent. New products will occupy Eveready’s shelf-space.
But what success have you had with new products, such as mosquito coils?
We have exited coils. We are getting into products such as lanterns. It is working very well in rural and semi-urban areas. We have also launched lanterns with rechargeable batteries. It is a new area of focus for us and is bringing good sales. We are looking at rechargeable lighting solutions. We have entered the lighting segment in a major way. We plan to put more focus in the lighting segment, which has a very good fit with the Eveready brand.
This year, we plan to launch our incandescent lighting products aggressively as the market for this has strengthened following the rise in prices of CFL lamps. We have tasted success here. Going forward, we plan to focus on CFL, too. We will get into all lighting products. We want to position Eveready as a power and lighting solution company. In CFL, our market share is negligible, but we are working on it.
In battery, we will emphasise on the alkaline battery market. We plan to scale up the ‘Ultima’ brand where we see good growth. We now need to promote this product.
We also want to change our rural bias with a presence in the urban market.
How are you doing in tea business?
Packet tea is stable. Contribution to our total turnover is around 7 per cent.
Your biggest margin is still from batteries and flashlights
Yes. That remains the same and we expect batteries to contribute strongly to our profitability. However, from the share of above 50 per cent, dry cells’ contribution would come down to 40 per cent over a three-year timeline.
How are your acquired companies doing?
If you are asking about Uniross, then we have to say that the timing of the acquisition did not work well for us. Europe went through a major recession immediately after. Moreover, with its operations located just outside Paris, the Uniross brand was present in many countries. It is not making money for us. The rechargeable batteries are also not doing well. For us, the main dent was Western Europe. It has been a tough acquisition for us. We have cut cost by shedding people. We have cut down operations, made it very lean and a low-cost model.
We have taken the Uniross brand and operations under ‘Powercell’. We merged Uniross distribution with Powercell, which was also an acquisition, but it is doing well.
The entire manufacturing of the Uniross is out of China. It does a lot of private labelling. But, we also learnt some lessons through this buy. We learnt on sourcing from China, which we have capitalised for Eveready. Uniross taught us how to handle overseas customers.
For now, the focus is more on the domestic market as we try to capture a larger share of the rechargeable battery market with Uniross and Powercell, rather than increasing costs by chasing a scarce overseas market.
What are your options for Uniross?
We do not want to continue bleeding in a market, chasing business which may not come. As Eveready India, we invested around Rs.65 crore for the acquisition, we are not in a position to keep losing money … we have reduced the marketing operation in France to a bare minimum.
How is Powercell doing?
Very well. This is a great asset for Eveready. Powercell was acquired in 2005. It is a division of EIIL with a separate sales and a marketing team.
What are your plans for Eveready next year?
For us, 2011-12 has been a tough year. This year, we have been able to pass on the excise duty hike announced in the budget and now there are two-three areas where, we think, we will be able to add value and we will concentrate on these areas. Batteries should grow; our focus is to add alkaline batteries to our range. We are working to keep alive the D-size battery using product segment.
We are planning a new range of mobile charger packs — our R&D is working on this. It will not be made in India. These will be the areas, which will drive brands with innovative solutions to revitalise the brand. So that the youth has an association brand.
We want to bring out devices which will use D size. We have done a lot of work on the distribution side — mainly leveraging modern trade. I admit Eveready has to do a lot more to increase its urban visibility, across the gamut of outlets with torch lamps, tube lights, CFL — the entire range.
Outsourcing is a major activity for you
This is actually increasing. Batteries and flashlights are domestically made but for our LED lights, we are looking to source from China, which is already a major sourcing hub for us. The LED for flashlights is from China.
What is your outlook for the company?
We expect to break-even in 2012-13 and get back to growth after three-four years. We have a good range of products which would be in the market this year and bottom line would improve.