Emami steps on the gas

Chugging along in its chosen spheres, mid-tier FMCG player, Kolkata-based Emami, is now getting out of its comfort zone. Analysts ascribe Emami's recent move into female hygiene care as its move to graduate from its mid-tier status.

"Like peers such as Dabur, Godrej Consumer and Marico, who felt the need to move up in terms of turnover, prompting them to go after acquisitions, look at new product lines and expand distribution, Emami too is going down that road," says Gautam Duggad, vice-president, research, Motilal Oswal.

The Rs 1,821 crore personal and healthcare major recently wrapped up the acquisition of She Comfort, a sanitary napkin brand, from Mumbai-based Royal Hygiene Care. Sales of the brand was Rs 30 crore in 2013-14. Emami, it is estimated, acquired the brand for Rs 40-50 crore, according to analyts tracking the sector.

The entry of Emami, owning brands such as Zandu balm, Boroplus antiseptic cream, Navratna Cooling Oil and Fair & Handsome fairness cream, into the multinational-dominated female hygiene care market did surprise many. The pecking order in the Rs 2,100-crore category has hardly changed in years, with Procter & Gamble (Whisper), Johnson & Johnson (Stayfree and Carefree) and Kimberly-Clark Lever (Kotex) being the key players.

But FMCG analysts point out that the need to bolster turnover had also compelled the manufacturer of Ujala Blue, Jyothy Laboratories, to acquire loss-making Henkel India a few years ago, giving it greater legroom in competitive categories such as laundry, personal wash, home care and household insecticides.

"The acquisition of She Comfort is part of our inorganic growth strategy and is being funded through internal accruals," Naresh Bhansali, CEO - finance, strategy and business development, Emami, has said at the time of the buy.

And this is not the only bold bet by Emami in recent months.

Growing risk appetite

Just before the acquisition of She Comfort, Emami launched He, a range of deodorants that company director Harsh Agarwal had described as its foray into male grooming. Endorsed by Bollywood actor Hrithik Roshan, Emami has been aggressively pushing the He range on television these days and is expected to take the brand into haircare and skincare products for men. The male-grooming space has seen new players, including regional players, step in and existing players consolidate their position in the last few years.

Agarwal says that the foray into the deodorant space was a logical step for the company given that it had made the first move into male skincare with Fair & Handsome nine years ago. The latter has the distinction of creating the men's fairness cream market in India, which is pegged at Rs 350-400 crore, according to industry estimates. Emami claims it has over 60 per cent volume share, above rivals such as Hindustan Unilever and Loreal's Garnier.

Fair & Handsome has not been restricted to fairness creams. In March this year, Emami extended the brand into facewash and may look to take it to other men's grooming areas, according to company officials. The company has also forayed into the light hair oils market with Emami '7 Oils in One', which was launched in April.

Abneesh Roy, associate director, research, institutional equities, Edelweiss, says, Emami's moves are in line with its guidance of entering new categories. "The company has guided launch of eight new products. This will diversify product portfolio and reduce seasonality impact," he has said in a recent note on the company.

Roy estimates that Emami's current moves could add Rs 500 crore to the turnover in two years, taking it beyond the Rs 2,300-crore mark.

While Emami officials have not indicated turnover targets, sources say that the company could be eyeing Rs 5,000 crore in about five years to get into the big league. Emami is likely to continue to scout for more acquisitions, as a result.

Tried and tested

Analysts say that Emami is selecting its areas of operation carefully - segments that are small but growing. Companies such as Paras, which Emami had aggressively bid for but which was eventually bought by Reckitt Benckiser in 2010, had become successful on the back of this thought-process: The products were either category creators or differentiators.

Agarwal has hinted that the He line of deodorants was different from the rest in terms of product efficacy. Similarly, She Comfort will be pushed aggressively into semi-urban and rural areas, where Emami's distribution network is strong.