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Our perception of health is changing dramatically. In the past, health was a state of no–illness; today it is defined holistically and is a function of lifestyle, diet, fitness, physical, emotional and even spiritual well–being.
The consumer is looking for a health and wellness quotient in each aspect of his/her life and this is a deciding factor influencing consumer choice: from the food they eat to, where they live to the products they use. This preoccupation with wellness is especially witnessed within the personal care space, where health and beauty are now coming together. People are no longer satisfied with products that just make them look good or feel good, but also want them to do–good. Moreover, the do–good aspect is understood in terms of a health rather than a cosmetic benefit. Another trend signaling the merging of health and beauty is the emergence of herbal, natural and organic products within personal care, which are considered safe, sensitive to the skin and free of side–effects by consumers.
Since consumers actively seek health benefits from personal care products, they spend a lot of time researching the product before making a purchase decision. They want to know how a product works, what ingredients it contains, the properties and actions of these ingredients and results. People still love to pamper themselves with silky smooth creams and lotions, but they also make sure that their favorite personal care products are not just making them feel good but are also keeping them healthy. It is the convergence of these supposedly disparate developments that is growing the market for Indias fast–moving consumer goods sector in general and Emami Limited in particular.
Industry and the economy
In the Indian FMCG sector, rural India accounts for more than 40% of the countrys consumption. It is our understanding that as prosperity percolates across the lower levels of Indias income pyramid, the FMCG industry will outperform its earlier annual growth average. As the Indian economy is reporting highest ever growth, there are a number of pockets of optimism:
Urban demand :–
We feel that a 10% annual growth will continue to drive FMCG sector growth.
Rural demand :–
A huge proportion of Indias population lives in rural villages; the per capita consumption in these pockets is among the lowest. In our opinion, we have reached the tipping point and annual demand is now soaring.
Infrastructural development :–
We feel that planned infrastructure development roads, ports, railways and airports will accelerate FMCG growth.
Low manufacturing base :–
We foresee that Indias low–cost manufacturing base will enable it to address the growing FMCG demand in Bangladesh, Sri Lanka, Middle East, Pakistan and similar countries; besides, non–resident Indians in the UK and the USA represent a prospective market.
Brand consciousness :–
We perceive increasing brand consciousness as consumers gradually move away from loose and unbranded alternatives.
Favourable tax structure :–
We sense that the introduction of VAT will reduce longstanding tax ambiguities; Companies in tax exemption zones will benefit. The fringe benefit tax rationalization on brand ambassadors, celebrity endorsement as well as tours and travels will strengthen the FMCG sector.
Modern retail formats :–
We see modern retail stores accelerating FMCG off take and leading to a greater proportion of the growth of branded and value–added products.
We must inform our shareholders that Emami stands to capitalize on these industry opportunities through the following initiatives:
Aggressive marketing and distribution :–
Emami continues to market its products aggressively. While huge resources are spent on new launches, existing power brands are marketed through endorsements from celebrities like Amitabh Bachchan, Shah Rukh Khan, Chiranjeevi, Kareena Kapoor, Govinda and Dharmendra. Distribution is also being strengthened and new channels of sales are being established to take care of rural markets and emerging new retail stores.
New product launches :–
The Company continues to launch new products like Fair and Handsome fairness cream for men, Navratna cool talc, Boroplus light cream and lotion, Mr. and Mrs. Black kesh kala, Malai Kesar Cold Cream and Ayurvedic OTC products like Good Morning (an Ayurvedic laxative churna), Sardi Ja (a cough syrup and Vaporub) and Memo–plus (a memory booster).
Continuous innovation :–
Emamis strong R&D and aggressive marketing capabilities enable it to identify emerging needs and aspirations of consumers and convert them into opportunities. Fairness cream for men, the first of its kind in India and the branding of Chyawanprash as Sona Chandi Chyawanprash are results of such innovative R&D and marketing efforts.
Entry into new segments :–
Emami forayed into hair care and baby care segments through the introduction of products like Mr. and Mrs. Black kesh kala and hair dye powder, and Sona Chandi baby massage oil. It plans to come out with a full range of male grooming products as well as enter the baby range category.
Fresh capacity being commissioned :–
The Company is in the process of commissioning another state–of–the–art factory in north–east India, enjoying economic benefits.
Wider international footprint :–
The Company will widen the presence of its Fair and Handsome fairness brand in Asia and Africa; it will expand the global reach of its Naturally Fair brand in the Middle East and Asia. It has initiated efforts to globalize its power brands. Boroplus Antiseptic cream is the largest selling antiseptic cream not only in India but also in Ukraine, Russia and Nepal. Fair and Handsome is also recently launched in GCC countries and is the number 1 selling whitening cream for men.
Emami Realty – another business opportunity :–
While Emami Limited is on the lookout for acquisitions in India and abroad for inorganic growth in the FMCG sector, it has identified realty as a potential business opportunity leveraging its resources. A wholly–owned subsidiary, Emami Realty Pvt. Limited, was formed in May 2007 to drive this business through an independent focus since it would be a 100% subsidiary of Emami Ltd. While aggressive growth in the FMCG business will continue, the realty segment will enhance profitability and shareholders wealth.
We must conclude on a note of unmistakable optimism. As a result of increased capacity, upcoming launches, product extensions, wider geographic coverage and growing service station, we expect to accelerate our topline growth and strengthen our margins. In widening our revenue spread and climbing the value–chain, we expect to enhance value for our shareholders as well as other stakeholders in a more emphatic way over the foreseeable future.
Mr R.S. Agarwal and Mr R.S. Goenka
Joint Chairman Emami Limited