Welcome to yet another edition of the Emami Annual Report!
When we started presenting our annual report in the form of a magazine a number ofpeople asked 'A magazine? Really?'
The advantages of an exhaustive reporting format soon began to emerge.
A number of shareholders at the AGM complimented the management for going againstconvention. They said they found the magazine engrossing. Some indicated the informationreporting was comprehensive. Yet others indicated that they never realised the managementdepth of the Company until they read this differentiated treatment.
And that is precisely why we selected to extend the Annual Report beyond itsconventional treatment - from a collection of numbers and strategic analyses towards adocument that broadly captures the romance of the Company.
We hope you enjoy this edition!
There has been just one secret behind the transformation of Emami into a frontlineIndian FMCG company. The ability to understand latent unexpressed needs of consumers andtranslate them into cluttercutting products. The result is a company that was valued ataround H21200 crore in market capitalisation as on 31st March 2016 growing by nearly 40times in value since its Public Offer in 2005.
Emami is present in the fourth largest national sector. The sector touches billionsacross geographies. The sector is overcrowded by organised and unorganised players. Theseplayers manufacture a large number of products. A number of these products are me-too andeven counterfeit.
The aim is not to merely survive this environment; the objective is to succeed in it.This success needs to be derived from the identification of niches relatively insulatedfrom competition. These niches are created (and occupied) by understanding where theexternal environment is trending what consumers are likely to need and working backwardsto create relevant and affordable products. Our edge lies in spotting categories that areunique devoid of competitors and with a unique proposition enabling us to enjoy absolutecategory leadership.
In this environment it would be easy to offer deep discounts and freebies in thepursuit of short-term visibility and market share but the strategy would be largelyunsustainable and even brand-destroying.
Since inception Emami's success has been derived from its keen understanding of Indianmiddle-class aspirational consumers. This competence is often under-appreciated; sinceIndia is a vast country with varied geographical and climatic conditions where consumerprofiles change every 100 km what one needs is a product portfolio addressing diverseconsumer requirements.
And this is where we come to something we are deeply proud about: Emami is a trulyIndian company that addresses middle- class aspirational consumer needs by creating trulyIndian brands.
Emami's consumer understanding extends beyond product functionality. When our consumerstudy indicated that nearly 30% of women's fairness creams were actually used by men westudied user buying patterns.
Men were not comfortable buying the product directly across the counter. There was ahesitation in admitting openly that men also needed to look fair. We worked on these cuesand the result was that we introduced a fairness product exclusively for men - Fair andHandsome - supported by a communication strategy that empowered closet users to step outand buy the product. We didn't just launch a product; we created a category for the firsttime in India.
Or take the case of Nityam tablets. The conventional consumption of an ayurvediclaxative is cumbersome. We worked around this problem to introduce a convenient tablet.This innovation is not just about a new product introduction; it encourages a new form ofconsumption graduating the consumer experience.
That brings us to four words that have made all the difference at Emami.
Graduating the consumer experience.
We don't merely plug product gaps; we create stand-out products. We don't just makeconsumers feel good about purchase; we graduate their experience to a different level. Wedon't just focus on therapeutic safety; we weave a deep research-led ayurveda traditioninto product safety. We don't just bank on ayurveda; we validate our products throughcompetent safety studies.
Emami's success is derived from its niche ayurveda and herbal-based positioning as wellas its strong innovation and new category incubation.
We have leveraged ayurveda with modern-day science to deliver best yet affordable andeffective products which have been manufactured using advanced scientific and laboratorypractices. Most of our manufacturing units are ISO 9001: 2000 compliant and accreditedwith ISO 14001:
2004 and ISO 18001: 2007 certifications.
It would have been defeating for a truly Indian company addressing its vast middle-class consumer base to be urban-driven. The reality is that Emami is among the few IndianFMCG players to extend deep into a rural market which accounts for more than 70% of thecountry's population. Here too we progressively adapted our role: we graduated frommarketing large SKUs to small affordable equivalents. Besides we marketed products aroundattractive price points that encouraged enhanced value- addition without becomingexpensive creating a compelling volume-value play.
It would have been convenient for a truly Indian consumer products company to continuemarketing within the heart of India on the grounds that this given the extensiveunderconsumption represented a world of an opportunity. Emami is a confident globalIndian corporate; we customised our brands around the climatic and physical suitability ofcountries the world over. The result is that we extended our Indian multi-categoryleadership to international markets. And best of all we did not merely market in some ofthese countries; we commissioned our first international manufacturing unit (Bangladesh)to address the needs of that geography.
It would have been timeconsuming for an ambitious Emami to grow through the organicroute. We selected to acquire businesses instead.
In 2008 we acquired a multidecade Zandu possessing a rich repository of ayurvedicknowledge and products. The acquisition was considered daring for its scale; weimplemented the acquisition repositioned acquired brands and the result is that the Zanduportfolio has trebled its domestic sales since acquisition. In 2015 we acquired theayurvedic hair and scalp care business under the Kesh King brand (ayurvedic medicinal oilaloe vera herbal shampoo and ayurvedic capsules) on the grounds that the ayurvedic hairand scalp-care category was extensively under-penetrated.
It is just not enough to create effective and affordable products of the best quality.They also need to be competently communicated to consumers. Emami's products are backed byrobust communication understood by the masses. Our products have been consistentlypositioned around enhanced life quality.
We complemented this pitch through the pioneering engagement of celebrity brandambassadors.
Even as a strong consumer pull was created because of these initiatives it wasimportant to create a robust distribution system. We reached consumers everywhere; we madeour products available in villages of population clusters of less than 10000. The resultis that we now have more than 2900 distributors a direct coverage of more than 6.4 lacretail outlets and indirect reach across more than 4 million retail outlets. Even in theremotest part of the country you are likely to find a store - possibly the smallest shack- marketing Emami products across the counter.
Emami's Power Brands are growing and penetrating further. The brand extensions and newlaunches are receiving encouraging response. The International business is expected togrow aggressively. An improving economic landscape leading to higher disposable incomesand normal monsoons are expected to revitalise the rural economy and FMCG prospects. Emamiis poised to take benefit of these growing opportunities.
The bottomline is that we find Emami waiting to capitalise extensively. Our story isjust beginning.