The Hindu Business Line : `Fairness creams to be our growth drivers'

Emami Ltd has opted for innovation as one of its growth strategies. Emami's range of fairness creams will be the growth drivers in the near future, according to Mohan Goenka, Director of the company.

"Our two flagship brands, Navratna Cool Oil and Boroplus Antiseptic Cream, are leaders in their respective categories. They have been growth drivers for their categories as well as our company and will continue to play that role in the near future," said Goenka in an e-mail interview. Excerpts:

For the full year, Emami reported a 38 per cent increase in net sales. And for the quarter the increase has been quite substantial. What would you attribute this to?

I would attribute it to the favourable market trends. The FMCG sector grew by 3.5 per cent in the June 2005 quarter and the growth gradually increased to 7.7 per cent in March 2006 quarter.

Rural growth had been phenomenal in the latter part of the year, from 1.7 per cent in the first quarter to 14 per cent in the last quarter. With continuously increasing market buoyancy, and because most of our new launches were introduced in the latter part of the year, growth in the last quarter was extremely good at 64 per cent.

At the bottomline level too, the company has shown a sharp spike both in the quarter as well as the full year. Apart from deferred tax, could you throw light on the real reason for growth in profitability?

Some of the initiatives that helped us grow our margins were increased production across each product category, resulting in attractive economies of scale; concurrent with an increase in volumes, 70 per cent of our production now comes from excise-exempt zones against 55 per cent in the previous year; reduction in borrowing costs through the judicious use of foreign exchange loans, derivative and treasury products; reduction in packaging costs — spout pack for Boroplus Antiseptic Cream, PET bottles for Navratna oil and change in the cap design for the oil were relevant instances.

Your company has also faced raw material price pressure. No doubt volume growth does help mitigate the effect of rising input costs. What measures would your company and the industry take to not let input cost hamper growth?

The industry, including our company, needs to innovate products continuously to ensure that input cost does not affect growth adversely. Cost-effective packaging can help in balancing the increase in the cost of raw materials.

The trick is to aim for a level of volume, which can mitigate the effect of the cost inflation in inputs.

Do you really think this FMCG buoyancy that everyone is talking about is sustainable?

Yes, as it will be supported by a new generation of consumers who have a good amount of disposable income and are quite willing to experiment with various new products available in the market.

A whole new lifestyle based on the usage of different new types of FMCG products is knocking at the doors of the Indian middle class which is welcoming the change. The Indian consumers have just got the taste of modern trade stores offering a totally different kind of shopping experience. The retail boom, happening all around us spreading from city centres to suburbs and from metros to smaller towns, is going to accelerate this FMCG buoyancy.

Your own strategy has been to introduce new and innovative products, a strategy which some of the other smaller FMCG companies have also adopted. What is your assessment of the market's appetite for such innovative products?

The appetite of the consumers for innovative products is endless.

An innovative product that is backed by consumer insight can fulfil a need gap and can be a sure winner. However, every new product does not succeed in the market place. The consumer of today cannot be taken for a ride. Unless the new product offers real benefits or value for money or both, the consumer does not hesitate to reject the same very fast.

In your own portfolio of products, which do you think are the growth drivers in the near future?

Our innovative range of fairness creams are growing to be growth drivers in the near future. After segmenting the market very successfully by sex with the introduction of Fair & Handsome, we have introduced two new innovative brands this year, i.e., Fair & Teens and Fair & Ageless with an aim to segment the women users of the fairness cream by age.

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