The top priority of Jyothy Laboratories in the current fiscal year is geographical expansion, says M P Ramachandran, the company’s Chairman and Managing Director.
The mission of 31-year-old Jyothy Labs, a leading FMCG company, in fiscal year 2014-15 is branding of its premium brands – Ujala, Exo, Maxo, Pril, Margo, Fa, and Mr White across the country. Apart from expanding geographical footprints, Jyothy Labs, which transformed white as the colour of business, will concentrate more on advertising campaigns, relaunching various products, and expanding the brand portfolio. Strengthening of its R&D wing and manufacturing units to increase productivity are also on the cards. To tap the huge market in rural areas, the company has stepped up marketing and sales and distribution.
Building a professional team
To contemporise the self-made system of functioning, the management has roped in S Raghunandan as the CEO. The company is grooming a new team under the expertise of professional heads in key divisions such as Manufacturing, Sourcing, Distribution and Brand Management. Ramachandran informs that the company is expecting 25 percent compounded annual growth in next three years. “Under the new team, we are planning to achieve revenues of Rs 3,000 crore by 2016,” he says.
Jyothy’s various products are available in 2.9 million outlets in India as of March 31, 2013, apart from 1 million direct outlets. The company has a 4,000 strong distribution network across the country, which includes 1,700 distributors in urban areas, 200 Super Stockists, and 2,000 Sub Stockists in rural areas.
Jyothy Labs has decided to rationalise distributor margins to be in line with other companies and refixed 6 percent on all 10 brands as part of streamlining its distribution network. Retailer margins were also standardised to 10 percent. The number of distributors has been rationalised. Earlier, the company was functioning with owned depots and Commercial Sales Agents whereas now the thrust is on C&F outlets. In the rural areas, the products of Jyothy Labs are distributed through a super stockist. Zonal Commercial Structure has been set up to expedite service to the distributors and faster settlements. This will result in good savings in distribution cost.
More ads, more revenue
“We will pay more attention to widen our retail network. Besides, we will do advertising campaigns and rebranding of the products across India. We are exploring the possibility of expanding our portfolio too,” reveals the MD
To connect with new customers and increase the sales, Jyothy Labs, has increased the advertisement spend to 10-12 percent. “I believe advertisement is an investment. The more you advertise, the more revenue you will get,” he adds. The company has also revised stockist margin for Ujala from 8 to 6 percent, while retailer margin has been revised from 10 to 15 percent from the earlier 10 percent. The company reported net sales of Rs 296.98 crore for the third quarter ended in December 31, 2013 against Rs 234.20 crore in the last quarter, and a 63.11 percent rise in its net profit to Rs 27.37 crore.
Acquisition raised revenue
Ruling out that acquisition of Henkel India has been affecting the company’s growth, Ramachandran pointed out that the company reported a 63.11 percent rise in its net profit to Rs 27.37 crore in the last quarter. “The acquisition has accelerated our growth in a big way. We are growing on a positive note. It is a good sign. The organisation will function like a well-oiled machine and derive optimal benefits of the synergies, be it sourcing, manufacturing, distribution or marketing. The acquisition has boosted our presence in urban areas as Henkel’s strong presence in modern retail formats is an advantage,” he adds.
The company spent Rs 15.04 crore on advertising in the third quarter, up 25.2 percent from a year ago. Its expenditure on promotions in the third quarter tripled to Rs 12.04 crore from Rs 4 crore a year ago. The combined advertising and promotional expenses in the third quarter rose 71.6 percent to Rs 27.48 crore from Rs 16.01 crore a year ago.
Diversification and emotional satisfaction
Product diversification and satisfaction of customers are equally important in a business. “When I started my business, experience was the main capital. During that time, I couldn’t find a single product that satisfied my need for maintaining pure white clothes. It paved the way for Ujjala, and I wanted the brand to be known as a fabric whitener class and not as a product in that segment. Though raw materials were simple, we introduced a different concept for whitening clothes, and it paid off.”
The brand’s offer of ‘chaar boondo waala’ (four drops only) communicated its key promise of ease of use in a simple manner. The brand leveraged the four drops story across all media channels, though television remained the bedrock of the marketing campaign. Today, Ujala commands 72 percent share in the fabric whitener market.
“The emotional factor drives business in two ways,” stresses Ramachandran. “One is emotional attachment of customers to the brand. The second is marketing of the products through customers’ emotions. If we provide a product that satisfies the need of a customer, definitely, he or she will be inclined towards that brand. To maintain that emotional chord, we used advertisements that connect with customers, for instance, we used traditional art forms to market our products in Kerala.” He informs that they are expecting 25 percent growth in the next three years.
Developing Indian brands
According to Ramachandran, the rural market has been the key growth driver for Jyothy Labs in the past few years. “Around 70 percent of our revenue comes from rural India. Consumption has doubled in rural areas over the years. To take advantage of this rising market, we have stepped up our marketing and sales and distribution,” he says.
“However, though there is a vast opportunity in FMCG market, young entrepreneurs are not utilising it well. Why can’t we think of manufacturing quality Indian products?” he adds and points out that most of the consumer products available in the market are being produced by foreign companies – be it soap, toothpaste, cosmetics, shaving products, or detergents, etc. The situation is not different in other sectors. “Ninety percent of the FMCG market in India is being controlled by foreign companies such as Hindustan Unilever, Nestle, Procter & Gamble, Pepsi and Colgate-Palmolive. I urge all youngsters to come forward and seize the opportunity. We should be self-sufficient in all areas; it is the need of the hour.”
“Innovation makes us succeed,” he adds. “If you don’t innovate, you will fail in the long-run. For instance, observe the umbrella and the automobile industries; several innovations are happening in both the sectors and the companies give utmost priority to research and development. Without innovation, there is no existence in the market. Innovate or perish is the slogan now. Go on innovating – whatever be the product – otherwise you will be pushed back in business.”
More products, more productivity
The company will be strengthening its R&D wing and manufacturing units to increase productivity. “Having our own manufacturing unit is more beneficial, as it helps us to quality control the end product, and meet demand in a timely manner. However, we are also open to exploring the feasibility of outsourcing when we are allowed full quality assurance of both input and output,” he says.
The company plans to relaunch Henko detergent as a new stain champion variant. It also plans to relaunch its Fa deodorant as an international women’s bodycare brand. It plans distribution expansion, new ad campaign and marketing investment for its Fa brand. The company will also relaunch Maxo mosquito coil, and premiumise Margo soap; and launch a new face wash. The company had relaunched Ujala, its flagship brand, with a new packaging last year.
As regards competition between Exo and Pril, Ramachandran says that Exo is a powerful brand in the bar section while Pril is a market leader in liquid form. “Exo is doing well in rural areas while Pril has a predominant market in urban areas. We will capitalise the potential of both the products by marketing their strengths in a balanced manner.”