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Eveready looking beyond batteries to boost growth

LiveMint logoLiveMint 04-04-2017 Soumya Gupta

Mumbai: Eveready Industries India Ltd is betting on its lighting business to try and make the company less dependent on its century-old battery division.

Eveready Industries managing director Amritanshu Khaitan said sales from the lighting division have doubled.

The quintessential battery maker—famous for its tagline “Give Me Red”—is restructuring its packet tea vertical and has launched home and kitchen appliances, including fans, cooking stoves, and water heaters last year. Last month, the company announced it will sell air purifiers.

“A brand that is 110 years old needs to keep doing initiatives to remain young,” Khaitan said in a phone interview. “A new category like air purifiers may not contribute a lot to turnover but it will help extend the brand.”

Eveready has been trying to reduce its dependence on its mainstay battery business, that contributes Rs800 crore, or 60%, to the firm’s top line.

“We have a 50% share in the batteries market, but the total market is small, only Rs1,500 crore,” Khaitan said. “With lighting, fans and kitchen appliances, we are addressing a nearly Rs25,000-crore market.”

Khaitan said these segments are expected to grow 10-15% per year.

Eveready reported Rs1,323 crore revenue in FY16 and its current market capitalization is Rs1,977 crore. In Q3 of FY17, Eveready reported a year-on-year revenue growth of 6.3% to Rs344.7 crore and a 20.3% rise in profit before tax to Rs28.55 crore.

Eveready’s lighting business doubled from Rs150 crore in 2014-15 to Rs300 crore in 2016-17, and Khaitan expects it to bring in Rs500 crore in the next two years.

“We are a single brand company so the amount we need to invest in brand building in a new segment is relatively much lower,” Khaitan said. “A case in point is lighting. With our brand campaigns in the LED space, we have managed to break into the top 3 with limited expense as compared to a new entrant like Syska which would have spent 3-4 times our budget.”

Khaitan said Eveready spent Rs25-30 crore in marketing its line of LED bulbs, nearly half its total allocated budget for advertising and promotion.

“We are using 50,000 electrical (goods) outlets from our existing battery network that goes deep down in rural India, reaching villages of even 5,000 population,” Khaitan said. “That gives us a competitive edge. In the past 18 months, we have added another 25,000 outlets in more urban markets.”

Khaitan said the company will expand its lighting business with luminaires—light fixtures with a body and a bulb socket—and with LED-based tube-lights.

Analysts said although Eveready is making the right moves, it might find growth in the lighting business challenging. “Eveready is a good brand and it has introduced luminaires in its lighting vertical, which is a high-margin business”, said an analyst, requesting anonymity. “Eveready has also been shifting from plain vanilla bulbs to LED,” he added.

“However, sales from CFL (compact fluorescent lamp) bulbs are falling as the country shifts to LED. With more competition and increased commoditization, margins in the LED business are also falling,” the analyst added. “LED sales may not be enough to compensate for Eveready’s fall in revenue from CFLs.”

Meanwhile, Eveready is also pushing growth in its small appliances business. Along with lighting, the company is now investing in marketing the appliances business.

“In the current year, we have plans to promote both lighting and appliances business,” Khaitan said. “Our TVCs (television commercials) will be for lighting and will be pan-India. But with appliances, we will focus on selected print media ads that target the north and the east to communicate our entry into this segment.”

While bulbs and lighting have found a ready distribution network in Eveready’s existing batteries business, the company is building a network for appliances from scratch.

“We are building a completely new network with an entirely new sales team,” Khaitan said. “We found the DNA for appliances does not go with an FMCG (fast-moving consumer goods) distribution network.”

Eveready is currently sourcing its appliances in equal volume from vendors in China and India, marketing them under its brand name. Khaitan said the firm does not plan to manufacture appliances on its own until it can identify a product category that is growing rapidly.

Appliances will be crucial in driving the company’s growth over the next two years, a report by Karvy Stock Broking said in January. The firm has found traction in the “northern and eastern parts of India where kitchen and heating appliances have taken off well along with ceiling fans”, the report said. The report added Eveready will focus on building a dealership network for appliances in southern India, moving away from the northern and eastern Indian markets where it dominates.

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