ST. JOSEPHS COLLEGE OF BUSINESS ADMINISTRATION

18 Residency Road, Bangalore 560025

Emami Limited

Module 1 & 2

Strategic Management

Submitted by - Group B5

Aayushi Singh, 13041

Mudassir Sharieff G M, 13063

Neenu Varghese, 13064

Pratik Porwal, 13070

Ruben Barreto, 13074

Group B5, II PGDM

Emami Limited 2

Table of Contents Introduction .......................................................................................................................... 3

Vision .................................................................................................................................... 3

Mission .................................................................................................................................. 3

Competitive structure of the industry ................................................................................. 4

Competitive position of the company ................................................................................. 4

Competiveness and Position of rivals ................................................................................ 6

Major Competing companies in FMCG segment ................................................................ 6

Drivers for Growth ................................................................................................................ 7

SWOT Analysis ..................................................................................................................... 7

Key Success Factors Emami ............................................................................................ 8

Strategic Approach .............................................................................................................. 8

Approach for top line growth - Sales .......................................................................................... 8

Approach for bottom line growth - Profits ................................................................................ 8

Porters 5 Forces Model Analysis ....................................................................................... 9

External Factor Evaluation Matrix EFE Matrix ................................................................10

Internal Company Analysis .................................................................................................10

Competition Analysis ..........................................................................................................12

Financial analysis ................................................................................................................12

Ratio based analysis ...........................................................................................................12

Strategic Formulation SWOT analysis ............................................................................14

Strategic Formulation BCG Matrix ..................................................................................14

Competitive Advantages of Emami ....................................................................................15

Business model and Value Proposition .............................................................................15

Business Model ...................................................................................................................15

Value Creation .....................................................................................................................16

Strategies in action .............................................................................................................17

Future Prospects .................................................................................................................19

Projections ...........................................................................................................................20

Projected Income Statement for next 3 years ...................................................................20

Conclusion ...........................................................................................................................22

Bibliography ........................................................................................................................22

Group B5, II PGDM

Emami Limited 3

Emami Limited

Introduction

Emami Limited is one of the leading and fastest growing personal and healthcare

businesses in India, with an enviable portfolio of household brand names such as

BoroPlus, Navratna, Fair and Handsome, Zandu Balm, Mentho Plus Balm and Fast

Relief.

Established in 1974, Emami has a portfolio of over 250 products based on Ayurveda

formulations. Emami Limited, the flagship company of the Group, recorded a turnover of

Rs 1821 crore in the financial year 2013-14.

Vision

Making people healthy and beautiful naturally

Mission

To contribute whole heartedly towards the environment and society integrating all

our stakeholders into the Emami family

To make Emami synonymous with natural beauty and health in the consumers

mind

To drive growth through quality and innovation in products and services.

To strengthen and foster in the employees, strong emotive feelings of oneness

with the company through commitment to their future

To uphold the principles of corporate governance

To encourage decision making ability at all levels of the organization

We would strive

To be part of every household in the country

To be a major player in every product category we venture into

To be one of the most respected marketer in the country

To be recognized as a global brand

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Emami Limited 4

Competitive structure of the industry

The consumer products industry has been growing at a brisk pace in the past few

years backed by robust economic growth and rising rural income. Growth drivers

such as rapid urbanization, evolving consumer lifestyles and emergence of

modern trade have shielded the industry from the slowdown.

The industry is still urban-centric with majority of the goods being consumed by

urban India. Metropolitan cities and small towns (population of 1-10 lakh) have

been driving the FMCG consumption in urban India since 2002.

Consumer goods are retailed through two primary sales channels - General

Trade and Modern Trade. General trade comprising of the ubiquitous kirana

stores is the largest sales channel forming 95% of overall retail sales.

The implementation of the Goods and Services Tax (GST) is expected to benefit

the sector immensely by reducing the overall incidence of taxation. GST aims to

reduce the cascading effect by replacing a multitude of indirect taxes such as

central excise, service tax, VAT and inter-state sales tax with a single GST rate.

Competitive position of the company

Emami Limited, the flagship company of the Rs 2000 crore Emami Group, is a leading

player in the personal and healthcare consumer products industry in India. A jewel in

the crown of the conglomerate, the company is a coveted Rs 700 crore business entity

engaged in manufacture and marketing of health, beauty and personal care products

that are based entirely on ayurvedic formulation.

The companys financials show it has repeatedly outperformed the industry standards.

Emami Ltd has maintained a CAGR of 25% over the last three years compared to the

industry average of 16-17%.

Understanding the human needs and fulfilling them by dint of technical research is a

positive feature of Emami. This is being made possible by Himani Ayurveda Science

Foundation (HASF) that generates the very best of Ayurveda formulations. The

foundations unique range of healthcare products aptly caters to consumer needs. The

world class quality control methods and processes maintained by HASF ensure

Group B5, II PGDM

Emami Limited 5

optimum utility of each ingredient. The foundation is completely engaged in constant

innovation and pharmaceutical enhancements.

Boroplus brand is the market leader in the antiseptic cream segment; the Navratna Oil

is also in the pole position in the cool oil segment. Fair and Handsome is the pioneer in

the fairness cream for men segment. Emamis products in different categories like cool

oil, antiseptic cream, fairness cream for men, and the crme herbal hair pack have

carved a niche for themselves in their respective segments.

Boroplus has been selected as among the top 100 brands by the Brand Equity of The

Economic Times. In 2006 and 2007, Navratna has been ranked the 6th Most Energized

Indian Brand by the DY&R Brand Asset Valuator.

Sona Chandi Chyawanprash, Himani Fast Relief, (Ayurveda pain relief ointment)

Mentho plus (pain balm), Hairlife (crme herbal hair pack) and Emami Malai Kesar (cold

cream) are also major players in their respective categories. Brand extensions have

helped Emami consolidate its position in the market and also cater to varied consumer

needs.

Emami covers all the states with 28 depots across India. Its supply-chain management

assumes immense significance which was aptly reflected through remarkable

expansion in dealer-distribution network, outlets and manpower. The domestic sales

and distribution division directly covers 4,00,000 outlets all across the country along with

an additional 2100 modern retail outlets. Emamis products reach out to nearly 30 lakh

retail outlets across India through 4,000 distributors.

Emami Limited has recently been conferred the Most Enterprising Company of the Year

by IIPM (Indian Institute of Planning and Management) and The Sunday Indian

publication of the Planman Media Group. In 2007, the company received the Institute of

Cost and Works Accountants of India (ICWAI) Award for Excellence in Cost

Management.

In East India Emami occupies leadership in sectors such as paper and newsprint,

private hospital, edible oil, bio-diesel and real estate. Emami also has presence in ball

Group B5, II PGDM

Emami Limited 6

pen tips manufacturing, contemporary art and retail chain with Frank Ross and

Starmark. Emami has also signed a MoU for a cement plant in Chhattisgarh.

Competiveness and Position of rivals

Major Competing companies in FMCG segment

HUL

Nestle

Marico

ITC

Name Last Price Market Cap.

(Rs. cr.)

Sales

Turnover Net Profit Total Assets

HUL 619.45 133,993.71 28,019.13 3,867.49 3,277.05

Dabur India 187.70 32,964.79 4,870.08 672.10 1,946.63

Godrej Consumer 815.00 27,744.71 4,079.84 564.84 3,021.92

Colgate 1,512.00 20,562.11 3,578.81 539.87 599.86

Marico 248.80 16,044.44 3,682.49 577.20 2,647.62

P and G 4,285.00 13,909.43 1,686.78 203.22 805.32

Godrej Ind 364.55 12,229.02 1,453.55 119.69 2,491.74

Emami 516.50 11,722.88 1,627.09 323.77 820.85

Gillette India 2,150.00 7,005.82 1,437.72 87.16 649.23

Bajaj Corp 242.90 3,582.78 671.73 150.44 483.82

Jyothy Labs 178.30 3,227.65 1,260.18 106.11 1,261.24

JHS Svendgaard 8.60 20.72 35.28 -28.79 149.70

GKB Ophthalmics 31.85 13.23 31.38 0.83 30.95

Group B5, II PGDM

Emami Limited 7

Drivers for Growth

Growing Population

Rapid Urbanization

Evolving consumer lifestyle

Modern trade

Taxation Special reference to Goods and Services Tax GST

SWOT Analysis

Strengths

Brand name

Research and Development

Distribution Channel

Market Share

First Mover Advantage

Mens Fairness Cream

Weakness

Lack of Diversification

Oppurtunities

Growing Population

Evolving consumer lifestyle

Diversification in related categories

Threats

Entry of International brands

Unbranded Healthcare products

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Emami Limited 8

Key Success Factors Emami

Ayurveda Formulations

Strong Distribution Channel

40000 distributors and 400000 outlets across the country

Product innovations and brand extensions

Effective and efficient cost control initiatives in marketing

Low cost manufacturing techniques

Strategic Approach

The group strategy is for growth through both Organic and Inorganic expansion which is

driven by power brands, upcoming brand extensions and new launches, coupled with a

wider international presence through acquisitions.

Approach for top line growth - Sales

Enhance product recall through aggressive promotion via celebrities

Expand distribution to reach rural pockets

Differentiated Value For Money products

Innovate and enter new product categories

Undertake brand extensions

Wider international footprint ,entry in new geographies drive exports

Leverage existing distribution network

Approach for bottom line growth - Profits

Engage in effective and continuous cost control initiatives

Reduce proportion of ad- spend with increase in volumes

Stabilization of new launches and brands

Enjoy benefits of economies of scale

Leverage on low cost manufacturing taking full benefit of location advantage

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Emami Limited 9

Porters 5 Forces Model Analysis

Forces Intensity of the Force

Critical Reasoning

Risk of Entry of Potential Competitors

Moderate

No identified new entrant other than ITC in the segment

Emami has strong presence in the markets it caters to

Rivalry among established companies

Moderate to High

Consumption pattern and Demand show increasing trend

Distribution network being common is a critical factor

Bargaining power of buyers

Moderate to High

Dominance of consumer is high

Dependence on end consumers is high

Switching brands is easy

Bargaining power of suppliers

Moderate to Low

Dominance of suppliers is low

Dependence on supplier is not so high as every company has multiple suppliers for same resources

Switching costs are low

Substitute Products Moderate to Low

No good substitutes are available

Quality of substitutes is questionable

Overall the threat is moderate; however, Emami keeps on evolving itself by creating and

sustaining value for money products and fulfill consumer needs in every possible

aspect. This competent feature of Emami helps it overcome competition and beat the

industry performance year on year.

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Emami Limited 10

External Factor Evaluation Matrix EFE Matrix

Total weighted average score is 2.95 which indicate that the company is well equipped

with strategies and tactics to face the external environment.

Internal Company Analysis

Strengths

Brand name

A strong brand name is a major strength of Emami. This gives Emami the ability

to charge higher prices for their products because consumers place additional

value in the brand.

Key External Factor Weight Rating Weighted Score

Opportunity Factors

Rural Business development .05 4 0.2

Distribution Network .2 3 0.6

Modern Trade practices E commerce

.1 2 0.2

Government Policies Taxation .05 2 0.1

Growing Incomes levels .1 3 0.3

Rapid Urbanization .05 3 0.15

International Markets .05 2 0.1

Threat Factors

Entry of International brands .05 4 0.2

Private Label Brands Unorganized local products

.15 4 0.6

FDI in retail .1 3 0.3

Consumer preference .1 2 0.2

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Emami Limited 11

Strong brands in its portfolio

Rs 100 crore plus brands - Boroplus, Navaratna, Fair & Handsome, Zandu

Emami covers all the states with 32 depots across India and enjoys a wide

distribution network comprising strong network of 3500 distributors and 40000

sub distributors , with direct retail reach across of 5,00,000 outlets

Customer loyalty

Procurement policy

Company procured raw materials from vendors from no excisable areas like

Assam, Uttaranchal and Himachal Pradesh etc at affordable costs

Hedging

Company strengthened their hedging policy to mitigate the risk of volatile

commodity prices.

Operational excellence:

Automated processes - filling, capping, labeling and cartooning.

More than 80% of the production is derived from tax-exempt zones. Outsourcing

manufacture of select products to reduce costs and focus on branding.

Research and development

Weaknesses

Lack of diversification

Company offering FMCG products based on Ayurveda only and hence limits its

scope of product mix.

Emami focuses only on products with higher margin.

Company depends on ITC e-Choupal to distribute its product and does not have

its own system established.

Lack of scale

A lack of scale means Emamis cost per unit of output is very high. Increasing

volume, while maintain quality, would help reduce those costs

Competition at peak

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Emami Limited 12

Competition Analysis

Sales data of competitors for the years 2012 and 2013

Financial analysis

Ratio based analysis

The EV/EBITDA ratio is a relevant ratio for financial analysis. Emami Ltd shows a

EV/EBITDA ratio of 22.72 for the next 12 months.

This is significantly higher than the median of its peer group: 14.82. According to this

financial analysis Emami Ltd's valuation is way above its peer groups.

This ratio is significantly higher than the average of its sector (Software): 8.89.

According to this financial analysis Emami Ltd's valuation is way above its sector's.

The liquid ratio is decreasing year after year. Though the ratio is above 1 in all the five

years, it is preferable to improve upon the situation. This may be due to the fact that the

stock is major composition of current assets, which excludes liquid assets.

The debt to equity ratio is decreasing year after year, which indicates, the servicing of

debt is less burdensome and consequently its credit standing is not adversely affected.

Group B5, II PGDM

Emami Limited 13

The cash ratio is decreasing year after year.

The fixed assets ratio is increasing year after year which proves that the fixed assets

are utilized to its optimum level, thereby increasing the production and reducing the

cost.

It can be stated that the working capital management of the company seems to be

satisfactory. But in certain years there is decrease in working capital, which is due to

higher amount of current liabilities especially, increasing in provision for dividend and

taxation and creditors.

Internal Factor Evaluation Matrix IFE Matrix

Total weighted average score is 3.45 which indicate that the company is well equipped

with strategies and tactics to tackle the internal environment changes.

Key Internal Factor Weight Rating Weighted Score

Opportunity Factors

Market share .2 4 0.8

Quality .1 3 0.3

Operational Efficiency .15 2 0.3

Customer Loyalty .05 3 0.15

Threat Factors

Product mix .2 4 0.8

Lack of diversification .1 4 0.6

Economies of scale .1 3 0.3

Counterfeit products .1 2 0.2

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Emami Limited 14

Strategic Formulation SWOT analysis

SWOT Analysis

Strength Develop niche segments into brands

First movers advantage - Fair and Handsome Domestic distribution network

Strong brands - Boroplus, Navaratna, Fair & Handsome

International presence

Weakness Lack of diversification

Opportunity Demographic trends

Related diversification into growing categories

3. Modern retail distribution E commerce

Threats Competition - Recognized Brands and Private Label Brands

FDI in retail

Strategic Formulation BCG Matrix

Star - Boroplus

Question Mark - Mentho Plus

Cash Cow - Fair and Handsome Dog - airlife

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Emami Limited 15

Competitive Advantages of Emami

Sustainable business model

Innovative marketing campaigns

Distinctive product lines

Product differentiation

Wide and direct distribution network

Business model and Value Proposition

Emami Ltd. is engaged in the business of manufacturing and marketing personal care,

health care and beauty products.

Business Model 1. Value propositions

It is a promise of value to be delivered and acknowledged and a belief from the

customer that value will be appealed and experienced. Emami promises to Make

people healthy and beautiful, naturally and it certainly delivers all its promises

through it different brands like Navratna oil, Fair and Handsome, Zandu balm

(Acquired Zandu brand)

2. Target customer segments

Majority of the customer base of Emami is from rural segments. Revenues close

to 50% are from rural sales.

3. Distribution channels

Geographical presence increased to 40lakh outlets in India

Direct reach increased by 20% to 6 lakh outlets

Core capabilities Distribution channel and unique products

Rs. 279 crore spent on advertising and promotions

Strong network of 3000 distributors and 5600 sub-distributors, with a direct reach

across 6,00,000 retail outlets

Availability of products across 40,00,000 outlets

4. Customer relationships:

Project Swadesh increased Emamis distribution down to rural and isolated

population clusters of up to 10,000

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Emami Limited 16

5. Low competitive intensity

Emami is the market leader in almost all the segments it is present because of

the unique products and less competition

6. Low Penetrated and Niche product categories

Antiseptic cream category

Pain management category

Mens fairness cream sector

Cooling oil category

7. Innovative & effective products

Fair and Handsome for Men (Fairness cream for men)

Value Creation

The Company follows the strategy of extending brand equity through sub-segmentation

of the core brand, hence expanding market reach

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Emami Limited 17

Strategies in action

1. Functional Strategies

Differentiation

Launch of Emami Talcum, Emami Vanishing Cream and Emami Cold Cream and

glycerin soap , which were great favourite brands with the quality conscious

consumers in the mid-seventies. The company soon became adept in selling

beautiful dreams to Indian women interested in finding their own identity. The

signature tune of Emami played over radio and TV became a household

favourite.

Innovation

Emami provides products that take the consumer experience a few notches

ahead each time. This is because Emami has commissioned a dedicated

research unit stewarded by experienced industry professionals who reconcile the

wisdom of ayurveda with the discipline of professional science.

In 2005, Emami created a completely new market segment by introducing Indias

first fairness cream customised for men. Travelling the region and by interacting

with a host of retailers and intermediaries Emami discovered that 30 to 35 per

cent of users of fairness creams are men, with a growing interest in personal

grooming. The sales of Fair and Handsome in its first year had touched around

Rs 50 crore. Another feather on the cap was when Emami roped in Bollywood

superstar Shah Rukh Khan to endorse the brand, targeting the male fairness

cream market in India which immediately made the brand even more popular and

trusted by the consumers.

In 2006 the company decided to introduce a Health Care Division and a number

of new brands of Ayurvedic OTC medicines. The company has taken up the

challenge of growing this new division with a dedicated and enthusiastic team

working on this project.

2. Business Strategies

Penetration into rural markets

Emami has selected to work in under-penetrated segments with potential and

introduced aspirational products without compromising mass relevance. In a

world where sustainable success is derived from sales across a wide footprint,

Emami has invested in deep geographic penetration. Emami has leveraged its

rural distribution channels that have made it possible for the Companys brands

to be sold down to rural population clusters of 10,000+.

Group B5, II PGDM

Emami Limited 18

Emami first invested in creating a separate distribution system for rural markets

under Project Swadesh in 2010-2011. It has since covered 8,000-9,000 villages,

each with a population of 20,000 or above, across 15 states, including Uttar

Pradesh and West Bengal.

Pricing

Emami is planning to take on Johnson and Johnson in the baby products arena

with a two-pronged strategy which hinges on working out a right pricing formula

on the one hand and marketing products based on ayurveda on the other.

The company had priced its products at least 20-30 per cheaper than the market-

leader while introducing smaller packs to expand the market and bring baby

products within the reach of all.

Emami has also revised its product prices. Over the past one year, it has

launched Zandu balm and Navratna oil in Rs.2 and Rs.1 packs, respectively. It is

also test marketing talcum podwer pouches priced at Rs.1 under the Navratna

brand in Uttar Pradesh and Bihar.

3. Corporate Strategies

Mergers and Acquisition

In 2006, J B Marketing & Finance Ltd., the erstwhile marketing company of the

Emami Group merged with Emami Ltd. and the total turnover of Emami including

sales in domestic and export market stood at Rs 516 crores at the end of the

fiscal year 2006-07.

Within three decades, the company Emami Ltd has a turnover of Rs. 1500 crore,

the flagship company of the Rs.5000 crore Emami Group.

Emami Limited with an investment of Rs 730 crore acquired Zandu

Pharmaceuticals Works Ltd on the basis of huge business synergy between

Zandu and Emami. Post the acquisition of Zandu Pharmaceuticals, a century old

household name in India, some of its prominent brands like Zandu Balm, Zandu

Chyawanprash, Zandu Kesri Jeevan, Zandu Pancharishta, Sudarshan and

Nityam Churna came under Emamis basket of brands.

Business restructuring

The Emami group is looking to restructure the business of its recent acquisition,

the Mumbai-based pharma firm, Zandu Pharmaceutical Works.

A Rs 2,000 crore diversified group with interests in the FMCG sector, healthcare

and realty, Emami also plans to recast its realty business managed by group

company Emami Realty. Emami Ltd has been looking to consolidate Zandu's

business and become a dominant player in the FMCG segment. Since the

Group B5, II PGDM

Emami Limited 19

company has tremendous growth potential, Emami intends to tap them to

improve its topline as well as bottom-line.

Future Prospects Based on the following points, Emami Group is expected to grow between 8 to 10% yoy

over next 2 years. The points mentioned below refer performance in the year 2013 in

comparison to year 2012.

Initiations in Operations

Initiated to cover 600 distributors under the outreach secondary sales software,

contributing to 60% of sales

Land acquired for third unit in North-east India under a mega project scheme and

the unit is expected to commence operations in FY16

Construction initiated for warehouses in 4 locations : Kolkata, Patna, Ambala

&Guwahati

Performance in Sales and Turnover

Consolidated net sales Rs 1,821 crore grew by 7.2%

Domestic sales Rs 1,511 crore grew by 5.1%

International business Rs 221 crore grew by 23.0%

Cost of goods sold at 37.4% of sales decreased by 470 bps.

Profitability

EBIDTA Rs 441crore grew by 27.1%

EBIDTA margin 24.2% improved by 380 bps

PAT Rs 402.4 crore grew by 27.9%

PAT margin 22.10% improved by 357 bps

EPS 17.73 also grew by 27.9%

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Emami Limited 20

Projections

Projected Income Statement for next 3 years

The growing business trend and operational efficiencies are the major reasons for this

prediction. Increase in distributor capacity, Investment in plant capacity is definitely

resulting in top line growth Sales.

Brand name, strong distribution network are major strengths of the company which can

provide competencies in the long run.

Differentiation, Pricing, Mergers and Rural penetration strategies are expected to

provide for the projected growth of 10% in the domestic markets.

Costs associated are investment in 25,000 outlets across the country, re-launch of

certain brands with value added benefits.

Group B5, II PGDM

Emami Limited 21

Projected Position Statement for next 3 years

The growing business trend and asset additions form basis for this projection.

Wealth maximization and creating shareholder value are major strengths of the

company. Diversification and vertical integration are the strategies adopted to provide

for the projected growth.

Investments in plan

Rs 125 crore to expand capacity at various plants across the country in next 3

years.

Rs 200 crore on construction of warehouses at 4 locations : Kolkata, Patna,

Ambala & Guwahati

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Emami Limited 22

Conclusion

The inception of Emami Group took place way back in mid-seventies, in West Bengal; it was an

extremely bold step in the early seventies when the Indian FMCG market was still dominated by

multinationals. Within three decades, the company Emami Ltd has a turnover of Rs. 1500, the

flagship company of the Rs.5000 crore Emami Group.

Today, Emami Limited is led by Mr. R S Agarwal and Mr. R S Goenka with the help of the

second generation Promoter Directors from the two families. Emami Limited has a team of over

4000 people running one of the leading and fastest growing personal and healthcare

businesses in India.

Bibliography http://www.cii.in/

http://www.emamiltd.in/

http://www.gnimonline.org/Download/pdfresearchprojects/FMCG_industry.pdf

http://www.mbaskool.com/brandguide/fmcg/6597-emami.html

http://www.infinancialsanalytics.com

http://www.emamiltd.in/investor-info/index.php#AnnualReport

http://www.ukessays.com/essays/marketing/emami-limited-analysis-of-

product-diversification-marketing-essay.php