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Rashmi \n Pratap, The Hindu Businessline<\/i><\/p>\n Rashmi \n Pratap, The Hindu Businessline<\/i><\/p>\n
Mumbai, \n June 13, 2014<\/i><\/p>\n
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In \n a market where homegrown and multinational companies alike make \n a beeline for the hinterland, here’s one that has boarded \n a bus to urban India after becoming a household name in villages. \n Jyothy Laboratories has meticulously targeted rural consumers \n to grow its brand into the country’s fifth-largest in the \n fast-moving consumer goods category.<\/p>\n
Every month, truckloads of Ujala fabric whitener and detergent, \n Maxo mosquito repellent coil and Exo utensil cleaner arrive at \n the doorstep of retailers in lakhs of villages, saving them precious \n time and transportation costs. The goods are also sold on credit, \n which is a major draw for rural retailers such as Gyaneshwar Kadam \n of Ajang village in Maharashtra’s Dhule district. “We \n are always short on working capital. Credit is a big help. Even \n our buyers prefer to pay after they get their wages. So I don’t \n stock products of distributors who don’t give me credit,” \n he says.<\/p>\n
This, then, is the story of thousands of retailers who now swear \n by Jyothy Labs products. “In rural India, we have the first-mover \n advantage. Since we went to villages first, gave them respect \n and credit, we get trust in return. Big companies don’t give \n credit, but I ensure my distributors do it. The moment you give \n credit, people become your patrons,” says Ullas Kamath, joint \n managing director of Jyothy Labs, best known for its Ujala fabric \n whitener.<\/p>\n
City shops beckon<\/b><\/p>\n
The company’s products are available through 2.9 million \n outlets, and it supplies directly to one million of them. Now, \n as it readies to spread into every urban nook and corner, it has \n re-jigged some strategies. To begin with, it has added more products \n to its line-up.<\/p>\n
“When you are in business, you want to spread your risks \n as well as product portfolio. And that’s what we have done,” \n says Kamath.<\/p>\n
The company acquired 50.9 per cent in loss-making Henkel India, \n a subsidiary of Germany’s Henkel AG, for ?60.73 crore in \n March 2011. With that it attempted to improve its rural-urban \n sales mix. Before the acquisition, 65 per cent of its Ujala sales \n came from rural India. “Now it is 50:50 from urban and rural. \n That is how Henkel has helped. They have distributors in urban \n areas and that network has improved our reach,” Kamath says.<\/p>\n
Earlier, retailers and stockists in urban areas were reluctant \n to take on Jyothy Lab’s products. “Along with Henko \n (Henkel’s detergent brand), we are able to push other categories \n too like personal care and liquid mosquito repellent. And people \n are accepting it.”<\/p>\n
Villagers buy more<\/b><\/p>\n
“In rural India, the consumption per family might be small \n but the number of families is so large that it outgrows urban \n India,” says Kamath. His assumption is not without basis. \n Rural spending at ?3.75 lakh crore far outstripped urban consumption \n at ?2.994 lakh crore during 2009-12. Rural consumption per person \n exceeded the urban equivalent by 2 per cent, according to CRISIL \n and data from the National Sample Survey Organisation.<\/p>\n
But for a national presence, Jyothy has to look beyond rural \n India. “In moving to urban India, there will be more opportunities \n than challenges. Migratory population in cities is humongous. \n And their needs are more like those of rural consumers — \n whether it is the kind of products or even the price they are \n willing to pay. If a company can ensure a good supply chain across \n large cities, it can grab a substantial chunk of the market,” \n says Devangshu Dutta, chief executive at consulting firm Third \n Eyesight.<\/b><\/p>\n
Jyothy has accordingly made changes in its management structure. \n Its top team now has 17 people, including the CEO, S Raghunandan. \n Each brand head operates in a silo. “We have brought in a \n new management team to grow the categories. We give them enough \n money to spend on a brand and understand the reasons behind their \n performance or non-performance.”<\/p>\n
The gamble seems to be paying off. Raghunandan, an FMCG veteran, \n has helped the company restructure and cut the distributor margin \n from eight per cent to six per cent.<\/p>\n
Advertising and sales spend has increased by 65 per cent to ?135 \n crore in FY14. “Brand expenditure continues to pay returns \n over a long period of time,” says Kamath. He points out that \n even when MNCs advertise, they not only grow their own brands \n but also create new categories. “Everybody’s brand grows \n as people know a product exists and then they compare similar \n products.”<\/p>\n
Global dream<\/b><\/p>\n
Jyothy Labs is looking to launch newer products and re-launch \n some others. “We should be in at least two more categories \n in a few years. The aim is to be among the top three players in \n each category,” Kamath says.<\/p>\n
That does not appear to be daunting. Henkel can still buy a 26 \n per cent stake in Jyothy Labs by 2016. That would give Jyothy \n the financial muscle to take on the biggies. Moreover, an equity \n partnership with Henkel should allow it to hop onto the German \n company’s wide international network and ride into emerging \n markets.<\/p>\n
But until then, Kamath and his team are busy marking the miles \n and the milestones on the road to urban India.<\/p>\n