Corporate Analysis

On
Emami Limited

-By Vishal Harbada

F.Y.M.F.M (Batch I)
Roll no. 226
Industry Overview
Fast moving consumer goods (FMCG) are the fourth largest sector in the Indian
economy. There are three main segments in the sector – food and beverages
which accounts for 19 per cent of the sector, healthcare which accounts for 31
per cent and household and personal care which accounts for the remaining 50
per cent.

The FMCG industry in India is divided into the demographics of rural and
urban India. The urban market contributes 60% of the consumption revenue of
the FMCG market in India. Semi-urban and rural segments contribute over 40%
of the overall revenues of the FMCG sector in India. The FMCG sector has
grown from Rs 2,20,852.4 crore in 2011 to Rs 3,68,669.75 crore in 2017-18.
The sector is further expected to grow at a Compound Annual Growth Rate
(CAGR) of 27.86 per cent to reach Rs 7,24,759.3 crore by 2020. FMCG market
is expected to grow at 9-10 per cent in 2020. FMCG urban segment witnessed
growth rate of 8 per cent whereas rural segment grew at 5 per cent in quarter
ended in September 2019, supported by moderate inflation, increase in private
consumption and rural income
Latest Date 01-Jan-
About Emami Limited 19
Latest Price (Rs) 420.00
Emami Limited is one of the leading and 52 Week High (Rs) 714.00
fastest growing personal and healthcare
52 Week Low (Rs) 386.05
businesses in India, with an enviable portfolio
of household brand names such as BoroPlus, Face Value(Rs) 1.00
Navratna, Fair and Handsome, Zandu Balm, Industry PE 58.83
Mentho Plus Balm, Fast Relief and Kesh Price/BV(x) 10.08
King. Established in 1974, it has a portfolio
EV/TTM EBIDTA(x) 25.37
of over 300 + products based on ayurvedic
formulations. Emami is the flagship company EV/TTM Sales(x) 7.41
of the diversified Emami Group. Over 130 Dividend Yield% 0.83
Emami products are sold every second MCap/TTM Sales(x) 7.31
somewhere around the world. Emami
Market Cap (Rs in Cr. ) 19,063.80
acquired the heritage brand Zandu in 2008 on
the basis of huge business synergy between EV (Rs) 19,310.00
the two brand portfolios. Latest no. of shares (in Cr.) 45.39
Emami also acquired Ayurvedic Hair & Scalp business of "Kesh King" as a
business strategy in 2015. In January 2019, the company also acquired Creme
21, a German brand with strong roots & brand recall.

Analysis of Industry Structure and Profitability

EMAMI LIMITED five forces analysis, strategic planners will be able to
understand how different factors under each of the five forces affect the
profitability of the industry. A stronger force means lower profitability, and a
weaker force means greater profitability. Based on this a judgement of the
industry's profitability can be made and used in strategic planning.

1.Competitive Rivalry Among Existing Firms (High)

Dabur India is one of Emami's top rivals. Dabur India was founded in
Ghaziabad, Uttar Pradesh} in 1884. Dabur India is in the Household Products
industry. Compared to Emami, Dabur India generates $944.8M more revenue.

HUL is Emami's #2 competitor. HUL was founded in 1956, and is

headquartered in Mumbai, Maharashtra. Like Emami, HUL also competes in
the Consumer Goods space. HUL generates $5.5B more revenue vs. Emami.

Marico is a top competitor of Emami. Marico's headquarters is in Mumbai,

Maharashtra, and was founded in 1990. Marico competes in the Personal
Services industry. Marico generates 283% of Emami's revenue.

2. Threat of New Entrants (Moderate)

The economies of scale are fairly difficult to achieve in the industry in

which EMAMI LIMITED-THE FAIR AND HANDSOME CHALLENGE
operates. This makes it easier for those producing large capacitates to have a
cost advantage. It also makes production costlier for new entrants. This makes
the threats of new entrants a weaker force.

The capital requirements within the industry are high, therefore, making it
difficult for new entrants to set up businesses as high expenditures need to be
incurred. Capital expenditure is also high because of high Research and
Development costs. All of these factors make the threat of new entrants a
weaker force within this industry.

2.
3. Threat of Substitute Products (High)

The very few substitutes available are of high quality but are way more
expensive. Comparatively, firms producing within the industry in which
EMAMI LIMITED operates sell at a lower price than substitutes, with adequate
quality. This means that buyers are less likely to switch to substitute products.
This means that the threat of substitute products is weak within the industry.

There are very few substitutes available for the products that are produced in the
industry in which EMAMI LIMITED operates. The very few substitutes that are
available are also produced by low profit earning industries. This means that
there is no ceiling on the maximum profit that firms can earn in the industry in
which EMAMI LIMITED operates. All of these factors make the threat of
substitute products a weaker force within the industry.

4. Bargaining Power of Suppliers (High)

The number of suppliers for EMAMI LIMITED operates is a lot compared to

the buyers. This means that the suppliers have less control over prices and this
makes the bargaining power of suppliers a weak force. The product that these
suppliers provide are fairly standardised, less differentiated and have low
switching costs. This makes it easier for EMAMI LIMITED to switch suppliers.
This makes the bargaining power of suppliers a weaker force. The suppliers do
not contend with other products within this industry. This means that there are
no other substitutes for the product other than the ones that the suppliers
provide. This makes the bargaining power of suppliers a stronger force within
the industry.

As the industry is an important customer for its suppliers, EMAMI LIMITED

can benefit from developing close relationships with its suppliers where both of
them benefit.

5. Bargaining Power of Buyers (High)

The number of suppliers of EMAMI LIMITED is lot more than the number of
firms producing the products. This means that the buyers have a few firms to
choose from, and therefore, do not have much control over prices. This makes
the bargaining power of buyers a weaker force within the industry.

The product differentiation within the industry is high, which means that the
buyers are not able to find alternative firms producing a particular product. This
difficulty in switching makes the bargaining power of buyers a weaker force
within the industry.

Company can focus on innovation and differentiation to attract more buyers.

Product differentiation and quality of products are important to buyers within
the industry, and also company can attract a large number of customers by
focusing on these.

EMAMI LIMITED needs to build a large customer base, as the bargaining

power of buyers is weak. It can do this through marketing efforts aimed at
building brand loyalty. Company can take advantage of its economies of scale
to develop a cost advantage and sell at low prices to the low-income buyers of
the industry. This way it will be able to attract a large number of buyers.

Competitive Strategy Analysis

EMAMI LIMITED, which launched the Navratna brand in the early 90s, will
continue to cash in on its first-mover advantage and is focusing on the health
aspect – the oil has just graduated from just a ‘Thanda-Thanda, Cool-Cool’
relief positioning to a stress buster that gives relief from headaches, insomnia,
tension and fatigue. EMAMI LIMITED is in fact looking at a 15-20 % growth
this year. The company has gone in for brand extensions as well. Apart from
Navratna light oil and Navratna extra thanda oil which help keep the buzz
going, the company has also gone in for Navratna cool talcum powder and
deodorant talcum powder

Their strategy is to create sub-brands and brand extensions building on

‘cooling’ as one of the strategies to create a larger brand recall. So, in future too,
they will try and introduce products and build on this successful ‘thanda-thanda,
cool-cool’ concept.

There are two main strategies that are used by multinational firms to achieve the
growth objectives. They are as follows:

1. Cost leadership
Cost leadership strategy involves gaining a competitive advantage by lowering
the cost. Cost leadership is the main generic strategy that Emami Limited uses
in various consumer markets. The primary objective of using this strategy is to
preserve the market leadership position through efficient value chain
management. This strategy allows Emami Limited to expand the market share
by targeting the middle class, which makes the largest proportion of overall
consumer market mix in most of the countries. Middle class consumers
generally place high importance to the pricing factor and cost leadership is the
best strategy to cater the needs of this consumer segment. Other than charging
low prices by lowering production cost and maximizing supply chain efficiency,
Emami Limited The Fair and Handsome Challenge frequently offers discounts
and coupons to achieve sales targets and handle the competitive pressure by its
closest rival. The intended outcome of these discount and promotional
campaigns is to increase brand popularity and encourage consumption. The
analysis of Emami Limited competitive advantage strategies highlight cost
leadership as the main strategy, the company also uses the differentiation
strategy along with cost leadership to set the basis for sustainable competitive
advantage in the intensely competitive global consumer market.

2. Differentiation

Differentiation is another most commonly used generic strategy to build a

competitive advantage. Emami Limited uses differentiation in combination with
the cost leadership strategy to achieve growth objectives. Emami Limited’s
strategic objective of using this strategy is to differentiate by embedding the
innovation and address the consumers’ growing health concerns. For example,
Emami Limited has extended its product line after studying the consumers’
changing interests to differentiate it from competitors and expand the scope of
opportunities within the industry. The combination of the differentiation and
cost leadership has helped Emami Limited build a strong and loyal customer
base. Other than these, the brand logo is also used to set the differentiation
basis. The unique and distinctive brand logo has established a strong brand
image in consumers’ mind. Although the brand has undergone many revisions,
the essence has remained the same, which also serves as a strong differentiating
factor.
Moreover, the company offers a wide variety of flavors to match the unique
taste needs of consumers. It uses innovation as a tool to offer differentiated
augmented services that may delight the customers and increase their preference
of Emami Limited The Fair and Handsome Challenge over other brands.

Corporate Strategy Analysis