Emami: Extending beyond the core portfolio

14 Feb 2024 , 01:26 PM

Analysts of IIFL Capital Services hosted Mr. Mohan Goenka, Vice Chairman and Whole-time director at IIFL’s 15th Enterprising Bharat- Global Investor’s Conference in Mumbai. With increased competitive intensity, the mass-end product segments have been under stress, however the management remains optimistic on the company’s growth revival on the back of reducing the dependence on rural markets by investing behind the new age channels, making products for new age customers and extending beyond its core portfolio with the help of acquisitions. 

Rural remains under stress: 

In the past 2-3 years, there has been a slowdown in the traditional channel of distribution affected by weakening of the demand sentiment especially in the rural markets. As the core customer base of the company is for its mass-end products, the rural markets and GT remains a key focus area for the company. Despite the slowdown in rural markets, Emami has been focussing on strengthening its rural distribution footprint. With project Khoj, Emami targets to reach ~60k villages by end of FY24 vs 52k villages at the end of FY23. 

Improving margins in new age channels: 

The share of new age channels (MT+e-com) in company’s domestic sales has increased from ~7% in FY19 to ~24% in 9MFY24. The large pack strategy has enabled the Emami to cater to the new age customers and increase the salience of new age channels in their domestic sales. While the new age channels are growing at a much faster rate than the traditional channel, these are pre-dominantly promotion driven channels and tend to have lower margins as compared to traditional channel. Going ahead, the management is aiming to increase the margins from these channels. 

Future levers for growth: 

The management is focussing on i) reducing the dependency on rural (this is being done through increased salience of new age channels in the domestic sales mix), ii) targeting the new age customers (this is being done by launching of new value added products such as onion oil, aloevera herbal shampoo, etc), iii) Inorganic growth to expand beyond the core categories (the strong balance sheet of Emami makes it easier for them to acquire new companies).