Wednesday, July 17, 2019

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Jyothy Laboratories : Ujala | Henko | Mr. White | New Super Chek | More Light | Margo | Fa | Toothpaste | Exo | Pril

Cleaning Products FMCG Products home care Personal Care Personal Hygiene
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Jyothy Laboratories Products Distributorship

About: Founded in 1983, Jyothy Laboratories Ltd is a pan India play FMCG company. It is the largest player in the fabric whitener space with a market share of 80%. The company’s business divisions are Fabric Care, Personal care, air care, Household Insecticide, Utensil Cleaners, Toilet cleaners and Laundry services.

Since its inception, the company has focused on research and development, product designing and superior customer service. It has 19 manufacturing units and has a distribution network comprising of 1,400 stockists and 4,000 sub stockists.



Business Verticals of Jyothy Laboratories Image

Product portfolio dynamics : Image

Company Overview : A FMCG company with presence in the fabric care, household insecticide, surface cleaning, personal care and air care segments. 

Promoted by Mr. M.P. Ramachandran in 1983 : Mr. Ramachandran has over 37 years of experience in production, sales and management. 

Leadership through Key Brands: Ujala: #1 in Fabric Care: 71.1 % all-India market share by value and 57 % by volume for September 2010

Maxo: 23.2 % all-India market share by value and 25.3 % by volume for September 2010

Exo: 22.5 % South India market share by value and 20.1 % by volume for September 2010

Extensive Distribution Network: 
Available in ~ 2.7 mn outlets in India as of March 31, 2010 (Source: A.C. Nielson).
Sales staff of over 1,800 people servicing approx. 3,500 distributors.
Field staff have a direct reach of ~ 1 million outlets.
Strong presence in both rural and urban markets.

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Manufacturing: 
28 manufacturing facilities in 16 locations across India – some of these are tax efficient units.

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Jyothy Laboratories Limited Distribution ( Distributors / Distributorship ): 

Distribution
In keeping with objective of reaching out to every Indian household, Jyothy Laboratories Limited have ensured that its brands touch the daily lives of people across the country.
This objective is translated on the ground through the formidable distribution network of Jyothy Laboratories Limited covering even far flung hamlets that dot the remotest corners of this vast nation. 
Jyothy Laboratories Limited acts on a clear understanding of the consumer and the market that it serves. Quite naturally, its distribution strategy is attuned to the dynamics of catering to different types of markets in diverse locations. Thus, there is a high level of customization of the distribution channel depending on the nature of the market and the specific geography that it operates in.
The deep insights garnered from the grassroots, focused sales & marketing strategies and persistent efforts have resulted in higher penetration, increased sales and delighted customers. A large field force with over 1500 sales personnel and a network of over 3500 distributors ensure a direct reach of over 2 million retail outlets and an indirect reach of over 2.7 million retail outlets.
Around 400 of its 5,000 employees have been around for at least 15 years. Some of the 5,000 employees—termed the “suicide squad” because of their effectiveness —have the responsibility of directly managing retailers, around a million of them

Jyothy Laboratories Ltd.’s Strategy
Jyothy Laboratories Ltd. (JLL) strategy uses diamond framework.  JLL is an Indian FMCG company which offers products in household segment. JLL was founded in year 1983 by M P Ramachandran. He started JLL by selling a single product UJALA, a liquid fabric whitener.  Later company launched fabric care products under brand Ujala and household insecticides under brand 'Maxo'. JLL Laboratories had since grown from a corpus of INR 40,000 to a company with a turnover of over INR 400 crores.
Company has seen many developments in a short span of time. In March 2011, JLL bought a stake of 50.9% in Henkel India a subsidiary of Henkel AG in a cash deal of Rs 60.73 Crores. With this acquisition JLL Laboratories has now access to a diversified product portfolio of Henkel which includes detergents and hair care products. JLL now stands in the league of big FMCG firms like HUL, ITC, Godrej Consumers and Emami. JLL has also started a new venture to provide laundry services to diversify the risk from products to services.
JLL’s strategy fits in five elements of diamond framework.
Arena
Management of the company should know where they want to see their company in future, in which segments/arena the company should be in after some years.  JLL started from fabric whitener but today it manufactures and distributes brands across product categories as diverse as Fabric Care, Household Insecticide, Utensil Cleaners, Fragrances, Personal Care. Its strategy is to constantly innovate brands, tap high growth categories, reach untapped markets and explore untapped segments. The company has also made its presence in other markets like Bangladesh and Sri Lanka with local partners.
JLL is diversifying into services by starting the business of laundry care. Laundry business model consists of two categories. One is the retail model under brand ‘Fabric Spa' which provides premium services and other category under the brand ‘Snoways’ which provides the economy services.
The arenas discussed above, can be seen in company’s vision statement “Develop innovative brands, tap high growth categories, reach untapped markets and explore untapped segments to meet the day-to-day requirements of every Indian household”.
Vehicle
After deciding the arenas the company should decide how they can reach there. JLL engages in organic and inorganic expansion.
Market Expansion
Its sales grew at a CAGR of 18% while its profit grew at a CAGR of 13% over the past three years. It has formed a joint venture with Kallol Bangladesh Limited to manufacture and market Ujala and Maxo in line with the strategy of tapping new markets.
Acquisition
It has acquired a stake of 50.9% in loss making Henkel India a subsidiary of Henkel AG in a cash deal of Rs 60.73 Crores. With this acquisition JLL has now access to a diversified product portfolio which includes detergents and hair care. JLL now stands in the league of big FMCG firms like ITC, Godrej Consumers and Emami.
This acquisition will help JLL to reduce its dependence on one or two products.  Also company will be able to access the premium category market with the help of Henkel’s premium brands like Fa, Mr. White.
JLL would like to create reciprocal synergies by working closely and customizing the resources of Henkel India. JLL has one of the most extensive distribution networks in rural and semi urban markets whereas Henkel has strong presence in urban markets. JLL has 2.7 million outlets with approximately 3500 distributors. Henkel India on other hand has 740 distributors with a total reach of 0.7 million outlets in urban markets. Thus both of them are perfect complement to each other.
Differentiators
Company beats its competitors by providing important differentiators. JLL has launched its Ayurvedic soap Jeeva which talks about 27 ingredients. It was able to make its presence despite the presence of other brands like Medimix, which was positioned as a curative soap.  In Mosquito repellent segment they differentiated by launching Red Giant, the largest-sized distributed coil in India, to carve out a niche in the market. Moreover, they have developed new packaging with distinct brand identity to promote mosquito coils. Also they acquired multi-insect repellent technology from DRDO known as DEPA technology utilized by the defence personnel. Company differentiate itself from competitors through these strengths:
·         Well-known brand identity
·         Local presence and wide distribution reach
·         Focus on the rural markets
·         Product Development Capabilities and Ability to Launch New Products
·         Leveraging established brands
·         Increase focus on supermarket and hypermarket sales
·         Pursue selective acquisitions
·         Grow  laundry and fabric care services
Increased product line width
Staging
It can be defined as the speed and sequence with which the company is taking decision in order to implement the strategy successfully.  JLL started from one product Ujala from one state (Kerala) and after that it launched it in other state (Tamil Nadu) and later launched the product in whole country. When the Ujala brand became an established brand in whole India JLL diversified into other segments.  It launched new products Maxo and Exo in Household and utensil care segments. The management realized that in order to survive it has to diversify into other segments especially into premium segments as disposable income of average Indian will increase in coming years. Secondly, 95% of revenue was coming from three products. In order to combat these threats company followed these strategies:
Acquisition
JLL decide to buy Henkel India which has innovative products, good distribution network in urban market which complements JLL’s distribution network.

Joint Ventures
JLL expanded in other market like Srilanka and Bangladesh through Joint ventures with local firms.

Services
JLL decided to move into services by starting a new venture in laundry care services.
Now we can analyse JLL’s growth since its beginning. In the above diagram we can see various stages of JLL’s growth.
Stage A:  It started from single product in 1983 and became a well-established brand in few years.
Stage B: It launched Maxo and  Exo in Household and utensil care segments
Stage C: It acquired Henkel India to diversify its portfolio and leverage the distribution network of Henkel in urban markets.                                                                            
JLL’s changed strategy can be confirmed by its new target. JLL founder and chairman M.P. Ramachandran, has set a target of more than tripling the revenue of the combined entity to Rs. 5,000 crore in four years from the Rs. 1,100 crore in the year ended March 2011, which could give it a place among the top four consumer goods companies in Asia’s third-largest economy.

Economic Logic
Extensive distribution network in rural network especially in south India gives JLL an edge over competitors. JLL was able to hike the price of products whenever there was rise in input material costs. Company has always paid attention towards achieving economies of scale. It started from acquiring its supplier, it acquired Tata chemical’s plant which used to provide it raw material. It always launched a product in a phased manner for example it first launch in Kerala, then Tamil Nadu and then in whole nation.  This strategy saves a lot of money for them and they have become experts in doing that.
Strong Synergies, Nationalization Strategy
ü  Synergies to play out in FY13
The acquisition of Henkel India in 1QFY12 has given Jyothy a range of fabric-care brands across price points and geographies (urban and rural, north and south India). The merger of distribution networks (with a mere 10% overlap), synergies in raw material and media sourcing, consolidated brand-building, and the creation of new brands are expected to drive revenue and margins in the next 3-4 quarters.
ü  Strong strategy in place to unlock brand potential
Jyothy is leveraging its key Ujala brand with a strong sub-segmentation strategy. Further, the company plans to launch regional brands such as Maxo, Exo & Margo on a national scale, by leveraging its new pan-India distribution network. It also plans lower freebies, price hikes and re-launches.
ü  Sale of assets to reduce debt burden
High balance sheet debt is a major concern for Jyothy. The company plans to sell land at Ambatur and Karaikal (Tamil Nadu) in 1HFY13 for ~`2bn, to substantially reduce its interest cost burden. It also has the option of selling its Kolkata property.
ü  Change in estimates
Company reduces FY13 earnings estimates by 22% but expects higher profit margins due to less competition from HUL & P&G as the price war tapers off. It estimates 14% revenue growth in FY14.

Road Ahead
Detergents to turn profitable
On acquiring Henkel India, Jyothy Labs obtained a complete range of fabric-care brands across geographical areas and price points. The sub-segmentation strategy (involving key brand Ujala) and measures such as lower freebies, price hikes and re-launches are likely to unlock brand potential. We expect profit margins to expand as a result of lower competitive pressure from HUL and P&G following the end of the detergent war, as higher raw material prices have resulted in reduced media spend and price hikes.
A complete portfolio in detergents
Following the Henkel India acquisition and the restructuring of its portfolio, Jyothy now has a complete range of detergents across price points and geographical areas. This includes the premium Henko Stain Champion and Ujala Technobright, the mid-market Chek and Ujala, and low-end Ujala detergents and Mr White. The company leads the market in the liquid blue (fabric whitener) segment with its major brand Ujala. In addition, it has developed a range of other fabric whiteners around Ujala.
The company’s (consolidated) distribution network covers the nation. Ujala is a strong brand in south India. Henko and Chek are stronger in the northern and eastern parts. Mr. White has good brand recall in Kerala. This complete range should help the company compete at various price steps.
Complete Range of Detergents

Improved utilization of media spend to create strong brands
Jyothy Labs has been insistently investing in Ujala Technobright detergents (via ad spend and inducting celebrities as Sachin Tendulkar) to create the new brand. Henkel India too had been investing and building its three detergent brands: Henko, Mr. White and Chek. Since both the companies had smaller distribution networks and lower penetration, such media spend was not optimized. However, with a wider rollout of products through the combined distribution networks, Company expects better utilization of media spend and improved pricing power for its brands.
Unlocking brand strength to drive revenues and earnings
Jyothy plans to unlock brand strength by reducing freebies and discounts, and increasing prices where possible. It has reduced the offers on detergents initiated by Henkel.
Key Drivers to unlock value from detergent brands

Developing an array of products around Ujala
The company’s flagship brand is still Ujala, the market leader in liquid blue. Apart from this, the company has introduced detergents, fabric whiteners and fabric conditioners. It plans to introduce more products and variants under Ujala, in order to leverage its strong brand equity to successfully launch other products. This sub-segmentation strategy under the Ujala brand should also help reduce dependence on a single Ujala product and would make price hikes easier to implement.
Ujala Sub-segmentation Strategy
Detergent price war less fierce now
The detergents wars have mellowed in the past 2-3 quarters. P&G reported losses of `3.3bn, equal to profits accumulated in the six years prior to FY11. Lower profitability for all detergent manufacturers has resulted in reducing media spend and hiking prices. Higher raw material costs have pushed detergent players to reduce media spend and hike prices in order to cover costs. The lower media spend and price hikes by competition should allow smaller players such as Jyothy Labs to enjoy better profitability
Price hikes in last six months by detergent manufacturers
Higher raw material prices may spoil the party
Major raw material prices of Linear Alkyl Benzene (LAB) – a crude oil derivative used as the key raw material for detergents – and packaging material continue to trend higher. The ~20% rupee depreciation is likely to result in raw material prices moving further northward. Company expects the impact of higher raw material prices to affect 2HFY12 results.
Major raw material prices on an upward swing
Synergies in distribution and sourcing
With the settlement of employee compensation following the closure of Henkel’s Karaikal factory, Company expects the merger of distribution networks, synergies in raw material and media sourcing, consolidated brand-building activities and creation of new brands to drive Jyothy Lab’s revenue and margins in the next 3-4 quarters.
Merger of distribution networks to drive revenue
Being a south-India-focused company, Jyothy has a robust distribution network in the south. Its brands enjoy strong recall in Kerala and in rural India. In contrast, Henkel’s brands have stronger recall in urban India and witness vigorous off-take through modern trade outlets. Henkel has a strong distribution network in the southern and eastern parts of India.
Together, the companies reach 4m retail outlets. The overlap of distribution networks is just around 10%. We believe the merger of distribution networks will give substantial power to Jyothy, making it easier to launch products and increasing the company’s bargaining power with distributors. We also expect the rationalization of distribution margins to result in higher profitability margins.
Merger of distribution network
Utilization of media spend to improve
Jyothy and Henkel had been competing in detergents and dishwashing segments, increasing ad spend to gain market share. Jyothy aggressively pushed Ujala detergents in Kerala against Henkel’s Mr. White detergent. Going forward, the (consolidated) media spend would be optimized to gain market share from other detergent manufacturers rather than from each other.
Creation of national brands could unlock value
From its current portfolio of strong regional brands, Jyothy plans to create several national brands. The brands to be rolled out nationally include Maxo coils, Neem oral care products and Exo dish wash. These brands enjoy strong recall in their present areas of operations. The company plans to launch these products through a broader distribution network, which would support the creation of national brands.
The company intends to unlock the value of some of the brands at an attractive price after the national launch. The national rollout of its brands is expected to result in higher valuations.
Strategy to Create National Brands

New management to handle merged business
Jyothy Labs, a family-run business, plans to induct a professional management team to handle the newly merged business. The new management is to consist of a new CEO and three ‘category’ managers for fabric-care, laundry-care and personal-care. The company also plans to induct a new head for the supply chain, while the dish-wash segment is to be managed by the chairman, M.P. Ramachandran. The role of the new management would be crucial post the acquisition of Henkel, as most consumer companies now have separate heads for each product category, in order to focus on consumer preferences.
New Management Structure
Sale of assets to create value
The company is in the process of selling the excess land on Henkel’s balance sheet. It hopes to sell two acres at Ambatur (for `500m) and 17 acres at Karaikal (for `1.5bn) in 1HFY13. It also has saleable land at Kolkata that is valued at ~`250m. The shift of production from Karaikal to Uttaranchal is expected to result in fiscal benefits (excise duty) and lower production costs.
Company expects the consolidated entity to enjoy tax breaks due to Henkel’s accumulated losses. Company expects effective tax rates for the consolidated entity to be around the minimum alternate tax (MAT) level over the next 4-5 years. Jyothy as a standalone entity will continue to remain at the MAT level in FY12 and FY13.

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