Jyothy Woos Urban Women to Raise Deodorant Sales SixfoldAdi Narayan
Jyothy Laboratories Ltd., the Indian maker of fabric whiteners and dishwashing soaps, is targeting a sixfold gain in sales of deodorants, vying with bigger rivals such as Unilever to woo urban women whose incomes are rising.
Revenue from the Fa brand, which includes products for women such as talcs and soaps, is expected to climb to 1 billion rupees ($18 million) in three years from 150 million rupees, Chief Executive Officer S. Raghunandan said. Jyothy plans to boost spending on advertising the brand, he said.
Jyothy is counting on luxury discretionary spending to spur demand for Fa products in India targeted at women as Euromonitor estimates the market for deodorants will more than double by 2017. Still, it will face competition from companies such as the local unit of Unilever, which had the biggest share of the country’s deodorant market last year, and Reckitt Benckiser Group Plc.
“Deodorants as a segment are growing very fast in India and the Fa range is an international product that has a strong brand recall here,” Raghunandan said on May 22. “It can gain a big chunk of this market.”
The average annual income of an urban Indian woman increased 111 percent over a decade to 2010, compared with the 100 percent growth in incomes for people living in the country’s cities and towns, according to Mumbai-based market researcher IMRB’s website.
Jyothy, based in Mumbai, bought a majority stake in the Indian unit of Henkel AG, the German maker of Dial soap, in 2011. These businesses were operated by subsidiary Jyothy Consumer Products Ltd., which has now been absorbed by the parent.
Jyothy gained rights to sell Fa in India, Bangladesh and Sri Lanka with the acquisition. It pays royalties of 2 percent of sales to the German consumer products company.
The market for deodorants in the world’s second-most populous nation will increase to 38.8 billion rupees in 2017 from 15.2 billion rupees last year, according to Euromonitor.
Jyothy faces “heavy competition” to gain market share in the women’s personal care segment, Abhijeet Kundu, an analyst at Antique Stock Broking Ltd., said in Mumbai.
“Lots of brands are there in the deodorant space,” said Kundu. “At least in the feminine side, there is not much competition. There are lots of deos for men, but there are not a lot for women.”
Jyothy fell 2.1 percent to close at 179.70 rupees in Mumbai, the biggest decline since May 17. The stock pared this year’s gains to 10.5 percent, compared with the 1.4 percent advance in the benchmark S&P BSE Sensex. Hindustan Unilever Ltd., the local unit of Unilever, has climbed 12 percent.
The company, including the merged unit, posted a profit of 196.5 million rupees on sales of 11.04 billion rupees in the year ended March 31.
Sales are expected to rise by as much as 25 percent this year, Raghunandan said. The margin for its earnings before interest, taxes and depreciation, will probably expand to 15 percent from 12 percent in the year ended in March, he said.
Profit will probably climb to 1.15 billion rupees in the year ending March, according to the median of 10 analyst estimates compiled by Bloomberg. Sales will increase to 14.96 billion rupees, nine analysts’ estimates show.
Raghunandan, who joined the company last year from Reckitt Benckiser Group’s India unit, has consolidated the business by lowering distributor and retailer margins, spending more on advertising and raising product prices to improve profitability.
This strategy may not yield the desired results, according to Vishal Jajoo, an analyst at Nirmal Bang Securities Ltd.
“Earlier, the distributor got a high margin and would push more of Jyothy’s products,” said Jajoo. “Now, they are trying to aggressively promote their products. The question is whether the customer will actually end up buying it?”
Also, the major brands in Jyothy’s portfolio will require significant advertising, and that in turn will put pressure on cash flows, Jajoo said.
Jyothy, which started operations with its Ujala fabric whitener three decades ago, began diversifying in 2000 to add products such as household insecticides and kitchen utensil cleaners. A year later, it started selling incense sticks. Subsequently, it expanded the range to include herbal soaps, detergents and mosquito repellents.
The company’s strategy of growth by using brands that have come through an acquisition is similar to that of some competitors. In 2009, Wipro Ltd. acquired rights to the Yardley of London brand of beauty products in Asia, Middle East and parts of Africa from the U.K.’s Lornamead Group. The purchase gave Wipro an entry into the more profitable business of selling premium cosmetics. Wipro has since spun off its consumer care business into a separate company.
The changes at Jyothy come amid slowing economic growth in Asia’s third-biggest economy. India’s statistics office has estimated the nation’s gross domestic product expanded 5 percent in the year ended March, the weakest pace in a decade.
Still, Indians living in urban centers are indicating higher discretionary spending for the year, according to Nielsen’s consumer confidence survey for the quarter ended March. Consumption of “small ticket” items will be encouraged, while automobiles and homes won’t find that many buyers, it said this month.
To win more women customers, Jyothy will sell its Fa range of deodorants in smaller packets.
“We have reduced the size of the can so it can fit easily in a handbag,” said Raghunandan.