Jyothy Laboratories hoping to reach a revenue of Rs 3,000 cr by 2015
Jyothy Laboratories is willing to forego some sales growth in the short term but is hoping to reach a revenue of around Rs.3,000 crore by 2015. It is a rare company that welcomes a minor dip in its fortunes.
It is a rare company that welcomes a minor dip in its fortunes, but that is exactly what Jyothy Laboratories Ltd is doing.
In the September quarter, Jyothy Laboratories reported muted sales growth in its major brand Ujala. (Also read: FMCG industry overview)
The change from gurukul to business school is not easy
Ullas Kamath, Joint Managing Director, Jyothy Laboratories 
“We believe the company has lost market share on the back of a cut in retailer margins, which has resulted in hushed push by channel partners. Simultaneously, Maxo also lost market share in the mosquito repellent category. We believe Jyothy Laboratories would be unable to sustain revenue growth with low channel partner margins,” said analysts Sanjay Manyal and Parineeta Poddar, ICICI Securities Ltd in their November report.
“The change from gurukul to business school is not easy,” said Ullas Kamath, joint managing director of Jyothy Laboratories who is willing to forego some sales growth in the short term but is hoping to reach a revenue of around Rs.3,000 crore by 2015. (Also read: Five trends that will drive FMCG growth in 2013)
His reference is to the company’s move towards professionalizing its management, which can be traced back to May when it appointed 46-year-old S. Raghunandan as CEO of Jyothy Laboratories Ltd. His mandate: to ensure the smooth integration of Jyothy Lab with Jyothy Consumer Products Ltd (JCPL), formerly Henkel India Ltd, and double the revenue of the combined entity from Rs.1,200 crore to Rs.3,000 crore in 2-3 years.
Raghunandan had his job cut out since the culture at Jyothy Lab had not changed for the last 20 or more years, noted Kamath. The company did not have brand managers; the advertising agency was the custodian for the brand. Its brands were under-invested as the company spent just 8% on advertising and marketing as compared to the industry norm of 12%. (Also read: Godrej acquires Colgate brand Soft & Gentle in UK)
There was no manufacturing head or sales head. The company also paid higher distributor and trade margins that cut into the advertising spends.
“This can easily qualify as the toughest job in the industry,” Raghunandan said in an interview on 28 January.
And so far, he seems to have done alright. Between July and December shares of Jyothy Laboratories rose 38.40% on the Bombay Stock Exchange. In the same period, the BSE FMCG Index rose 18.51%, while the benchmark Sensex rose 11.46%.
Founded by M.P. Ramachandran in 1983 with a capital of Rs.5,000, Jyothy had grown into a Rs.800 crore company on the strength of brands such as fabric whitener Ujala, but it was its 2011 May acquisition of Henkel India that made the company’s top management feel the need to change.
“M.P. Ramchandran, my chairman, and I myself are not from the FMCG (fast moving consumer goods) space,” admitted Kamath.
He added that with the acquisition of Henkel, the company felt the need to change from a family enterprise to a professionally-managed one as it entered the more competitive detergents and personal care business where its newly-acquired brands such as Margo, Pril, Henko and Fa compete with multinationals.
Source: www.livemint.com
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