Eveready enters confectionary biz; aims for 25% revenue from FMCG in 5 yrsBusiness Standard - January 09, 2018

The company's foray into the confectionery business is with a fruit chew product, under the Jollies brand name

Amritanshu Khaitan, MD, Eveready

Targeting to generate at least 25% of its consolidated revenue from the fast moving consumer goods (FMCG) category, namely, confectionery and packet tea, in the coming five years, Eveready Industries India Limited (EIIL) rolled out its own brand - Jollies.

According to MD Amritanshu Khaitan, the company's foray into the confectionery business with a fruit chew product, under the Jollies brand name, is its first step into entering the FMCG vertical.

"At a later day, based on how the brand performs, we might expand the portfolio. But it will be in the mass consumption segment," Khaitan said.

The confectionery market in India is pegged at Rs 90 billion, of which the fruit chew segment accounts for 5% of the total category. It is expected that the category will expand to Rs 140 billion in the next five years and the fruit chew segment will account for Rs 10 billion during the same period.

Khaitan believes that if EIIL is able to capture "even a portion of this market", it would translate into revenues to the tune of Rs 2 billion for the company.

The confectionery category is dominated mostly by ITC and Perfetti through its brands Candyman and Alpenliebe, Jelly Belly and others.

Faced with limited growth potential in the batteries market in the country, Khaitan's idea is to enter newer large value categories, which have high-growth potential. The earnings from the batteries business is, thus, likely to be routed to other categories it has recently entered.

"Before narrowing down on fruit chews, other categories were also considered. But we selected to make our mainstream FMCG foray with this category as it has high growth potential of around 20%, is dominated by few players and can be expanded further across India," Khaitan said.

Currently, batteries and flashlights account for 71% of EIIL's revenue, with the lighting segment accounting for another 21%. Appliances account for 3%. In the next five years, EIIL wants to bring down batteries and flashlight's contribution to 40% of the total turnover, with lighting and appliances accounting for 30%. The rest 30% is expected to come in from the FMCG venture.

As on March 31, 2017, Eveready's own brand of packet tea comprises its sole FMCG portfolio in the foods and beverages segment, contributing 5% to its Rs 13.54 billion turnover. However, it has entered into an agreement with McLeod Russel, another group company to form a joint venture (JV) and transfer the tea business to this JV entity.

The revenue generated by this JV will be distributed equally among EIIL and McLeod Russel.

Following an asset light model, EIIL has selected a partner to manufacture this product thereby avoiding investments altogether. For the poised brand expansion at a later date, a similar outsourced manufacturing model is likely to be followed.

Earlier, the company had forayed into the appliances and lighting business as well.

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