Next time you say 'Gimme Red', it may be tea, a mosquito coil or even an apartment you are asking for. Venkatachari Jagannathan reports on the battery of products Eveready is putting out.
Eveready Industries India Ltd, the Rs827-crore dry battery maker and part of the Kolkata-based Williamson Magor group, is on the move - in terms of its technology, capacity, infrastructure, retail reach and, hold your breath, its prime real estate holdings.
Last year, Eveready Industries acquired BPL Soft Energy Systems Ltd for Rs67 crore - Rs45 crore cash and Rs22 crore in liabilities (one crore is 10 million) - and renamed it as Powercell Batteries. Powercell's plant in Karnataka has a capacity of 20 crore units per year and makes two brands BPL Powercell and BPL Shakthi, which enjoy a combined market share of 8 per cent in the Rs1,500 crore (220 crore pieces) domestic dry cell battery market.
Lean and clean
Post acquisition, Eveready - which has an equity of Rs35.87 crore - centralised sourcing and is flexing its newly beefed up muscle to get inputs at more competitive rates. This is important, as the price of zinc - the main input - has jumped from the $1,000-to-$1,200-per-tonne band to a $3,000-to-$3,500-per-tonne range in the last 15 months, and Eveready uses around 1,000 tonnes of zinc per month.
Integration of backend facilities like warehousing, logistics and others, has also enabled Eveready to reduce its subsidiary's operational costs. But, curiously, the company is not leveraging production facilities, its own and that of its subsidiary, to cross manufacture brands and reduce distribution costs.
Says executive vice president Ravi Grover, "At present, we are upgrading the subsidiary's production technology. Soon, we will offer our flashlight / torchlight technology to Powercell." He does not rule out the possibility of using the Powercell plant to make Eveready products. The parent company caters to the southern market mainly out of its Chennai and Hyderabad plants, which have a combined capacity of 64 crore units per annum.
Anatomy of a battery
Dry cell batteries are of three types - zinc, alkaline and rechargeable. The low-priced zinc battery cell is the mass segment, while premium-priced alkaline and rechargeable battery cells cater to niche segments. Grover says the Indian market is skipping one stage, alkaline battery cells, and is moving directly to rechargeable batteries. Though a few players did launch alkaline battery cell operations, none of them made a real mark in the market. "Even our Energizer brand was unable to notch up a decent market share. The domestic alkaline battery cell market is not more than 20 lakh units per year," he points out.
But rechargeable batteries can only be used for certain types of equipment. So for all practical purposes, dry cell batteries in India are basically zinc batteries. Battery cells classified into four segments in terms of their size. The smallest, AAA, are used in television remote controls and some toys. These are followed by AA, popularly known as the pencil cell. Medium and D or big size cells are mostly used in torches, cassette recorders, transistors and other portable equipment.
Today, the medium size is almost extinct, and most battery-powered equipment requires AA, AAA or D size battery cells. Amongst these three, AA has been the fastest-growing segment in the last few years, but the last fiscal was different, as the AA segment stagnated while the D segment grew - Eveready saw a two per cent growth in the AA segment and 10 per cent in the D segment. Nearly 55 per cent of its battery sales consist of the D size. Battery cells are also classified by their dressing - the more expensive leakproof metal clad cells and the cheaper paper clad cells.
India has five major dry cell battery players - Eveready Industries (Brand: Eveready, market share 47 per cent), Nippo Batteries Company Ltd (Nippo: 28 per cent), Panasonic Battery India Company Ltd (Novino: 13 per cent), Powercell Batteries (BPL: 8 per cent) and Geep Batteries India Pvt Ltd (Geep: 4 per cent). Nippo and Panasonic Battery are both powered by technology from Matsushita Electric, Japan.
Except Powercell and Geep, all other dry cell battery makers have flashlights / torches made from metal and plastic in their product portfolio. Geep Batteries is setting up a torchlight plant in Himachal Pradesh, while Eveready Industries is the largest torchlight manufacturer in South Asia, selling around 50 lakh torchlights per year that account for a consumption of 5 to 6 crore battery cells per year.
Leveraging the reach
As the company reaches sales of around 33 lakh retail units across the country - its products moving faster than some of the fast moving consumer goods (FMCG) companies - Eveready Industries has moved into the FMCG space for growth.
To begin, the company introduced four packet tea brands - Tez, Jaago, Premium Gold and Classic, selling around 7,000 tonnes of branded packet tea for Rs65 crore during FY2006. The target for the current fiscal is 10,000 tonnes. To leverage the flagship brand's equity, the company will soon have the brand name Eveready prefixed to its tea brands.
Last year the company added Eveready Poweron mosquito coils to its product basket. Having already launched it in a few states - West Bengal, Uttar Pradesh, Kerala and the North East region - the company plans a national rollout shortly. It will also add a 12-hour burn coil to its existing 8- and 10-hour burn coils. A rechargeable battery-powered mosquito mat heating unit is also on the anvil. "Owing to power cuts, mosquito mats do not find favour in the rural areas, though there is a good potential," Grover explains.
And finally, with real estate prices going through the roof, the company is looking at mining more value from its land holdings. It has concluded a Rs72 crore deal in Chennai, and similar deals in other cities may happen in future. For instance, the company is closing down its electrolyte manganese dioxide (EMD) unit in Thane, as it has become unviable.
Bigger and better
But Eveready Industries is not neglecting its core business; it is looking for an ambitious 50 per cent market share for Eveready batteries. Presently, the brand commands a market share of 47 per cent, though the group's combined brands Eveready and BPL command a formidable 55 per cent market share.
Even though it is already the world's third largest zinc carbon battery manufacturer, the company is putting up a new plant in Uttaranchal - its 11th overall - to make AA battery cells. The Rs60 crore plant will have a capacity of 40 crore units per year, taking the company's total capacity to 210 crore units per year. Adding Powercell's capacity, the group total is 230 crore units per year.
The company will shortly launch a new advertisement blitzkerg with Amitabh Bachchan as the brand ambassador and a new tag line Kuch Hai Extra. However, the 15-year-old popular tag line Give Me Red will be retained.
Unlike other product manufacturers, dry cell manufacturers face the problem of market positioning. As the power drain differs from equipment to equipment, companies are not in a position to quantify battery life. Power drain is a major purchase factor only for use in heavy drain equipment like cameras, which are powered by rechargeable batteries these days. It's to address these issues that Eveready has put out the generic tag line Kuch Hai Extra, which conveys that Eveready batteries have a longer life, irrespective of the equipment they are used to power.
"Though the Give Me Red campaign established Eveready's dominance in the consumer mindspace, it failed to convey the product's essential attribute - a long life," Grover points out. "As per our tests, across all equipment, Eveready batteries last 10 to 25 per cent longer than other brands."
What is most interesting is the company's client profile. Unlike other players, who sell sizeable quantities to bulk customers like clock and television manufacturers, Eveready generates nearly 90 per cent of its battery sales from retailing. "It is not that we are absent in the institutional segment," says Grover, "we do sell to Philips, LG and some clock manufacturers. But, compared to the retail market, the institutional segment is small," he concludes.