MY OVERVIEW CAN BE CONCISED IN JUST TWO WORDS:
PRIDE' AND PREPAREDNESS'.
Until not too long ago there was a tendency to look down on everything Indian.
Consumers who went out to buy products generally gravitated towards the internationalat best and anything that even sounded remotely international at worst.
The general conclusion was that if it is international then it must be superior; if itwas Indian then it must be mediocre.
The biggest transformation of the last half-decade is a new-found pride in a number ofthings Indian.
Let me talk of what is happening in our space. The emergence of a deeply Indian brandlike Patanjali from virtually nowhere is more than a sign of product success; the robustgrowth of ITC's foods and FMCG businesses are pivoted around a business model that extendsfrom farm to fork; the rapid strides made by Emami indicate a growing traction forayurveda-based FMCG products; the rising trend for Dabur indicates a widening room forhomegrown success.
Besides there are a number of other developments at play: a growing scale achieved bythese Indian companies the manufacture of products that reconcile world-class standardswith relevant customisation the growing penetration of these products into rural Indiathe engagement of home-grown role models to endorse these products and increasingcompetitiveness. The result is that most of these companies are not merely content to playfor incremental market share; through the introduction of innovative products they arekeen to create markets that never existed.
The result of this transformation in national identity and pride is captured in theresponse of friends to our decision to emerge from the outsourcing shadow of a globalmultinational.
When we announced this decision a few years ago the first response was 'How will yousurvive?' When I explain our business model today the reaction has largely changed to'Wow! It's so nice of an Indian company to take on international brands.'
The bottomline is that it is increasingly inconceivable that the second most populousconsumption market in the world would need to depend on global brands for its everydayneeds. On the contrary the time has come for home-grown brands to capture a large sliceof the Indian market leverage the prevailing economies of scale and emerge as successfulglobal brands in their own right.
It would be foolhardy to assume that a growing respect for Indian brands will raise thelevel of water for all ships.
In an Indian FMCG space populated by a variety of national and international brandssuccess will be derived through a convergence of diverse competencies.
One a word-class standard. An increasing number of consumers will seek to buyproducts not because they are Indian but because they are outstanding and Indian in thatorder. And here I must add that the time has come when a number of Indian FMCG productsare not just as good as international brands; they are better.
Take the instance of Patanjali's toothpaste; in the brief tenure of a couple of yearsthis single product has extensively transformed a decades-old habit of using whitetoothpaste into a respect for herb-based brown paste. What used to be so downmarket untilnot too long ago is now considered acceptable.
Indian brands will need to invest in research with the objective to createworld-beating products instead of conventional reverse-engineering. Besides Indian brandswill need to plan infrastructure from a decadal perspective instead of going back to thedrawing board every couple of years.
Three advertising and promotion.
Indian companies will need to extend beyond merely putting products on shelf- spaces;they will need to create world-class brands that inspire trust and loyalty.
Four wider portfolio.
Indian companies will need to put a wide complement of products in the marketplace sothat the success of one feeds on the offtake of another-and vice versa.
At JHS Svendgaard we have invested with the objective of creating a future-readycompany.
Even as we are in the process of turning around in the current financial year-theCompany was cash-positive in each of the quarters of the last financial year-we arealready engaged in aggressive capacity creation and balancing. The Company is investingaround C40 crore in additional investment in the creation of a second manufacturing unitand the balancing of capacity at its first unit. This capacity is expected to becommissioned by the end of 2016-17 with the potential to generate an aggregate Rs.500crore in revenues at peak utilisation.
I would like to assure shareholders that in this second coming we have progressivelyinvested in extensive business derisking.
The reinvented JHS will be debt-free coupled with patient equity investors who haveprovided a significant part of the Company's precious growth capital.
The reinvented JHS will not have any customer accounting for more than quarter of itsrevenues compared to our previous incarnation when nearly 80% of our revenues werederived from our largest customer.
The reinvented JHS will generate half its revenues from proprietary brands anexcellent revenue shock absorber from unforeseen declines in outsourced volumes.
The reinvented JHS has entered into five-year outsourcing contracts with prominentdownstream customers as against the erstwhile practice of entering into renewable two-yearengagements.
The reinvented JHS has rationalised its product portfolio enhancing focusspecialisation and consequent economies of scale.
I am optimistic that in this second coming JHS Svendgaard will respond with speed andsensitivity to the great Indian consumption boom not only as an anonymous back-end forsome of the most visible Indian brands but as a proud visible player capturing theattractive upside of the Indian consumption journey.