business reform

After 112 years of powering India, the country’s biggest battery maker is out to reinvent itself

Eveready Industries traces its Indian roots to the early days of the 20th century.

For more than a century, Eveready Industries has remained synonymous with batteries.

With an iconic logo – a black cat amidst the number 9 (since a cat has nine lives) – the battery maker has been a favourite among Indians looking to power up their toys, clocks, and other sundry devices.

Today, the 112-year-old battery maker has an over 50% share of India’s Rs 1,500-crore durable battery market. Eveready is also Asia’s largest manufacturer of flashlights, a basic necessity in a country where power outages are frequent and street lighting is grossly inadequate.

However, instead of resting on the laurels of its long-standing market leadership, the Kolkata-based company is now re-inventing itself. Over the past few years, Eveready has diversified rapidly into sectors it had little presence in. In 2015, it ventured into India’s booming LED industry and then, last year, into the Rs 15,000-crore home appliances industry, selling everything from geysers and air purifiers to ceiling fans and food processors.

“A brand that is over 110 years (old) needs to find ways to stay young,” said Amritanshu Khaitan, Eveready’s managing director. “The Eveready brand is known to over 700 million Indians. But simply restricting our focus to batteries isn’t good for the brand. That’s why we decided to leverage the brand and extend the brand into new categories.”

India’s largest battery maker

Eveready Industries traces its Indian roots to the early days of the 20th century.

In 1905, Eveready dry cells, manufactured by the Missouri-based Eveready Battery Company, began to be imported in India. The National Carbon Company, headquartered in Cleveland, imported the batteries (pdf). Eveready launched the AA-sized battery in 1907 and by 1914 the NCC bought out Eveready Battery company. The NCC, in turn, was later bought out by the Houston-based Union Carbide Corporation.

By 1934, Union Carbide India was set up, with UCC holding a controlling stake. It began by primarily selling batteries under the Eveready brand and in 1939 set up its first battery plant in Kolkata. This was followed by a plant in Chennai in 1952. In 1955, UCI was listed and became a public limited company, making dry batteries, flashlight cases, and zinc alloys.

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As Union Carbide India began expanding in the country, it also ventured into carbon products, welding equipment, plastics, industrial chemicals, pesticides, marine products, and other segments. By the early 1980s, the company employed over 9,000 people across its 14 plants. And Eveready remained the jewel in its crown.

Disaster strikes

In 1984, it all came down crashing for Union Carbide India.

A pesticide factory built by the company in the 1970s in the central Indian city of Bhopal leaked the deadly methyl isocyanate. Some 40 tonnes of the toxin swept through the slums surrounding the facility in the early hours of Dec. 03, 1984, killing over 2,259 people. Over the years, an estimated 15,000 people exposed to the gas have died, making it the world’s worst industrial disaster.

The leak sounded the death knell for UCI. Over the next few years, the company was fighting legal battles and many of its group companies were left struggling. Even then, by 1989, India was the only country where UCC was making Eveready batteries; in 1986, it had sold the business in the rest of the world to the Missouri-based Ralston Purina Company.

In 1989, five years after the disaster, UCI agreed to pay $470 million as compensation to the victims after the country’s supreme court asked it to. In 1991, the supreme court again upheld the earlier verdict, after some petitions were filed against the settlement amount. In its 1991 order, the supreme court also asked Union Carbide to set up a hospital, after which the company sought the court’s permission to sell UCC’s stake in UCI.

Buyout and success

In 1994, Kolkata-based businessman Brij Mohan Khaitan paid over $96.5 million – one of the highest takeover prices at that time – for a controlling stake in UCI. The Khaitans outbid others, including the Wadias of Bombay Dyeing and Manufacturing. Owners of the Williamson Magor group, the Khaitans bought out Eveready through their tea company Mcleod Russell.

Two years later, in 1996, the Williamson Magor group merged McLeod Russel and Eveready to form Eveready Industries.

The new company’s portfolio primarily included a division that made batteries, flashlights, and tea. However, in 2004, the companies were once again de-merged, with McLeod Russel focusing on bulk tea production and Eveready on batteries, flashlights, and the packet tea business.

Since then, McLeod Russel has become the world’s largest bulk tea producer. Eveready, meanwhile, sold packaged tea under the Tez, Premium Gold, and Jago brands, accounting for over 7% of the company’s total revenues.

“I think the decision to de-merge the business was a great one,” said Khaitan. “It unlocked a lot of value for both the companies.” Eveready later roped in two Bollywood superstars – Amitabh Bachchan and Akshay Kumar – as brand ambassadors for the company. Today, Eveready sells over 1.2 billion batteries and 25 million flashlights annually in India. Last year, it reported Rs1,323 crore in revenue, of which nearly 60% came from batteries.

Primed for growth

In 2015, Eveready began diversifying aggressively.

It started by manufacturing LED lamps, just at a time when the Narendra Modi government had announced a national scheme to promote this category. The scheme involves the government procuring LED bulbs, which consume nearly 80% less energy than conventional incandescent bulbs‚ from private firms through competitive bidding and selling them to the public cheaply. Today, LEDs contribute to a little over 20% of the company’s revenue.

In 2016, the company entered the home appliances segment by launching fans, food processors, induction cookers, irons, water heaters, and electric kettles. India’s small consumer appliances market is currently growing at over 12% annually and is pegged to be worth Rs25,000 crore by 2021.

“It is something of a natural progression,” Rajat Wahi, a partner at consultancy firm KPMG, said. “A number of Indian companies such as Havells have been looking at leveraging their brand and entering the home appliances industry. For Eveready, home appliances are a good extension since the brand is well known and has huge trust associated with it.”

Khaitan, however, isn’t too worried about competition. “I think there is huge potential for a new player to enter into this sector since the market is huge, and we will scale up the business with the deep rural distribution that Eveready already has,” he said.

Over the next three years, Khaitan reckons the two new categories will help boost revenues by over 50%. “Ideally, we would want the battery business to contribute about 40% of the business in the next three years, with our LED and home appliances businesses going on to contribute a combined 40% towards the revenues,” he said.

Analysts seem to back the plan. “We believe revenue will grow at a compounded annual growth rate of 6.4% between FY16-19E (estimate) driven by LED which is expected to grow at 13%,” brokerage firm Karvy Stock Broking said in a report in January. Motilal Oswal, a Mumbai-based brokerage, also believes the new categories will be the key drivers of growth for Eveready in the coming years, especially since the response to the new launches have been good.

But there could be some challenges, too. “The demand for home appliances is huge, despite the disruption brought in by demonetisation,” said Wahi. “But what has happened with the entry of e-commerce players and Chinese imports is that prices of home appliances have begun to fall.” Wahi however reckons that Eveready, with a large distribution network, will find it easier to reach millions of homes across India.

For a brand that has existed in the country for 112 years, despite being hammered by UCI’s legacy, diversifying and venturing into new areas is giving it a fresh lease of life. Perhaps, it’s got something to do with that logo.

This article first appeared on Quartz.

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HBX Platform | Courses offered in the HBX CORe program
HBX Platform | Courses offered in the HBX CORe program

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HBX Interface | Students can view profiles of other students in their cohort
HBX Interface | Students can view profiles of other students in their cohort

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HBXers at ConneXt, with Prof. Bharat Anand
HBXers at ConneXt, with Prof. Bharat Anand

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