Bringing Back The Colour At Camlin

Updated: Jul 27 2002, 05:30am hrs
What Dettol is to antiseptics, Camlin is to colours—a near generic name for the product, to most Indian consumers. Generations of Indians associate the Camlin brand and its Camel logo instantly with colouring materials and stationery. On July 18, when the Rs Rs 188 crore company announced a 1:1 bonus and a 25 per cent dividend, it realised its much cherished dream of bringing back colour to its shareholders faces.

Dilip Dandekar, Chairman and Managing Director, Camlin
After nearly four decades, during which Camlin was virtually the sole player in the segment painting the broad Indian canvas, between the years 1993 and 1997, the company started moving into the red. With an onslaught of cheap imports and international players entering the market, post-liberalisation, Camlin saw its profits fading away quickly. Imported products created an initial euphoria not only because it was cheaper but also because a consumer fatigue had crept in due to the dominance of a single brand for so long.

Realising, that restructuring, pruning costs and evolving a fresh brand-identity, was the call of the day, Camlin had embarked upon a four-pronged restructuring blueprint back in 1999. It took three years to get its act together, and finally in 2001-2002 the Camlin’s consumer products division has become profitable.

“We had suffered a tremendous setback initially, when consumers started shifting to imported brands, we realised that the onus had shifted to us to reach out to the consumers and do that at a competitive price,” says chairman and managing director, Dilip Dandekar.

Managing costs
As a first step, the company introduced a Voluntary Retirement Scheme (VRS), which has enabled them to reduce the total strength of the organisation across all levels by 32 per cent in the past three years. About 250 people had opted for the VRS in its very first year. “This helped us to arrest the escalating incremental costs every year considerably,” says Mr Dandekar.

Secondly, the company shifted a chunk of its manufacturing facilities from Andheri, in north Mumbai, to a relatively cheaper location in Tarapur in interior Maharashtra and resorted to outsourcing nearly 50 per cent of its requirements from smaller players. Result: a 40 per cent reduction in manufacturing costs.

Next, Camlin focussed on streamlining its settlement period. While earlier, payments were collected between 50 to 55 days, the company brought it down significantly to 8 to 12 days. This was made possible by opening 22 depots across India, which would collect the payments immediately. This move improved the cash flow situation and helped in reducing inventory management. The company was able to reduce its inventory from 40 days to 20 to 22 days. “These measures helped us to pay our long-term debts and improve our balance sheet,” says Mr Dandekar. All these cost optimising efforts, however, will be an ongoing process and Mr Dandekar hopes to make Camlin a debt free company in another three years.

Wooing back the consumer
Once, the fundamentals were put back in place, Camlin still had to tackle the issue of declining consumer interest. “The need to make Camlin a brand that will attract the youth was pressing and that is why we decided to evolve a new hobby segment,” says Mr Dandekar. The company launched a slew of products like fabric paint, glass paint, ceramic colours, body and face colours for tatooing etc, over the past two years to sport a youthful look. Today, the hobby segment is one of the fastest growing amongst consumer products, which contributes as much as 74.5 per cent or Rs 140 crore to the total turnover of Rs 188 crore.

Camlin, had gained a foothold in the Indian market by innovative promotions — by reaching out to schools and colleges, sharing information about how art impacted the development of a child’s mind and thereby increasing the usage of art products. “ The professional artists were initially reluctant to try our products so we targeted the untapped markets. With time we could assert that our products were comparable,” says Mr Dandekar. Camlin played a crucial role in increasing the breadth of the market for decades by launching colour competitions and creating art awareness across India. The dynamics have changed since then. Today, Camlin cannot simply depend on direct promotions and has to support it possibly with mass media advertising.

The company has also chalked out plans to tap the rural markets for further growth. The thrust laid on education by the government and rising levels of income have created opportunities for the company to reach out to the B-grade and C-grade towns. Camlin also plans to take its hobby range of fabric, glass and ceramic paints to these small towns. Video cassettes demonstrating the usage of these products have been created and “promoters” have been appointed to market these products directly in smaller towns.

The company has taken several steps to streamline its marketing team. First, the fast-moving goods, like the students range of colours and stationery have been allocated to an agency who will be marketing it through traditional retailers. The company has created a team of 250 professionals or “enrolled secondary salesmen” across India, to cater to the non-traditional retailers like provision and general stores. A speciality product group has also been created that would market the hobby range and other speciality products. These efforts are directed towards lending a focussed approach to its marketing which, with a retailer base of over 2 lakh, is not an easy task.

The company has also lined up a series of product launches in the next one year. T-shirt markers, Mehendi markers, ceramic paints and a new range of mechanical pencils are some of the fresh colours to emerge from Camlin’s palette. “Our approach is to minimise our presence in the me-too categories like ball pens etc and lay emphasis on innovative, technology intensive products,” says Mr Dandekar. These measures, hopes Mr Dandekar, would help him tackle the lack of growth in the overall market which has been growing between 5 and 7 per cent. Over the next two years, Camlin expects to growth at 15 to 20 per cent. Considering that there are other players like the makers of Fevicol — the Pidilite Industries which eyeing the hobby segment, and Faber Castell of Germany, Apsara Pencils and several other players trying to make its mark, will it be an easy task “Our growth has been hindered not because we are losing the market share, but because the market itself has been rather stagnant,” says Mr Dandekar.

Other businesses
Around Rs 48 to Rs 50 crore of Camlin’s overall turnover is accounted for by the company’s interests in pharmaceuticals and fine chemicals. The company has manufacturing facilities in Tarapur for bulk drugs and in Nashik for formulations. “By choice, we have restricted our exposure in this business and treaded every step cautiously,” says Mr Dandekar. In 1982, the company had diversified into pharmaceuticals largely because there was little scope to invest further in the art material business, which was reserved for the small scale sector. The company had a carry-over business licence for capacities that were created before this reservation restrictions were slapped. Camlin’s strategy to diversify was to create a channel for reinvesting the money from the current business. “We chose formulations because by then Camlin was a trusted brand and we could leverage that confidence in the brand to reach out to doctors,” says Mr Dandekar. The company has a limited presence in formulations, with thrust on the skincare and nasal drops. Subsequently, the company entered the bulk drugs business in 1994. So far the Camlin’s investment in the pharma business have been a modest Rs nine crore. In bulk drugs the company has exposure to dermatology, and lifestyle segments like hypertension and diabetes.

Mr Dandekar agrees that pharmaceuticals and fine chemicals are unrelated diversifications but justifies the company’s presence in these segments by the sheer fact that these businesses have allowed the company to hold its ground when the consumer products business was not profitable during 1993-99. “It has done well as a supportive function,” says Mr Dandekar.

With the consumer products division turning around and becoming self supportive this year, the company will probably take a harder look at these non-core businesses. But now Mr Dandekar is happy with the way these non-core businesses are progressing. The company is also using its research and development (R&D) facilities to contract research for US-based firms. Clearly, after having addressed the immediate needs, it is also possibly time to look at the long term strategic issues.