NOMARKS : THE SPOT BEYOND HAIR OILS

In the face of tough competition from biggies like HUL and P&G, smaller FMCG firms, including Ajanta Pharma and Ozone Ayurvedics, are selling off their popular flagship brands as they find it increasingly tough to grow them. While Ozone Ayurvedics is looking at selling off its flagship personal care brand 'Nomarks', Mumbai-based Ajanta Pharma has recently sold off its popular energising capsule '30-Plus' due to change in priorities and as the brand has become stagnant. "The issue is if the management is unable to support the brand or not finding it profitable, the best route is to sell it off," Shirish Pardeshi, an analyst with Anand Rathi Financial Services told PTI. As the brand grows, it is important to have the kind of distribution and scale of economy that it requires to compete with much stronger brands, he added. Ozone Ayurvedics, which sells personal care brand 'Nomarks', said it is willing to sell it off to an appropriate buyer which has the right network to make the product more lucrative. 'Nomarks' competes with the likes of 'Fair & Lovely' from HUL and Reckitt Benckiser's anti marks cream 'Clearasil'. "If we find any firm, with great distribution channels, who wants to buy (Nomarks), we will consider it," Ozone Ayurvedics Chairman and Managing Director S C Sehgal said, adding till date top six to seven firms have approached them. He claims the brand, which garners an annual sales of Rs 60 crore is still profitable. It is just that his firm has not exploited the true potential 'Nomarks' as it has been focusing on other areas. Similarly, Ajanta Pharma sold off '30-Plus' to leading FMCG firm Dabur, which has a more stronger distribution channel and has been aggressively looking at expanding its healthcare portfolio.

The company said the OTC brand has not grown though it still enjoys a strong recall among consumers. "With the change in focus at Ajanta Pharma, 30-Plus' was stagnant for some time, though it still enjoys a strong recall as an energiser brand," Ajanta Pharma Managing Director Yogesh Agrawal said. According to Pardeshi of Anand Rathi, brands like 30-Plus and Nomarks have established themselves among consumers. "But it has to go beyond in terms of their geographic expansion or making it more larger than what it is. Management needs to do justice to it," he said. Last year, despite having strong brands like Moov, Krack and Set Wet, Paras Pharmaceuticals was acquired by British firm Reckitt Benckiser for Rs 3,260 crore. FMCG firm Ozone Ayurvedics today said it will consider selling off its flagship personal care brand 'Nomarks' to exploit the full potential of the product and already up to seven companies have approached it. "We are open to all sort of alliances and whichever route is appropriate for the brand to grow we will go ahead," Ozone Ayurvedics Chairman and Managing Director S C Sehgal told PTI when asked if the firm is look to sell off the brand. Explaining the reasons for the company considering such a move, he said: "We have not got the kind of distribution that it should have for the brand to grow. We are looking for an aggressive marketing strategy this year. "However, if we find any firm, with great distribution channels, who wants to buy, we will consider it." Asked if Ozone Ayurvedics is in talks with other companies for the same, he said: "Till date top six to seven firms have approached us". He, however, did not disclose the names. He said the company has not exploited the true potential of 'Nomarks' and the brand has been ignored as it has been focusing on other priorities. He said the company has not been aggressively promoting the Nomarks "as should be doing". At the same time, Sehgal said the company may also consider for alliances with other companies, "if that is appropriate for the brand to make it more lucrative". At present, the brand garners a sale of around Rs 60 crore and plans to make a Rs 150 crore brand by the end of this fiscal.

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Bajaj Corp today acquired NOMARKS brand from Ozone Ayurvedics for an undisclosed sum. NOMARKS is a cream in anti-blemish/mark segment and has market share of 12% in Rs 342 crore anti marks category which is growing at 27% per annum, the company said in a filing to stock exchanges. It is the second largest brand in this category, it said. With this acquisition Bajaj Corp has now entered skin care category worth Rs 8,500 crore which grew by 12.1% in FY13, the company said. Bajaj Corp is the part of Shishir Bajaj group which has other brands like Bajaj Almond Drops, Bajaj Brahmi Amla and Bajaj Amla Sheekakai. The acquisition of the NOMARKS brand by Bajaj Corp is a strategic move as it enhances our presence in personal care market and gives us an entry into skin care market said Kushagra Nayan Bajaj, Chairman, Bajaj Corp. NOMARKS would be continued to be manufactured by Ozone Ayurvedics for one year as a part of transition support agreement.
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Bajaj Corp has surged over 6% at Rs 255, extending its previous days 3.4% gain, after the company said it has acquired Nomarks, the country's second largest anti-marks brand, from Delhi-based Ozone Ayurvedics for an undisclosed amount. "The acquisition is a strategic move as it enhances our presence in the personal care market and gives us an entry in to the skin care category," Kushagra Bajaj, chairman of Bajaj Corp, said in a statement. With the acquisition of these brands Bajaj Corp enters the Rs 8,500 crore large skin care category which grew by 12.1% during FY2013. Nomarks has more than 12% market share in an Rs 342 crore anti marks category which is growing at 27% per annum, it added. The stock opened at Rs 246 and touched high of Rs 258 on NSE. A combined around 70,000 shares change hands on the counter so far on NSE and BSE.

Bajaj Corp, the FMCG player with strong financials, has taken its first, albeit small, step to break into the big league
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Sumit Malhotra, the managing director of Bajaj Corp, makes his reason for its latest acquisition clear. "It is our prelim before we can play the final," he says. He means that as a single-category (hair oils) fast-moving consumer goods company with no history of acquisition, Bajaj, listed in 2010, wants to learn from mistakes before going for a larger target. But go it will. Nomarks, the anti-blemish skincare brand it has acquired from the New Delhi-based pharmaceutical company Ozone Ayurvedics, has a range of offerings but it still can't be considered a huge buy for the company, part of the Shishir Bajaj Group. The gross revenue was Rs 651 crore in 2012-13 (growing at 25 per cent annually), and earned Rs 167 crore in net profit (margin of 28 per cent). Financial marksmanship While Malhotra declines to comment on the amount paid for the brand, owing to a confidentiality clause, Nomarks is more profitable than even the flagship Bajaj Almond Drops. "It has a gross margin of 65 per cent, more than Bajaj Almond. It made sound sense for us to acquire the brand," adds Malhotra. The company already has a cash reserve close to Rs 425 crore and the acquisition of the intellectual property rights for Nomarks, estimated to cost Rs 80-100 crore, according to analysts, is not expected to strain Bajaj's financials. Bajaj's diversification had been in the offing for two years. Skincare, soaps and shampoos were seen as adjacent categories for the hair oils-led company, with Bajaj Almond Drops being the third-largest hair oil brand in the country, after Marico's Parachute and Dabur Amla. With nine per cent of the total hair oil market (it leads in the fragrant hair oils that has Marico's Hair&Care and Keo Karpin from Dey's Medical), Malhotra believes Almond Drops has a good five to seven years before needing a rethink. But Bajaj assessed that Almond Drops might not double as a strong mother brand for product extensions, making way for an inorganic addition. Bajaj will bank on Nomarks' residual brand value. Once a trendsetter Nomarks is the second largest in the anti-blemish category, as defined by Nielsen. Himalaya's Neem facewash remains the bestseller in the category but Nomarks is close behind with around 12 per cent of the Rs 340-crore market.

Launched in 2000 as a cream, it was extended to lotions, facewashes, soaps and face packs by Subhash Chandra Sehgal, the group chairman of Ozone Ayurvedics. It carved out a segment of anti-blemish, and led major skincare companies to launch their own takes on it. HUL came in with its version under Fair & Lovely, for example. However, being a pharma-led firm, without the necessary distribution or advertising bandwidth for the FMCG battlefield, Sehgal had been looking to sell the brand for a few years, and Bajaj entered talks in October, 2012. Malhotra says, "It is a small brand in the entire skincare market but we are happy being a big fish in the small pond of anti-blemish. We will learn how to turn around acquisitions before we consider acquiring, say, a Rs 200-crore brand, which is a much big risk right now." Sehgal from Ozone says, "Nomarks has the potential to become a Rs 90-crore brand in the next couple of years. Despite a correction last year, it still brought in Rs 55 crore including revenue from exports. With Bajaj's strength in distribution, all its categories will generate good volumes." It made just under Rs 40 crore in the domestic market in 2012-13. Work in sync While Ozone sold the brand through 500 distributors in 150,000 outlets, under Bajaj the brand can access 2.3 million outlets through 6,700 distributors. Malhotra says increasing the yearly sales to Rs 150 crore for Nomarks, as a result of increased distribution might be a speck in the Rs 8,000-crore skincare market but would still mean an increase of over three times its current sale. Nomarks fits with its existing reach for better profitability through synergies. "We would be saving up to five to seven per cent distribution costs that way," Malhotra had said earlier. Both are the strongest in the north, followed by east and west and not so dominant in the south of India, with Bajaj Corp getting 40 per cent of revenue from the north. To-do list The company, however, will have to work hard. While Bajaj had 17 SKUs (or the number of different product packages sold), Nomarks had no less than 60 SKUs for its many products. "There will have to be some rationalisation. For a small brand, it does not make sense to sell multiple products because the real challenge in FMCG lies in supporting the different extensions with an advertising budget," says Malhotra, though he is yet to chalk out spends for Nomarks. Nomarks gets 45 per cent of its revenue from cream, 26 per cent from facewash, 17 per cent from soap and the rest from lotions, face packs etc. Malhotra will focus on speciality creams and facewashes for the brand in the next five years.

A tight ship For Bajaj, Nomarks will be its entry into other categories. Bajaj is yet to break even with its previous launch in 2011, the cooling oil, Kailash Parbat. But Malhotra says, "It has made Rs 20 crore in two years, which is three per cent of the cooling oil market. We have not broken even but for the long term, this category will work well as in a hot country like India, there is still scope to broad-base it beyond the UP-Bihar belt." Bajaj insists Nomarks won't sway the tight ship it runs. Bajaj has not acquired any assets. It has a lean supply chain with just nine days of finished stocks. It still banks on sales teams on the payrolls of its distributors. Its employee cost increased from Rs 22.9 crore in 2011-2012 to Rs 29.16 crore in 2012-13, commensurate with a 25 per cent increase in revenue. Malhotra has put in place a second line of command with a few senior-level hires in the past couple of years.