By staying true to its focus on creating brands that enjoy instant recognition and keeping customers close, Pidilite has ensured a long-time dominance of the adhesives market
It was an early December morning in 2013. Bharat Puri and his wife Alka, who were vacationing at Fort Lauderdale in Florida, were seated on a beach, discussing plans for the last ten years of his working life. He was also thinking of moving to India and there was an opportunity. Madhukar Parekh, chairman and managing director (MD) of Pidilite, the largest manufacturer of adhesives and industrial chemicals in India, had offered Puri the post of the first non-family head of the company. Parekh, son of the late founder Balvant Parekh, would take on the role of executive chairman.
The Parekhs wanted to take the company global and were scouting for professional talent. Enter Puri, who was president, global chocolate, gum and candy for Mondelēz International, based out of Zurich. (Earlier, as head of Cadbury India, which was later acquired by Kraft Foods in 2010 and split into two companies—Kraft and Mondelēz—he knew the local FMCG market and had successfully led the company through a crisis in 2003, when, in a few instances, worms were found in the milk bars.)
Not surprisingly, Puri, who had been an independent director on the board of Pidilite since 2008, took the call to join Pidilite. “I told myself: Here is an opportunity to take a good homegrown company to the next level. Can I make it a world class company where I can leave behind a legacy?” Puri, 55, tells Forbes India
at his Andheri office on a rainy June day. And, in April 2015, he became the first professional managing director of the Mumbai-based Pidilite.
So far, the legacy seems to be shaping well. For the year ended March 31, 2016, the company recorded revenues of Rs 5,369.45 crore, a year-on-year increase of 11 percent; net profit went up by 47 percent to Rs 755 crore and operating margins stood at around 19 percent.
This growth, sustained at a CAGR of 16 percent over the last 5 years at Pidilite, is the result of a clear three-pronged focus—on brand-building, on the spirit of innovation and on maintaining strong relationships with customers. Simply put, Puri has inherited a strategy that works—one he has to continue to employ and build on.
How it works: The company identifies underserved markets and provides them with a brand; the first-mover approach typically results in them becoming a pioneer, and often leader, in most of the categories they operate in. Building the brand early is key because it helps their products define or become synonymous with their category. After all, adhesive does equal Fevicol in most Indian households. And it all comes down to their ads. “Look at their pride in their advertising that they even put it on the cover of their annual report once,” laughs Piyush Pandey, executive chairman and creative director, Ogilvy & Mather (India and South Asia), and a long-time associate of the Parekhs.
The veteran adman first worked with Pidilite in 1982, but the company’s association with the agency started in the early ’70s. Then, the focus was largely on trade advertising. At that time, the MD of Ogilvy & Mather was PN Sarma, who, along with Balvant Parekh, designed the elephant logo for Fevicol—it was for B2B purposes. It was only in the late ’80s that they decided to transform Pidilite into a consumer-facing brand (today, 85 percent of its revenues comes from the consumer business). The need was mass media advertising and that is when Pandey stepped in.
For the first commercial ad he created for Pidilite in the late ’80s, Pandey says the brief was to show a ‘strong bond’. He experimented with the concept, but was short of money, so he did the voiceover himself “and the chorus was given by Ila Arun’s theatre group, all for free,” he says. Once the ad spot was shot, he presented it to Balvant and Madhukar Parekh. They loved the film, but felt that it suits Fevicol better, and not Fevitite, for which it was originally shot. (Fevitite is a variant meant for commercial use.) Pandey was given the financial support needed to reshoot the advertisement. The rest, and ‘Dum laga ke haisha’
, is now history.
Ultimately, it’s “peace of mind for consumers”, says Puri. “The consumer reassurance is seeing the Fevicol dabba
(container). That’s the power of the brand.”
This belief also manifests in their decision to promote M-Seal, bought for Rs 10 crore from the Mahindras in 2000. Pidilite even allowed Pandey to create a 70-second advertisement for it. Reason: The management was convinced about the potential of the brand and has managed to grow it 15 times over its original value.
Puri’s experience with brands, then, will prove crucial. “Bharat [Puri] has a very good knowledge of brands, not just from the advertising perspective, but also from a trade, marketing, distribution and sales standpoint, and this is probably the reason he has been so successful with companies that value brands, be it Asian Paints, Cadbury or Pidilite,” says Vijay Bhat, who worked with Ogilvy & Mather for 21 years, and met Puri in 1993 when he was working for Asian Paints.
But it isn’t just about the advertising. The product is at the heart of it, constantly getting innovated in conversation with—who else—the consumer.
__PAGEBREAK__For instance, in 2010, Pidilite’s research and development team found a huge demand from the market for a glue which could stick metals and beads on to fabrics. To create the right product, Pidilite’s team worked with zardosi karigars
in places like Surat, Delhi and Mumbai. Today, Fevicryl No Stitch Fabric Glue, is not just a fast-selling product in India, but is also exported globally. Puri says he hasn’t seen a competitor yet.
In fact, whenever it finds a niche sector, Pidilite creates novel brands for it. It entered the arts and materials segment in the late ’80s and established the Hobby Ideas product range in 2002. Today, arts and materials products account for 12 percent of its overall turnover. Similarly, Pidilite was among the first to spot an opportunity in water proofing and acquired Dr Fixit from the Mahindras in 2000. Today, it has become a category on its own, competing in a big unorganised segment.
With every innovation, the company collaborates with electricians, carpenters and plumbers—whom it calls the ‘influencers’—to ensure adoption and appropriate usage. This has allowed Pidilite to build strong consumer insights, which help in developing new ideas. Much of the senior leadership team is in the market on Thursdays and Fridays to stay in touch with consumers. “We work closely with the consumers. There is a structured way of doing this and we have focussed group discussions and a feedback mechanism to put our findings in one place,” says Rajesh Joshi, who heads the consumer products maintenance division for Pidilite.
Pidilite also doesn’t hesitate to launch new products at the cost of the earlier ones. For instance, it recently launched Fevikwik gel. “We realised that people needed a product which gave users better control during application. One could say you will cannibalise your own product, but if you can do it with a better product, why not?” asks Puri. He is also focusing on the water-proofing business and has acquired Nina Waterproofing Systems and Percept Engineers, two leading water-proofing companies based in Mumbai and Bengaluru respectively; also, Chemifix, the largest adhesive brand in Sri Lanka. Pidilite has even set up a factory in Dubai.
To buttress the existing success formula, Puri is putting all his international experience to work. He has hired consultancy Bain & Company to create a global growth strategy. In the wood-finishes segment, he has formed a JV called Wood Coat with leading Italian company Industria Chimica Adriatica. The goal is to create a high technology, wood-finish company that will concentrate on the Indian market. Puri believes there is a need for premium finishes in India with wood becoming more valuable and consumers wanting the material to look new even after ten years.
“Since Bharat [Puri] joined, there is a renewed focus on innovation and on making the company a great place to work,” says Salil Chinchore, the head of HR for Pidilite. “He is clear that he doesn’t want to change the culture or values of the company. If an employee has put in more than five years in Pidilite, in most cases he or she stays on till retirement. We hire people through our brands and retain them through our culture. And this is something we will maintain to make this company the best place to work across generations.” The workforce, therefore, is a happy balance of experience and new blood, says Chinchore.
The external customers too are kept satisfied—and in close contact. To stay in touch with dealers, the company is investing in software and technology. It has been around 18 months since the company salesmen started using hand-held tablet devices. As a dealer’s stock goes down, an order is generated automatically. Essentially, the company is moving away from the forecasting method to a replenishment method.
It has also developed a software for dealers which enables Pidilite to track the neighbourhood stationery store and see if it has stocked up on their products. This is now slowly reflecting in the working-capital management of the company. The sales-to-working capital ratio—a measure of how much cash is needed to generate a certain level of sales—has gone up marginally to 5.48 times in FY16, compared with 5.41 times in the previous year. The company has kept more inventories on hand to easily fulfil customer orders whenever they need to be replenished.
This exercise of empowering the salesman and the dealer is going to help the company in keeping the end-customer happy. “We always had a situation where we did not have the right stock at the right time. We put in a reorder level system at the warehouse as well in terms of manufacturing to ensure that the entire supply chain reflects the consumer offtake,” Joshi adds.
Maintaining relationships has been a hallmark at Pidilite, be it within or outside the organisation. It has established the Fevicol Champions Club in 2002, which works towards encouraging high ethical standards and building the carpenter community through various social and professional activities. The club has 96,000 members across 600 cities. So, Pidilite has a database of most of the carpenters in India.
Puri himself was pleasantly surprised to see how this data can help. Puri’s parents (his father is a retired colonel in the Indian Army) stay in Chandigarh. One day, his mother called to know how she can fix an almirah which was infested with termites. There was only one carpenter she knew who could fix it, but did not know how to contact him. She only knew his name was Raju.
Puri’s sales head overheard the conversation. By evening, his team had nailed Raju from their database of carpenters in Chandigarh. Raju fixed the almirah that evening. “And this is not big data we are talking about. This is the influence of our relationship with our customers,” says Puri.