The Eureka (Forbes) moment

The CEO lived up to his reputation of not mincing words. At the offsite, he quickly unmasked the grim side of wonderland: Blunderland. “The volumes have not grown for 10 years,” he said, underlining another flip side of falling sales. Eureka Forbes, he pointed out, has a large service component. “If we don't sell, we don’t get service revenue, which means we were working on a smaller and smaller pie.” There was a stunned disbelief. There was another harsh reality that the Eureka Forbes team was happily oblivious to: A dipping market share. 

The leader was bleeding from multiple cuts. And a few deep cuts came from its tardy response mechanism. For instance, take Kent RO. The rival brand rolled out its RO device in 1999, roped in Bollywood actor Hema Malini as its face, and launched a hyper-aggressive marketing and advertising campaign. Eureka Forbes, the smug market leader, reacted to the onslaught after six long years. By then, its market share had dipped from 80 percent to less than 40 percent. Another instance of delayed reaction was how it tackled the threat from LG. The Korean biggie launched a stainless-steel water purifier in 2016 and gained market share, while Eureka Forbes started sliding. The leader again took six years to respond. The lack of an innovation pipeline was also a drag on Eureka Forbes. 

At Lonavla, Pota was clear of his vision. The brand, he said, needed reinvention, reimagination, and a turnaround. A transformation strategy, called Operation Udaan, was rolled out with a mission to drive penetration, innovation, differentiation, awareness, affordability, relevance, access, and distribution. 

Fast forward to December 2024. Volume dip is now a thing of the past: The July to September quarter of FY25 was the fourth successive quarter of double-digit growth for the company. The product business grew by 20 percent, advertising and sales promotion spend grew 40 percent year-on-year, the adjusted Ebitda margin increased to 11.5 percent, and profit after tax grew 83 percent year-on-year, to Rs 46.7 crore. 

The company has turned around on another front: From Rs 200 debt to Rs 100 crore surplus last year. Another remarkable aspect of transformation has been the fact that the growth of water purifiers and vacuum cleaners was driven by a combination of volume and an increase in average selling price; unlike the past, it was not a pricing-led growth alone. However, to decode the transformation, one must go back to the past. 

The seeds of a brighter future, Pota says, were sown after the Lonavala gathering. For Operation Udaan to be successful, he sensed that something drastic had to be done. A new owner and a new CEO, it was widely perceived within the Eureka Forbes establishment, would usher in disruptive changes. For a 40-year-old organisation, Eureka Forbes was founded as a joint venture between Forbes and Campbell (a Tata Group company) and Electrolux of Sweden in 1982. The Tatas sold its stake to Shapoorji Pallonji in 2001. The company had a large direct sales team that was beset with high costs and low margins. It was widely rumoured that the new management would shut down this channel.

Pota, therefore, made empathy the core of his transformation blueprint. “I decided to kill apprehension, fear, and anxiety,” he recalls. “Forget shutting down, I want to double down on direct,” he announced. The reassurance was followed by a battery of quick steps designed to eliminate inconsistencies in marketing strategy. Usually, the direct sales team was asked to sell products at a higher price compared to retail. Pota, who was instrumental in relaunching PepsiCo’s Mountain Dew with an inspiring tagline, Darr ke aage jeet hai [beyond fear is triumph], killed price differential. In one go, Pota brought customers back into the reckoning. “One price for one product was a big unlock. This convinced us that we were walking the talk,” he recounts. “One reason why we had not been doing well was because we had not been investing. So we said we would invest in capability, brand, and drive innovations.” 

Another integral strand made the transformation possible: A new-look team. In the following nine months after becoming CEO, it became apparent to Pota that the existing core team was reluctant to bite the bullet. The criteria for picking up new team members was simple: Leaders with stints at strong foundation-building companies like HUL, P&G, and Asian Paints, with some years at a digital or new-age company. Pota wanted a team that was agile, experimentative, and fearless. Around 80 percent of senior management was infused with external hires. The squad was equipped with new-age R&D, category marketing, digital, engineering, product management, and data science capabilities. (See box.) “A captain is nothing without a winning team. I am fortunate to have built that at Eureka,” says Pota.

The team had its task cut out. As chief human resource officer (CHRO), Mahnaz Shaikh knew what it would take to rally the employees behind a cause. In a sharp disconnect from the past, she rolled out a company-wide ESOP programme. The move transmitted a powerful message: All managers across grades, functions, and locations were now owners of the company, working together and towards a common goal. “This was an industry-first approach,” says Shaikh. “We wanted to signal that everybody plays a critical role in the transformation journey.” 

The new chief financial officer, Gaurav Khandelwal, inculcated a new language and mindset. “The most fundamental shift has been the mindset to challenge the status quo and willingness to try new things, even if a few fail,” he says.  However, a business with over Rs 200-crore debt needed much more than a mindset reboot; it needed rewiring of internal and external business practices. “We bought in digitised collections,” he says, adding that within 18 months Eureka Forbes saw nearly 85 percent of collections becoming digital. Annual maintenance charges (AMC) were revamped. In 18 months, he claims, nearly 50 percent of AMC sales moved to the digital platform. 

The chief growth officer too had a clear vision: To drive growth and penetration. The water purifier segment has a paltry 6 percent penetration in India. The big question was how to make further inroads. The answer lay in a slew of things: Driving relevance, access, and innovation; focusing on replacements; nudging consumers to buy genuine filters; rapidly scaling vacuum cleaning on the back of convenient solutions like robotic and cordless cleaners; and growing the air purifiers and water softeners. “This framing has enabled resource deployment and big initiatives towards growth areas where we have a right to win,” contends Anurag Kumar. 

Lastly, the chief digital and product officer was tasked with stirring up a new culture. Nithyanand Shankar worked with one of India’s top UI/UX design firms to redesign the consumer app and website. He built an in-house product and technology team, incubated a data-science team to leverage millions of data points to build predictive models, and built and scaled ecommerce business across Amazon and Flipkart. “We built a best-in-class digital team that operates like a start-up within a 40-year-old company,” he reckons. 

With a handpicked team in place, the captain added more fizz and topping. “We took a hard look at Ebitda [earnings before interest, taxes, depreciation, and amortisation] margin,” says Pota, who had a reputation at PepsiCo and Jubilant for looking at everything through the Ebitda lens. “We were at 3.5 and 4.5 percent Ebitda margin. This was unacceptable,” he says. Reason? Ebitda margins in consumer durables businesses hover between 9 and 12 percent. But Eureka Forbes was not just a consumer durable company because of a large service business. So, the new benchmark was 16 to 17 percent. “We began to cut costs,” he says, sharing other measures such as better managing cash, tightening inventory, focusing on realisations, and moving to digital payments. 

Then came the move of rationalising stock-keeping units (SKUs). In 2022, Eureka Forbes had around 200 SKUs of almost similar products across sales channels. “You can't replicate every single SKU for every channel. So we trimmed it to 45 SKUs,” says Pota. The next big ask was to make people buy new products. It was a tough task because of classic category barriers. Consumers, says Pota, perceive branded purifiers to be expensive. Why pay Rs 15,000 when you can get a cheaper local version? With the added cost of five-years AMCs, the total cost comes to around Rs 30,000. “We had to address the cost of ownership issue,” says Pota. This was done by making purifiers affordable. Pota rolled out a purifier with a price tag of under Rs 7,000 in March 2023, and launched a television ad campaign that targeted a traditional method of using cloth to filter tap water: Sar se kapda hatana hai toh nal se kapda hatane padega [if you have to remove the cloth from your head, you have to remove the cloth from the tap]. 

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The gambit paid off. “Our sales from April skyrocketed,” says Pota, who aggressively invested in the R&D team to roll out a bunch of innovative products, such as Aquaguard Slimtech, which blended functionality with aesthetics, and Aquaguard Blaze Insta, which was loaded with instant hot water technology, and Aquaguard UTC (under-the-counter) that could be installed beneath the kitchen counter. A company that was starved of innovation for years now had a rich product pipeline. 

The new owners are elated with the turnaround. "We are proud to champion Eureka Forbes on its transformative journey into a premier health tech company,” says Sahil Dalal, managing director at Advent India, which owns a 62.56 percent stake in Eureka Forbes. Under Pota and his team of CXOs, the company has reinforced its market position, pioneering innovation and elevating customer satisfaction, he reckons, adding that the company is ensuring a sharp focus on technology and product innovation. “We are confident in the company’s dynamic growth trajectory,” he adds. 

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Despite a change in fortune, Eureka Forbes will have to contend with a series of potential challenges. The biggest is wooing a new set of users who migrated to other brands and rivals over the last decade. “Rekindling an old romance is not easy because there are new lovers,” says Ashita Aggarwal, professor of marketing at SP Jain Institute of Management and Research. One needs a compelling reason to go back to the brand. There are strong multinational rivals as well as a bunch of home-grown challengers who have grown aggressively at the cost of the leader. “The brand needs to stay aggressive in marketing, advertising, and product innovation for a few more quarters,” she says. Another challenge for Eureka Forbes is to drive the penetration of water purifier and vacuum cleaning categories. “A leader has to do it. And when one does it, there would be hits and misses,” she says, adding that sustaining the turnaround tempo would be another formidable issue. 

Pota, for his part, reckons that there is no U-turn from the transformation road. “In a way, we were India's first D2C company some 40 years back. Now we need to become a health-tech D2C company,” he says, adding that Eureka Forbes must get in sync with the changing profile of new-age consumers. “From an old cassette tape we need to become a Spotify,” he signs off.