BUSINESS FOCUS: Doldrums of Eveready Kenya

Eveready is one of the house holds in Kenya and East Africa, we have grown to love and associate with. The batteries and products of Eveready were deemed superior and of higher quality, compared to products of competitors like Duracell, Tiger and others. I still vividly remember the adverts that had the tag : ‘Eveready Shika Paka Power.’ The giant brand has fallen from grace to grass, and we cannot help but cry at the effect of changes of time and fortunes, as dispruptive technology, trends and consumer taste and preferences change. Equally, questionable business ownership and acumen to the changes of times , particularly in setting priorities and rethinking the whole business strategy is a matter that seems to get most out in the cold. Uchumi, Nakumatt, Nokia, G. Electric, Blackberry are some of the big businesses that have felt the slap of doing business unconventionally.

img_20180322_183307_997190771086.jpg
Eveready dry cells size AAA: Photo by Caveman+ Media

Everyready E.Africa is a public limited company incorporated in Kenya. Headquartered in Kenya, it has two subsidiaries. These are Flamingo Properties Uganda Ltd and Flamingo Properties. Formed back in 1967, Eveready has been providing power solutions to the region, which forms its core service to the E.Africa market. They have been the suppliers of Eveready, Energizer and Schick, among other power solutions. Not only do they distribute dry cells carbon zinc primary batteries and alkaline batteries, but also flash lights for the outdoor and rural and remote areas. Recently, they Turbo automotive batteries, bulbs and Clorox (a household bleach.It prides in one of the best distribution systems in E. Africa, which it strives to take advantage of, besides the re known quality for their products.

The Nakuru Plant

Where did it all go wrong? A well established company, with a good history and robust distribution system and networks suddenly making loss of millions in revenue and market share? In 2014, after a run of poor performance where its profits fell by 58.7%, Eveready closed its Nakuru plant. Putting emotions and blame game aside, it was found out that the cheap and illegal imports were badly eating into Eveready margins. Counterfeit power products ruled the local market at the expense of the genuine products. Whereas Eveready adhered to the standards and rules set by the government on taxes and trade, whereas the illegal traders provided the fake cells cheaply on the market. Consumers quickly got attracted to such products, which had short life span and cheap to purchase.

The attack on its core market affected its volume of sales, and eventually production directly. The annual battery production to meet the Kenya’s market demand is about 180,000,000 batteries. However, they cannot produce this volumes presently, with their core market demand having shrunk to 50,000,000 annually. The other share is largely supplied by the illicit batteries, which unfortunately found a consumer base that willingly purchase short term, cheap batteries. These cut in volumes severed Eveready’s bottom-line, with losses being reported in consecutive financial years. They were forced to evaluate their situation, and made the business decision to sell the Nakuru manufacturing plant. The plant (offices, warehouses and equipment) was valued collectively at around Ksh. 220,000,000, whereas the almost 19 hectares of land priced at Ksh.570,000,000. This, in addition to the Milimani property were assets which when disposed could assist elevate the ailing company from its adverse position.

New Way forward

The loss making company put up aggressive strategies to alleviate the problem and return back to making profits. They are planning to introduce new products into the market, as they focus on energy, household and personal care market segments. Eveready also intends to diversify into real estate, having engaged 3 property developers on proposed projects, both commercial and residential. Not sitting on their laurels, they have a deal with Yana Tyres in regards to car batteries. Ambitious plans were in place to ship ‘D’ size batteries from Energizer Egypt in 2014, whose 60 day credit arrangement was friendlier and overall agreement more cost effective than direct production. Thus, they proved a better alternative to local production at Nakuru. A new partner from UK was already identified and advanced plans were underway to supply incandescent and energy saving bulbs on the local market. These new plans and overall strategic way forward proved acceptable to the stakeholders, and Eveready was back in winning ways, recording profits once again as they bought into the new business model.

A massive Ksh.452,400,000 gains were reported from sell of its assets, especially the Nakuru plant. This boosted its overall performance at end of 2017 financial year as reported in September. Although the sales went down by Ksh. 214,300,000 (about 38.7%) compared to the previous year, the gains proved times especially in settling debts and providing capital for the ambitious business plans that were laid out. Remember the sales were battered by Kenya’s long drought spells, unfriendly credit term conditions and of course, the elections which took longer than anticipated.

The fall out

Even in the desperate fight to get back to winning ways, the effects of a failing business had had its impact. Eveready received a big blow in its distribution mechanism when Energizer Inc. pulled out of an earlier agreement concerning distribution of its products locally and regionally. Energizer had got into agreement with Eveready for distribution of its products back in 2011. Eveready is alleged to have delayed filling against Energizer pulling out of contract, hence Energizer’s right to cancel contract and engage other parties. As a matter of principle, the period of agreement of 5 years had expired (September 2016), and Energizer had given notice, to which Eveready did not act on in time, to rescind the act. In a turn of events, Energizer contracted Hasbah Kenya to supply its products. Apparently the same company distributes Energizer’s rival Duracell.

Eveready hopes of continuing the long relationship with Energizer Inc. hit a dead end, after 49 long years in business partnership. Energizer Inc pointed a blaming finger at Eveready E. Africa, citing slow action to invoices and under performance beyond acceptable levels. Eveready on the other hand pointed at the splitting of Energizer into battery and detergents business units did not favor the Kenyan market, especially the Eveready business model.

Back on the Drawing Board

Now, they have to go back to the drawing board and work out on products and viable business strategies. It is reported that Eveready will have to market, distribute and sell its own products under the Turbo Brand- car batteries, dry cells and detergents. The plans to diversify diversify into real estate are in limbo after selling of the 18.5 ha of land in Nakuru for about Ksh.837,000,000 to have funds to run the business. The court case is still pending, with some major issues still unresolved between the two firms. The turn of events were not anticipated, and much is to be determined. It would be better if Eveready swallow the bitter pill, cut their costs to a manageable level, build their new products and brands, rigorously work on their distribution systems as they work on new business partnership with willing and profitable partners as they think forward.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.