JHS Svendgaard, a contract manufacturer for toothpaste makers Colgate, Dabur and HUL, expectsd to see full capacity utilization by the end of this fiscal
Mumbai: JHS Svendgaard Laboratories Ltd, a contract manufacturer for toothpaste makers such as Colgate-Palmolive (India) Ltd, Dabur India Ltd and Hindustan Unilever Ltd (HUL), expects to see full capacity utilization at its plants by the end of this financial year.
After more than three years of under-utilization, the company is in the midst of capacity expansion and manufactures for Patanjali Ayurved Ltd, a fast grower in the consumer packaged goods sector where most others are floundering with low single-digit to negative volume growth.
“We will be utilizing our capacities fully by the end of this financial year which is precisely after three years, three months and 17 days after capacity expansion," Nikhil Nanda, managing director, JHS Svendgaard said in an interview. The overall slowdown in the sector impacted some clients’ expansion plans, leading to a lag in capacity utilization, Nanda explained.
The company plans capital expenditure of Rs30 crore for financial years 2017 and 2018, Nanda said, adding that most of its expansion is coming from launches in the ayurvedic and herbal space, led by companies such as Baba Ramdev’s Patanjali Ayurved.
Volume growth in the toothpaste category has been muted at about 1.5% in the September quarter as well as year-to-date in 2016, according to an October report by broker Edelweiss Securities Ltd.
Additionally, industry leader Colgate lost market share in toothpaste from 57.2% in 2015 to 55.7% in September, most likely to herbal companies who have posted strong growth, the Edelweiss report said. It pointed out that Colgate’s overall volume growth had come in at 4% for the September quarter. Dabur also saw muted volume growth at 4% in the quarter, whereas volumes at HUL fell 1%.
Meanwhile, Patanjali’s Dant Kanti crossed Rs450 crore in revenues in fiscal 2016. In calendar year 2015, Patanjali Ayurved’s retail value sales market share increased to 5.4% from 4.4% a year-earlier, whereas Colgate-Palmolive, HUL and Dabur India lost their market shares, according to Euromonitor International, a market research firm.
To be sure, Colgate has increased advertisement spends and introduced new herbal products such as Cibaca Vedshakti, a toothpaste with clove for sensitive teeth.