Reasons Behind The Fall of Keya Group

Although Kaya was able to run the business quite well from 2000-
2009, the company did not maintain its success in later times.

Losing Focus
The company shifted its focus away from core business due to its
inclination towards capital-intensive business like garments business
before it got stability and firm position in the cosmetics business. As a
result, the cosmetics business began to deteriorate. According to a
September 29, 2020 report by The Business Standard, the company’s
market share in the cosmetics sector stood at 5% in 2015. In the
2012-13 financial year, where Keya’s Local Sales was Tk 260 crore, in
the 2016-17 financial year it dropped by almost half to Tk 140 crore.
Despite the huge demand for cosmetics products, the company’s
management is not looking for any activities for the cosmetics
business expansion. According to a TBS report, due to the labor crisis,
limited production of detergents and soaps is taking place in two
production units.

Becoming a Distressed Company

As the country’s garment industry grew in the 2000s, so did demand
for the product. Keya wanted to take this opportunity and planned to
build a few factories in a very short time. The company took out a lot
of loans for the construction of these factories and other investments.
The company also bought cotton at a higher price in 2010 due to the
volatility of the cotton price in the global market. As a result production
cost increased and it was not possible to make profit as expected due
to not being able to sell accordingly. On top of that, the company’s
export order of around Tk 500 crore was canceled in 2010-11. The
company has been failing to repay regular loans since then. Merging
the business units to repay the loan, issuing shares in the capital
market and many other things did not save the end. In 2012, the name
of the founder of the company moved to the defaulter list of various
banks. In the latest 2017-2018 annual report, Keya Cosmetics had a
loan outstanding of around Tk 1,700 crore. In the list of top 300 loan
defaulters published on June 23, 2019, Keya was among the top 10
companies in the capital market and the amount of defaulted loans
was around Tk 100 crore. At present, loan repayments are relatively
normal, according to various bank sources.

Lack of Segmentation
Kaya has not done any work on their product in the last decade. Their
product categories are the same as before and in those categories the
previous products are being produced in limited quantities. Soaps,
detergents, shampoos, and beauty soaps are still being sold. No age-
based or gender-based segments were made. Large multinational
companies and cosmetics brands is manufacturing male and female-
centric products to position unisex products and increase their market
share.

Low Share of Voice

The share of voice of a company is the total advertising and marketing
activities of the company in the sector in which it is doing business.
The product marketing and promotional ecosystem has changed a lot
in the last five years. Media marketing occupies a large part of the
promotion. Celebrity Endorsement also relies heavily on social media.
There are also promotions through traditional TVC, Local and
International event sponsorship. All in all, the companies are following
360 degree or TTL marketing strategy without relying on one or two
mediums. In addition to their old and new TVC promotions, Lux
promotes products through title sponsorship of various drama serials,
sponsorship of Lux-Channel I Superstar, billboard marketing,
newspaper ads, etc. Keya is a surprising exception from this side.
Although the company has always given priority to TVC based
promotions, no TVC has aired since 2016. Keya is still working as a
sponsor of the magazine show “Ettadi.”, but we all know where
“Ettadi” is now in terms of popularity.

Absence of Positioning
Keya targeted all types of customers in the years of its establishment.
The company used to keep the price 7-8% lower than the competitors
to attract the lower income group.However, the company failed to
position their products properly. As big companies adjust their pricing
strategies through the correct positioning of their products, Kaya
remains on the market as “Just Another Beauty Soap”. Other soap
manufacturers have been able to achieve traction in beauty soaps as
well as anti-aging, ayurvedic products. Keya’s revenue generation
centers around its Beauty Soap.

Weak Product Distribution

Keya has been following the traditional model of product distribution.
And that is – Manufacturer to Wholesaler to Retailer and finally to
Consumers. This means that Kaya, like other cosmetics companies,
relies heavily on its intermediaries. Wholesalers and retailers are less
interested in Keya’s products due to insufficient products on demand,
and low margins. Other companies maintain good relationships by
providing adequate incentives to their wholesalers and retailers. In this
case, Keya has been quite indifferent for several years.

Keya Cosmetics in Share Market

Keya’s position in the stock market is not satisfactory. The company
has not paid any cash dividend since 2010. In 2011, Keya raised Tk
100 crore through a right share issue to repay its loan. The owner has
also sold shares at various times to repay the loan. The shareholding
of the company’s sponsoring directors was 46% as of September this
year, downfrom 63% in 2017. Keya Cosmetics is one of the few
exceptions where domestic and foreign hygiene and toiletries product
manufacturers are seeing profit growth due to high demand for their
products due to the novel Coronavirus. No annual report of the
company has been published after 2017-18, no quarterly report has
been published. The company held its 22nd AGM in October after the
AGM was closed for the past two years. The Financial Reporting
Council (FRC), Bangladesh’s financial reporting regulatory body, is
also currently investigating Keya revenue and profit reporting.
Conclusion
Considering the product quality, pricing and popularity, Keya has
moved to a better position in the market in a very short time. But due
to wrong strategy, lack of diversification in the product portfolio, and
irregularity in the supply chain, the company has lost its position. If
Keya Cosmetics had been able to make the right decision at the right
time and update itself in line with the strategies of other brands,
Bangladesh would now be in a leading position in the cosmetics and
toiletries market along with international brands. However, there is still
room for re-branding and product portfolio, including production,
packaging, distribution, and the entire company by increasing its share
of voice in the media. Will Keya Group of Industries be able to go
through these processes and regain a strong position in the market?