Mumbai, Aug 17: Lakme Ltd is planning to set up new plants in addition to enhancing productivity at existing units in Mumbai and Kandla. The company, which is a pure production-oriented company without a marketing wing following the transfer of all its brands to Lakme Lever Ltd, has recently upgraded its capacity by around 40 per cent, said sources.

Even though investment details are not available for the new facilities to be added, sources said the production capacity has been enhanced to cater to the increase in demand for cosmetics and toiletries, the market for which is growing at over 30 per cent annually. The additional capacity is aimed at servicing the growing needs of Lakme Lever, a 50:50 joint venture between Hindustan Lever and Lakme. Its marketing wing was set up in January, 1996.To boost production levels at existing units, the company management recently entered into a fresh agreement with the All India Lakme and Allied Companies' Employees' Union for a wage revision.

The three-year agreement entails an average 15 per cent across-the-board hike in the salaries of these employees. Company sources said the agreement will be revised after three years following negotiations with the employees' union.

Lakme Ltd's income from operations and net profits at Rs 48.77 crore (Rs 87.89 crore) and Rs 14.53 crore (Rs 107.68 crore), respectively, in 1996-97, dropped from the previous year on account of the restructuring in operations. The turnover of the cosmetics business at Rs 31.82 crore cannot be compared with the previous year's as the sales and marketing activities are being handled by Lakme-Lever. Thus, Lakme Ltd's sales represent the sales value at manufacturing price.

Lakme and Hindustan Lever (HLL) joined hands for the marketing venture two years ago, partly as a measure against the entry of the international brands of Unilever, Calvin Klein and Elizabeth Arden in the Indian market. As per the agreement, it was decided to eventually shift HLL's products in cosmetics and perfumery (the Denim range, for instance) to the new joint venture.

Lakme-Lever, which completed its first year of operations in December, 1996, posted net sales of Rs 134.08 crore. In the midst of intense competition from existing and new players, new products and variants in creams, talcs and perfumes were introduced last year. These include the new colour cosmetics range of Elle 18, which is said to have garnered a substantial 20 per cent share in the Rs 1,200 crore to Rs 1,400 crore cosmetics market. Lakme has a market share of over 67 per cent in lipsticks and around 50 per cent in nail enamels.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.